Household debts are increasing in many countries across Southeast Asia as a growing number people have few alternatives due to the current economic situation. A recent study from Milieu Insight found that 62 percent of individuals regionally currently hold debt or loans. Malaysia (79%) and Vietnam (76%) have the highest prevalence of people with outstanding loans or debt.
This potentially poses a problem with surging interest rates seeing the cost of borrowing rise for households and business owners. That may lead to more debt defaults and skyrocketing financial distress.
Milieu Insight noted that 14 percent of survey respondents reported an inability to save after deducting expenses and debt/loan repayment. This figure rose to 24 percent in Thailand, the highest regionally.
As household debts mount across Southeast Asia, many are watching the ability of the public to make monthly payments. In Singapore, 88 percent of people asked said they consistently pay their monthly credit card bills. This fell to 63 percent in the Philippines and 62 percent in Malaysia.
While borrowing has become more pervasive, it is not seen as a positive in some countries. For example, those in Indonesia (90%) and Thailand (86%) expressed discomfort in taking out loans. This was very different from Vietnam and Malaysia where those surveyed were more willing to take on loans or other types of debt.
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Interesting Analysis
Household debts in Southeast Asia aren’t bad on their own. However, this is a situation that bares watching. Economies across the region haven’t entirely found their footing post-pandemic which is one of the reasons more loans are taken out.
This, coupled with an inability to save, means more defaults are likely if nothing is done to support those struggling. For governments in these countries, it is important to find both short- and long-term fixes that ensure people burdened with debt have a viable path toward repayment.
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