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1 in 5 Korean companies unable to meet interest obligations in 2020: survey

A night view of Yeouido, Seoul (123rf)
A night view of Yeouido, Seoul (123rf)
One out of 5 companies in South Korea could not meet its debt obligations for the past three years, a report showed Tuesday.

According to an analysis by the Korea Federation of Industries, Korea ranked fourth among 25 member nations of the Organization for Economic Cooperation and Development, with 18.9 percent of its large companies classified as “marginal” as of 2020.

A company is categorized as being marginal when its operating profit fails to cover interest payment obligations for more than three consecutive years.

The OECD average was 13.4 percent of large companies.

The KFI’s study looked into companies from 25 OECD nations with more than 50 billion won ($42.27 million) worth of assets.

Canada had the greatest number of marginal firms, followed by Greece and the United States.

The proportion of marginal companies in Korea expanded by 2.8 percentage points from 2018 to 2020. This surpassed the OECD average of 1.8 percent.

“South Korea has a relatively high ratio of marginal firms among other nations in the OECD, and their numbers are also increasing rapidly,” said an official from the Korea Federation of Industries.

“We need to help marginal firms stand on their feet by fostering a corporate-friendly environment,” he added.

By Kang Jae-eun (kang.jaeeun@heraldcorp.com)
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