(AFP) Prime Minister Mahathir Mohamad said today he was hopeful economic growth would improve in the third quarter despite a prolonged US downturn.

"I think the third quarter might show slightly improved figures. That's our reading but I may be wrong. I don't know," Mahathir told reporters.

"In the beginning, they said the downturn in the US is short-lived and that it will turn around by the second half but we don't see this thing happening just yet. But Malaysia is much better insulated than other countries."

Almost 21 percent of all Malaysia's exports go to the United States, making it vulnerable to the economic slowdown there. But Mahathir has said the economy is not headed for a recession.

The government in March unveiled a three billion ringgit suplementary budget to shore up the economy.

It also slashed its gross domestic product (GDP) growth forecast this year to between five and six percent, from seven percent previously. Last year the economy grew by 8.5 percent.

Growth forecast could be revised

Central bank governor Zeti Akhtar Aziz has hinted the government may again revise its GDP forecast for this year.

Malaysia's GDP growth slowed to 3.2 percent in the first quarter, down from 6.3 percent in the October-December period.

Mahathir last month said GDP growth in the second quarter, due to be released Aug 23, would stay subdued.

The influential Malaysian Institute of Economic Research earlier this month cut its growth forecast for the second time to 2.2 percent from four percent previously, citing gloomy prospects for electronics exports.