(AFP) The economy is expected to recover by year-end or at the latest by the middle of next year, a deputy minister said today.

Deputy International Trade and Industry Minister Kerk Choo Ting said the diversified nature of the economy would shield it from the worst effects of the global slowdown.

"The manufacturing sector contributes only 35 percent to gross domestic product (GDP) and the current economic slowdown now involves more of the manufacturing sector," Bernama news agency quoted him.

The effect of the slowdown, Kerk said, "is on the semiconductor sector which makes up only 20 percent of the manufacturing sector. However, Malaysia is heading towards a recovery".

He also played down recent layoffs in the manufacturing sector, saying some of these were caused by companies restructuring operations.

He said what was really hurting was the drop in international palmoil prices, involving 430,000 households who rely on the commodity, and the government was taking steps to push up prices.

Persuading investors

The head of the Malaysian Trade Union Congress (MTUC) Zainal Rampak, gave a less optimistic view, saying about 90,000 electronics workers are expected to lose their jobs by year-end due to the US slowdown.

"Because of these economic problems, several multinational companies may shift their operations to other countries in order to reduce their costs especially labour costs," he said.

Zainal, speaking yesterday night and quoted by Bernama , said some companies had already shifted part of their operations out of Malaysia. He urged top officials to meet foreign investors to persuade them to stay.

Almost 21 percent of all Malaysia's exports go to the United States, making it vulnerable to the downturn there.

The independent Malaysian Institute of Economic Research has cut its growth forecast for this year to four percent from five percent. Official first-quarter growth figures will be released Wednesday.