Malaysia's economy grew 6.7 percent in the third quarter, fuelled by strong private consumption and investment, putting it on track to meet a 2007 forecast of 6.0 percent, the central bank said today.

The robust quarterly growth, which came in above expectations, was also credited to healthy manufacturing and construction sectors, and came despite fears over the US subprime market and credit woes.

"We have one month left in 2007 and earlier over October and November we have seen domestic demand very robust and significant investment activity so we have a high degree of confidence we will achieve 6.0 percent growth for this year," central bank governor Zeti Akhtar Aziz told reporters.

The economy grew by 5.7 percent in the second quarter and Zeti said that its momentum was expected to be sustained in the near term.

But there were medium-term risks, she said, including the prospect of a US economic slowdown.

"We will not be immune to the US economic cycle, there is not yet any clarity to the extent of the slowdown, whether it will be a pronounced slowdown or whether it will slide into a recession, that is still not clear," she said.

However, Zeti said that strong domestic demand in Asian countries meant regional markets would not face the full brunt of any downturn in the US economy.

"Now the domestic demand has become more significant in our economy ... and so we expect a partial de-coupling to take place," she said.

Inflation could rise

The central bank said the services sector grew by 10.5 percent in the three months to September, helped by a boom in the tourism industry.

Malaysia has launched a campaign to attract 20.1 million tourists this year, up from 17.5 million visitors in 2006.

The construction sector expanded by 4.7 percent in the third quarter due to the implementation of major infrastructure projects under a national development plan, the bank said.

It added that inflation increased to an average of 1.8 percent in the third quarter due to higher food and beverage prices.

The bank maintained its inflation target of 2-2.5 percent for the rest of the year but Zeti said inflation could rise next year if oil prices continued to spiral.