KUALA LUMPUR, Feb 7 — Malaysia has failed to rein in household debt that started ballooning since the 2007 global financial crisis and may expose the country to crisis should the credit bubble burst, according to a report released this week.
In the report tracking household liability in the seven years since the US subprime crisis by international research firm McKinsey Global Institute (MGI), Malaysia’s consumer debt was shown as having surpassed even that of the US.
The Southeast Asian economy was also listed among seven countries most vulnerable against debt.
“In developing economies, household debt is generally at much lower levels, but it is growing rapidly. In Thailand and Malaysia, household leverage exceeds US levels,” said the report titled “Debt and (not much) deleveraging”.
“The question today is whether countries with high levels of household debt are at risk of a crisis, or whether high debt levels can be sustained.”
Latest data from the fourth quarter of last year showed that Malaysia’s household debt-to-gross domestic product (GDP) ratio is 146 per cent, an increase from 139 per cent during the same period in 2007.
Comparatively, the US’ ratio in the fourth quarter of 2014 was 99 per cent, while it was 133 per cent in the UK.
The other countries deemed “vulnerable” besides Malaysia were the Netherlands, South Korea, Canada, Sweden, Australia and Thailand, where their debt-to-income ratio might be “unsustainable”, according to MGI.
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