Five corporate bankruptcies a day this year - 34.7% surge from the same period last year - South Korean report

"People have used tens of billions of won worth of personal assets as collateral to keep their companies afloat, but when their companies go bankrupt, they lose all their personal assets," said Lee Jung-yeop, chief attorney at LKB Law Firm.
The number of companies that went bankrupt in the first quarter of this year exceeded 400. This works out to five companies going bankrupt every day. Companies that could be said to be the backbone and roots of the Korean economy are facing financial difficulties due to the economic downturn and high interest rates.
As the effects of the prolonged economic downturn continue, some are calling for measures to break the cycle of economic recession and the slump in the real economy. According to documents from the Supreme Court, the number of corporate bankruptcy filings in the first quarter of this year was 1.2 times that of last year.
The total number of bankruptcy cases was 439, up 34.7% from last year. In the last 90 days, about 440 companies filed for bankruptcy, which means that in a simple calculation, 146 companies a month, or about 5 companies a day, are unable to overcome their financial difficulties.
This means that they have given up on continuing their business. This is more than double the number of cases from 2021 to 2022, when the COVID-19 virus infection was spreading.
It is analyzed that the economic situation remains sluggish and that an increasing number of companies are unable to bear the increased interest rates due to the impact of high interest rates.
The interest rate on loans to foreign companies (based on new transactions) has soared from 2.97% in 2020 to 4.44% in 2022 and 5.34% in 2023. The burden of high loan interest rates continues,
As loans taken out during the COVID-19 pandemic approach their maturities, many companies are being forced into bankruptcy as they are unable to withstand the pressure. According to the Financial Supervisory Service, the delinquency rate for corporate loans at the end of February was 0.59%.
The delinquency rate for small and medium-sized enterprises rose 0.24 percentage points from the same period last year to 0.76%, the largest increase among corporate loans.
Experts point out that the increase in corporate bankruptcies and delinquency rates for corporate loans is like an alarm bell for Korean society.
This is because it could lead to credit instability and a tightening of credit not only for companies but also for households and other industries. Shin Young-sang, director of the Financial Risk Research Center at the Korea Institute of Finance, said, "Corporate loans will inevitably be directed at households and other industries.
"The increase in bankruptcies and delinquency rates is not just a problem for businesses, it's a problem for all of us in society," he said, adding, "The government needs to set strict guidelines to prevent competitive companies from going bankrupt."
"It's time for financial institutions that can create and identify these to play their original role."