ADB sees no risk of US recession, finds Asia robust

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SINGAPORE, Sep 26 (Reuters) There is no risk of the United States tipping into recession on account of the slump in housing markets and Asian economies should therefore continue to grow robustly, the chief economist of the Asian Development Bank said.

''Our assessment is that the U.S. will not go into recession,'' Ifzal Ali told an emerging markets seminar on Wednesday.

''If the slowdown spreads to the euro zone and Japan also stays in negative growth territory, then growth in Asia will be lower,'' he told reporters later.

He said uncertainty about global growth and credit markets remained elevated but the ADB had not changed its forecasts for Asian growth.

In a report earlier this month, the ADB forecast economic growth in Asia excluding Japan would average 8.3 percent in 2007, compared with 8.5 percent last year.

The ADB also revised up its growth forecast for the region in 2008 to 8.2 percent from 7.7 percent but left open the possibility of downward revisions due to any fallout from the slump in the U.S. housing market.

Ali said he expected further monetary easing in the United States following last week's half-point cut in the fed funds rate. But he warned that the Fed did not have much leeway to cut rates, given inflationary pressures, and said this easing might soon have to be reversed.

He said Asia was ''marching to a different drumbeat'' and countries with inflationary pressures such as India would probably persist with rate rises despite the Fed's stance.

He also said China needed to permit greater movement in the yuan if it was serious about curbing the inflationary impact of its growing trade and current account surpluses.

''Unless the yuan is allowed to float more freely, these 0.27 point interest rate rises are not going to do the trick,'' he told reporters.

China has raised rates five times this year to tackle price pressures and slow credit growth, but inflation is at 11-year highs and economists expect more tightening in the months ahead.

REUTERS PBB RN1611

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