Industrial borrowings hit new highs in the first quarter
Businesses in Korea are borrowing more than ever as they struggle with challenges related to the Covid-19 outbreak.
According to Bank of Korea data released Tuesday, industrial loans reached an all-time high in the first three months of the year, both in terms of loans issued that month and total loans outstanding.
Industrial loans are money borrowed from depository institutions including depository banks and non-bank depository institutions by businesses including companies and self-employed people. The bank started compiling the data in 2008.
A total of 51.4 trillion won ($42 billion) of loans were newly extended in the first quarter compared to 24.1 trillion won in the previous quarter and 19.6 trillion won in the first quarter of last year.
Outstanding industrial loans totaled 1,259.2 trillion won as of the end of March, which is up 10.4 percent on year.
By industry, the service sector borrowed the most, as it took a direct hit from timid consumption.
The service sector borrowed 34 trillion won during the January-March period compared to 22.7 trillion won borrowed in the previous quarter. Manufacturing borrowed 14.8 trillion won over the cited period. In the previous quarter, manufacturing borrowed 100 billion won.
Within the service sector, wholesale, retail, hotels and restaurants borrowed the most, at 12.2 trillion won, followed by real estate, with 6.5 trillion won and finance and insurance, at 5.7 trillion won.
The construction sector borrowed 1.4 trillion won in the first quarter.
“The amount of loans increased largely in the service sector as its business condition deteriorated largely due to Covid-19, resulting in the government and the financial institutions to roll out loan programs to small- and medium-sized enterprises and self-employed people,” the bank wrote. “Manufacturing demand for capital increase due to dismal business conditions derived from Covid-19.”
Most of the new loans were used for working capital instead of on facility investment, which means that keeping their business afloat was an imminent issue rather than expanding or improving their businesses.
A total of 37.7 trillion won, or 73.3 percent of the new loan extended in the first quarter, was used as operational funds, while the remaining 13.6 trillion won was used on facility investment.
In the previous quarter, a total of 13.2 trillion won was used for operations fund, while 10.9 trillion won was committed to facilities.
BY JIN EUN-SOO [email@example.com]
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