The modest pick-up in global growth in 2017-18 reflects the effect of ongoing and projected fiscal initiatives, notably in China and the United States, and initiatives in other economies such as Canada, the report says.
"We have to remember the extent to which there was an explicit very forceful policy response by the Bank of England and a change in fiscal stance by the government", said OECD Chief Economist Catherine Mann. It had originally predicted a growth of 1.2% in November but did not upgrade its 1% outlook for 2018 which would the worst performance since 2009.
"Now, more than ever, governments need to take actions that restore people's confidence while at the same time resisting turning inwards or rolling back numerous advances that have been achieved through greater worldwide co-operation", OECD Secretary-General Angel Gurría said, commenting on the report.
Additionally, "financial market expectations imply that a large divergence in short-term interest rates between the major advanced economies will open up in the coming years", OECD warned.
"An increase in trade barriers in the major global trading economies - Europe, the United States and China. would have a major adverse impact on trade and GDP, particularly for those economies that imposed new trade barriers".
However, the "disconnect between financial markets and fundamentals, potential market volatility, financial vulnerabilities and policy uncertainties", could derail growth, it warned. "Under these circumstances, it is time for a new trade policy that defends American sovereignty, enforces USA trade laws, uses American leverage to open markets overseas, and negotiates new trade agreements that are fairer and more effective both for the US and for the world trading system, particularly those countries committed to a market-based economy".
In Japan, fiscal easing was seen underpinning growth of 1.2 per cent though the rate was seen falling back to 0.8 per cent in 2018. Coherent and committed policy action is needed to simultaneously raise growth rates and improve inclusiveness'. "The positive assessment reflected in market valuations appears disconnected from real economy prospects", the OECD said.
"Growth in China is expected to edge down further to 6¼ per cent by 2018 as the economy manages a number of necessary transitions, including shifting towards consumption and services, adjustment in several heavy industries, working off excess housing supply and ensuring credit developments are sustainable", the OECD said.