In a statement, MTUC Secretary-General N Gopal Krishnam said recent news reports that Malaysia’s household debt-to-gross domestic product (GDP) ratio had increased to 89.1% as of 2015 from 86.8% was alarming.

The figure meant that Malaysia has one of the highest household debts in the region, with household debt-to-GDP ratios almost doubling between 2008 and 2015.

Gopal said the situation might worsen due to the difficult economic situation Malaysia was facing, alongside the rising costs of living.
“MTUC is concerned that the ability of workers to settle their debt will be affected,” he said, adding that analysts have called for proactive measures to avoid a crisis similar to the United States subprime mortgage crisis.

The subprime mortgage crisis in the US was caused by a high rate of housing loan defaulters, leading to foreclosure of homes, triggering a huge drop in real estate prices, leading to some banks going bankrupt.

Gopal urged government and financial institutions to introduce worker-friendly schemes to reduce the household debt.

He also called on employers to reduce the burden of employees by increasing the employer’s portion of the Employees Provident Fund contribution, provide salary increments and review monthly allowances, including Cost of Living Allowances (COLA).

Gopal said MTUC had received complaints that the nett pay, or take home pay, of some workers was insufficient and said that if household debt continued to rise, it would affect workers and the nation.