It's 4.6pc growth for Malaysia in 2008

The earlier gross domestic product (GDP) target for 2008 was 5 per cent. GDP growth in 2007 was 6.3 per cent. Najib said the slower growth was due to the worsening global economy that had caused a significant drop in the country's exports.

"The global economic scenario is getting more critical and a prolonged recession is expected," he said at a press conference in Putrajaya yesterday.For the October-December period, Malaysia's GDP grew 0.1 per cent compared with 4.7 per cent in the third quarter.

This was the lowest quarterly GDP growth since 2001, but still credible compared to other economies that were hit worst by the global economic crisis.

Singapore's economy contracted 4.8 per cent in the fourth quarter, bringing 2008 GDP growth to just 1.1 per cent. Japan recorded minus 4.6 per cent growth in the fourth quarter and minus 0.7 per cent for the full year.

Malaysia's manufacturing sector contracted by 8.8 per cent from a growth of 1.8 per cent in the third quarter due to weaker demand for electronic and electrical products.Najib said the services sector grew 5.6 per cent, while the manufacturing, mining and construction sectors recorded negative growth of 8.8 per cent, 5.7 per cent and 1.6 per cent respectively.

Agriculture activities, meanwhile, saw a lower growth of 0.5 per cent due to a moderate increase in crude palm oil production (3.6 per cent) and a significant reduction in rubber production (-28.4 per cent).

He said it is unlikely that the current quarter will see any improvements. "Of course it all depends on the situation in the US and Europe. We have to see the effectiveness of the fiscal stimulus and efforts to revive the banking sector in US.

"However, all signs indicate deeper and more prolonged recession, as even IMF (International Monetary Fund) and most countries have revised economic growth projections, including Singapore which did it four times," Najib said.

He said the mini-budget to be tabled in Parliament on March 10 would help cushion the impact of a global recession on Malaysia, as the country would go into full gear to increase GDP growth by stimulating domestic demand.

This would be complemented by other initiatives, including easier monetary policies. The fiscal deficit for this year would be maintained at its earlier estimate of 4.8 per cent of gross national product.

The government would likely revise its earlier GDP projection of 3.5 per cent for 2009, as it was no longer sustainable in view of the weakening external economic environment. Najib said a new GDP target for the year would be announced on March 10.