UPDATE 2-US's Paulson:Global markets face prolonged turmoil

(Adds quotes from news conference)

By Glenn Somerville

TOKYO, Feb 9 (Reuters) - U.S. Treasury Secretary Henry Paulson said on Saturday the global economy faces a prolonged period of financial market disruption but expressed confidence the United States would not be dragged into recession.

"The current financial turmoil is serious and persisting," Paulson said after meeting fellow finance chiefs from Group of Seven industrial countries.

"As the financial markets recover from this period of stress, as of course they will, we should expect continued volatility as risk is repriced," he added.

Paulson said he expected U.S. economic growth to continue in 2008 but conceded the outlook faced risks that had made a fiscal stimulus package absolutely necessary.

He told a questioner at a news conference later that he believed the U.S. economy would expand this year even if it is at a slower rate. "I believe that we're going to keep growing," he said. "If you're growing, then you're not in recession."

Paulson acknowledged the risks to the U.S. economy -- the largest among G7 countries -- were to the downside.

"The housing correction, high energy prices and capital market turmoil have combined to weigh on near-term growth," Paulson said, adding that he felt the $152 billion fiscal stimulus package that Congress passed just before he flew to Tokyo would help and was vital.