Money Problems

 

In the last 30 years, the savings deposits of local manufacturers have risen two-fold. According to the Bank of Korea and Ministry of Strategy and Finance on February 11, the deposit savings rate for businesses in Korea’s non-financial sector jumped from 7.4 percent in 1975 to 15.4 percent in 2011. 

The increase in the disposable savings deposit rate implies that companies are not actively re-investing their earnings, instead opting to keep the money in the company coffers.

The total deposit savings rate for business steadily rose throughout the 80s, climbing to 8.9 percent in 1980, to 11.2 percent in 1984, and to 13.2 percent in 1988. Then it dropped during the 90s, to as low as 6.4 percent in 1998. The savings rate regained 10 percent during the 2000s. In 2010, just after the global financial crisis, the rate jumped to 16.3 percent. 

Out of all Organization for Economic Co-operation and Development (OECD) countries, Korea’s general savings rate for businesses increased as well. According to the same figure, Korea’s total corporate savings deposits ranked fourth, behind Japan, the Netherlands, and Estonia. In 2000, Korea was at 12th place. 

Experts point out that as savings disproportionately increased in 2008, the economy has lost steam. The Korea Institute of Finance Researcher Park Jong-kyu said, “This increase in corporate savings is reminiscent of the 1980’s, when businesses kept their money in real estate.” He went onto add, “Incentives must be given to lower the corporate savings. The companies must be lured to invest more, and save less, to rejuvenate the economy.”

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