Mahathir warns of growth slowdown

KUALA LUMPUR, Malaysia -- Malaysia's economy does not appear to have picked up momentum in the June quarter and growth is likely to be similar to the March quarter, Prime Minister Mahathir Mohamad said on Monday.

Malaysia's gross domestic product grew 3.2 percent year on year in the first quarter, well down on the 11.7 percent rate in the same quarter last year.

"The second quarter growth is not as good as we would like it to be. I think it may be similar to the Q1," Mahathir told reporters.

Mahathir said the slowdown in the U.S. economy had hurt demand for Malaysian exports and reduced trade with other countries hit by the drop in U.S. demand.

Official forecast is 5-6 percent in 2001

Malaysia's official forecast is for GDP growth of five to six percent in 2001, much slower than the 2000 figure of 8.5 percent.

But private economists say they expect growth to be lower than that. A June 12 poll of 10 research houses by Reuters put GDP growth at 3.6 percent in 2001.

Activity in Malaysia's manufacturing sector, the country's economic mainstay, has cooled as U.S. demand for semiconductors and electronics has slackened.

"We have a double effect -- that from the U.S. and that from the countries which are dependent on the U.S. economy that pressures our economy," Mahathir said Monday.

Mahathir's comments did little to move the share markets, with analysts saying they had expected Malaysia's economy to recover only in the second half of the year.

The Kuala Lumpur Composite Index slipped 1.12 points or 0.19 percent to 586.77 points Monday.

Reuters contributed to this report.