(RTTNews) - Asian economies are set to emerge from the global downturn both sooner and stronger than any other region, the International Monetary Fund's First Deputy Managing Director John Lipsky said Tuesday.

Speaking at the Federal Reserve Bank of San Francisco Conference in Santa Barbara, California, Lipsky said Asia was doing well as reflected by its economic indicators. Inflation has virtually disappeared and employment losses were also more milder during the present downturn compared to previous ones, he said.

In its latest World Economic Outlook, the IMF projected the Asian economies to grow 2.75% this year and 5.75% next year. Moreover, the region's three fastest growing economies, China, India and Indonesia are expected to grow 8.5%, 5.5% and 4%, respectively this year. Although many economists and policy makers were of the view that Asia's remarkable recovery represents a decoupling from the rest of the world, Lipsky noted that the rebound so far largely reflected a return to normalcy of trade and finance flows. 

The Asian economies took quick and forceful policy actions involving monetary easing, currency flexibility and in some countries, large fiscal stimulus, bigger than the G-20 average. Moreover, the region contributed to international capital flows and has in recent times also provided financial support to the IMF in turn to help other countries facing balance of payment problems.

However, Lipsky pointed out that with recovery still tentative and inflation levels remaining, a near term tightening of monetary policy would be premature for most countries. However, he made exceptions to Australia, India and China, where recovery was taking place rapidly. Moreover, he said the policy support measures should be continued until a durable recovery is seen.

With regard to the global economy, Lipsky said, "the worst has passed, and the healing process has begun." That said, he noted that "the global economy still faces considerable risks and challenges". The Washington-based IMF expects the global economy to expand 3.1% in 2010 after shrinking 1.1% this year.

In an interview to CNBC on Tuesday, Lipsky, the second top IMF official noted that the level of major currencies at present were not hampering a necessary recovery in global economy. However, in the long term they could play an important role, he said. Surplus countries may have to shift focus to internal demand and the deficit countries, the opposite, he said.

"There is a real danger that in the wake of the current crisis, there could be renewed wide-spread efforts to add to reserves." he warned in the speech at San Francisco Fed conference. "It is clear that if such efforts are pursued simultaneously, one result would be to dampen the global recovery." Further, Lipsky told CNBC that the IMF's biggest concern is a "successful handoff from public-sector demand to private- sector demand" in world economies.

In a conference at the Bank of Mexico on Monday, Lipsky said the challenge of restoring growth in the crisis would require revitalizing private demand and restoring fiscal sustainability. He noted that authorities in emerging market economies are likely to follow a cautious approach to further development of their financial systems, but there is little danger that they will turn back to earlier financial repression.