SINGAPORE: Singaporean households have continued their trend of debt reduction throughout the year despite the uptick in interest rates, according to the annual Financial Stability Review report released by the Monetary Authority of Singapore (MAS). The report indicates that the country’s total household debt reached its lowest point in a decade, at 1.2 times personal disposable income in the last quarter.

The eighth consecutive quarter of decline in household debt can be attributed to the heightened caution exercised by local households in acquiring additional loans, especially in the realm of personal loans. The surge in interest rates during the second half of the previous year acted as a catalyst, prompting residents to be more circumspect in their borrowing habits. The central bank suggested that the sustained growth of local income has played a pivotal role in contributing to the overall reduction in household debt.

However, the report cautions against complacency, highlighting an increase in the maturity risk of short-term debt, particularly credit card debt, during the current year. The resurgence of outbound tourism, rebounding domestic retail sales, and the resumption of large-scale entertainment activities in Singapore and the region have amplified the likelihood of individuals resorting to credit cards for consumption.

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Despite the increase in credit card debt, MAS maintains that it remains below the long-term average as a share of personal disposable income. The proportion of accumulated card debt in personal disposable income rose by 0.2 percentage points year-on-year, reaching 2.2 per cent in the last quarter. MAS points out that this particular category of consumers constitutes only about 20 per cent of the total number of credit card holders, a figure lower than the historical average.

In light of these findings, MAS advises credit card holders to meticulously assess their financial situations before making substantial purchases through short-term debt. For those facing challenges in repaying their card debt on time, MAS recommends taking early action to address the issue, such as restructuring their debt or formulating a viable repayment plan.