(AFP) updated version The government announced a RM4.3 billion stimulus package for the economy in the wake of the terror attacks on the US, the official Bernama news agency reported.

Prime Minister Mahathir Mohamad, who is also finance minister, said the world economy appeared to have taken a negative turn following the attacks and a global economic slowdown appeared imminent, the agency said.

Mahathir predicted economic growth this year would be around one to two percent. In March the government cut its growth estimate from seven percent to between five and six percent. The economy grew 8.5 percent in 2000.

The prime minister said the stimulus package, which includes small rural and selected urban projects worth RM1 billion, is aimed at ensuring optimal benefits for the economy.

He said the government would double payments for welfare projects to assist poor families, which would cost RM80 million.

An additional RM300 million would be allocated for upgrading and maintenance work in government buildings, facilities for schools and rural infrastructure.

Mahathir said RM150 million would be allocated for training retrenched workers and another RM110 million to promote tourism.

Bernama said that strategies for the remainder of the RM4.3 billion package would be announced by Mahathir when the 2002 budget is presented on Oct 19.

Recession expected

On Monday, Dutch-based bank ABN Amro said Malaysia would slip into recession this year as a result of fallout from the terrorist attacks in the United States.

The Sept 11 attacks on the World Trade Center in New York and the US military headquarters at the Pentagon in Washington as well as an imminent US recession had prompted a "massive downgrade" for gross domestic product (GDP) growth in Asia, the bank said.

The bank tipped Malaysia's GDP to contract 0.4 percent this year from its original projection of 0.7 percent growth. For next year, growth was pared back to 1.4 percent from 1.7 percent.

Last Thursday, Malaysia's central Bank Negara cut key lending rates for the first time in two years, slashing its three-month intervention rate from 5.5 to 5.0 percent.

'Comprehensive measures'

Central bank governor Zeti Akhtar Aziz told reporters Friday that Bank Negara would undertake more "comprehensive measures" to prevent Malaysia from slipping into a recession.

Mahathir said last week the Malaysian economy was "closely-pegged" with that of the US and the terrorist attacks would divert attention away from trade to security matters.

The US accounts for about 19 percent of Malaysia's foreign trade, mainly in rubber products, textiles and clothing, optical and scientific goods, electrical and electronics products and wood products.