Q1 GDP -6.2 PCT, PROGNOSIS FOR RECOVERY BRIGHT IN 2H

KUALA LUMPUR, May 27 (Bernama) -- Malaysia's first quarter gross domestic
product this year contracted by 6.2 percent from a growth of 0.1 percent in the
fourth quarter last year but the prognosis for improved economic conditions look
brighter in the second half of the year.

Bank Negara Malaysia Governor Dr Zeti Akhtar Aziz, in announcing the GDP
figures, attributed the contraction to the significant deterioration in
external demand following the deepening recession in advanced economies.

"Export demand continues to be weak and the environment is still
challenging. Despite early signs of improvement, Q2 will be similar to Q1," she
told a press conference on the country's economic performance here Wednesday.

The economy was expected to continue to contract in the second quarter,
said the central bank governor.

"However, economic conditions are expected to improve in the second half of
this year supported by fiscal stimulus measures and enhancing access to
financing," she said.

"Malaysia is expected to see a significant improvement in the third quarter
this year and a higher degree of positive growth in the fourth quarter that
would continue into next year."

"There will be improvement, but it will also depend on both the external and
domestic environment as well," she said.

"If the measures taken by other economies does take place, then Q2 would
have seen the worst, she added.

Elaborating on the first quarter contraction, Dr Zeti said it was
contributed also by the large inventory drawdown, particularly in the
manufacturing and commodity sectors.

Fixed investment registered a decline due to weaker business sentiment.
Public spending however, provided some support to growth.

On the supply side, all sectors recorded contraction except for the
construction sector.

Compared with the first quarter of last year, the manufacturing sector
declined significantly by 17.6 percent (Q4'08: -8.8 percent).

This was led by a 23.1 percent contraction in the export-oriented industries
and the electrical and electronic industry which contracted by 41.4 percent.

The services sector saw a marginal decline of 0.1 percent (Q4'08: +5.7
percent) primarily affected by sub-sectors closely linked to the manufacturing
sector.

The agriculture sector recorded a contraction of 4.3 percent (Q4'08: +0.5
percent) due to lower output of both palm oil and rubber.

The decline in the mining sector of 5.2 percent (Q4'08: -5.7 percent) was
due to falling crude oil and natural gas production.

Meanwhile, the construction sector, turned around to register a positive
growth of 0.6 percent (Q4'08: -1.6 percent) due mainly to an increase in
construction of office space and the high end segment of the residential
sub-sector.

Inflation rate moderated to 3.7 percent in the first quarter (Q4'08: 5.9
percent) due mainly to lower inflation in the food and non-alcoholic beverages
and transport categories.

Headline inflation continued to moderate to 3.0 percent in April.

Dr Zeti said further moderation was expected in the next two quarters with
inflation to be below 2.0 percent for the year.

In the external sector, Malaysia's trade surplus remained large at RM32.7
billion (US$9.34 billion)as the contraction in imports exceeded that of the
contraction in exports.
-- BERNAMA