"We are concerned that the imposition of controls may tend to delay the reforms that are needed in other parts of the economy," IMF deputy director of research Flemming Larsen said at a presentation of the fund's World Economic Outlook, the IMF's flagship publication.

He said while the fund was not opposed to capital controls "we are concerned about the imposition of controls in the midst of a crisis", adding that the impact was to weaken investor confidence in the country concerned and the region.

"For a very successful economy like Malaysia, the imposition of currency controls may be viewed by foreign investors as casting doubt on the openness of the country to the rest of the world," he said at a briefing for analysts and media.

Larsen said the IMF's hopes were that Malaysia wouldsucceed in tackling its current economic problems.

He told reporters later that the fund expects Malaysia to recover from the crisis in line with the recovery in the rest of crisis-hit Asia.

Larsen had projected that the economies of Korea and Thailand would bottom out in the first and second quarters of next year and recovery would be underway by the middle of next year.

He said Malaysia's projection of one per cent gross domestic product growth in 1999 was realistic. The Malaysian government had forecast the economy would shrink 4.8 per cent this year after growing 7.7 per cent in 1997.

He said at this stage, the chances of a recovery in Malaysia would be dependent on its pursuit of economic reform and the also what happens in global economies.

Larsen said Malaysia had started into the crisis with "somewhat better pre-conditions than the other countries and it had some breathing space tp tackle some of its problems".

He added, however, that at the time Malaysia did not make use this "breathingspace".

"There's a good chance that they will be making good use of the breathing space (that capital controls offer), but it's difficult to say at this stage."