The economy is out of the woods after the Iraq war and the Sars epidemic, with growth expected to pick up in the second half of the year, officials and economists said today.

The National Economic Action Council executive director Mustapha Mohamed said the government believes that the "worst is over" for Malaysia.

"The expected impact of Sars in May and June did not materialize. There is clear evidence that things are on the way up," he said, citing stronger production and trade data as positive indicators.