The economy is on track to meet a 6.0 percent growth target this year despite inflationary pressure, Prime Minister Abdullah Ahmad Badawi said today.

Abdullah said that expansion of 5.3 percent in the three months to March showed the country's economy was on a solid footing.

"Although we are faced with both domestic and external challenges, the country's economy is expected to expand further at 6.0 percent this year," he said according to the official Bernama news agency.

The premier said that one of the factors behind the country's buoyant growth performance was domestic demand which continued to remain robust.

"The high prices of major commodities helped to raise the income of those in the rural areas, especially the agriculture community, as the rubber price rose to its highest in 20 years," he added.

Pak Lah defends price hikes

The premier defended his unpopular decision to raise petrol prices in order to stem large subsidies that were draining national coffers.

"The large amount of subsidy allocated could be channelled for development especially to improve the public transport system and to develop areas which are still left behind," he said.

The central bank said yesterday that growth in the first quarter, which outpaced 5.2 percent expansion in the previous three months, was led by the private sector and supported by strong performances from manufacturing, services and agriculture.

The inflation rate, which reached a six-year high in March at 4.8 percent following steep fuel price hikes, is expected to "remain at an elevated level for some time" said Bank Negara governor Zeti Akhtar Aziz.