Malaysia posts 7.1 percent economic growth - AFP

Malaysia's economy expanded at an annual rate of 7.1 percent in the first quarter of 2008, and faces only a modest slowdown later in the year, the central bank said Wednesday.

Bank Negara also announced an easing of foreign exchange rules, in a move it said would boost Malaysia's competitiveness by making it easier to gain access to finance and reducing the cost of doing business.

The strong outcome for the three months to March compared to 5.5 percent growth in the previous corresponding period, and 7.3 percent in the fourth quarter of last year. The economy grew 6.3 percent in 2007.

Bank Negara said expansion was broad-based across all sectors, including agriculture which hit 6.3 percent compared with 3.8 percent in the first quarter of last year.

"Generally our forecast for the year of 5-6 percent growth remains," said central bank governor Zeti Akhtar Aziz, adding that growth was fuelled by high commodity prices and civil service pay rises.

"The global economy is expected to moderate in the second half of this year... and while the Asian region has done well in this first quarter, including Malaysia, we are likely to be affected," she told a press conference.

"However our assessment is that the underlying strength of our economy is likely to support growth in the second half of the year," she said. "Therefore, while slowdown or moderation is expected, it is expected to be modest."

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