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household debt

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Over the past few years, many Malaysians have realised what business journal Forbes has now articulated: Malaysia’s economy, complete with high property prices, low interest rates, rising federal government and household indebtedness, shows all the signs of a classic credit and property bubble. When is it going to pop?

It is not just household debt as a percentage of GDP that we should be concerned about, but household debt compared to disposable income is even more crucial. Take a look at the yellow bar to see where we stand.

Comparison of household debt/GDP and household debt/disposable income. Source: Yong, 2010; Endut and Toh, 2009; Bank Negara, 2010. - Graph: Penang Monthly

The other day, I was at the ATM when I noticed a middle-aged couple in front of me in the queue. They tried a few times to withdraw funds. As I waited a few minutes, I overheard them saying they were trying to withdraw RM20, but the machine responded “insufficient funds”. They looked stressed and worried.

All is not well among Malaysians. The level of household debt has been rising over the years at the rate of 11.1 per cent annually.

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