KUALA LUMPUR: Malaysia's government said the economy may shrink as much as 5 percent this year, slashing its forecast as the nation nears the first recession in a decade.

This year's contraction will range from 4 percent to 5 percent, Prime Minister Najib Razak said in Putrajaya, outside Kuala Lumpur.

In March, he said the economy would shrink 1 percent at worst or even expand by the same amount.