RTTNews - Malaysia's economic contraction slowed more than expected in the second quarter on higher public spending and private consumption growth.

The Department of Statistics report, released Wednesday, showed a 3.9% annual contraction in the second quarter, slower than the 6.2% fall in the previous quarter. The decline seen in the second quarter was also smaller than the 5% decrease expected by economists.

Final consumption expenditure rose 0.6%, reversing a 0.2% fall in the first quarter. Private spending moved up 0.5% and government spending grew 1%.

However, the gross domestic product was impaired by weak external demand and private investment activity. Exports plunged 17.3%, while imports registered a smaller fall of 19.7%. Gross fixed capital formation was down 9.8% versus a negative 10.8% in the last quarter.

Further, the manufacturing sector dropped 14.5% in the second quarter, not as severe as in the first quarter. The mining and quarrying sector recorded its fifth straight negative growth. The sector shrank 2.6% largely due to the decrease in crude oil production.

At the same time, the construction sector grew 2.8% and agriculture reported a 0.3% rise. The construction industry mainly benefited from the increased implementation of the stimulus package. The services sector recorded a better performance with a turnaround to an increase of 1.6% from a negative 0.2%.

For the first half of the year, the GDP dropped 5.1% compared to the same period of the previous year.

Earlier, the Bank Negara Malaysia said economic recovery is likely to be slow as most advanced economies are still undergoing adjustments amidst on-going de-leveraging activity in the private sector.

The central bank expects the domestic economy to improve in the second half of the year, underpinned by a recovery in domestic demand following improvements in labor market conditions and sentiment amongst business and consumers. Further, the stabilization of the global economy is expected to contribute to the improvement in the domestic economy in the second half of the year.

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