Malaysian Prime Minister and finance minister Najib Razak said Thursday the economy has "turned around a corner" and is on track for a recovery despite a second consecutive quarter of negative growth.
Malaysia's export-dependent economy shrank 3.9 percent in the three months to June year-on-year, in an improved performance from the 6.2 percent contraction seen in the first quarter.
The Malaysian central bank, Bank Negara, credited higher public spending and positive growth in private consumption for the slowing rate of contraction.
"I'm pleased in the sense that I think the worst is over, I think we've turned around a corner," Najib told reporters.
Although the country is still in a recession, central bank governor Zeti Akhtar Aziz expects the economy to improve in the second half of the year, supported by the government's fiscal stimulus and Bank Negara's efforts to boost financing for the private sector.
Najib also said that the government's two stimulus packages, the most recent in March worth some 60 billion ringgit (16.8 billion dollars), helped to bolster the economy.
"The two packages which we have announced contributed to the improved performance of the Malaysian economy and it looks like we are on track in terms of recovery," he added.
However, he declined to comment on whether the government would upgrade its growth forecast before the budget has been passed.
The government has said the export-dependent economy is likely to contract by 4.0 to 5.0 percent this year due to the decline in exports and manufacturing caused by the global economic slump.
Foreign investment has also seen a big dip this year, as foreign direct investment for the first five months stood at 4.2 billion ringgit compared to 46 billion ringgit in 2008.
Despite signs of recovery in the East Asian region, the Manila-based Asian Development Bank warned last month against changing courses too early.
It said that central banks must retain expansionary monetary policies even as risks to the recovery dissipate as economies in the region benefit from stimulus worth more than $950 billion and lower interest rates.
PM says the worst is over for the M'sian economy, 27 August 2009,
M'sia's PM says ailing economy set for recovery, 27 August 2009,
Malaysia’s Economy May Resume Growth This Year on Higher Demand, 27 August 2009,
Malaysian Contraction Slows Sharply in Quarter, 26 August 2009,