Prime Minister Abdullah Ahmad Badawi today said the economy will beat the official forecast of 6.5 percent growth for 2004 on the back of the economic recovery in key trading partner Japan.

"If we continue to register high growth for the next quarter, we expect that growth will be beyond what we estimate for this year," the prime minister told some 150 business leaders. He gave no precise figure.

"With improvement in the Japanese economy, the expectation that we will do well is achievable," he added.

Malaysia posted 7.6 percent year-on-year growth in the March quarter.

The central bank recently raised its 2004 growth forecast to 6.0-6.5 percent, up from 5.5-6.0 percent previously, after a better-than-expected showing of 5.2 percent last year. It projected double-digit expansion of 10.2 percent for manufacturing after 8.2 percent growth in 2003.

Abdullah, who is also finance minister, said the private sector fueled growth in the first quarter rather than pump-priming measures, adding that the government must be mindful of its fiscal position and strike a balance in what it does in terms of stimulating the economy.

Expanding the economy

Last month, Abdullah said higher private investment and prudent financial management would help push Malaysia's budget deficit this year to below the official estimate of 4.5 percent of gross domestic product (GDP).

Abdullah is expected to unveil the 2005 budget in September, his first since taking over as premier from Dr Mahathir Mohamad who retired last October after 22 years in power.

At the same time, the prime minister stressed "we will continue to expand our economy. There should be no fear about what the government is doing. The government will fund social projects."

As for fears that China's efforts to cool its overheating economy could hurt others, Abdullah said he had expressed Malaysia's concern since Kuala Lumpur was the fourth largest trading partner of China in the Association of Southeast Asian Nations (Asean).

"Any step they have to take, they should not think in terms of the Chinese economy exclusively but also the economies of other countries that have strong ties with them," he said.

Abdullah added that China wanted to make sure "if anything happens to its economy, it will be a soft landing."

The premier visited China late last month. - AFP