UPDATE 2-Global rebound anemic, BRICs may overheat: Roubini

* Advanced economies face risk of double-dip recession

* Economist Roubini: risk of deflation in bigger economies

* Need to remove stimulus to avoid emerging-market bubble

(Adds byline, Brazil and China comments, context)

By Guillermo Parra-Bernal

SAO PAULO, May 31 (BestGrowthStock) – Advanced economies face years
of anemic growth and the risk of a double-dip recession as
their citizens cope with sluggish employment and highly
indebted governments, economist Nouriel Roubini said on
Monday.

A sovereign debt crisis in the euro zone has rattled
financial markets in recent weeks as investors worry that
fiscal austerity measures dictated by a $1 trillion European
Union-International Monetary Fund rescue plan could stifle
already hobbled global growth.

In contrast, some emerging markets risk overheating and are
showing symptoms of a potential asset bubble.

“Labor market conditions will remain very weak in some
advanced economies,” said Roubini, known as Dr. Doom and most
famous for having predicted the U.S. housing crisis.

“Savings will have to rise faster than consumption for the
coming years. That is why growth will remain anemic,” Roubini,
who heads U.S.-based economic consultants RGE Monitor, told
attendants at a seminar in Sao Paulo.

The global economy struggled with a credit crisis in
2008-2009, and investors worry that the fiscal crisis in the
euro zone could hamper growth in advanced economies, which only
recently began to recover.

Fears over the the financial health of the euro zone
intensified last week after Fitch Ratings downgraded Spain’s
credit rating by one notch, to AA-plus, in a sign that the
crisis over Greece’s debt problems was spreading to other euro
nations. See [ID:nLDE64U02M].

Because the Spanish economy is far bigger than Greece’s, a
crisis there would have far more serious implications for the
16-nation euro zone and global growth.

Greece, Spain, Portugal and Ireland face serious
competitiveness bottlenecks that could hamper their recovery,
Roubini added.

RED-HOT

In contrast to sluggish growth in advanced economies, the
risk for emerging markets is overheating and asset bubbles,
Roubini said.

Record-low interest rates in advanced economies last year
pushed investors toward higher-yielding emerging markets so
quickly that countries like Brazil slapped a tax on capital
inflow to avoid an overvaluation of their currency.

Interest rates in advanced economies would remain close to
zero for a longer time, Roubini added, and it was time for
emerging markets to remove economic stimulus to avoid forming
an asset-price bubble.

There is also a risk that economies would overheat in the
so-called BRIC countries, Roubini said, which include emerging
powerhouses like Brazil, Russia, India and China.

Economic activity in Brazil, Latin America’s largest
economy, for example, grew nearly 10 percent in the first
quarter of this year, a new central bank indicator showed
recently. Analysts and officials at international institutions
like the IMF have flagged the risk that Brazil’s economy could
grow too quickly.

To be able to grow at more than 6 percent a year without
fueling inflation pressure, Brazil would have to boost its
infrastructure, improve business conditions and implement
structural reforms.

“Over the next years you have to push forward with a number
of structural reforms to achieve six-plus (percent) growth a
year,” Roubini said.

There was also more room for gradual monetary tightening in
Brazil to avoid inflation “getting out of control,” he said.

Brazil’s economy is expected to grow 6.47 percent this year,
according to the latest weekly central bank survey of local
financial institutions.

Economists in the survey, however, kept their forecast for
benchmark inflation steady for the first time in almost five
months, betting the IPCA consumer index will close the year at
5.67 percent [ID:nN31137396]

China’s economic outlook, Roubini said, was full of mixed
signals.

High inflation was a worry and there were signs of an asset
bubble forming, he said. But steps by the Chinese to cool the
economy could also be counterproductive, posing an additional
obstacle to already sluggish global economic growth.
(Additional Reporting by Aluisio Alves; Writing by Ana
Nicolaci da Costa; Editing by Padraic Cassidy)

UPDATE 2-Global rebound anemic, BRICs may overheat: Roubini