By Bank Negara Malaysia report 2010 | Mar 24, 2011
Households continued to have a strong aggregate financial position last year, supported by income growth and improved employment conditions. The strong recovery of the domestic economy saw more new job positions created, while unemployment rate continued to improve.
This allowed the majority of households to adjust to the rise in food prices, transportation costs and borrowing costs, while preserving their debt-servicing capacity.
Meanwhile, the household debt level continued to expand at a faster pace of 12.5% in 2010, reflecting a rebound in consumer sentiment. The ratio of household debt-to-gross domestic product remained almost unchanged at 75.9%.
While higher in comparison with other regional economies, risks of financial stress in the household sector remain limited at present, as the debt level is comfortably supported by a high level of deposits and other forms of savings.
Debt coverage, as measured by the household financial asset-to-debt ratio, is more than two times of household debts.
Delinquency rate is also low at 2.3% of total banking system household financing and has been on a sustained improving trend over the recent decade.
Financial assets of households expanded at 13.1% (2009: 14.9%) for the year. The growth in household financial assets was mainly attributed to the strong performance of the equity market, which bolstered market valuations and holdings of equity by households.
With one third of household financial assets in the form of equity, households are susceptible to volatile swings in equity prices as observed in 2008, when a 39.3% fall in the FBM KLCI precipitated a decline in household financial assets.
2bz4money: Better managing their debts last year. The normalisation rate policy implemented gradually will curb them from over dependent on loan this year.