KUALA LUMPUR, MALAYSIA - MALAYSIA'S economy beat expectations to grow by 6.3 per cent in 2007, fueled by robust domestic demand while the outlook for the current year remained favourable, the central bank said on Wednesday.

It said the 2008 outlook was despite a possible slowdown in global growth as 'expanding domestic demand will continue to provide strong support for the economy.'

It did not provide a growth forecast.

'While global growth is expected to moderate (in 2008), the continued strength of domestic demand in the emerging economies, particularly in the Asian region, are expected to lend support to global growth,' it said.

Malaysia recorded a gain in gross domestic product (GDP) of 5.9 per cent in 2006; 5.0 per cent in 2005 and a 6.8 per cent in 2004.

The 2007 figure was reached after GDP grew 7.3 per cent in the fourth quarter.

The bank said high commodity prices also contributed to strong growth.

The rosy announcement comes as Malaysians heads to the March 8 polls.

Wan Suhaimie Saidie, economist with Kenanga told AFP that the sharp growth in the fourth quarter was above expectations.

'It is a surprise. I was looking at 6.2 per cent. It could be due to government spending and rise in revenues from exports in oil and palmoil commodities,' he said.

Going forward, Wan Suhaimi said growth in the first quarter of 2008 would ease but would exceed six per cent amid the expected global economic crunch while for the whole year it could be 6.1 per cent.

'I think the growth upside will be tempered by the slowdown in the US economy - a major Malaysian trade partner - hence I expect growth will be capped at 6.1 per cent for 2008,' he said.

But the Malaysian Institute of Economic Research said in January Malaysia's economic growth was expected to slow to 5.4 per cent this year and could drop as low as 4.0 per cent if the US is hit with a recession.

The sectors that contributed to the sharp growth in 2007 were services (9.7 per cent) and followed by agriculture (2.2 per cent), mining (3.2 per cent), manufacturing (3.1 percent) and construction (4.6 per cent). -- AFP