Corporate Zombie Loans Increased by 20 Trillion Won in One Year
Impact of Economic Slump and High Interest Rates
The amount of loans provided by commercial banks to 'zombie companies' that cannot even pay interest despite earning money has exceeded 151 trillion won.
According to data received by Yoo Dong-su, a member of the Democratic Party of Korea, from the Financial Supervisory Service on the 20th, the amount was calculated at 151.4 trillion won. This is an increase compared to 130.5 trillion won in 2022. The number of companies decreased from 98,177 in 2022 to 88,081 last year. Although the number of zombie companies decreased, the loan amount increased.
This loan scale accounts for 32.8% of the total loan amount.
Looking at the banks, Woori Bank provided the highest proportion of loans to zombie companies compared to its total loan amount, at 43%, followed by Hana Bank (37.4%) and IBK Industrial Bank of Korea (34.1%). The bank with the largest loan amount was IBK Industrial Bank of Korea, recording 56.1 trillion won, followed by Woori Bank (28.4 trillion won) and Hana Bank (26.5 trillion won).
Due to the economic downturn and prolonged high interest rates, the number of zombie companies is on the rise. The Bank of Korea also reported in its 2023 business analysis that 40.1% of non-financial for-profit corporations subject to external audits had an interest coverage ratio below 1.
Representative Yoo said, "According to the Bank of Korea, if restructuring of 'zombie companies' had been carried out in a timely manner, overall manufacturing labor productivity would have increased by more than 1%," adding, "It is necessary to break the vicious cycle where chronic zombie companies worsen employment, investment, and labor productivity." He emphasized, "We need to prepare detailed and bold policy measures that institutionally support the cost burden of closures of zombie companies while surgically removing only the problematic parts."
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