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Tougher Policies From Bank Negara?
“While it was noted that the DSR has
slowed to below 40% for new loans,
the low-income group remained
overstretched with a leverage
position of up to seven times their
income in 2013,” said MARC.
In an effort to keep financial
imbalances in check, Bank Negara
Malaysia (BNM) is expected to
consider tougher policies through a
tighter monetary stance, which could
lead to an increase in its policy rate,
opined Malaysian Rating Corp Bhd
(MARC).
The rating agency said in a research
note that BNM is expected to
introduce more “macroprudential”
measures to scale back the overleveraged position of the household
sector.
MARC cautioned that the household
debt-service ratio (DSR) has risen to
about 43.5% in 2013 from the cyclical
low of 39.1% in 2006, suggesting
an increasing burden on Malaysian
households.
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It said the issue of rising household
debt was also amplified by the
resilient pace of growth in private
consumption (+7.1% year-on-year) in
the first quarter of 2014, which partly
fuelled the overall economic growth
to a robust 6.2%.
It said the monetary policy
committee statement by BNM on
May 8 was related to the need to
further address rising household
debt, which continued to accelerate
to 86.8% of GDP as at end-2013
following strong loan growth in
certain segments of the economy,
“although various macroprudential
measures introduced by BNM have
somewhat moderated the increase in
household indebtedness.”
Meanwhile, MARC noted that in
Singapore and Malaysia, creditto-gross domestic product (CTG)
climbed from 101.7% and 109.9%
respectively in 2009 to 155.2% and
124.5% respectively in 2013.
However, MARC cited BNM’s view
that although CTG has surpassed its
long-term trend, the trend does not
imply signs of credit excessiveness.
In Malaysia, both loan applications
and approvals in the banking system
have rebounded since mid-2013,
thanks to the improving prospects of
the global and domestic economy,
said MARC.
“Breaking it down, on a six-month
moving average basis, growth of loan
applications rebounded from -7.5%
in March 2013 to 11.7% in March
2014 while growth of loan approvals
improved from -6.4% in December
2012 to 4.2% in March 2014.”
The improvements were primarily
attributed to the sharp rebound in
the applications and approvals of
loans for the purchase of residential
properties.
MARC also noted that the stable
labour market, rising income level
and the relatively accommodative
monetary stance have partly
contributed to rising household debt.
Malaysia’s trade performance since
the second half of 2013 will likely
push up the headline growth rate
in 2014 more than expected, said
MARC, adding that household
financial assets will likely rise in
tandem with a stronger pace of
nominal gross domestic products
growth this year.
“The positive aspect of Malaysia’s
household debt is that it is mainly
backed by strong assets as they
are largely comprised of residential
property loans. And the positive
outlook of the property market helps
mitigate some of the risks.”
In Malaysia, both loan
applications and approvals
in the banking system have
rebounded since mid-2013,
thanks to the improving
prospects of the global and
domestic economy, said
MARC.