Savings up ... just in case

Worries over economic impact could have led more M’sians to save instead of spend

Malaysians have nearly RM180bil in their savings accounts with banks in April, an amount that has jumped ever since the MCO started in March. On the other hand, there are many people who are finding it hard to cope due to negative effects of Covid-19 on the economy.

PETALING JAYA: Many Malaysians who have cash to spare appear to be more prudent during the movement control order (MCO) period, which saw an increase in money deposited in the banks.

Statistics released by Bank Negara showed that deposits in the banking sector saw a big rise ever since the MCO started in March.

According to the central bank’s monthly data, savings by individuals in ordinary savings accounts rose by RM6.37bil in March to RM170.03bil compared with February. The amount saved jumped further in April by RM9.57bil to RM179.6bil.

Savings in such accounts by Malaysians have not seen such large increases but large jumps did happen from December to January in previous years.

The amount saved in April 2020 was 17% higher compared with the same month last year. It was the highest monthly year-on-year jump based on the central bank’s data stretching back to January 2007.

According to the figures, the amount of savings deposits in commercial and Islamic banks by customers under the category “individuals” stood at RM179.6bil in April, compared with RM153.3bil in April last year.

The amount in fixed deposit by individuals, however, appear to have remained constant with the amount seeing fluctuations from February to April. Individuals withdrew their money from fixed deposit accounts in March by RM1.13bil but increased their savings in such accounts by RM1.6bil in April to reach RM497.6bil.

The MCO started on March 18, and the data does not explain the reason for the sharp increase in savings deposits (see graphic). But closure of shops and spending opportunities, along with the need to save more, could explain the surge in money kept by people in their normal savings accounts.

Worries over the economic impact of the MCO may also have led some Malaysians with cash to spare to save more.

The figures do not show whether the jump in bank savings deposits is being driven just by the wealthy or by Malaysians across the board, many of whom are affected by the economic fallout of the pandemic.

An online survey by the Department of Statistics Malaysia (DOSM) conducted from March 23 to 31 revealed that 82.7% of private sector employees only have up to two months of savings while 71.4% of self-employed Malaysians were the most affected, with savings of less than a month.

Overall, only 6.2% of respondents said they were not financially impacted by the MCO while 52.6% said they were “very affected” by it.

The survey found that workers at government-linked companies and multinational companies were the least affected overall by the MCO, with 78.9% and 75.2% of them respectively having savings that could last up to four months.

Several financial experts and economists advised the public to remain prudent in their spending and aim towards building cash reserves of between six months and one year of their usual monthly consumption, if possible.

Sunway University economics professor Dr Yeah Kim Leng said that with lower spending throughout the MCO, individuals who could do so appeared to be depositing their excess cash in banks.

“This is a positive sign that affirms households’ tendency to save when faced with uncertainty. Falling household income as some employers reduce salaries is somewhat offset by income transfers under the stimulus packages.

“Due to the lingering threat of coronavirus infection and the SOP in place, it will be a while before we see a return to normalcy in consumer spending that underpins private consumption trend growth of 6%-7% per year,” he said.

In a survey in April, the DOSM found that cutbacks in spending were more severe among households in the higher income segments.

The top 20% households (T20) category recorded a 59% reduction in spending, followed by the middle 40% (M40) and bottom 40% (B40) categories at 48% and 41% respectively.

The government has announced various measures to help the people and businesses hit by the impact of Covid-19.

They include the offer of a six-month moratorium (deferment) for all individuals and small and medium enterprises (SMEs) with outstanding bank loans beginning from April.

Assuming that all households opt for the six-month moratorium, the decline in household spending would be 63% for the T20 group, and 54% and 49% for the M40 and B40 households respectively.

Amid the economic downturn here and abroad, Yeah foresees that consumer spending would remain cautious over the next few quarters.