The Malaysian Institute of Economic Research (MIER) in its annual economic briefing today announced that it has revised the growth projection of Malaysia's gross domestic product (GDP) from four percent to 2.2 percent.

According to MIER executive director, economist Dr Mohamed Ariff, the growth projection for Malaysia has to be revised due to the "fluidity of the current economic environment", adding that the US economy has not shown signs that it will recover by year-end.

"We've not done it before (adjusting the growth projection every quarterly). But things are so fluid," he said.

In April this year, MIER had revised its GDP growth projection to four percent from the five percent projected during the later part of last year.

Mohamed was speaking to reporters after presenting the institute's findings at its 16th Annual Economic Briefing entitled 'Coming to terms with economic slowdown' in Kuala Lumpur today.

During his presentation, Mohamed explained that the current slowdown is "not a new problem but a part of the crisis that began in 1997".

External circumstances

"What lifted us out (of the crisis) is export expansion due to favourable external circumstances," he said.

"The export demand that pulled us out is also the very reason that is letting us down (now)," he added, referring to the slowdown in the US economy which affected the demand for the export of Malaysian electronic products. Approximately 21 percent of Malaysia's total export goes to the US.

"We have not really recovered from the crisis," he said.

Asked whether the country is heading towards a recession like Singapore, he said, "We're heading towards that direction but we may not fall into it."

He elaborated that the country may end up on the "brink of a recession" if the current scenario worsens, but added that unlike Singapore, Malaysia's manufacturing sector is more diversified.

The high prices of natural resources such as petroleum and contributions from the agriculture sector will still provide a "cushioning effect" for the Malaysian economy, Mohamed said.

MIER findings indicated that the Malaysian economy is slowing down with 3.2 percent year-on-year GDP growth in the first quarter of this year while quarter-on-quarter growth is falling by 3.7 percent.