The Organization for Economic Cooperation and Development on Thursday upgraded this year's global economic growth outlook to 3.1 percent from 2.9 percent, sounding more upbeat about the United States, China and the euro area due to slowing inflation and resilient demand.
The upward revision from its February report came despite a sharp cut in its growth outlook for Japan as rising prices take a toll on consumption.
Japan's economy is forecast to grow 0.5 percent this year, slower than 1.0 percent seen in the previous report.
U.S. economic growth will be 2.6 percent, against its earlier forecast of 2.1 percent. China, a non-OECD member, is expected to see its economy grow 4.9 percent, faster than the previously predicted 4.7 percent.
The eurozone economy is likely to expand 0.7 percent this year, rather than 0.6 percent.
The Paris-based body expects global growth to be modest and divergent among economies, saying that heightened geopolitical tensions amid the Israel-Hamas war are a "significant near-term adverse risk."
"There are some signs that the global outlook has started to brighten, even though growth remains modest," the report said.
In 2025, the world's economy will likely expand 3.2 percent, faster than the 3.0 percent projected in February.
Aggressive interest rate hikes to combat inflation in the United States and Europe fueled recession fears but their economies have shown resilience. Meanwhile, Japan, which only in March raised interest rates for the first time in 17 years, still lags behind its peers in normalizing monetary policy.
The OECD expects rate cuts to begin in the United States and the euro area in the third quarter of 2024, with Japan to be an exception.
"In Japan, a gradual increase in policy interest rates would be appropriate," the report said, suggesting a hike to 0.75 percent by the end of 2025 from the current range of zero and 0.1 percent.
