The Malaysian economy, which posted a strong performance in the second quarter, would not be severely affected by the US subprime crisis, central bank governor Zeti Akhtar Aziz said today.

"I want to emphasize that ... the impact on Malaysia would be less pronounced than what we experienced previously, because we are a more diversified economy and more importantly we have a stronger domestic economy (now)," she told reporters.

The US is a major trading partner of Malaysia and a key source of foreign investments.

Zeti, however, said that it was too early to make a conclusive assessment of the US economy right now because it remains to be seen what kind of policy response the US authorities would take in regard to the subprime credit problems.

Target growth still 6%

The central bank will monitor very closely financial developments not only in the US but also in other parts of the world, she said.

Malaysia's economy beat expectations to grow a robust 5.7 percent year-on-year in the second quarter of 2007, fuelled by strong expansion in the services sector, the central bank said last week.

It said higher mining and construction activities also contributed to the steady economic growth, with the full-year target remaining unchanged at six percent, despite fears over the US subprime market and credit woes.