LETTER | High household debt: Should we be concerned?
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LETTER | Bank Negara Malaysia has reported that household debt to gross domestic product ratio has risen to a new peak of 93.3 percent as of December 2020, from the previous record high of 87.5 percent in June 2020.
According to BNM Report, household debt growth was mainly driven by car, housing and personal financing loans.
Should we be concerned?
Generally, a high level of household debt can be risky. A high level of debt increases the sensitivity of households to any shock to their incomes.
Also, during periods of financial stress, highly indebted households tend to cut their spending more than their less-indebted peers. This can make economic recovery more difficult.