Consumer savings and spending declines in Asia markets. Here's why.

The COVID-19 outbreak greatly increased financial burdens for people around the world, and many are still experiencing high-levels of anxiety to manage their financial responsibilities—especially as various government support measures sunset and inflation persisted in early 2023.

To better understand how these pressures are impacting everyday lives and feelings around financial inclusion, Principal conducted a small consumer poll in April and May 2023 focused on Hong Kong, Singapore, and Malaysia—three key markets that stood out in our inaugural 2022 Global Financial Inclusion Index.¹

Our 2023 Asia pulse survey findings provide insights about why many people in Asia feel financial pressure and how employers and governments can help offset these pressures. More than half of respondents reported a decrease in their savings, and aggregate results demonstrated weakening consumer sentiment and reduced feelings of financial inclusion across all three markets.

The research points to several factors leading to increased financial pressures.

Day-to-day costs are burdening families.

While respondents maintain a high degree of trust in the three pillars of financial (governments, financial systems, and employers), the financial lives of respondents in Hong Kong, Singapore, and Malaysia remain precarious due to increased global costs of living and broader economic conditions.

Financial pressure isn't just about the present—it's about balancing current needs with saving for the future. One-third (34%) of respondents say it’s harder today to afford daily bills than it was two years ago. As the global cost of living increases, 43% of respondents say saving for retirement is more difficult than it used to be, and the same proportion have seen personal debt levels rise.

Consumers in Asia who say:²

High eldercare costs are also contributing to the difficulty of balancing long-term planning against day-to-day costs. Half of respondents feel family members—especially elderly relatives—are more reliant on them financially than they were two years ago.

How do we use this knowledge to promote financial inclusion in Asia?

Encourage employers to play an expanded role.

While governments battle the fiscal consequences of pandemic-related support, employers play a critical role in helping individuals save for tomorrow. The survey indicated 20% of respondents felt higher pension contributions from employers would be most useful in making them feel more financially included. Employer matching policies help prop up consumers’ savings while allowing them to manage daily expenses.

It’s important that as many people as possible take advantage of employment retirement schemes. They not only provide a systematic way to save with additional tax benefits for savers, but also get employers involved with matching contributions.

In addition to retirement contributions, employer-provided benefit programs help consumers save for the future by reducing day-to-day burdens of childcare and personal insurance costs.

Increase accessibility to financial services.

Nearly 60% of respondents say accessing and using online financial services (e.g., online banking) is easier compared to two years ago. Yet the results show debt rising and savings falling. While access to digital financial services is a bright spot, the results indicate financial inclusion is about more than digitalization.

As inflation and high interest rates persist, access to investment products with a balance of passive and actively managed strategies will be necessary for generating actual returns and saving for the future.

As a global organization, we also see strong value in cultivating partnerships that may increase accessibility. This is why we’ve focused on cultivating both global and regional partnerships, which allow us to drive our global asset management expertise through the multi-channel distribution power of trusted intermediaries, including banks, digital platforms, and advisors. By doing so, we encourage clients to start planning early and remain disciplined in their consistent savings journey, meanwhile offering a suite of products and professional advisory to ensure success.

Advocate for government support.

We continue to advocate for policies supportive of increasing access to tools and resources that help people feel more secure about their financial futures.

For example, on Hong Kong pension reform, it’s important to note mandatory contribution limits and raising the upper tax limit for tax deductible voluntary contributions (Tax Deductible Voluntary Contributions) would also be beneficial. The upper mandatory contribution limit has not been raised since June 2014 and remains capped at HK$1,500—even as average wages have increased—leading to a much lower savings rate than intended. Additionally, 25% of respondents also point to higher contributions toward pensions from the government as a way to help people feel more financially supported.

We also support the continuation of tax-exempt status for Malaysia’s Private Retirement Scheme. It’s an essential catalyst for increased personal retirements savings in that market. Such inclusive polices have the public benefit of reducing the burden of retirement finance on the government over time.

Working together moving forward

Macroeconomic and socioeconomic factors are having a greater impact on individuals’ sense of financial stability than they did before the pandemic. As a firm with global pension and retirement expertise, this research reinforces our commitment to help more people access financial security through encouraging clients to start early through disciplined and consistent savings.

Looking ahead, we hope understanding the financial situations of those in Hong Kong, Malaysia, and Singapore will help governments, financial institutions, and employers ascertain how they can work together to drive positive change through effective policies and programs.