KUALA LUMPUR - MALAYSIA is not expected to sink into recession and the government is ready to further pump-prime the economy if conditions worsen, a local newspaper quoted Deputy Prime Minister and Finance Minister Najib Razak as saying.

'Malaysia will experience a slowdown in terms of economic growth, but we are not expected to slip into recession or even a technical recession,' Mr Najib, who will become prime minister in March, said in an interview with the Edge Weekly on Saturday.

'I am not adverse to putting in place another fiscal stimulus plan,' he said.

'If the budget deficit goes up to more than 5 per cent, it is still tolerable as long as it is for only one or two years.'

Malaysia's economy is forecast to grow 3.5 per cent next year, its slowest pace since 2001, from 5 per cent projected for 2008, according to government forecasts.

The government already announced this month an RM7 billion (S$2.94 billion) stimulus package.

The government has projected a budget deficit of 4.8 per cent for 2008, but Malaysian Institute of Economic Research (MIER), an influential think tank, said deficit could hit a five-year high of more than 5 per cent in the face of the global economic slowdown.

While falling crude oil prices would hit Malaysia, a net exporter of petroleum, the government hopes to boost federal revenue by selling state assets to government funds, such as the Employees Provident Fund, said Mr Najib.

'We are looking into ways and means to have some latitude in terms of the government's fiscal position should the external environment get any worse,' the paper quoted Mr Najib as saying. -- REUTERS