The economy expanded by 5.7 percent in the first quarter of this year against 5.8 percent in the fourth quarter of 2004, in line with expectations, the central bank said today.

"Growth in the first quarter was broad based, with all major sectors of the economy, except construction, registering positive growth rates," Bank Negara said in a statement.

The private sector continued to be the key driver of growth, underpinned by "robust" consumer spending.

"The fiscal position saw an improvement to register a surplus of 2.3 percent of GDP in the first quarter, attributable to strong revenue collection and lower development expenditure," the statement said.

'Moderate' inflation

Inflation increased "moderately" to 2.4 percent, driven mainly by higher prices for food and transport.

The trade surplus increased to RM25.2 billion, with gross exports increasing 13.5 percent supported by high prices for crude oil and double digit growth for manufactured exports. Imports increased by 9.8 percent.

Foreign direct investment inflows "remained high at RM4.4 billion, mainly to the services manufacturing and the oil and gas sectors".

The central bank's net international reserves rose to RM275.2 billion by the end of March, supported by sustained repatriation of export proceeds and inflows of FDI and portfolio investment.

Near-term outlook 'favourable'

The near-term outlook "remains favourable despite some signs of moderating growth in the global economy and rising prices," the bank said, while noting "emerging concerns over inflationary pressures".

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

Governor Zeti Akhtar Aziz told a news briefing today the bank was standing by its forecast.

"Based on indicators available, we have a high degree of confidence that the growth will continue into the second quarter," she said.