The economy expanded by a stronger five per cent in the third quarter of this year from a revised second quarter growth of 4.4 per cent this year, bolstered by domestic demand and a significant turnaround in exports.

In announcing the good news for the country's economy today, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said domestic demand grew by 8.3 per cent, while exports registered 1.7 per cent growth compared to minus 5.2 per cent.

This positive news is released on the back of increased volatility following uncertainties over the fiscal and monetary policies of the advanced economies, particularly in the United States.

The central bank maintained 4.5-5 per cent projection for 2013.

The headline inflation rate, as measured by the annual change in the Consumer Price Index (CPI), was higher at 2.2 per cent in the third quarter from 1.8 per cent growth in the second quarter.

She said the increase was mainly attributed to higher inflation in the transport, food and non-alcoholic beverages categories.

On the supply side, growth in most economic sectors improved in the third quarter, she said.

Zeti said the services and manufacturing sectors expanded further, supported by domestic demand and improvements in trade activities.

The agriculture sector's growth was also higher, supported mainly by production of food crops, while the moderation in growth of the mining sector reflected the lower production of natural gas and crude oil, she said.

Growth was also sustained in the construction sector, driven mainly by the residential sub-sector, she said.

Zeti said growth was further supported by the non-residential and civil engineering sub-sectors.

Quarter-on-quarter seasonally adjusted basis, the economy expanded by 1.7 per cent compared to 1.4 per cent in the previous quarter of the year, she said.

Private consumption grew by 8.2 per cent against 7.2 per cent in the previous quarter, supported by sustained employment conditions and wage growth.

Meanwhile, public consumption expanded moderately in the third quarter to 7.8 per cent versus 11.8 per cent in the second quarter this year, reflecting mainly lower government spending on supplies and services.

In the external sector, the current account surplus increased to RM9.8 billion in the third quarter, equivalent to 4.1 per cent to gross national income (GNI) from RM2.6 billion billion or 1.1 per cent of GNI.

The overall balance of payments registered a larger surplus of RM11.8 billion in the third quarter compared to RM1.5 billion in the second quarter of 2013.

At the prevailing level of the Overnight Policy Rate (OPR), Zeti said monetary conditions remained supportive of economic activities.

Going forward, she said, the gradual recovery in the external sector would continue to be supportive of growth for the Malaysian economy.

Domestic demand from the private sector would remain supportive of economic activities amid continued consolidation of the public sector, she said.

"The economy is therefore expected to remain on its steady growth trajectory," she said.

She noted that emerging signs of a recovery in the major advanced economies are expected to support overall global growth.

"Uncertainties surrounding the fiscal and monetary policy adjustments in these economies, however, may affect market sentiment and overall growth prospects in the global economy.

"(While) Global policy spillovers may have some impact on Asia, growth will continue to be underpinned by domestic demand," she added.