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"Recession, no. A slowdown, yes, " said Malaysian Rating Corporation Bhd chief economist Nor Zahidi Alias.
The accepted definition of a recession is when the economy shrinks for two straight quarters.
Malaysia's economy grew 6.7 per cent in the first half this year.
Economists expect slower growth in the second half at about 4-5 per cent.
They also said the country is in a "totally different" situation from 10 years ago. In 1998, the country had about RM100 billion in reserves.
Today, the reserves were close to RM400 billion, they said.
Malaysian companies are also in much better shape as the Asian crisis taught them lessons of not carrying too much debt.
Fears of a possible recession are emerging after United States congressmen surprisingly rejected a US$700 billion bailout plan for the financial industry, rattling stock market investors who sold shares worldwide.
Investors worry that the lack of a bailout would lead to a prolonged recession in the US, and possibly lead to a recession in Malaysia.
The US is Malaysia's biggest trading partner, buying up a big chunk of exports. When a recession hits, factories will cut production as global demand slows and they could even be forced to lay off staff.
During the 1998 recession, for instance, semiconductor companies were badly affected. Some companies reduced their operations from five days aweek to three days, while some employees even voluntarily took a pay cut to ensure they were not retrenched.
"Exports will definitely take a beating if recession happens," said RAM Holdings Bhd chief economist Dr Yeah Kim Leng.
"Let's not forget that a big bulk of our exports are to the US. You can expect factories and companies to cut jobs as a measure to reduce costs.
"Nevertheless, Malaysia should be able to withstand the US turbulence.
"Our consumer spending is still quite resilient." Economists believe Malaysia has ample resources to turn things around even in a worst-case situation.
They expect the government to come up with measures and policies to boost consumer spending.
"One way to do it is via reduction of EPF contribution, which will help increase disposable income," Yeah said.
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