S&P: Malaysia’s rising household debts may become ‘problematic’
December 20, 2013 Leave a comment
Updated: Thursday December 12, 2013 MYT 8:10:46 AM
Malaysia’s rising household debts may become ‘problematic’
PETALING JAYA: Malaysia’s rising household debts, while still manageable in this current economic condition, would be “problematic” if the country’s growth rate slows, according to Standard & Poor’s (S&P).A study by the World Bank identified Malaysia and Thailand as having the largest household debts, as a share of gross domestic product (GDP), among Asia’s developing economies.
Household debts in Malaysia have now exceeded 80% of GDP, prompting the Government to introduce measures to curb credit growth.
S&P last month cut its credit outlook for four Malaysian banks on concerns that rising home prices and household debt are contributing to economic imbalances.
“Thailand and Malaysia economies are fine at this point in time,” S&P financial rating services’ managing director and lead analytical manager Ritesh Maheshwari said yesterday.
“But an unfavourable global economic event could affect Malaysia adversely, and this is why we have been highlighting in our reports that Thailand and Malaysia face risks,” he said in a teleconference on Asia-Pacific’s outlook for 2014.
Meanwhile, the firm has a “net negative bias” on Asia-Pacific corporate ratings in the chemicals, building materials, metals and mining, and the healthcare sector.
Net negative bias indicates the likelihood of ratings being downgraded.
S&P Asia-Pacific managing director and head of corporate research Terry Chansaid he continued to be negative on mining partly because of the expected slower growth in China moving forward on the backdrop of a sustained supply growth of minerals although it does see “some moderation” next year.
S&P has a “stable to negative” outlook for building materials due to a combination of a more steady packaging sector that largely caters to the food, beverage and the tobacco industries.
“But forest products are vulnerable particularly to potential demand for timber building materials and paper products,” Chan said.
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