PARIS, May 26 (Reuters) - The global economy is recovering faster than expected from recession with Asia leading the way, but it is at risk from huge debts in developed countries and possible overheating in countries such as China, the OECD said yesterday.

In a twice-yearly report, the Paris-based Organisation for Economic Co-operation and Development raised its forecast for global growth to 4.6 percent in 2010 and 4.5 percent in 2011. Last November it predicted growth of 3.4 percent this year and 3.7 percent in 2011, after a 0.9 percent contraction in 2009.

It was also far more optimistic about job markets globally, saying unemployment in its 31 member countries may have peaked at around 8.5 percent — much lower than its previous prediction of almost 10 percent.

The new forecasts are higher than the average annual rate of growth in the decade before the financial crisis that spilled out of the US in 2007 — an average of 3.7 percent per annum over 1997-2006, according to OECD figures — but the OECD said the bounce was uneven and risk-prone. The developed economies where the 2009 recession exacted the biggest toll were getting a lift from resurgent international trade, propelled primarily by export demand from rising economies in Asia, the OECD said.

It raised its forecast for US growth this year and next to 3.2 percent each time, from 2.5 and 2.8 percent in its forecasts of last November.

It predicted Japanese growth of 3.0 percent in 2010 and 2.0 in 2011, up from 1.8 and 2.0 percent previously, and forecast the euro zone to lag with growth of 1.2 percent and 1.8 percent this year and next, still marginally more than forecasts of 0.9 and 1.7 percent last November.

The biggest challenge the advanced economies faced right now was cutting post-recession debts and containing financial market instability that had spread recently from Europe.

Fiscal consolidation is imperative for many countries. It is also to lay the groundwork for sustained growth in the longer term," OECD Secretary General Angel Gurria said. "Getting the timing and sequencing right will prove enormously challenging everywhere."

That challenge is about juggling austerity measures that may be vital but are also likely to hurt growth, while keeping sight of the need to wean economies off rock-bottom interest rates and government support put in place when many believed the downturn could degenerate into a second Great Depression.

After a debt crisis that spread from Greece to spark broader financial market turmoil over perceived debt default risks, the euro zone is accelerating austerity plans such as cuts in public wages and spending.

Recent weakening of the euro currency should offset some of the growth hit from austerity by lifting exports and the region should avoid a relapse into recession, OECD chief economist Pier Carlo Padoan said in an interview with Reuters.

The OECD highlighted a very different threat to the emerging market economies such as China and India, saying: "A boom-bust scenario cannot be ruled out, requiring a much stronger tightening of monetary policy in some non-OECD countries, including China and India, to counter inflationary pressures and reduce the risk of asset-price bubbles."