KUALA LUMPUR, May 4 ― The local economy is set to expand 4.4 per cent this year, underpinned by resilient domestic demand despite slowing exports, the International Monetary Fund (IMF) said in its Asia Pacific Regional Outlook issued yesterday.

The agency noted that despite the slight moderation triggered mostly by China's slowing economy, Asia remains the driving engine to global growth with most of the South East Asian nations performing well on the back of lower commodity prices and growth in disposable income.

“Economies in the region are set to perform well… Vietnam is leading the fast-growing economies in the region, helped by rapidly growing exports of electronics and garment manufacturers.

“For the Philippines and Malaysia, growth is expected to remain robust, underpinned by resilient domestic demand,” the report said.

But the region is still exposed to external volatility that include slow growth in advanced economies and a shaky global financial market, the agency noted.

It added that the sluggish global growth across the rich and emerging markets could compound some of the countries' high debt problems, while highlighting how China's transition to a new growth model had already affected exports for its major trading partners.

“The region faces a number of external challenges, including slow growth in advanced economies, a broad slowdown across emerging markets, weak global trade, persistently low commodity prices, and increasingly volatile global financial markets.

“These risks compound domestic vulnerabilities, such as high debt incurred in recent years,” it said.

Malaysia's 2015 export to China totalled at RM130 billion, according to official data, making it the top trading partner last year.

Prime Minister Datuk Seri Najib Razak last week said Malaysia’s GDP growth averaged 5.6 per cent annually since 2010, keeping the country on track to becoming a high-income nation by 2020.

The IMF report cautioned Asia to adopt economic pro-growth policies by reducing their exposure to global and regional risks despite its relatively strong position to absorb shocks.

It also emphasised the need for structural reforms to help bolster potential growth and facilitate rebalancing.