Paris, 3 Sept. (AKI) - The global economy may recover from recession earlier than previously thought, according to a new forecast from the Organisation for Economic Co-operation and Development. The OECD on Thursday predicted a third-quarter expansion of economic output, measured by gross domestic product, in the United States and the 16-country euro zone, led by Germany and France.

The forecasts showed an annualised expansion of 1.6 percent in the United States in the third quarter, 0.3 percent in the euro zone and 1.1 percent in Japan. The OECD outlook was much more optimistic than the previous update released in June.

However, the Paris-based body predicted continued third-quarter contractions in Italy and Britain, while the broad outlook for the Group of Seven industrialised powers had improved.

"Governments will need to continue to stimulate their economies as rising unemployment and weak housing markets continue to dampen private demand," the OECD report said.

"The current exceptionally low interest rates should remain in force for the time being."

The OECD forecasts economic growth across the Group of Seven countries to fall by 3.7 percent this year, a less brutal contraction than the 4.1 percent drop projected in June 2009.

But it predicted continued further contractions in Britain and Italy where GDP was predicted to fall by 5.2 percent in 2009, a little more positive than the 5.5 percent fall forecast in June.

The OECD said the broad picture for the G7 group of industrialised powers was better.

The forecasts show the euro area turning positive in both of the last two quarters of 2009 after five straight quarters of contraction.

The OECD's 30-member countries do not include rising powers such as China but other major industrialised countries where the trouble began in 2007 as the credit and housing markets collapsed in the United States.