Malaysia is likely to escape a recession next year and post a modest growth despite the global financial crisis due to strong consumer demand and public spending, the central bank said today.

"We expect to have positive growth next year," central bank governor Zeti Akhtar Aziz told reporters.

zeti akhtar with bank negara report Malaysia's top trading partner neighbouring Singapore and Asia's largest economy Japan are already in a recession.

Zeti said if the global financial crisis does not worsen, Malaysia would post a growth of 3.5 percent in 2009.

"Domestic demand has become the engine of growth. Our financial system is not facing the financial stress. We have ample liquidity in the system.

"We have no large-scale retrenchments. We are creating jobs. We are in an economy where there is no asset burst," she added.

Savings on reduced subsidies

Zeti said since Malaysia was not hit by the many such problems, the economy will enjoy growth and not face "a risk of a recession."

The government earlier this month announced a RM7 billion stimulus programme and warned growth would slow substantially in 2009.

The spending package, reaped from savings on reduced oil subsidies, is to be spent on "high-impact" projects including roads, schools and low-cost housing.

Earlier Zeti announced Malaysia posted a slower growth of 4.7 percent in the third quarter amid a "sharp deterioration in the global economic and international financial environment."

The central bank revised upwards second quarter growth to 6.7 percent from 6.3 percent. Malaysia posted a 7.1 percent growth in the first three months of 2008.

Zeti said Malaysia would register economic growth of 3.5 to 4.5 percent while for the whole year it would post five to 5.5 percent growth.

"We said the next 12 months will be a challenging period. Despite that we expect our growth (this year) to be five to 5.5 percent," she said.

Inflation has peaked at 8.4%

Zeti also said Malaysia had at its disposal a string of measures to sustain strong consumer demand, which will be introduced if there is a major economic downturn among its Asian neighbours and the world.

"This would relate to fiscal and other measures to attract foreign direct investments. It could also include monetary policies. A wide range of measures will be implemented if the global economic situation worsens.

"The objective is to contain the impact on our economy. It is to ensure there is access to financing," she added.

Zeti said inflation had peaked at 8.4 percent and would moderate next year. "In the second half of 2009, it will fall below 3.9 percent."