KUALA LUMPUR: A local think tank has urged Putrajaya to pursue long term economic reform as opposed to aggressive stimulus measures in response to Bank Negara announcing a 17.1% contraction of the gross domestic product (GPD) in the second quarter of the year.
Institute for Democracy and Economic Affairs (IDEAS) research manager Lau Zheng Zhou warned the government against making knee-jerk decisions in response to the announcement.
“While it is understandable that the sharp contraction in Q2 2020 GDP can be a cause for panic, this is also an opportunity for us to reshape our policy direction so that we can promote a more competitive and inclusive economy moving forward.”
In a statement, he said the government needed to encourage closer collaboration between SMEs and research universities on product and process innovation and other industry-related areas.
“We should undertake strategic reforms to address structural vulnerabilities facing our industries, especially the SMEs, and how to help them adapt more successfully for recovery in the longer term,” Lau said.
This comes after it was announced that Malaysia’s GDP contracted 17.1% in the second quarter of the year after a 0.7% uptick in the last quarter, marking the lowest since the financial crisis in 1998, according to the Statistics Department.
A total of 735 industries recorded negative growth compared with 381 in the first quarter, with a value added share of 68.5% (RM176.1 billion).
Negative growth was seen in all production sectors with the exception of the agriculture sector in Q2.