International Money Fund (IMF) expressed that Malaysia's financial sector appears resilient with sound profitability and liquidity indicators, as well as low non-performing loans in a statement yesterday.
Despite that, they encourage local authorities to continue monitoring risks stemming from large household debt and the real estate market closely as Malaysia's household debt is high compared with its neighbours, with a large share of mortgages and with pockets of vulnerability among low-income groups.
Malaysia's household debt-to-gross domestic product (GDP) was recorded at 83.2% as at September 2018, Finance Minister Lim Guan Eng said in November last year. Around 52.8% of the debt was for housing loans.
The IMF executive board expressed these views following the conclusion of its 2019 bilateral discussion with Malaysia on Feb 15, as required under Article IV of IMF's Articles of Agreement, it said.
The fund also commented on "residency-based differentiation" in the property market, likely referring to changes in the real property gains tax (RPGT) on profits from disposal of property or shares in property companies in the sixth year and beyond, as announced in Budget 2019.
At the time, the government announced that it will raise the RPGT for companies, non-citizens and non-permanent resident holders to 10% from 5%, while citizens and permanent residents will now have to pay 5% from nil previously.
"A number of IMF directors agreed that the measures related to residency-based differentiation in the property market should be gradually phased out as the systemic risks dissipate," said IMF.