The International Monetary Fund (IMF) has raised its growth forecast for the world economy.
The global economy is likely to grow by 5.1 per cent this year and 4.9 per cent in 2007 - both a quarter percentage point higher than the fund had forecast in April.
The IMF cited the possibility that inflationary pressures could intensify and prompt major central banks to raise interest rates further.
It also said expansion could be tempered by high oil prices and a likely slowdown in the United States caused by the cooling housing market.
In the euro area, stronger corporate balance sheets have helped bring increased investment, rising employment and a more balanced expansion to the 12 nations that use the common currency, the report said.
Growth would rise to 2.4 per cent in Europe in 2006 before moderating to 2 per cent in 2007, largely due to scheduled tax increases in Germany, it said.
However, the report said oil prices could climb higher and that the US housing market could cool more rapidly than expected and trigger an abrupt slowdown in the US.
Growth in the United States is expected to slow from 3.4 per cent in 2006 to 2.9 per cent next year, said the report, released in Singapore, where the IMF and World Bank will be holding their annual meetings on September 19th/20th.