South Korea’s corporate debt increased at the second-fastest pace among 34 countries in the world in the third quarter as companies grappled with high interest rates amid global financial tightening.
According to a recent report released by the Institute of International Finance (IIF) on Sunday, the debt-to-gross domestic product (GDP) ratio of South Korean non-financial companies in the third quarter was 126.1%, ranking third among 34 countries in the world. It was the highest. Following Hong Kong and China.
South Korea’s debt ratio increased by 5.2 percentage points compared to the second quarter of this year. This was the second fastest growth after Malaysia (28.6 percentage points).
The rapid increase in domestic corporate debt was due to global financial tightening, and companies were struggling with cash flow.
South Korea also had the highest number of corporate bankruptcies among the countries surveyed.
The report, which assessed the number of companies that went bankrupt in the past year in 17 major economies, placed South Korea second on the list with a bankruptcy rate of about 40%.
The IIF said private loan issuance has declined in many countries, including Europe, and companies with poor credit ratings have become financially vulnerable.
South Korea’s household debt-to-GDP ratio was the highest at 100.2%, making it the only economy with this ratio over 100%.
South Korea’s government debt to GDP ratio reached 48.9%, ranking 22nd. However, the growth rate increased by 4.7 points, placing it in 4th place.
Private debt from households and businesses continued to increase in the fourth quarter. As of November 16, the outstanding loans of the five major domestic financial companies reached 689.5 trillion won ($531 billion), an increase of 3.5 trillion won from the end of October.
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