Rise in domestic debt places Malaysia at risk of crisis, economists warn

KUALA LUMPUR, Dec 24 – Economists warn that a rise in domestic debt that has been keeping Asia’s economy strong could place the region, which includes Malaysia, at risk of a major crisis, the Wall Street Journal (WSJ) reported. The WSJ noted the great increase in the number of loans being taken by Asian businesses and individuals due to the low interest rates offered by banks.
But Frederic Neumann, co-head of Asian economic research at HSBC, warned that the Asia could be at the brink of a major debt crisis, saying: “I believe we are at the beginning of a major debt cycle in Asia.”
“We are certainly seeing the early symptoms of a debt bubble emerging, and I think it’s worth keeping a close eye on,” he told the international business paper last Friday.
The WSJ reported that Asia’s debt levels had jumped far greater than the troubled Euro zone and the US.
Asia’s credit-to-GDP ratio shot up to 104 per cent this June from 82 per cent in December 2007, while the Euro Zone’s was a slower rise of 131 per cent from 123 per cent and the US’ ratio had went down by one per cent to 62 per cent.
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