Malaysian economy grows at slowest pace in nearly two years

Malaysia's economy grew at its slowest pace in nearly two years in the second quarter, the government said Thursday, the latest negative sign for policy-makers faced with a plummeting currency and political turmoil.

Second-quarter growth was 4.9 percent, down from 6.5 percent in the same period last year, as both exports and private consumption weakened, the central bank said.

Future growth prospects for Southeast Asia's third-largest economy -- which is heavily reliant on energy exports -- have come under a cloud due to the slump in world oil prices.

The ringgit currency fell to a 17-year low this week after China devalued the yuan, sparking fears Asia's biggest economy could start a regional currency war where central banks race to devalue their units.

The ringgit has also been hit by political uncertainty stemming from allegations of financial improprieties involving Prime Minister Najib Razak. Central bank governor Zeti Akhtar Aziz, however, said the economy would remain resilient.

"The Malaysian economy is expected to remain on a steady growth path, with domestic demand continuing to be the key driver of growth," she said.

Domestic demand growth weakened in the second quarter, however, with private consumption expenditures expanding 6.4 percent, compared to 8.8 percent in the first quarter. It had been widely expected to slip due to the April 1 introduction of a consumption tax that many consumers say has caused higher prices of key goods.

Najib, who also is finance minister, faces the biggest crisis of his tenure over the alleged irregularities involving debt-ridden state investment firm 1Malaysia Development Berhad (1MDB).