A leading Malaysian forecaster has maintained its 5.2 percent economic growth prediction for 2007, picking up to 5.5 percent in 2008, despite increasing uncertainty in the global outlook.

"The global economy is showing early signs of deceleration," said the influential Malaysian Institute of Economic Research (MIER) in its fourth quarter outlook report.

MIER's growth projection is lower than the government's forecast of 6.0 percent GDP growth for 2007.

"The greater threat to the Malaysian economy is the deceleration in the major export markets. With tepid growth in developed countries affecting Malaysia's exports in 2007, domestic demand may feel the heat as well," MIER said.

However, MIER said that Malaysia has grown less sensitive to the United States, its largest trading partner, and more sensitive to East Asian economies, especially China.

"The softening demand in primary markets such as the US has partly been compensated by the expansion in secondary markets involving intra-Asian trade," it said.

The economic think tank also said that Malaysia's expansionary 2007 budget, with its big spending programs, "could help cushion" the global slowdown.

General election a factor

MIER forecast growth for 2008 to reach 5.5 percent if the US dollar undergoes an orderly correction and oil prices remain stable or ease.

It also said that the 2008 economic outlook would be brighter on expectations that domestic demand will be propped up ahead of an expected general election.

Malaysia's government expects growth to exceed its projection of 5.8 percent for 2006 and has painted a robust picture of the economy amid moderating inflation and easing oil prices.

It posted GDP growth of 7.2 percent in 2004, the fastest pace in four years, but slowed to 5.2 percent in 2005.