Singapore - The spread of the financial contagion beyond the United States has increased the likelihood of a global financial crisis and recession, the executive director of Singapore's sovereign wealth fund warned on Monday.

"We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years," said Tony Tan at a staff conference of the Government Investment Corporation (GIC), which bought substantial stakes in troubled UBS in December and Citicorp in January.

Tan, who is also the GIC's deputy chairman said the investments in the Swiss and US giants are regarded as "long-term investments which will give us good returns when markets stabilize and economic conditions return to more normal levels."

"We are now entering a period of extreme uncertainty in the world economy and the global financial markets," Tan said. "As banks continue to de-leverage, cutting down on their lending activities and causing contraction in credit supply, the prospects for the US economy and possibly even the world economy are fraught with considerable downside risk."

The economic downturn can be mitigated if decisive and timely actions are taken by policy makers in the United States and elsewhere, he said.

"If such actions by the authorities are not taken within the next three to four months, it will be left to the market forces of supply and demand to stabilize the US housing market before we can see the light at the end of the tunnel," Tan said. "This will be a considerably more painful and long drawn process."

Financial and investment markets will be extremely nervous and volatile over the next one to two years, Tan said. Policymakers, business managers and investors will require "fortitude and nimbleness." (dpa)