Alarming Increase in Corporate Debt in Korea
By Hanimomo – Herald Economy
A notice at a bank in Seoul has brought attention to the rapid increase in corporate debt in Korea. A recent report by the Institute of International Finance (IIF) reveals that Korea’s corporate debt-to-GDP ratio has reached a concerning 126.1%, ranking third globally. The only countries surpassing Korea in this aspect are Hong Kong and China.
In addition to this, Korea’s default growth rate is approximately 40%, making it the second highest in the world after the Netherlands. The report by IIF also highlights the increasing vulnerability of companies with low credit ratings, despite the decrease in lending to the private sector by banks around the world.
Furthermore, the household loan ratio in Korea has reached 100.2%, the highest among 34 countries. The Bank of Korea warned that exceeding the ratio of household credit to GDP by 80% could lead to a decline in both short-term and long-term growth rates.
On the government level, the debt-to-GDP ratio is 48.9%, placing Korea at 22nd globally. However, the rate of increase in government debt in the country is faster than the world average.
The increase in corporate and household loans in Korea remains a cause for concern. The total home loan balance of the five major banks has risen significantly in just 15 days, with an increase of trillions of won. Corporate loans, too, have increased, resulting in a rapid rise in the delinquency rate of corporate borrowers.
These findings paint a worrying picture for the Korean economy, as both corporate and household debts continue to escalate despite global efforts towards austerity. It is clear that urgent measures need to be taken to address this growing financial crisis in Korea.
A notice regarding loan interest rates is posted at a bank in Seoul. random news
[헤럴드경제=한석희] The rate at which Korean companies’ debt is increasing was found to be the second in the world. In particular, the rate of increase in default is also the second highest in the world, so it is analyzed that companies that are difficult to stop with loans have reached their limit.
This means that corporate borrowing in Korea, which already has the infamy of having the largest household debt scale in the world, is also reaching its limit. The problem is that corporate and household loans continue to increase rather than decrease. In just the last 15 days this month, the loan of the five big banks to households and businesses has increased by 2 to 3 trillion won.
▶ Corporate debt ratio 126.1%… a disgraceful 3rd place after Hong Kong and China = According to the latest report on Global Debt by the Institute of International Finance (IIF) on the 19th, as of the third quarter of this year, 34 countries across the world (the euro area is one). single statistic) with a ratio of GDP to GDP. ) As a result of examining the debt ratio of financial companies, Korea (126.1%) was the third highest.
The only countries that surpassed Korea were Hong Kong (267.9%) and China (166.9%).
Korea’s corporate debt-to-GDP ratio jumped 5.2 percentage points compared to the second quarter (120.9%), moving up one level to third place, surpassing Singapore in three months. This increase is the second largest in the world after Malaysia.
Compared to the third quarter of last year (120.4%), it is 5.7% points higher, and the rate of increase over the past year is also third after Russia (13.4% points, 68.2 → 81.6%) and China (8.6% points, 158.3 → 166.9%).
Despite the global austerity trend, the countries whose corporate debt ratios have risen inversely in the last year are these three countries, Saudi Arabia (+5.5 points), India (+2.6% points) , Vietnam (+2.5% points), and Kenya (+1.2 percentage points), % points), South Africa (+0.3 percentage points), and Egypt (+0.1 percentage points), there were only 9 countries in total.
▶ Korea’s default growth rate is about 40%… 2nd in the world after the Netherlands = IIF also compared the growth rate of corporate bankruptcy in 17 major countries, including Korea (in October this year and compared to the same period last year), and Korea was 2nd at about 40%, after the Netherlands (about 60%) It went up.
The countries that were the subject of the comparative study were Korea, the United States, the United Kingdom, France, Germany, the Netherlands, Finland, Belgium, Spain, Sweden, Denmark, Türkiye, Canada, Japan, Australia, Singapore, and South Africa.
In its report, IIF said, “As banks in many countries around the world, particularly in Europe, reduce lending to the private sector, signs of increased vulnerability among companies with low credit ratings are becoming increasingly apparent. This trend is despite the increase in the number of corporate defaults.” “It’s reflected,” he said.
▶ Household loan ratio of 100.2%, scandal to be placed first for 4 years = In the case of household debt, Korea’s ratio to GDP was 100.2% from the third quarter, the highest among 34 countries. Since 2020, when the COVID-19 event began, it has not relinquished its infamous position for almost four years.
In particular, Korea was the only country among the countries surveyed where household debt exceeded the overall economic size (GDP).
In a recent research report, the Bank of Korea warned, “If the ratio of household credit to GDP exceeds 80%, not only the medium to long-term but also the short-term growth rate will decline.” There were only three countries where the household credit to GDP ratio was above 80%: Korea, Hong Kong (95.2%), and Thailand (91.5%).
▶ Government debt ratio 48.9%, 22nd… 4th place in an increase of 4.7 percentage points in a year = Korean government sector debt-to-GDP ratio (48.9%) ranked 22nd, which was in the lower middle range.
The country with the highest government debt relative to its economic size was Japan (239.9%), followed by Singapore (170.8%), the United States (117.6%), and Hong Kong (103.4%).
However, the rate of increase in our country’s government debt was faster than the world rate.
Compared to the third quarter of last year (44.2%), a year ago, the increase (4.7% points) was in Hong Kong (23.3% points, 80.1 → 103.4%), Argentina (8.1% points, 74.0 → 82.1 %) , and China (7.1% points, 7.1% points) The fourth largest remained (75.9 → 83.0%).
▶ The largest number of borrowers and bank corporate loans ever… Delinquency rate is the highest in 2 years and 3 months = The problem is that the credit rating (debt) in the Korean private sector (households + corporations), which much higher than the size of the economy, continues to grow in the fourth quarter.
Last October, home loans in the banking sector, especially home mortgage loans, increased by 6.8 trillion won compared to the end of September, and in the entire financial sector, including second tier financial institutions, they also jumped 6.3 trillion and won.
Even in November, the growth in home and corporate loans shows no signs of slowing down.
As of the 16th of this month, the total home loan balance of the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) is KRW 689.5581 trillion, an increase of KRW 3.5462 trillion in about 15 days compared by the end of October (KRW 686.119 trillion) It cost hundreds of millions of money.
Not only did mortgage loans increase by KRW 3.4175 trillion (KRW 521.2264 trillion → KRW 524.6439 trillion), but credit loans even increased by KRW 310.6 billion (KRW 107.9424 trillion → KRW 108.2531 trillion).
The balance of loans to businesses other than households (small and medium enterprises, including large corporations and small business owners) currently stands at 766.3856 trillion won. It also increased by 2.0696 trillion won compared to the end of last month.
Compared to the end of last year (703.7268 trillion won), corporate loans from the five major banks have increased by 62.6587 trillion won this year alone.
In particular, in the case of corporate loans, the delinquency rate is increasing rapidly.
According to the ‘Corporate Loan Status’ data presented by the Bank of Korea to Representative Yang Kyung-sook (Democratic Party of Korea), member of the Planning and Finance Committee of the National Assembly, in the second quarter of this year, the number of corporate borrowers of domestic banks was 3.5 million, and their loan balance was KRW 1,262 trillion, a record high.
The delinquency rate of corporate borrowers was 0.37% in the second quarter, reaching the highest level in two years and three months since the first quarter of 2021 (0.37%).
hanimomo@heraldcorp.com
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