ACCORDING to the recently published Trade and Development Report 2019 by the United Nations Conference on Trade and Development the world economy is heading into troubled waters, with risk of recession in 2020. Economists have signalled a possible global recession next year partly due to the US-China trade war, which is expected to impact open economies like Malaysia’s.
A global economic slowdown is worrying especially for a country like ours which is heavily dependent on exports to drive economic growth. Weak global demand for our goods will cause slowdown in output, risking job losses and we all know that when household debt is at 83% of gross domestic product, job losses can be very stressful.
Bank Negara’s Financial Stability and Payment Systems Report 2018 shows that our country’s household debt stood at RM1.18 trillion in 2018, of which residential housing loans accounted for 53.2% of total household debts while the remaining 46.8% were for personal consumption including motor vehicles, credit card and personal finance. This same report also warns that there was a growing number of defaults in personal financing.
It further highlights that half of total outstanding personal financing is held by borrowers with monthly earnings below RM5,000 and some households were already showing signs of difficulty in servicing their debt, especially among low-income borrowers with personal financing, and borrowers with larger housing loans who are more dependent on variable income sources.
This report highlights clear risks of a recession, if it actually happens.
Whenever there are signs of a recession countries immediately activate strategies to stimulate domestic consumption supported by government spending. Unlike countries with a huge consumer base like India, China or America where strong domestic consumption can help sustain output, ours at 30 million people is relatively small. To withstand such economic turbulence it is vital that we stay united and collectively support economic activity to keep things going, or at least minimise the impact of a recession, but the big question is if we are all ready.
It is crucial to put an immediate stop to political bickering, shift our energy towards key socioeconomic issues such as eradicating poverty, managing high cost of living and increasing the income of people.
Darshan Singh Dhillon
President
Malaysia Consumers Movement
