Domestic business lending remained firm in August, but household credit indicators continued to soften amid persistent cost-of-living pressures, prompting Hong Leong Investment Bank (HLIB) to expect Budget 2027 to place greater emphasis on household support measures.
HLIB said total loan growth edged up to 5.7% year-on-year in August from 5.6% in July, supported by stronger business lending, which accelerated to 8.0% from 7.6%.
Growth was particularly strong in information and communication, electricity and gas-related activities, as well as real estate.
Household loan growth, however, eased marginally to 5.0% from 5.1%, reflecting softer demand for passenger vehicles, residential property, personal financing and credit cards.
The weakness was more evident in loan applications. Total applications contracted 0.3% year-on-year in August, reversing from a 17.2% increase in July. Household applications fell 5.1%, while business applications expanded at a slower 5.5%, compared with 37.8% previously.
Loan approvals also moderated to 11.0% from 24.8%, with household approvals declining 10.4% and business approvals expanding by 30.9%.
HLIB said the widening household loan-deposit gap also warranted attention. Household deposits grew just 0.8% year-on-year, down from 1.3% in July, while household lending continued to expand at a faster pace.
Overall deposit growth eased to 5.2% from 5.6%, as slower business and household deposit growth outweighed stronger foreign deposits.
Monetary indicators were mixed. Narrow money supply, or M1, accelerated to 9.2% year-on-year from 8.2%, while broad money supply, or M3, slowed to 5.0% from 5.7%.
Foreign investors meanwhile returned as net buyers of Malaysian bonds, recording RM11.1 billion in net inflows in August after a RM6.4 billion outflow in July. HLIB attributed the rebound to strong economic fundamentals, benign inflation and expectations of a stable Overnight Policy Rate.
Local equities moved in the opposite direction, registering RM2.0 billion in net foreign outflows.
HLIB said the divergence between resilient business activity and weaker household indicators suggests Budget 2027 is likely to focus on easing financial pressure on households through measures such as continued subsidies and higher social assistance.
The research house maintained its 2026 GDP growth forecast at 5.3%, implying growth will moderate to 4.8% in the second half of the year from 5.7% in the first half.
