KUALA LUMPUR (March 23): Malaysia's household debt-to-gross domestic product (GDP) ratio contracted to 88.4% as at end 2016 from 89.1% in 2015, as households cut loan exposure for purchases of non-residential properties, cars and securities.
Bank Negara said in its 2016 Financial Stability and Payment Systems Report that the 2016 household debt-to-GDP ratio was the first contraction since 2010.
In 2016, Bank Negara said household debt grew 5.4% to RM1,086.2 billion, from a year earlier. In 2015 and 2010, household debt expanded 7.3% and 14.2% respectively.
Today, Bank Negara said: "Other than home purchases for own occupation, households have generally scaled back other borrowings, in line with loan affordability."
"This was observed in the markedly slower expansion in outstanding financing by households for the purchase of non-residential properties (mainly shops) (+3.5%; 2015: +8.1%). In addition, borrowings for the purchase of cars and securities both declined by 0.8% and 1.5% (2015: +3.5% and +1.7%) respectively, during the year," Bank Negara said.
Malaysian households have strong financial buffers. Bank Negara said household financial and liquid financial assets accounted for 2.1 and 1.4 times of debt respectively.
"Notably, household debt grew in line with financial assets, with growth rates converging for the first time since 2012. In value terms, household financial assets increased by RM113.4 billion, compared with an increase in debt of RM55.6 billion.
"High holdings of deposits and deposit-like instruments (which represent 43% of household financial assets) continue to provide households with considerable flexibility to adjust to unexpected changes in income or expenditures," Bank Negara said.