updated version

(AFP) Malaysia's economic growth slowed sharply in the first quarter as the global slowdown began biting, according to figures released today, and economists said the worst is not over yet.

The 3.2 percent figure for gross domestic product (GDP) growth year-on-year compares with a revised 6.3 percent figure for October-December, the central bank and the Statistics Department said.

"The economy has moderated after the relatively strong pattern during 2000, reflecting adjustments to the global economic slowdown," the department said in a statement.

It said manufacturing growth fell significantly in the first quarter to 3.7 percent from the previous first quarter. The sub-sector which includes electronics "mustered only a dismal growth of 3.4 percent."

Agriculture grew an unprecedented 12.0 percent in real terms - adjusted for price fluctuations - the statement said.

But it noted that at current prices the sector recorded negative growth of 7.8 percent, mainly due to the sharp drop in palmoil prices.

The services sector grew 4.0 percent in the first quarter.

The statistics department said private consumption spending continued to lose momentum and and rose only 4.1 percent, the lowest since the second half of 1999.

"The moderating trend in private consumption spending is indicative of deteriorating consumer sentiment," it said.

In the first quarter the export of goods and services rose by 6.6 percent in real terms, the lowest since the second quarter of 1999.

Optimistic gloss

Central bank governor Zeti Akhtar Aziz, who announced the same figures at a press conference, put a more optimistic gloss on them.

She said growth was increasingly supported by domestic demand, which in turn was supported by higher government spending.

Growth in domestic-oriented industries, semiconductors and agriculture and services "helped cushion the marked slowdown in the electronics industries".

Exports of electronics equipment and parts fell 13.4 percent in the first quarter. But this was partly offset by a 15 percent rise in exports of semiconductors.

A central bank statement said the full impact of the global slowdown was expected to be felt in the first half of this year.

Zeti predicted a pick-up in the second half and maintained the official growth forecast for the year of five to six percent.

"We see manufacturing slowing further in the second and third quarter," said Nizam Idris, Singapore-based economist with IDEA global.

"The worst is not yet over. Malaysia's main growth driver, manufacturing, is hampered by the slowing in the US economy."

Nizam forecast full-year growth of 3.8 percent compared to 8.5 percent last year.

Slowdown faster than anticipated

Ramon Navaratnam, an economist and former deputy secretary general of Malaysia's Treasury, said the slowdown was faster than anticipated.

"Expectations of the US economy picking up in the second quarter seem more remote now."

Eddie Lee, regional economist with Vicker Ballas in Singapore, said declining demand for electronics was "hitting Malaysia where it hurts most."

He forecast growth dropping further to 1.9 percent in the second quarter but was optimistic of a better second half.

"We are looking for some some recovery in the US in the second half especially some recovery in technology and this should flow into better numbers for Malaysia," Lee told AFP .

His full-year growth forecast is 3.5 percent.

In one sign of the times, newspapers reported that some 11,000 people applied for 500 job vacancies in hospitals in the northern state of Perak.