Record household debt: Economic model not sustainable?


Study on Household Debt in Singapore

I refer to ValuePenguin’s article “Household Debt in Singapore – Trends and Causes Analyzed”.

Household debt is growing dramatically

It states that “household debt is growing dramatically as a percent of household assets. Such trend was especially true for personal loans and credit card debt, which now account for over 22% of total household liabilities in Singapore, up from 16% in 2007.

Household debt reached a record 61.1% of GDP

In the 2nd quarter of 2016, household debt reached a record 61.1% of GDP in Singapore.

At 61.1%, Singapore’s current household debt to GDP ratio is lower than the United States (78.8%) yet higher than is currently found in the Euro Zone (58.9%) or China (41.85%).


Data from

More levered than their counterparts in the US or Korea

Singaporean households are more levered than their counterparts in the US or Korea, with asset to equity ratio reaching 120% for Singaporean households compared to 80-90% for US and Korea.

Decrease in consumer spending will create a cyclical cooling cycle

The concern now is that this decrease in consumer spending will create a cyclical cooling cycle. This type of economic slowdown can tend to “snowball” in the following way:

Consumer spending declines
Economic growth slows
Wage growth and economic opportunities stall or decline
Consumers find it harder than ever to pay off their existing debt obligations.
The cycle then repeats itself…”

Three unique factors compounding low consumer spending?

Singapore’s already very low consumer spending may be further compounded by the following, factors, which are arguably unique to Singapore:-

… Up to 38 per cent of income goes to the contribution to CPF, which reduces disposable income

… From a cashflow perspective – we may not be spending any money on CPF, HDB or healthcare. Thus, increasing the financial strain on consumers, and reducing disposable income.

… Average annual cash budget surpluses (under IMF fiscal reporting guidelines) of about $20 billion a year. This may also impact consumer spending as arguably, less spending by the Government may translate into greater spending by citizens on basic essentials of living – and less disposable income.

Economic and social development model not sustainable?

Our unique economic and social development model may not be sustainable anymore.