December 15, 2022
KUALA LUMPUR – Malaysians are at their worst financial position in 2022 compared with the last five years, and the looming recession may push them to the brink with dwindling savings coupled with the aftermath of the Covid-19 pandemic.
A recent survey by Malaysian financial services website RinggitPlus revealed that 70 per cent of Malaysians saved less than RM500 per month (S$153) in 2022 or did not save at all.
“This is compared with 52 per cent of Malaysians saving less than RM500 monthly in 2021, the largest year-on-year increase since 2018,” the RinggitPlus Malaysian Financial Literacy Survey 2022 showed.
But what is even more worrying is that some Malaysians cannot guarantee their retirement as about 3.6 million pension fund Employees Provident Fund (EPF) members have less than RM1,000 in their accounts as at November 2021. EPF has a total of 15.21 million members as at December 2021.
The country’s largest pension fund said in September that members retiring in the next few years will need about RM600,000 to have a decent retired life.
The survey also showed that 63 per cent of Malaysians can survive only three months or less with the diminished savings, should they lose their jobs.
However, in 2021, the majority of Malaysians were confident of surviving for between three and six months with their savings, according to Bank Negara Financial Stability Review First Half 2022 report.
In 2021, the central bank announced that there was a sharp increase in individual savings since lockdown was imposed to curb Covid-19. In June 2021, current and savings account balances rose to RM306.5 billion, Bank Negara data showed.
Reports suggested that the rise in savings was due to a drop in consumer spending after businesses shut down during the lockdown.
Mr Patrick Tay, deals partner, economics and policy at Malaysia PwC, is not surprised by the decline in savings in 2022.
“One reason for the depleted savings is low wages and higher inflation. But another key reason is that Malaysians are spending more post-pandemic on holidays or other leisure expenses because some may feel that they saved during the pandemic, and it is fine to now spend this year rather than save,” he told The Straits Times.
Should Malaysia fall into a recession in 2023, Mr Tay said, Malaysians who had lost their jobs during the pandemic, particularly from the service sector, will be most affected as they do not have enough savings to fall back upon.
“This includes the retail and tourism segments. The country’s export sector which includes the electrical and electronics industries may also be adversely impacted due to the drop in global demand of consumers goods, with layoffs expected in this sector,” he added.
Ms Bavita Dhillon, 37, who works as a chef, said: “My grocery bills continue to climb as there has been a significant increase in price of basic food items. It has become much harder to save this year.”
Financial planner Yap Ming Hui foresees a rising number of Malaysians filing for bankruptcy in the coming year, with depleting cash reserves and decline in income amid an impending recession.
“When you don’t have income to pay for house or car loans, the number of people becoming bankrupt in the country will soar. Given the high inflation and an expected recession in 2023, we foresee more middle 40 per cent of earners (M40) falling to the bottom 40 per cent of income earners group (B40),” he said.
The aftermath of the pandemic had already led to more than half a million M40 households, representing about 20 per cent of the middle-income group, slipping into the B40 category, then Prime Minister Ismail Sabri Yaakob said in a written parliamentary reply in 2021.
Malaysian digital economy consumer association secretary Shaani Abdullah suggested that the government subsidise public services, such as education and transport services for schools, so that Malaysians can save more.