The country's recovery gained momentum in the second quarter to June with the economy growing a stronger-than-expected 3.8 percent from a year earlier, the central bank said today.

Growth in gross domestic product (GDP) during the three months was a robust 3.9 percent compared with the first quarter due to a strong recovery in exports and domestic demand.

"The Malaysian economy expanded at a stronger pace in the second quarter of 2002. Sustained strength in domestic demand and a recovery in exports raised real GDP growth to 3.8 percent on an annual basis from 1.1 percent in the first quarter," Bank Negara governor Zeti Akhtar Aziz told a press conference.

Private consumption rose 5.6 percent from a year earlier in the second quarter compared with 3.0 percent in the first quarter, while public sector consumption jumped 15.4 percent, she said.

Manufacturing rebounded

Zeti said that for the first time since the first quarter of 2001, exports recorded positive annual growth of 5.3 percent. They were boosted by stronger growth in electronics exports and improved terms of trade arising from higher prices for palm oil, rubber, cocoa and timber.

Economic growth was further strengthened by a recovery in the manufacturing sector and year-on-year growth of 4.5 percent in services.

Manufacturing rebounded in the second quarter with growth of 5.6 percent compared with a decline of 2.3 percent in the first quarter. The rise was the first since the first three months of last year, Zeti said.

The year-on-year growth rate was higher than general expectations and it should be positive for the market, an economist said.

"The figure is very much stronger than what the market had expected. It shows that the economy is recovering. It should be positive for the market but what the market wants to find out is whether this growth momentum could be sustained," said Lee Heng Guie, an economist with Hong Leong Bank.

External risks

Lee said recovery should continue into the third and fourth quarters but warned external risks arising from uncertainty in the US economy remained.

Last month the Malaysian Institute of Economic Research said Malaysia's economy was on track for 4.5 percent growth this year and 5.7 percent in 2003, backed by rising business sentiment and consumer confidence.

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