Household debt vs GDP is now 88.4%, down from 89.1%.

Yesterday, Bank Negara Malaysia released a press statement entitled, “Bank Negara Malaysia Annual Report 2016” Some interesting facts from the long article as follows:

  1. 2016 was a year when the world economy grew the SLOWEST since the Global Financial Crisis
  2. Global inflationary pressures remained low, mostly due to weak demand and weak commodity prices, especially crude oil.
  3. Due to the growth concerns, many countries adopted an accommodative macroeconomic stance (including Malaysia)
  4. Malaysia achieved 4.2 percent GDP growth in 2016 (YES, I personally think this is a very good achievement versus majority of all the countries in the world)
  5. Domestic demand remains the growth anchor, supported mainly by private sector spending. Measures include temporary reduction in employees’ contribution to the Employees Provident Fund (EPF), higher Bantuan Rakyat 1Malaysia (BR1M) payouts (Direct provision to the right targeted households would help the most when it comes to household spending)
  6. Except agriculture, all economic sectors continued to expand in 2016!
  7. Unemployment rate increased from 3.1 (2015) percent to 3.5 percent (2016)  (Technically, this is still considered full employment)
  8. Net employment gains totalled 112,300 and it is concentrated in the high-skilled segments such as professional and managerial jobs (This is very positive indeed. Now we know why the car sales increased for the more expensive models.)
  9. We (Malaysia) still have trade SURPLUS even if the amount is smaller.  (Note that largest economy is still having trade DEFICITs)   Currency should appreciate when there is a trade surplus and not the other way around. This is assuming a rational market.
  10. International reserves of Bank Negara Malaysia amounted to USD94.5 billion (equivalent to RM423.9 billion) as at end-2016. As at 28 February 2017, the reserves level amounted to USD95.0 billion (equivalent to RM426.3 billion).
  11. External debt is equivalent to 73.9 percent of GDP as at end 2016. One third is denominated in ringgit which reduces the risks from foreign currency fluctuations. (U.S’s external debt is 95 percent of GDP. To have a reference of external debts of other countries, refer here. 
  12. In 2016, the ringgit, along with most major and regional currencies, continued to be influenced by shifts in portfolio flows. For the year as a whole,the ringgit depreciated by 4.3% and ended the year at RM4.486 against the US dollar. (As at 24th March 2016, it is at US$1 to RM4.4230; appreciating trend in 2017)
  13. Global economic activity is projected to improve in 2017 (Great for a trading nation like Malaysia)
  14. Malaysian economy is projected to register a sustained growth of 4.3% – 4.8% in 2017.
  15. Domestic demand will continue to be the principal driver of growth, underpinned by private sector activity. (Keep buying yeah)
  16. Inflation for 2017 would be higher, at an average in the range of 3.0% – 4.0%.
  17. Fiscal policy in 2017 will focus on further strengthening of the Government’s fiscal position.(Yes, committed to reduce the deficits further)
  18. Household debt to GDP saw a reduction from 89.1% for 2015 to 88.4% for 2016.  (Household debt to GDP for a few selected countries as follows: U.K (87.6%), U.S (79.4%) and Australia (123%)

next suggested article:  BNM’s accommodative stance for the economy maintained

3 thoughts on “Household debt vs GDP is now 88.4%, down from 89.1%.

  1. Hi Charles,

    I remember our debt to GDP ratio should not be more than 55% (exact figure not sure), now it’s 79%. Shouldn’t we get parliamentary approval in this case?

    • Shuner, govt debt to GDP must not exceed 55%. Currently, it’s still below 55%. It’s different from household debt. For example, Singapore govt debt to GDP is over 100% while its household debt to GDP is 62%. Australia’s household debt is over 125% and its govt debt to GDP is close to 40%. Cheers.

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