(AFP) - The decision by Finance Minister Daim Zainuddin to go on leave for two months may erode business confidence and hurt Malaysia's fragile economy, a labour chief and an opposition leader said today.

Zainal Rampak, president of the Malaysian Trades Union Congress (MTUC) said Daim's decision take a two-month leave of absence amid a slowdown in the US economy could "hurt market sentiments and lower business confidence".

"Remember he is the finance minister. It is a very important post - only second to the prime minister. He should not go on leave now," said Zainal.

The MTUC has about 170 affliates representing 750,000 workers

Prime Minister Mahathir Mohamad had denied Daim was resigning, saying that he was just "tired".

"He is not leaving in the first place. Just going on leave," Mahathir told reporters when asked about any resignation plans by Daim.

"He's only not attending cabinet meetings and Umno (ruling party) supreme council meetings."

But Zainal said the market would interpret Daim's move as tantamount to resignation.

"From the market's point of view - when you go on leave or resign - it is one and the same thing. Daim should not take leave," he said.

"I appeal to him to return."

But an economist with the National Economic Action Council (NEAC) downplayed the impact of Daim going on leave.

The primary task of the NEAC is to restore confidence in the economy following the 1997 Asian financial crisis. Daim is the executive director and it is chaired by Mahathir.

Growth forecast revised

An influential think-tank last Tuesday cut its forecast for Malaysia's economic growth this year amid a worsening US slowdown.

The independent Malaysian Institute of Economic Research (MIER) said it had reduced the gross domestic product growth forecast to 4.0 percent from 5.0 percent for 2001 but was maintaining the 6.0 percent prediction for 2002.

MIER said confidence, a major factor affecting investments and consumption decisions, was weakening sharply.

Daim is considered Mahathir's most trusted lieutenant and is treasurer of Malaysia's dominant political party, Umno.

The 62-year-old was born in the same village as Mahathir. He was finance minister from 1984 until returning to the private sector in 1991.

He was brought back into the cabinet in June 1998 as special functions minister to promote economic recovery, dealing a blow to then-finance minister Anwar Ibrahim.

Anwar was sacked in September 1998 and subsequently jailed. Daim was appointed finance minister in January 1999.

'Daim should make clear his stand'

Lim Kit Siang, chairman of the opposition Democratic Action Party blasted the government for failing to appoint an acting finance minister.

"The government, parliament, Malaysians are mystified as to who is currently carrying out the functions and powers of the finance minister! Is it still Daim?" he said in a statement.

Lim said Daim should surface publicly tomorrow and "make clear his position as finance minister, whether he is resigning or not."

Economist Zainal Aznam Yusoff, a member of the NEAC, said: "I think workers and the opposition should not get a feeling that with Daim on leave, things are left hanging in the air," he said yesterday.

NEAC's Zainal said Daim had not taken a break since the 1997-1998 crisis, adding that he was still going to work even if he was not attending cabinet meetings.

"Concerns over the running of the economy coming to a halt are an exaggeration," he added.