Concerns over Singapore's rising household debt levels may increase after data showed bankruptcy orders have risen to the highest level since 2009, but it isn't clear whether it signals trouble ahead.
Bankruptcy orders rose nearly 14 percent on year in 2013, and although the actual number was relatively low at 1,992, that is the highest number since 2009, the middle of the global financial crisis.
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"We're seeing perhaps rising costs coming from rentals and labor costs having some impact on some businesses in a very competitive landscape," said Song Seng Wun, an economist at CIMB (Kuala Lumpur Stock Exchange: CIMB-MY). "It is inevitable that some businesses and individuals who may have overstretched themselves would struggle."
The wealthy Southeast Asian nation has seen soaring household debt levels in recent years as low interest rates have led to a borrowing spree, prompting the government to step in to curb demand amid concerns rates are heading higher.
Singapore's household debt-to-income ratio has risen to 2.1 times in 2012 from a low of around 1.9 times in 2008 during the Lehman crisis, according to data in the annual financial stability review, released by the city-state's central bank, the Monetary Authority of Singapore, in December.
The MAS estimates about 5-10 percent of borrowers have a total debt-servicing burden of over 60 percent of their income, with that potentially rising to 10-15 percent of households if mortgage rates rise by 300bps.
Song noted that banks' charge-off rate for credit cards at the end of December was at 5 percent, up from 4.8 percent at the end of 2012 and 4.3 percent at the end of 2011.
"It tells a story to a certain extent," he said. "The amount written off by banks is still modest, but nonetheless, the trend is there," Song noted.
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Changing cultural values may also be driving some of the increase in bankruptcy orders. Traditionally for Asian families, declaring bankruptcy would be considered a "loss of face" and would be avoided.
"It's less taboo nowadays, certainly it's much more the case than say a decade ago," Song said. "With people encouraged to be entrepreneurs, there's less of a stigma to be declared bankrupt."
A stronger entrepreneurial spirit does appear to be driving some of the increase in bankruptcy orders.
While "traditional" problems - such as people living beyond their means and racking up debt on credit cards and auto loans - drive many bankruptcies, entrepreneurship gone wrong is spurring more filings, said R Nandakumar, an attorney who does insolvency work for both companies and individuals.