The country's economic recovery is on track with gross domestic product (GDP) rebounding from two quarters of contraction to expand 1.1 percent in the quarter to March, the central bank said Wednesday.

The year-on-year expansion was driven by steely growth in the services sector due to strong consumer spending and an upturn in electronic exports, Bank Negara Malaysia said in a statement.

But on a quarter-on-quarter basis, GDP fell 2.9 percent for the third consecutive quarter.

Central bank governor Zeti Akhtar Aziz said the 1.1 percent growth was within expectations and in line with the official forecast of 3.5 percent growth this year.

"We expect continued improvement. The second quarter GDP will be an improvement over the performance of the first quarter, and this trend will continue in the second half of the year," she told a news conference.

Economists said the growth confirmed expectations of an economic recovery.

"The economy is slowly but definitely crawling out of the slowdown. It is picking up again and this is a confirmation of what we expect," said Nizam Idris, regional economist with Singapore-based IDEAglobal.com.

"I think the economy has done well to diversify - to spread its growth (dependence) away from manufacturing."

Signs of recovery

Hong Leong Bank economist Lee Heng Guie said: "I would term this as an early sign of recovery. The recovery process is in place and things are likely to strengthen in the second half."

Bank Negara said indicators pointed to continued domestic-driven growth amid improved capacity utilisation and expectations of a recovery in investments in the second half of the year.

"Overall, improving external conditions, sustained domestic activities and sound fundamentals will be favourable for strengthening of the economic recovery in Malaysia."

It said the services sector was the main driver of growth in the January-March period, rising 4.6 percent year-on-year, while construction expanded 2.9 percent.

The manufacturing sector recorded a significantly lower decline of 2.1 percent, after slumping 8.4 percent in the previous quarter.

Bank Negara said electronic exports turned positive, rising four percent in March to mark the first positive growth in a year and was up 1.1 percent for the first quarter.

Also for the first time since March 2001, imports logged positive growth of 0.5 percent mainly to meet higher demand of intermediate inputs for manufactured goods.

The mining sector dipped 0.8 percent due to lower demand for natural gas while agriculture fell 4.9 percent due to lower palm oil output.

Inflation remained low at 1.4 percent and the country continued to operate under full employment despite the retrenchment of 10,083 workers in the first quarter, the central bank said.