Consumption To Drop To 3.6%, Predicts HSBC

Consumption To Drop To 3.6%, Predicts HSBC

Malaysia could see a slump in consumption from 5.6% in 2016 to 3.7% this year, says HSBC Bank.

According to its economist, Lim Su Sian, the wage growth has been losing steam with the country’s unemployment rate creeping gradually higher, to 3.6% as of November 2016. A multi-year high, she said.

“While there are cash handouts for current and retired civil servants and a possible snap election in the first half of 2017, consumption could be lifted temporarily,” she added but warned that a “soggy” ringgit and large debts could depress consumer confidence.

Households will still have to work through paying off debt equivalent to about 90% of the country’s gross domestic product, she said.

Malaysia has one of the highest household debts in Asia, and is expected to lag behind the Philippines, which is projected to ramp up consumption at an impressive 7.1%.

Ever since the ringgit bottomed, Malaysia’s economy has been expanding at its slowest pace as private consumption eased, pressing policymakers to bolster growth and boost confidence.

According to Bloomberg, the ringgit remains significantly undervalued and is still risky towards economic expansion.

[Source]

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