Malaysia's growth drops to slowest pace in over 6 years

KUALA LUMPUR (Reuters) - Malaysia had its slowest economic growth in 6-1/2 years in the first quarter, as the trading nation continues to feel the bite from low oil and commodity prices and tepid domestic demand.

Growth from a year earlier was 4.2 percent in the first quarter, slightly beating a median forecast of 4.1 percent in a Reuters poll but down from 4.5 percent in the previous quarter.

January-March became the fifth straight quarter of slowing growth. The latest pace was the lowest since the third quarter of 2009.

Muhammad Ibrahim, governor of Bank Negara Malaysia, said growth is projected to improve in second half "driven by higher production in manufacturing sector from added capacity, improved commodities production after El-Nino and higher minimum wages."

He also said "It's quite important for us not to forget that Malaysia is an open economy and global growth will have an impact on us. We are not immune." In January, the government revised its 2016 growth projection for Southeast Asia's third largest economy to 4.0-4.5 percent from the initial 4.0-5.0 percent, on expectations of a sustained slump in global crude prices.

The current account surplus narrowed to 5 billion ringgit ($1.24 billion) in the first quarter from a revised 10.5 billion ringgit over the October-December period.

Growth over the first quarter was largely supported by net exports, though expansion in outbound trade grew marginally by 0.2 percent in March compared to 6.7 percent a month earlier.

Malaysia's ringgit has seen some recovery after a difficult 2015, when it was hit by the collapse in global crude prices, slowing demand from top-trade partner China and a financial scandal tied to state-owned 1Malaysia Development Berhad (1MDB).

In the second quarter, the ringgit has been the worst performing Asian currency, shedding about 3.1 percent against the dollar. But it remains the best performer this year, after strengthening 10 percent in January-March.

(Reporting by Rozanna Latiff and Emily Chow; Writing by Praveen Menon; Editing by Richard Borsuk)