The Bank of Korea announced on Dec. 26 that the outstanding debts of South Korean enterprises totaled an all-time high of 1,153 trillion won as of the end of September this year, up 8.5 percent from a year earlier.
At the same time, the corporate debt-to-nominal GDP ratio reached 101.6 percent with a year-on-year increase of 6 percentage points. During the period, the household credit-to-nominal GDP ratio rose 2.2 percentage points to 93.4 percent. The outstanding corporate debts in deposit banks rose 4.9 percent whereas those in non-banking financial institutions such as savings banks jumped 20.9 percent.
The interest coverage ratio of South Korean companies dropped from 9.0 to 4.4 from the first half of 2018 to the first half of 2019. Besides, the value obtained by dividing current operating profits by interest costs was less than 1.0 in 37.3 percent of those companies and amounted to 49.7 percent in the case of non-large companies.
Moreover, an increasing number of credit rating agencies are currently lowering their credit ratings and outlooks for South Korean companies and concerns are rising over the future soundness of those companies. As of November this year, the ratio of those given improved credit ratings by local credit rating agencies to those given the opposite result was 0.5 whereas the ratio had been 1.0 last year.
Likewise, the ratio of companies with a negative credit rating outlook rose from 11.9 percent to 14 percent in the case of outlooks given by South Korean credit rating agencies and from 7.3 percent to 17.9 percent when it comes to outlooks provided by foreign agencies.