Malaysia’s economy shrinks 6.2pc in Q1 ’09

(The Malaysian Insider) – The Malaysian economy is worse than expected, contracting 6.2 per cent in the first quarter from a year ago, its worst fall since the fourth quarter of 1998 at the height of the Asian financial crisis.

It also shrank further from the 0.1 per cent Gross Domestic Product (GDP) growth in the previous quarter in 2008, Bank Negara said today.

“We already anticipated a very slow growth as the financial crisis has become more prolonged than earlier expected and the deterioration in global economy was far greater than expected,” Bank Negara governor Tan Sri Zeti Akhtar Aziz told reporters.

The government had expressed optimism that  the export-driven economy will return to growth in the third quarter after slumping in the first half of 2009 as exports plunged.

Prime Minister Datuk Seri Najib Tun Razak had already cautioned the government will revise down its forecast for Malaysia to weaken by one per cent for most of 2009

The country’s short-term growth depends on a global recovery boosting demand for its electronics, oil and commodities exports and also on Asian giant China’s consumption holding up.

Najib, who is also Finance Minister, has said Malaysia will have to change its economic model in order to generate future growth, adding he would concentrate on innovation and creativity particularly in services for Asia’s third-most export-dependent nation.

Asked about the outlook for the second quarter, Zeti said there was still uncertainty in the global economy.

“There is a high degree of uncertainty in the global environment,therefore we decided to reduce interst rate and we said we front-loaded it, because the deterioration was far more severe than what we have previously anticipated,” she said, adding Najib will announce the new GDP forecast tomorrow.