The Malaysian economy registered a smaller decline of 0.5 percent in the first quarter, as compared to a contraction of 3.4 percent in the fourth quarter last year, underpinned by the improvement in domestic demand and the expansion in exports, Malaysian Central Bank said Tuesday.

The central bank, Bank Negara Malaysia, said in a statement that the growth was supported mainly by the improvement in domestic demand and robust exports performance, particularly for electrical and electronics (E&E) products.

"The imposition of the Second Movement Control Order (MCO 2.0) and the continued closure of international borders and restrictions on inter-state travel, however, weighed on economic activity. Nevertheless, as restrictions were eased in February and March, economic activity gradually picked up," it said, referring to Malaysian government's restrictive measures to curb the COVID-19 pandemic.

Going forward, the central bank said the Malaysian economy remains on track for a recovery in 2021, supported by better external and domestic demand, as the country is well positioned to continue benefitting from stronger global economic and trade activities.

"While the growth outlook continues to be shaped by developments surrounding the pandemic, the implementation of containment measures which are mainly aimed at curbing social activities and allow almost all economic sectors to operate, would minimize the impact on economic activity," it said.