Another Source of Burden on Economy
South Korea’s industrial loans in the third quarter, including owner-operator loans, expanded at a pace similar to that during the global financial crisis. In particular, corporate loans in the service sector, which had a high ratio of independent business, showed the largest ever growth. As interest rates are about to rise, corporate debt is expected to become another major source of burden for the central bank in addition to more than 1,500 trillion won (US$1.34 trillion) of household debt.
According to a report titled “2018 Q3 Industrial Loans by Savings Institutions” released by the Bank of Korea (BOK) on Nov. 29, the total amount of loans came to 1,107 trillion won (US$987.51 billion) in the third quarter, up 24.3 trillion won (US$21.68 billion) from the previous quarter. The figure showed the biggest growth rate in 10 years after the 30.3 trillion won (US$27.03 billion) increase in the third quarter of 2008 when there was a global financial crisis. The rate of increase on-year stood at 6.8 percent, maintaining the 6 percent level for a year since the fourth quarter of 2017.
The amount of loans in the service industry, which has a high ratio of self-employed business owners, grew by 18 trillion won (US$16.06 billion) on-quarter to 659.7 trillion won (US$588.49 billion), showing the largest growth in history.
The amount of loans in the manufacturing industry also increased by 4.7 trillion won (US$4.19 billion) to 347 trillion won (US$309.55 billion). Its growth rate greatly increased in a quarter from 500 billion won (US$446.03 million) in the second quarter. It showed the biggest figure in 18 months after 6.2 trillion won (US$5.52 billion) in the first quarter last year.
In addition, the amount of loans in the construction industry rose by 800 billion won (US$713.65 million), turning into growth from 400 billion won (US$356.82 million) of decrease at the previous quarter. The figure stood at 41.1 trillion won (US$36.66 billion) at the end of the third quarter.
By use of loans, the growth rate of loans for operation funds to run business was three times higher than loans for facility investment. The balance of operation funds at the end of the third quarter amounted to 639.2 trillion won (US$570.21 billion), up 14.2 trillion won (US$12.67 billion) from the previous quarter. It was 3.3 times higher than 4.3 trillion won (US$3.84 billion) of growth in the second quarter.
On the other hand, the amount of loans for facility funds went up by 10.1 trillion won (US$9.01 billion) to 467.8 trillion won (US$417.31 billion). The growth rate of operation funds had stood at 4 trillion to 8 trillion won (US$3.57 billion to 7.14 billion) so far. The fact that it skyrocketed to 14 trillion won (US$12.49 billion) in the third quarter means that a majority of companies increased loans to cover operation costs for the present. By lender, savings banks saw 16.1 trillion won (US$14.36 billion) grow, while non-banking depository institutions had 8.1 trillion won (US$7.23 billion) increased.