Debt Ratio of Accommodation and Food Service Industry at 216.08%: "Surviving COVID-19 with Debt"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] The debt ratios of lodging facilities and restaurants, which were severely impacted by the spread of the novel coronavirus infection (COVID-19), have consecutively reached record highs. As social distancing measures due to the resurgence of COVID-19 continue to cause sales shocks, there is a possibility that debt ratios will rise further for the time being.

According to the Bank of Korea on the 14th, the debt ratio of companies in the lodging and restaurant industry stood at 216.08% as of the third quarter of last year. This is the highest figure since statistics began to be compiled in 2015, following the first time the ratio exceeded 200% in the second quarter of last year (200.24%), setting a new record consecutively.

The debt ratio in the lodging and restaurant industry generally remained in the mid-100% range since statistics began to be compiled. It fell to 128.33% in the second quarter of 2018 but gradually rose again to the mid-100% range.

In the first quarter of last year, when COVID-19 initially spread, it rose to 168.68%, and in the second quarter, it exceeded 200%.

Loans taken out by lodging businesses and restaurants continue to increase. As of the third quarter, the total loans from deposit-taking institutions to the lodging and restaurant industry amounted to 72.5806 trillion won. This is a 2.0% increase from the previous quarter and a 20.8% increase from one year earlier.

In the second quarter, loans surged by 9.9% compared to the first quarter and by 21.5% compared to one year earlier, marking the highest growth rates ever recorded.

Since the third wave of COVID-19 began last winter and social distancing levels were raised accordingly, sales in lodging and restaurants have not improved, making it highly likely that debt ratios will continue to rise for the time being.