06 Aug Debt in Southeast Asia On Rise, Trouble Down the Road for Sourcing?
FORGET the stereotypes of Singaporeans as a cautious and conservative bunch. It’s now “spend, spend, spend” in the small but wealthy city-state, where old scruples about going into debt seem to have been cast aside. Singaporeans are among the most indebted in Asia, relative to income. According to Standard Chartered, Singapore’s households have loans averaging 151% of annual income, second only to Malaysia’s in South-East Asia.
Singapore’s banks look well-capitalised. One of them, DBS, points out that although Singapore’s debt has risen faster than, say, Hong Kong’s, Singapore’s GDP per person has grown much faster, too. The danger, warns Ravi Menon, the head of the MAS, will come when interest rates move up again. His concern is that borrowers have been lulled by low interest rates over a long period of time, and could be woefully unprepared for rate rises.
These are the sort of figures that banking crises are made of. Moody’s, a ratings agency, recently downgraded its outlook on Singapore’s banks from “stable” to “negative”. Mr Menon asserts that Singapore bank lending is still “mostly prudent”. But he also acknowledges that with so much demand for borrowing, “there is some laxity creeping into the system.”