KUALA LUMPUR (AFP) - Malaysias central bank said Wednesday the economy could grow as fast as 5.5pc in 2010, fueled by domestic and external demand for its manufactured goods and commodities. The forecast represented a strong recovery after a 1.7pc contraction in 2009 as the export-dependent economy was hit by the global slowdown. The Malaysian economy is projected to expand by 4.5 to 5.5 percent in 2010, underpinned by strengthening domestic demand and supported by the improving external environment, said central bank governor Zeti Akhtar Aziz. Domestic demand was expected to improve with better employment conditions and uninterrupted credit flows, she said in a statement. The government last October forecast growth of 2.0 to 3.0pc for Southeast Asias third-largest economy, but PM Najib Razak said last month that the expansion could reach 5.0 percent. Bank Negara earlier this month raised its key interest rate for the first time in almost four years, shifting the overnight policy rate by 25 basis points to 2.25pc. Banks have increased their lending rates as a result. Najib will next Tuesday announce new economic policies to attract much-needed foreign investment and boost the countrys competitiveness, a govt official said. Wan Suhaimi Saidi, an economist with Kenanga Investment Bank, said the stronger growth projection was attributed to rising demand for electrical and electronics products, and commodities like palm oil and crude oil. But he said that continuing demand all depends on the performance of the developed economies such as the US, Europe and Japan. Suhaimi said there was a possibility that the key interest rate could be raised by another 25 basis points at the central banks next monetary policy meeting in May. Bank Negara said inflation was expected to remain modest at an average of 2.0 percent to 2.5 percent in 2010. Inflation last year stood at 0.6 percent. Malaysia has announced two stimulus packages containing some 67 billion ringgit (20.2 billion dollars) in measures to pump-prime the economy.