(AFP) - Malaysia's manufacturing production shrank by almost 10 percent in the first quarter of this year compared to the previous quarter, the Statistics Department said today.

Economists said the sharper than expected decline was mainly due to falling demand for electronics products amid the US slowdown.

Separately a senior human resources ministry official said an average of 15,000 people, mainly in the electronics sector, are losing their jobs every month.

The Statistics Department said the overall industrial production index rose 0.5 percent year-on-year in March and was up 5.8 percent from February.

For the three months to March, the index was up 4.3 percent year-on-year but fell 7.2 percent from the fourth quarter last year, it said in a statement.

The manufacturing component shrank by 9.6 percent quarter-on-quarter and fell by 0.1 percent in March compared to March 2000.

The index covers manufacturing, mining and electricity generation.

Electronics sector

Song Seng Won, regional economist with GK Goh in Singapore, said he had projected around four percent year-on-year growth for the whole index in March after it rose 4.3 percent year-on-year in February.

"The sharper slowdown is mainly due to the contraction of the electronics sector. It shows that pump-priming efforts may be too small to lift the construction-related manufacturing activities," he told AFP.

Eddie Lee, regional economist with Singapore-based Vickers Ballas, said the slowdown was sharper than expected.

"January's manufacturing output was double-digit but it had gone from 13.6 percent (year-on-year) to minus 0.1 in just two months. Malaysia's large exposure to electronics is hurting the economy," he said.

Almost 21 percent of all Malaysia's exports go to the United States, making it vulnerable to the economic slowdown there.

GDP forecast reduced

Syed Muhamad Syed Abdul Kadir, the top civil servant in the Human Resources Ministry, said there was no cause for alarm about the figures he gave for job losses.

"Vacancies are still abundant and the ministry is not leaving anything to chance but has already put in place several mechanisms to curb unnecessary retrenchment or huge lay-offs," he was quoted as saying by Bernama news agency.

"It's a matter of matching retrenched workers with available jobs."

Both Lee and Song expect the slowdown to be more marked over the next quarter.

"April and May figures suggest there will be continued weakness in the electronic sectors for the coming months. The industrial production index could contract in the second quarter," Song said.

Song has reduced his growth forecast for this year to 4.5 percent from 5.1 previously. Lee forecast GDP growth for the year at 4.3 percent.

Last month the Malaysian Institute of Economic Research cut its GDP forecast for this year to four percent from five percent based on a sharper US slowdown, the highly uncertain external environment and the continuing weak Japanese economy.