The country's economy is on track for 4.5 percent growth this year and 5.7 percent in 2003, backed by rising business sentiment and consumer confidence, a private think tank said Thursday.

The Malaysian Institute of Economic Research (MIER) said business sentiment in the second quarter rose to its highest level since the last quarter of 2000 while consumer confidence had risen sharply from 2001.

It said electronic and electrical companies were expecting "better times ahead," with upward demand for exports and healthy domestic orders.

"We believe the US economy will continue to recover at a moderate pace and that positive development in the real economy, coupled with low interest rates and tax cuts, will outweigh negative sentiment arising from the plummeting financial markets," it said in a report.

This was based on the assumption the accounting scandals in the United States would not increase dramatically and that the US government would undertake stringent measures to curb further abuse.

"We also feel that East Asia has regained enough strength to generate its own internal dynamics which could partially offset the negative knock-on effects from the US," the MIER said.

"Barring any unexpected event, we feel that the Malaysian economy can still register a 4.5 percent growth in 2002."

Good value

The report said investors who have shifted funds away from the US would be looking for a potential location and East Asia offered good value.

"As developed countries gravitate towards the trend of growth, Malaysia could return to its growth trajectory, with 5.7 percent in 2003," the MIER added.

It said the business condition index in the second quarter rose to 57.5 points, up from 51.9 in the first three months, while consumer confidence jumped to 109 points, from 104.4 in the first quarter.

"Overall, expectations among the companies indicate higher production in the coming months," it added.

The Malaysian trade ministry last month forecast the economy would recover to expand between three and five percent this year after an anaemic 0.4 percent growth in 2001. — AFP