Prime Minister Mahathir Mohamad said today he is confident Malaysia's economic growth could surpass the government's official forecast of 4.5 percent for 2003.

Mahathir, who is also finance minister, said a stimulus package unveiled last month would boost economic growth.

"The government is confident that these measures can once more regenerate economic growth to exceed the projected 4.5 percent," he was quoted as saying by the official Bernama news agency.

The government announced a RM7.3 billion economic stimulus package on May 21.

The central bank has cut its official GDP growth forecast to 4.5 percent this year from previous estimates of 6.0-6.5 percent due to the Iraq war and the outbreak of the deadly Severe Acute Respiratory Syndrome (Sars).

Economists cautious

The stimulus package cut interest rates, set up a one billion ringgit relief fund and gave tax breaks to the tourism sector, liberalised foreign investment rules and offered loan programmes for troubled traders.

Economists, however, have expressed caution, saying it would still be tough to reach the targeted 4.5 percent growth given the global economic uncertainties and renewed threats of terrorist attacks.

Statistics released by the government today showed that the country's industrial output in April rose 11.8 percent compared to the same period last year.

Analysts said it exceeded market expectations and bucked the regional trend as countries such as Singapore, Taiwan and South Korea were reeling from the effects of Sars on business.

The key manufacturing sector in April expanded 12.7 percent year-on-year, mining grew 9.8 percent, and electricity rose 7.0 percent, the Statistics Department said in a statement.

Month-on-month, the April industrial production index (IPI) rose 6.7 percent due to a 9.4 percent gain in the manufacturing sector index, which more than offset the 2.3 percent decline in the mining sector and the 1.2 percent fall in the electricity sector.

Way above expectations

Azrul Azwar, an economist with MIDF Sisma Securities, said the 11.8 percent growth was far beyond the 2.0-3.0 percent widely expected by economists.

"The figures are way above market expectations. While other countries in the region have reported contractions, Malaysia has bucked the regional trend," he told AFP.

South Korea reported a 1.9 contraction year-on-year, Taiwan 0.7 percent and neighbouring Singapore 7.2 percent, he said.

Regional industries had been hurt by the Sars outbreak but it did not appear to have had a significant effect on Malaysia's manufacturing sector, he said.

"One explanation could be that domestic industries have gained ground against export-oriented industries," he said.

"As a result I have now revised my growth forecast for 2003 from 3.3 percent to 3.8-3.9 percent," he said.

In March, the IPI rose 5.0 percent year-on-year but fell 1.8 percent from February.

In the four months to April, the IPI rose 8.4 percent year-on-year, with positive contributions from all indices led by the manufacturing sector, which gained 8.9 percent; electricity, which rose 7.3 percent; and mining, which advanced 6.7 percent, the Statistics Department said. - AFP