S. Korea's excessive funds down by $3.9 bn in Q2 amid rising corporate borrowing

[Source: Bank of Korea]

South Korea’s net lending shrank by 5.5 trillion won ($3.9 billion) in the second quarter from a year ago, indicating that private sector and the government all rely more on borrowing to secure operating capital and extra budgets to deal with the pandemic fallout and soaring commodity prices.

According to the Bank of Korea’s (BOK) preliminary data showed on Thursday, Korea’s total excess funds or net lending, the value of financial assets minus financial liabilities, stood at 8.5 trillion won in the April-June period, down from 14 trillion won a year ago.

Non-financial companies net borrowed 46.9 trillion won in the second quarter, up from 19.4 trillion won net borrowing from a year ago as they borrowed more money for business operation amid global commodity price hikes. Short-term borrowings and other financial liabilities increased due to worsening borrowing conditions in the corporate bond market, banks’ tightening of corporate loan availability, and rising interest rates.

During the same three-month period, the government net borrowed 15 trillion won, reversing from net lending of 6 trillion won a year ago due to the rise in state expenditures for pandemic relief and extra budget, among others, the BOK said.

In contrast, net financial funds managed by households and non-profit organizations reached 39 trillion won in the second quarter, sharply up from 24.5 trillion won from a year earlier, thanks to increased income.

As of the end of June, total financial assets stood at 2,3331.4 trillion won, down by 57.3 trillion won from a year ago. Total financial assets, the sum of financial assets held by households, companies and the government in the country, include those held by non-residents.

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