Household debt seen remaining at prudent levels

KUALA LUMPUR: Household debt to gross domestic product (GDP) growth for Malaysia is likely to remain at prudent levels and its growth limited through the continued implementation of macroprudential measures.

BMI Research, a unit of Fitch group, noted that the household debt as a share of GDP fell slightly to 68.9 per cent in the first quarter from 70.3 per cent in the fourth quarter of last year.

“There is limited room for expansion in Thailand and Malaysia due to existing measures,” it said in a report.

In the case of Thailand, which has the highest household debt as a share of GDP in Asean, standing at 70.2 per cent in the first quarter, is unlikely to deleverage much further in the coming quarters.

A combination of reduced lending in the auto sector, combined with strong real GDP growth over the past two years, has helped to improve household balance sheets, which should reduce pressure to further deleverage.

The days of rapid credit growth to the Thai households are now behind due to tightened regulations regarding unsecured consumer lending in an effort to safeguard against a surge in lending to vulnerable households.

According to data from the Bank for International Settlements, countries such as South Korea, Asean, Australia and New Zealand had seen their levels of private debts fall in terms of the proportion to GDP in the first quarter versus a quarter ago.

BMI Research said elsewhere in Asia, the private sector was starting to deleverage, which was positive for macroeconomic stability.

Chinese policymakers are looking to prevent systemic risk and will attempt to lower non-financial corporate debt, particularly for state-owned enterprises.

Australian and New Zealand households are likely to deleverage as their housing market cools.