Here's a silver lining behind Singapore’s very high household debt

Will the country survive rising rates?

Lower income households and highly indebted individuals may be in big trouble once interest rates rise. Singapore’s household debt to GDP ratio now stands at roughly 150%, the second highest in the region just behind Malaysia.

Despite this risk, analysts from BMI Research believe that Singapore remains one of the best-placed developed markets to weather rising interest rates,

“It is difficult to tell exactly what impact global rate normalisation will have on the local economy, and much depends on the trajectory of the rise in US rates and on the eventual equilibrium level to which they reset. Although concerns such as household debt and the cost of credit prompt questions over the health of the Singaporean economy and consequently the consumer, we retain our view that the economy remains on sound footing, retaining its position as one of the region's outperformers,” said the report. 

Several years of extremely low interest rates have resulted in a credit surge for Singapore, and some households have taken on a significant amount of debt in order to catch up with the country’s housing boom.

“As the price of money affects almost every major business spending and consumption decision, higher costs of credit will undoubtedly have far-reaching implications. However, higher global rates will bring positive as well as negative developments, and we believe that Singapore is among the developed nations best equipped to withstand global interest rate normalisation,” said the report.