Agence France-Presse . Singapore

The US economy is heading for a recession and the downturn is expected to last until next year, the chief economist for Standard Chartered bank said Tuesday. A US slowdown will hurt Asia's export-led economies but the region is in a better position to cope with the situation because of its huge currency reserves and improved finances, Gerard Lyons said.

'The US economy in our view is heading into a recession,' Lyons said at a conference organised by the London-based bank. Unlike previous US recessions which typically last 10 to 11 months, Lyons said the world's largest economy will stay weak into next year. He added the US Federal Reserve will cut interest rates to 3.0 per cent by June to shore up growth.

Lyons said that in his view, 'they should go even lower.' While Asia's economies are still reliant on the US, the region is seen as boasting significantly bigger currency reserves and better fiscal positions, which should soften the impact of a US slowdown, said Lyons. 'Basically there is a lot more room to respond to any downturn,' he said, referring to Asia's ability to cope.

Standard Chartered is forecasting the US economy will grow 0.5 per cent this year. Other major financial houses including Goldman Sachs and Merrill Lynch have also tipped a US recession. 'The recent data suggest that the US economy is falling into recession,' Goldman Sachs economists said in a research note last week, noting that the impact of credit and housing woes is already being felt. Goldman Sachs said it expects the Federal Reserve to cut interest rates aggressively, bringing the federal funds rate from the current 4.25 per cent to 2.5 per cent by late 2008.

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