The 10.1 percent first quarter economic growth trumpeted by the government does not provide an accurate reflection of the actual growth because it was benchmarked to last quarter of 2009, when the economy was still in crisis.

Speaking at a seminar today, Standard Chartered Regional Head of Economic Research Tai Hui said that if benchmarked with the same quarter in 2008, the growth figures were far more modest at 3.5 percent.

"If your child comes back and tells you he scored 75 marks in an exam, but last semester he scored 50 marks. You won't be so impressed if you knew that before this, he scored 100 marks.

"The good news is that the economy is expanding, but the business environment has only improved a little better than before the crisis," he said.

He added that this is evident as business spending is still cautionary with most holding back on investing, despite believing that the economy is on a recovery path.

However, Malaysia has shown sustainable performance in recovery and is expected to grow further as Asian economies, with their relatively low debt-to-GDP ratio, becomes more favourable to their European and US counterparts.

As such, he said that Standard Chartered is forecasting a growth of five percent for Malaysia at the end of this year, and 5.5 percent growth for 2011.

Gradual subsidy removal

Meanwhile, Hui believes that steady growth and stable energy prices provides favourable conditions for Malaysia to unwind subsidies.

"I believe that the window of opportunity is within the next one to two years, while the economy is in a recovery state and energy prices is stable," he told reporters after the seminar.

However, he said, the process must be undertaken gradually to avoid increasing market volatility and sharp inflation.

Malaysia also needs to control its deficit spending to ensure that the debt-to-GDP ratio is maintained at a reasonable level, by looking at new revenue sources, he said.

"Going forward, Malaysia needs to broaden its revenue base which is why discussions on the goods and services tax (GST) should continue... and that the unwinding of subsidy is a worthwhile long-term project," he said.