Nine out of Ten Export Companies Say "Funding Situation Unlikely to Improve Within 6 Months"

FKI Survey... Three in Ten Say "Conditions Worsened Compared to Last Year"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] It has been revealed that nine out of ten export companies are finding it difficult to secure funding due to interest rate hikes and other factors, and they believe the situation is unlikely to improve within the next six months.

The Federation of Korean Industries (FKI) announced on the 5th that, based on a survey commissioned to Mono Research targeting manufacturing export companies among the top 1,000 companies by sales, 90% of the 100 respondents answered this way.

Regarding the expected timing for improvement in funding conditions next year, 25% pointed to the 4th quarter, and 23% to the 3rd quarter. Meanwhile, 42% responded that "it is unlikely to improve for the time being."

When asked about the current funding situation compared to last year, 29% answered that it has "worsened," which is 11 percentage points higher than those who responded "smooth" (18%).

The main industries reporting worsened funding conditions were steel (50%), general machinery (44.5%), and automobiles (33.3%). This was analyzed as a result of overlapping burdens from demand stagnation due to economic slowdown, increased production costs caused by high exchange rates and inflation, and rising loan interest rates.

Regarding the funding methods currently facing the greatest difficulties, bank loans (43.4%) were the most common answer, followed by corporate bond issuance (14.3%) and government subsidies (14%). More than half of the responding companies (55%) cited rising bank loan interest rates as the most negative factor affecting funding.

In October, corporate loan interest rates reached 5.27%, the highest level since September 2012 (5.3%) during the European debt crisis. The increase in loan interest rates (0.61 percentage points) was also the largest since January 1998 (2.46 percentage points) during the foreign exchange crisis.

Policy tasks for creating a stable funding environment included slowing the pace of interest rate hikes (25.0%), expanding policy financial support (18.3%), and supporting long-term funding (18.0%).

Yoo Hwan-ik, head of the FKI Industry Division, emphasized, "The short-term funding market congestion is not easily resolved, and the rise in corporate loan interest rates is the highest since the foreign exchange crisis. We must fully consider the situation of export companies experiencing the triple burden of interest rates, exchange rates, and inflation," adding, "It is necessary to carefully consider interest rate hikes based on a comprehensive assessment of domestic and international economic conditions, while expanding policy financial support for companies temporarily facing funding shortages."