PARIS, Sept 21: The OECD offered an optimistic assessment on Tuesday of prospects for world's leading industrialized economies, raising its projections in Japan and the euro zone and concluding that momentum had been only marginally hampered by a spike in oil prices.

The Organization for Economic Cooperation and Development in its latest economic outlook study shaved its forecast for US growth to 4.3 per cent this year from a forecast of 4.7 per cent issued in June. However, Japan was set to grow by 4.4 per cent, rather than three per cent, while in the 12-nation eurozone the economy would likely expand by two per cent instead of 1.6 per cent.

Individual figures for other big economies were: Germany 1.7 per cent revised up from 1.1 per cent, Britain 3.4 per cent up from 3.1 per cent, France 2.7 per cent from 2.0 per cent and Italy 1.3 per cent from 0.9 per cent.

"The momentum of the recovery projected in our Spring Economic Outlook has been only marginally dented by higher-than-assumed oil prices," OECD chief economist Jean-Philippe Cotis told a press briefing.

He said the turnaround "continues to unfold as foreseen," with gross domestic product in the six largest OECD member economies - the United States, Germany, France, Italy, Japan and Britain - likely to reach an annual rate of 3.5 per cent in the second half of the year.

While rising oil rates had exerted some upward pressure on inflation, their impact on core prices - which usually exclude food and energy - and wages was limited. "Thus far, the negative impact of oil market turbulence has therefore been of limited magnitude," Cotis said.

The health of the US expansion now depends on job creation and business investment, he added. US consumer confidence has been affected by lacklustre job growth but has still managed to remain close to its historical average.

At the same time, he said, US companies had made good use of a prolonged period of low interest rates, shoring up their balance sheets and boosting profits. Cotis said that while growth in Asian powerhouses Japan and China had slowed from the brisk pace seen in early 2004, "the most likely scenario remains one of sustained expansion".

He noted that in Japan firms were hiring workers but for the most part under non-permanent contracts in a context where wages were not recovering. As a result, consumer confidence was picking up but was not yet robust.

However, Japan should still able to rid itself of deflation in the next two years on condition that authorities carry on with structural adjustment measures. In the eurozone, household confidence is lagging the optimism shown by businesses, the OECD found, with gross domestic product expanding at near its potential rate, pulled along by external demand.

Cotis also noted "stark differences" in the euro area, with domestic demand buoyant in France but sluggish in Germany, the eurozone's largest economy. In another report on Tuesday, the European Central Bank said investment capital was flowing out of the eurozone, prompting analysts to warn that interest rates might rise and the euro weaken as a result. -AFP