Malaysia's manufacturing sales, a key driver of the economy, dived 25.5 percent year on year in June, according to official data released today.

The government's Statistic Department said the poor figures were led by a heavy fall in the iron and steel sector as well as plastics manufacturing due to lower demand caused by the world economic slowdown.

The number of people employed in the manufacturing sector, which accounts for about a third of Malaysia's gross domestic product, dropped 7.8 percent from the same period a year ago, the department said.

Revised May manufacturing figures showed sales plunged 25.6 percent year-on-year.

Malaysia has said its economy is likely to contract by 4.0-5.0 percent this year, despite a massive RM60 billion dollar package unveiled in March, after the economy shrank 6.2 percent in the first quarter.

Last week, the International Monetary Fund said the country had been hit hard by the global economic crisis but sound policies had positioned it to cope with the downturn.

Smaller Budget for 2010

Meanwhile, Reuters reported that Malaysia's budget for next year will be lower than 2009.

Malaysia is readying its 2010 budget after a year in which he government projects the economy will shrink by 5 percent, its first major recession since the 1998 Asian financial crisis and its budget deficit is expected to balloon to 7.6 percent of gross domestic product this year.

The Malaysian Institute of Economic Research (MIER) has earlier said that budget deficit could reach 9-10 percent in 2010.

- Agencies