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M'sian economy posts better than expected growth

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KUALA LUMPUR: Malaysia's economy expanded at the fastest pace in more than two years in the second quarter on the back of domestic demand and robust exports, defying expectations for a slight slowdown.

The strong performance is likely to add to speculation that Prime Minister Najib Razak will call early polls to take advantage of improving economic conditions and a fractured opposition.

South-east Asia's third-largest economy grew 5.8 per cent in the April-to-June period compared with a year earlier, data showed yesterday, well above a Reuters poll forecast of 5.4 per cent.

Growth accelerated from 5.6 per cent in the January-to-March period, which had also been better than expected. Following the data, Malaysia's central bank raised its 2017 growth forecast to above 4.8 per cent.

The last forecast in March predicted growth of 4.3 per cent to 4.8 per cent.

"Based on the numbers from Q1 and Q2, we expect (full-year) growth will go beyond our earlier forecast," Bank Negara governor Muhammad Ibrahim told a news conference.

Construction, services and manufacturing grew at a faster pace in the quarter, offsetting weakness in mining and agriculture.

The governor expected domestic consumption and exports to improve further in the second half, but warned of risks related to global factors.

Exports grew 10 per cent in June from a year earlier, well below May's 32.5 per cent.

But analysts believe the slide may be due to seasonal factors, noting that global demand still seems strong.

Fitch Ratings affirmed Malaysia's A- credit rating with a stable outlook on Thursday, citing its strong economic growth and the government's ability to contain the impact of falling oil prices on its budget deficit.

"It is another recognition for the country's economic management," Mr Najib tweeted yesterday about the Fitch rating. - REUTERS