KUALA LUMPUR - MALAYSIA lowered gasoline and rice prices on Tuesday as part of government moves to boost consumer confidence and spending as a global economic downturn unfolds.

Deputy Prime Minister Najib Razak announced late on Monday that gasoline and diesel pump prices were being lowered 7 per cent to RM2 (S$0.84) and RM1.90 per litre respectively.

He said the reduction - the fifth cut in the past four months - was in line with a drop in world crude oil prices. The government raised petrol prices by 41 per cent in June when oil prices reached a record high to reduce its subsidy bill.

The government also lowered the ceiling price for two types of rice by 7 and 11 per cent respectively. This month government leaders have also visited coffee shops and hypermarkets to encourage them to lower their prices.

The government has refused to let bus operators double their fares, and told taxi drivers to sell water, peanut packets and mobile phone prepaid cards to customers to supplement their income.

Mr Paul Selva Raj, head of consumer research at the Federation of Malaysian Consumers Associations, warned the government should only control critical items like food and petrol and let the market regulate itself.

'I think consumers still have to be cautious,' he said. 'One of the things consumers have to get used to is to adjust to the market.'

Inflation in Malaysia recently hit its highest level in nearly three decades. For September, Malaysia's annual inflation was 8.2 per cent - slightly lower than the 8.5 per cent recorded in July and August partly because the government reduced retail fuel prices.

The Malaysian government recently cut its economic growth forecast for 2009 to 3.5 per cent, from 5.4 per cent, and said it would inject RM7 billion into the economy next year to boost spending.

The growth of the manufacturing sector, a mainstay of the economy, is expected to slide to 0.8 per cent next year compared with the original forecast of 4.3 per cent.

The government last week said it will remove import duties on raw materials and intermediate goods for manufacturing and ease licensing requirements to help businesses cope with the global economic slowdown. -- AP