Manufacturing Crisis
Korean companies’ sales growth rate recorded an all-time low last year. In particular, manufacturers in the automobile and IT industries and big businesses posted a sales growth rate of less than 1 percent.
The Bank of Korea announced on Oct. 16 that 492,288 Korean companies showed an average sale growth of 2.1 percent last year. This percentage is a record low since 2002, when statistics began to be compiled. Also, the rate fell from 15.3 percent to 12.2 percent and then to 5.1 percent between 2010 and 2012.
That of the manufacturing sector plummeted to 0.5 percent, which is the lowest ever since 1961. The sector recorded a percentage below 1 percent, specifically 0.7 percent, only in 1998 until 2012. Big businesses’ sales growth rate dropped from 5.0 percent to 0.3 percent between 2012 and 2013 as well, while that of small and mid-size enterprises edged up from 5.3 percent to 5.6 percent. The sluggish performance on the part of the former can be attributed to the appreciation of the Korean currency and the global economic recession, according to the central bank.
Corporate profitability is deteriorating at a rapid pace, too. Last year, Korean companies recorded a pre-tax profit rate of 2.9 percent. The rate dropped from 4.9 percent to 3.7 percent between 2010 and 2011, and to 3.4 percent the following year. Their profit-to-sales ratio remained at 4.1 percent in 2012 and 2013.
Under the circumstances, the corporations are trying to enhance their stability by means of debt reduction. The average debt ratio was reduced from 147.6 percent to 141.0 percent between 2012 and last year and the total borrowings to total assets fell from 31.9 percent to 31.5 percent during the same period.