Companies’ Financial Conditions Getting Worse
The Korea Chamber of Commerce and Industry recently analyzed 674 non-large listed manufacturers and announced on Dec. 19 that their operating profit increased 3.9 percent from September last year to the same month of this year.
“In that period, their interest cost jumped 20.3 percent and total liabilities increased 10.4 percent with inventory assets continuing to increase,” it said, adding, “In other words, they are in the black but under huge pressure due to snowballing debts and interest costs.”
The South Korean government implemented programs in April 2020 for loan maturity extension and deferred repayment of principal and interest. The programs for non-large companies and small business operators have been extended four times and are scheduled to end in September next year. Their concerns are increasing with interest rates rising and a recession looming large.
“South Korean companies’ financial conditions are likely to keep getting worse in the first half of next year,” the chamber said, adding, “This is because the Bank of Korea raised the key rate a lot in the second half of this year and it takes six to 12 months for the adjustment to affect the real economy.”