Malaysia has highest household debt in Asia
Driven by a buying spree of houses and cars, Malaysia's household debt has climbed to 86.8 percent of GDP, which is the highest in Asia.
"The ratio of household debt-to-GDP is expected to remain elevated over the next few years as demand for credit is likely to remain strong, particularly from the relatively young labour force and more affluent population in urban centres," said Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz who was quoted in the media.
From 2003 to 2013, Malaysia's household debt increased by 12.7 percent annually to reach 86.8 percent of GDP, while total household assets grew at a slower pace of 10.4 percent annually to 321.6 percent of GDP by 2013.
Nevertheless, household assets are set to surpass debt levels by 3.7 times largely due to rising household income, which has encouraged asset accumulation.
However, the high household debt is worrying and poses a risk to Malaysia's economic health. People who may have over-borrowed are also vulnerable to adverse financial shocks.
As a result, the central bank will continuously monitor the situation and will implement measures to curb the growth of household debt when necessary. But for now, lending to Malaysian households remains stable despite the high GDP-to-household-debt ratio.
"Household loans from the banking system continue to improve in quality across all loan segments, with delinquencies remaining low and continuing to trend downwards. This has been supported by sustained improvements in the lending and risk management practices of banks," added Zeti.
Furthermore, the debt servicing capacity of Malaysian families remains intact due to favourable employment and income conditions, while aggregate household borrowings in 2013 grew at its slowest pace of 11.7 percent since 2010.
Image source: The antdaily.com
Farah Wahida, Editor of PropertyGuru Malaysia, wrote this story. To contact her about this or other stories email farahwahida@propertyguru.com.my
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