Aerial view of the Sepang International Circuit. Photo: GP Malaysia/File

KUALA LUMPUR – Malaysia will stage its final Formula One Grand Prix in October after the government and the sport's commercial rights holders announced on Friday that their hosting agreement would end a year early.

Malaysia has hosted a round of the world championships at the Sepang International Circuit since 1999 but the government said in November 2016 the deal would not be renewed when it ran out at the end of 2018.

On Friday, however, both parties announced that the 1 October race this year would be the last.

Formula One commercial operations managing director Sean Bratches said: "It's always sad to say goodbye to a member of the Formula One family. Over nearly two decades, the Malaysian F1 fans have proven themselves to be some of the sport's most passionate supporters."

Malaysian Prime Minister Najib Razak said on Friday declining ticket sales, viewership and tourism were behind the decision to pull out of hosting the race.

"The Cabinet has agreed to end the contract for hosting the Formula One race starting 2018," he said, "after considering lowering returns to the country compared to the cost of hosting the championships."

State oil and gas firm Petronas, the title sponsor of the race, has been hit hard in recent times by tumbling oil prices. Najib said it would, however, continue to sponsor the Mercedes-AMG Formula One team as part of its marketing strategy.

He added that government funds allocated for the race would be redirected towards other types of motor racing, upgrading the circuit, and training future Malaysian Formula One drivers.

Mercedes team boss Toto Wolff said he hoped the last race at the circuit would provide a fitting finale.

"It's been a very successful race over 18 years but they have decided to call it a day and we have to respect that decision," Wolff told reporters in Shanghai, where Mercedes are preparing for this weekend's Chinese Grand Prix.

"I hope we can mark 2017 with a special result in Sepang – it will be the last Grand Prix on a really challenging circuit and it would mean a lot to win there for all our fans in Malaysia.

"Although we will miss the event from the calendar, our long and successful partnership with Petronas means Malaysia will continue to have a world-class presence in F1 in the years ahead."

Formula One faces an uncertain future in Southeast Asia as the other race in the region, the Singapore Grand Prix, has yet to agree terms on an extension to its contract that expires this year. The first Singapore race was held in 2008.

The Sepang circuit will continue to host a round of the motorcycle world championships until 2021 under the terms of a deal signed with MotoGP rights holders Dorna Sports in 2016.