KUALA LUMPUR, Nov 26 — With Malaysian households already burdened with debt, Putrajaya must look to private investment to take the strain of powering the country’s economic growth, a local think tank said today.

The government must also continue with its Economic Transformation Programme (ETP) as it has been shown to increase the rate at which private investment has risen this year, the Malaysian Institute of Economic Research (MIER) added.

“The main driver is still domestic demand … I feel that we have been asking them to work very hard, especially the household,” MIER executive director Dr Zakariah Abdul Rashid told reporters here.

“Now we’re already shifting from private consumption to private investment, private investment have to do a lot more work going forward to 2014.”

Zakariah’s met reporters on the sidelines of the annual National Economic Outlook Conference organised by the institute, where he reiterated MIER’s outlook for Malaysia’s economy to grow by 4.8 per cent this year.

In its third quarter report this month, Bank Negara Malaysia (BNM) announced that domestic demand has increased to 8.3 per cent versus a dip last quarter, as most economic sectors recorded a higher growth.

Private consumption expanded by 8.2 per cent, supported by a higher wage growth in both export and domestic-oriented industries, but mostly contributed by the latter.

Private and public investments have also expanded thanks to spending in the oil and gas sector for both.

“This shows that the ETP project have to go on, the government must have the energy to continue pushing the economy forward, the government have to push the ETP ... We can’t put too heavy burden on the household,” he added.

According to Zakariah, all this while the government had instead relied on increasing domestic demand, by offering cash handout such as the 1Malaysia People’s Aid (BR1M) and easy credit.

Malaysia’s economy grew 5 per cent year-on-year in the third quarter of 2013 and rose strongly from 4.4 per cent the previous quarter owing to a recovery in exports, and remained heavily driven by domestic consumption.

However, this had previously resulted in a rise in household debt, as Malaysia’s household debt-to-GDP ratio rose from 75.8 per cent in 2010 to 76.6 per cent in 2011, and to 80.5 per cent in 2012, which is one of the highest in the region.

Although non-banking financial institutions and development financial institutions only account for 12 per cent of Malaysia’s total household credit, they are responsible for 57 per cent of personal financing credit, a figure that has risen significantly.

The comparative ease of obtaining personal loans has increased the percentage of personal financing over household debt from 16 per cent in 2011 to 17 per cent last year.

As a result, BNM had introduced in July three new measures to curb Malaysia’s rising household debt which included reducing the maximum tenure for personal loans to 10 years from 25, and 35 years for house loans. Offers for pre-approved personal loans have also been prohibited.

The measures had subsequently kicked it, as central bank announced that the rise of the household debt-to-GDP ratio has eased slightly to 2.5 per cent in the third quarter of 2013, compared to 3.2 per cent in the preceding period.