"The most difficult decision that I had to make after assuming the responsibilities of prime minister was to reduce the deficit," he told the ruling United Malays National Organisation (UMNO) annual congress.

"We must manage public spending and strike a balance between stimulating economic activity to prompt economic growth (and) running up a deficit that develops into an unmanageable problem," he said.

The government hopes to cut the budget deficit to 3.5 percent of gross domestic product (GDP) in 2005 from 4.0 percent in 2004.

Abdullah, who succeeded former premier Mahathir Mohamad in October 2003, said he was aware that the move was not politically popular but it was necessary to protect the country's long-term interests.

"For some, the decision to reduce the deficit is seen as denying them a source of income to which they have become accustomed," he told some 2,500 UMNO leaders in an opening speech.

"The interest of the nation must be placed ahead of the political interests of certain groups or individuals."

Abdullah has faced growing pressure from thousands of ethnic Malay contractors to stimulate growth in the infrastructure sector by approving big new projects.

But in contrast to Mahathir, who had a penchant for grandiose schemes like the Proton national car, Abdullah has put large-scale infrastructure projects on hold since coming to power.