ECONOMY TO CONTRACT BY BETWEEN -4 & -5 PCT, SAYS M'SIAN PM

PUTRAJAYA, May 28 (Bernama) -- The Malaysian economy will contract by
between -4.0 and -5.0 percent this year, Prime Minister Najib Tun Razak said
Thursday.

However, he said the economy was expected to do better in the second half of
the year.

In March, the government had forecast the country's growth to be
between -1.0 percent and 1.0 percent.

Currently, there are early signs that the economic stimulus packages are
beginning to have positive effects, said Najib.

This has further been supported by higher commodity and stock market prices
as well as rising investor confidence, he said.

"With this, it is hoped that the economy will recover at the end of the
year," he said.

"Although the fourth quarter is likely to be positive, the overall growth
for the year is still negative because the first quarter is negative, and the
expected negative growth in the second quarter and slight negative growth in
third quarter," he told a media briefing at his office here.

Najib, who is also Finance Minister, also said Malaysia was already in
technical recession.

"Our recovery depends on the world recovery. We have to see what happens in
the United States and Europe. If they recover, we will be on track for growth,"
he said.

Najib said the sector which had pulled the first quarter growth down was
exports which contracted by 25 percent as external demand plummeted more than
expected.

He added that private investment was also down by 26 percent.

"The worldwide foreign direct investment (FDI) has shrunk. FDI going into
Malaysia is down to about half of what it was last year. That is the reason why
our performance has gone down," he said.

As such, he said the government would ensure that both the first and second
stimulus packages as well as next year's budget have a positive impact on the
country's economy.

Najib said all ministers have been tasked to monitor the performance of
projects in their own ministries to further expedite the fiscal stimulus
packages.

Asked if it was necessary to introduce another stimulus package, Najib said
the government was monitoring the situation closely and would do whatever was
necessary to minimise the impact.

Najib said the government was also preservering in reinforcing the economy's
resilience and competitiveness by ensuring that government allocation was spent
according to schedule with priority on value for money, enhancing liberalistion
initiatives, boosting human capital development, facilitating and increasing
access to credit, as well as further strengthening the public sector delivery
system.

On the local banking sector, Najib said the financial institutions here are
not only resilient, but also healthy and flushed with liquidity.

In fact, he said lending activities have increased by 10 percent.

Najib said there would also be new guidelines for the Foreign Investment
Committee to further enhance the liberalisation of various economic sectors in
Malaysia.

"There would be new guidelines on FIC requirements which is being put
together and in the final stages. It is expected to be announced soon," he said.

-- BERNAMA