UPDATE 1-Malaysia to cut growth outlook on global gloom

KUALA LUMPUR, Oct 20 (Reuters) - Malaysia will cut its 2009 growth forecast due to the global economic slowdown, may review its budget deficit targets for this year and next and will examine some infrastructure projects, the government said on Monday.

Deputy Prime Minister Najib Razak told a news conference Monday that while Malaysia was insulated from the worst effects of the global crisis, the growth forecast for 2009 'will be reviewed downwards'.

Najib is currently also finance minister and is set to take over as prime minister in March. He said that although Malaysia's financial services sector was 'resilient', the crisis would affect the economy here, which the government had seen growing 5.4 percent next year.

The Southeast Asian nation has a managed float for its rinngit currency and runs a large current account surplus which has insulated it from the financial contagion that has hit the world's economies.

'Yes, our stock market is affected by the sentiment in other markets, but I would like to say that we are not in a financial crisis and certainly we should not talk ourselves into one,' Najib said.

Malaysia is, however, the third most exposed economy in terms of exports as a percentage of gross domestic product, according to a survey from investment bank UBS (nyse: UBS - news - people ) on emerging economies.

The country's budget deficit is expected to surge this year to 4.8 percent of GDP from a planned 3.1 percent of GDP, thus limiting the government's room for a big spending stimulus to offset falling exports.

Najib also said that Malaysia would liberalise some sections of its financial services economy to attract more foreign investment and would seek to encourage more foreign investment in property.

'It is realistic for the government to review the growth forecast for next year given the budget hasn't fully factored in the global financial crisis,' said Lee Heng Guie, economist at CIMB.