Malaysia today reported better than expected industrial output growth in March of five percent from a year earlier but analysts said a slowdown was likely in the second quarter.

The key manufacturing sector expanded 6.2 percent in March while mining output rose 5.9 percent to cushion a 6.2 percent fall in electricity, the Statistics Department's preliminary data showed.

However, output in March edged down 1.8 percent from February as manufacturing activity slid 5.1 percent, offsetting 14.8 percent growth in electricity and 8.7 percent in mining, it said in a statement.

In the first quarter of the year, the industrial production index expanded 5.4 percent from a year earlier.

Slowing external demand

Paul Schymyck, economist with IDEAglobal in Singapore, noted that the department had also revised upwards February industrial output from a 0.9 percent contraction from a year earlier to a 7.6 percent rise.

"The numbers have come in better-than-expected. It looks as if the first quarter GDP growth rate will come in quite healthy at around five percent," he told AFP .

"But we would caution that exports are trending down, suggesting that external demand has slowed down. Domestic spending is hurt by Sars and the Iraq war, so we expect growth will slowdown in the second quarter."

Malaysia's industries are being hurt by the double blows of the war in Iraq and the outbreak of the deadly Severe Acute Respiratory Syndrome (Sars) which has left nearly 500 people dead worldwide.

The central bank has cut its 2003 growth forecast to 4.5 percent from 6.0-6.5 percent, and Prime Minister Dr Mahathir Mohamad is expected to unveil a twice-postponed stimulus package this month in an attempt to halt any further slide in the economy.

"Given the latest developments that have occured recently with Sars, certainly it will affect the underlying growth figures," Bank Negara governor Zeti Akhtar Aziz told reporters today.