Korea’s bankruptcy filings surge by 36.3% in H1

[Image source: DALL·E]

The number of corporate bankruptcy filings surged by nearly 37 percent in the first half of this year from the same period a year ago, with most of them being small and medium-sized enterprises.

According to the Supreme Court on Sunday, the number of bankruptcy filings reached 987 cases, up 36.3 percent in the first half of this year from the same period last year.

The number of filings in the first six months of this year is more than double that of the pre-pandemic period in the first half of 2019, which had 485 cases.

The surge in bankruptcies is attributed to the accumulation of management failures from the Covid-19 era, compounded by the economic crisis of high inflation, high interest rates, and high exchange rates.

Additionally, rising costs for electricity and labor have further burdened these businesses. The economic downturn, resulting in decreased sales, has also contributed to the increase in bankruptcy filings among SMEs.

There is also a growing trend of SMEs being unable to repay their debts.

According to the Bank of Korea and other sources, the outstanding loan balance for SMEs reached a record high of 1,028.2 trillion won ($750 billion) as of the end of June.

With high interest rates expected to continue and the minimum wage set to exceed 10,000 won next year, the number of SME bankruptcy filings is likely to rise further unless the business environment improves.

The Korea SMEs & Startups Institute (KOSI) emphasized the importance of swift and flexible public support for SMEs that have viable business models but are facing economic difficulties.

The institute highlighted the need for financial improvement and business revitalization to help these struggling companies.