Malaysia's economy could grow at a slower rate than expected this year due to high oil prices and a decline in exports, an independent think tank said today.

The Malaysian Institute of Economic Research (MIER) said it was lowering its gross domestic product (GDP) growth estimate to 5.4 percent from 5.7 percent predicted in January.

The global economy was slowing down and "as an open economy, Malaysia's growth would depend highly on external conditions, as domestic demand can only cushion part of the slack," it said.

Higher oil prices would be "a persistent threat that could dampen global economic growth. The increasing downside risks in the external environment means that Malaysia's economic prospects could be affected as well," it added.

MIER also pointed out that the Malaysian ringgit - which has been pegged at 3.80 to the US dollar since 1998 - had depreciated along with the US dollar since early 2002.

"An exit strategy has to be properly devised to ensure a smooth adjustment process since the ringgit peg will have to be lifted eventually," it said.

Malaysia's central bank said last month that a prolonged downturn in the global semiconductor industry, high oil prices and rising interest rates could push economic growth to as low as five percent this year.

Bank Negara Malaysia said growth was expected to slow to 5.0-6.0 percent in 2005, after 7.1 percent in 2004, its fastest pace in four years.