KUALA LUMPUR: Allianz Economic Research, a unit of the Allianz Group, forecast Malaysia's GDP to contract 2.5% in 2009 as investment and exports slump in the first half of the year.

In a statement released ahead of a media briefing here on May 28, Allianz said: "In the first half of the year, we expect Malaysia's economic development to remain soft.

"In line with the stabilisation in world trade that we are penciling in, business activity is likely to pick up in the second half of the year."

It said, however, the economy was expected to return to a solid GDP growth of 3.5% in 2010.

On May 27, Bank Negara announced a worse-than-expected GDP contraction of 6.2% in the first quarter due to a severe decline in the manufacturing sector. The contraction was the worst since the Asian financial crisis of 1997-98.

On its Asian outlook, the German insurance giant, which also runs ALLIANZ MALAYSIA BHD [], said the region would likely grow 2.7% this year, a fairly low growth given its average annual growth of 8% between 2004 and 2008.