Loans to households in Malaysia higher than GDP: Allianz Wealth Report

KUALA LUMPUR: Loans to private households increased at a faster pace than national gross domestic product (GDP) and also their financial assets in 2015, according to the Allianz Global Wealth Report.

It said on Thursday the 7.2% growth in loans to the households exceeded the GDP of 4.6% growth and even their financial assets with 4.9% “thus worsening the private debt to GDP ratio and asset to debt ratio further”.

“Household debt climbed to 89.1% of GDP, while the financial assets to GDP ratio edged up only marginally to 182.9% from 182.4% in 2014,” it said in the seventh edition of the report.

The report also pointed out that at the end of 2015, every inhabitant of Malaysia had debts to the tune of Euros 7,285 (about RM33,500) as against average financial assets of Euros 14,960 (RM68,810). 

“The assets to liabilities ratio of 2.1 seems to be comfortable, indicating that most households should be able to repay their debts. 

“However, it has to be pointed out that only Thailand had a lower ratio. In Taiwan, for example, a country with a similarly high debt to GDP ratio of 90.4%, the respective ratio was 5.5,” it pointed out.

Allianz also said with net financial assets per capita amounting to Euros 7,670, Malaysia ranked 34th worldwide and 7th in the Asian comparison. 

It noted that together with China, Malaysia forms a kind of midfield of the analyzed Asian countries, with per capita net financial assets four times the per capita net financial assets in Thailand, which ranked one place behind Malaysia, but still only 9% of those in Japan, the richest Asian country in terms of net financial assets per capita.

The report puts the asset and debt situation of households in more than 50 countries under the microscope. 

It noted that based on the findings of the report, it seems that the good years are a thing of the past: global financial assets climbed by 4.9% in 2015, just a whisker above the growth rate of economic activity. 

In the three previous years, financial assets grew at twice that pace, with an average rate of 9%. 

Alianz chief economist  Michael Heise said the development of financial assets has reached a critical juncture. 

“Obviously, extreme monetary policy is losing its impact even on asset prices. As a consequence, an important driver for asset growth no longer exists. At the same time, interest rates continue their remorseless slide, even into negative territory. For savers, the outlook is not rosy,” he added.

The report pointed out that growth in financial assets in industrial countries was slowing. Hence, slowing growth has hit Europe, the US and Japan the hardest. 

In Western Europe (3.2%) and the US (2.4%), asset growth more than halved in 2015. 

At the other end of the spectrum is Asia (excluding Japan), where financial assets expanded by 14.8%. 

The region's lead over the rest of the world is only getting bigger. This also applies in relation to the world's other two up-and-coming regions, Latin America and Eastern Europe, where average growth was only half that in Asia. 

The report pointed out the days in which these regions were able to keep up with their counterparts in Asia are long gone. 

Of the total global financial assets of Euros 155 trillion, the region Asia (excluding Japan) accounted for 18.5% in 2015; this not only means that the proportion of assets held by this region has more than trebled since 2000 but also that the region’s share now far outstrips that of the eurozone (14.2%).

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