Malaysia's economy shrank a worse-than-expected 6.2 percent in the first three months of 2009 and is headed for a technical recession.

malaysia gdp 2009 280509 Bank Negara governor Zeti Akhtar Aziz said that second-quarter results "will be very similar" to the outcome in the first quarter which saw the economy contract for the first time in nearly eight years.

"We are almost completing the second quarter and we see that the export sectors and export demand continue to remain weak and the environment is still challenging," she said.

Two successive quarters of negative economic growth represent a technical recession.

Zeti said a recovery in the economy, which has been battered by falling exports and manufacturing, will gather pace in the second half of the year.

"In the third quarter we will see a significant improvement taking place and in the fourth quarter we have a higher degree of confidence that we will have positive growth," she told a press conference.

Worse than economists had expected

The economy grew by a bare 0.1 percent in the last quarter of 2008, but the first 2009 quarter's outcome was worse than economists had expected.

zeti akhtar aziz In March, the government warned the economy could contract by 1.0 percent this year despite a massive, 60-billion-ringgit stimulus package, dumping its earlier target of 3.5 percent growth.

However, Second Finance Minister Ahmad Husni Mohamad Hanadzlah said earlier this week that the contraction would be sharper than previously forecast.

"I cannot tell you but it will definitely be below minus 1.0 percent," he said.

Meanwhile, shares slipped 0.38 percent as players stayed on the sidelines ahead of the release of disappointing first-quarter economic growth data, dealers said.

The Kuala Lumpur Composite Index lost 3.95 points to 1,047.68, with advancers outnumbering decliners 305 to 290.

"Construction stocks were in play today in anticipation of more contracts, but the general market was lacklustre... flip-flopping between positive and negative territories with investors unwilling to take long term positions," one dealer told Dow Jones Newswires.

Among major stocks, Top Glove fell 4.1 percent to 5.80 ringgit, Genting lost 0.9 percent at 5.45 ringgit, MISC eased 1.8 percent at 8.40 ringgit and KL Kepong closed 1.7 percent weaker at 11.90 ringgit.