In a written parliamentary reply yesterday, Prime Minister Datuk Seri Anwar Ibrahim disclosed that Malaysia’s aggregate household debt has surged to RM1.53 trillion as of the end of 2023. This revelation comes amid growing concerns about the country’s financial stability and its implications for the wider economy.
Anwar, who also serves as the finance minister, provided insights into the composition of household debt, with housing loans constituting the largest share at 60.5%. This was followed by vehicle loans at 13.2%, personal financing at 12.6%, and loans for other purposes such as non-residential property purchases, credit card debt, and security.
The prime minister further elaborated on the trajectory of household debt over the past years, indicating a steady increase from RM1.19 trillion in 2018 to the current figure of RM1.53 trillion in 2023. This represents a significant rise in indebtedness among Malaysian households over a relatively short period.
One of the key metrics highlighted by Anwar was the ratio of household debt to gross domestic product (GDP), which slightly rose to 84.2% by the end of 2023, compared to 82% in 2018. This suggests a growing reliance on debt relative to the country’s economic output, raising concerns about financial vulnerability.
An average annual growth rate of 5.1% in household debt was also noted by the prime minister. This increase, according to Anwar, is primarily driven by housing and vehicle loans, fueled by government and private sector incentives aimed at promoting home ownership and vehicle purchases, including sales and service tax (SST) incentives.
While initiatives to stimulate certain sectors of the economy through increased consumer spending may have positive short-term effects, there are lingering concerns about the long-term implications of high household debt levels. Excessive indebtedness could potentially strain household finances and pose systemic risks to the economy, especially in the event of economic downturns or rising interest rates.
Anwar’s disclosure underscores the importance of prudent financial management and effective policy measures to address the challenges posed by escalating household debt.
