Ability to repay borrowings, VERY important.

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Sometimes, I get tired of having to repeat this. “No, Malaysia is NOT in a recession and it is NOT forecasted to be in a recession anytime soon, whether by our own government, our BNM or even all the other external rating agencies or the World Bank and International Monetary Fund.” As for the question of whether Malaysia may be moving towards another financial crisis since the economists say that acrisis happens every 10 – 12 years, I do not think anyone has a firm answer yeah. Predictions, probably.

Anyway, one of the best signs of any impending crisis in any country would be the ability of its people to continue servicing their debts. In other words, if they borrow, are they able to repay the borrowings. Once we have the trend of people unable to repay their debts, get ready for that potential crisis. Let’s look at a few relevant countries for some clues and see where Malaysia is when compared to all of them. I did not include any developing countries at all. We will only benchmark the advanced economies yeah. No point being ahead of some weaker countries.

UK: We can see a positive trend of lower NPLs
United States: We can see that NPL peaked in 2010 and trending downwards since.
Australia: NPL peaked between 2010 /2011 and has been on a downtrend since
Singapore: NPL peaked in 2009. It has been trending upwards but is now on a downtrend since 2017
Malaysia: NPL peaked in 2006 and has been on a downtrend since.

I hope the charts are clear enough for everyone to understand that the ability to pay what they have borrowed continues to be healthy for Malaysians. Actually, it’s also pretty healthy for all other countries above too, so if some crisis were to happen, it will be due to some unforeseen circumstances which could definitely include trade and economic wars between all the big economies of the world. Yeah, it could also be caused by some instability if some countries under sanctions cross path with the U.S. again, strongly. Please do not borrow beyond our means. Buying a property should always be within affordability and stop trying to buy a property if one just could not afford to. There’s no need to make the NPL rise again in the near future. Happy understanding everyone.

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written on 28 July 2019

<Featured Image is courtesy of Stock Photos from Bankrx>

Next suggested article: Stay safe, buy within affordability and stop bubble from building

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