The latest global report in debt published by the McKinsey Global Institute shows that Singapore is the third largest debtor nation in the world at a Debt-to-GDP ratio of 382%.
A country’s overall debt includes debt of the government, non-financial corporations, and households. A large part of Singapore’s debt comes from the corporate sector. This is not surprising with so many MNCs setting up their base in Singapore.
The report states that
High debt levels, whether in the public or private sector, have historically placed a drag on growth and raised the risk of financial crises that spark deep economic recessions.
But what should be of especial concern to Singaporeans is the third component: household debt. The report shows that Singapore’s household debt – that is, the debt incurred by Singaporeans primarily through housing loans – is one of the highest in the world.
In fact, our percentage change in household debt-to-income ratio between 2007–2013 saw the biggest jump worldwide (see chart on right).
It must be pointed out that the difference between Singapore and other countries is that our housing system is predominantly controlled by the PAP Government.
In other words, in the more than 50 years that the PAP Government has been in control, it has engineered the system to the point where the people have become the biggest debtors in the world – to the PAP Government.
The report also states that “Household debt relative to income has continued to grow rapidly in some countries and may be unsustainable…”
With our retirees having insufficient to funds to live on and with our greying population, the above statement seems particularly ominous.
And because we owe so much, we have to keep working harder and harder just to pay off these loans. It is no wonder that 50% of our households live from paycheck to paycheck.
Because of this, Singaporean workers are the most stressed out and disengaged in Asia, and we hold the dubious honour of being the least happy people in the world.
Because of this our productivity levels have been languishing for the last decade with few signs of a pick-up. And because income levels have to be kept in tandem with productivity growth, it looks like our wages are going to grow nowhere, hence the shockingly high household debt-to-income ratio.
This is a grave problem. Something has to change. We must take the pressure off our people. We need to develop a more sustainable economic model, one that makes the Government serve us – not profit at our expense.
The SDP will propose solutions on how we can do this in our policy A New Economic Vision – Innovation, Equal Opportunity, and Compassion which we will launch tomorrow, 7 February, 2pm at the Chinese Success Media, Bras Basah Complex. Join us.