Financial issues are a major concern for the Malaysian population. A recent AKPK study polled 3,115 working adults, aged 18 to 60 years, from both the public and private sectors. It found that the high cost of living is the number one factor in causing financial stress in Malaysia. Second in importance is the lack of savings. Those with higher savings were more able to manage financial stress, but those with lower savings were more vulnerable to its effects.
In recent years, Malaysia’s financial system has struggled to deal with the consequences of the 1997-98 Asian financial crisis. The government has tried to address this problem by implementing emergency measures, including tight fiscal policy and a deposit insurance scheme. But the country is still facing structural problems. The Bumiputra First Policy, which has resulted in a weak financial system, has contributed to the problem.
The Malaysian government has taken steps to tackle these problems. One of these is the expansion of the Employees Provident Fund (EPF), the central pension pillar. The EPF is likely to divert more risks due to relaxed investment regulations, but it cannot escape the responsibilities it has to distribute income among Malaysians.
While Malaysia’s Bumiputra First policy is regarded as a success, the result is inefficiency in its financial system. The Bumiputra First Policy promoted the expansion of the domestic banking sector, but it distorted the system and created financial intermediaries that were inefficient. This caused a slowdown in the construction of a sound banking system. Ultimately, financial issues in Malaysia must be addressed before the economy can move forward.
Following the Asian crisis, Malaysia’s economy began to recover. Economic growth surpassed eight percent and unemployment was at three percent. Despite the economic challenges, the Malaysian government maintained an attractive macroeconomic policy regime. Moreover, it pegged the currency to the US dollar, which helped protect the domestic interest rate from the fluctuations in the international exchange market.
Malaysia has a long history of financial problems. The Malaysian government is taking steps to address these problems. One way to improve the financial condition of the country is to create an investment environment that encourages financial growth. The Malaysian government is committed to ensuring the success of Malaysian firms. All investors need to know what their risks are and how to mitigate them.
Household lending remains strong. This is supported by sound debt servicing capacity and healthy financial buffers. Meanwhile, banks continue to assess loan affordability and adhere to prudent underwriting standards. They also continue to provide credit to consumers. However, financial issues in Malaysia still pose a risk to the economy. The Malaysian economy remains a highly competitive place to do business.
