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S. Korea's zombie companies rise in 2022

26 Sep 2023, 17:18 GMT+10

SEOUL, Sept. 26 (Xinhua) -- South Korea's zombie companies incapable of repaying borrowing costs with its operating profit rose last year, fueling worry about financial instability, the central bank said Tuesday.

Out of 25,135 non-financial companies subject to external audit in 2022, 15.5 percent were classified as zombie firms that logged a ratio of operating profit to the total interest cost below 1 for the past three years, according to the Bank of Korea (BOK)'s financial stability report.

The 2022 figure was up from 14.9 percent tallied in the previous year.

The BOK said that if the marginalized firms fail to be normalized for long, the supply of funds to productive sectors will shrink, leading to the worsened soundness of financial institutions in the event of internal and external shocks.

The number of companies classified as zombie firms for at least five successive years stood at 903 in 2022, taking up 23.1 percent of the total zombie companies.

The BOK noted that long-term zombie companies with a higher insolvency risk than short-term ones would face a lower possibility of getting normalized.

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