An analysis found that the number of corporations with more liabilities than assets has significantly increased over the past six years as of the 23rd.
According to the '2024 Diagnosis of Weak Corporations through Corporate Weakness Prediction Analysis' released by The Federation of Korean Industries (FKI) on the same day, it is estimated that 4,466 out of 37,510 firms subject to external audits (excluding the financial sector) are in a state of complete capital impairment, accounting for 11.9%.
The number of weak corporations, as well as their proportion within all externally audited firms, has reached the highest level since 2019. In 2019, there were 2,508 firms (7.9%), in 2020, 3,077 firms (9.2%), in 2021, 4,012 firms (11.2%), in 2022, 3,856 firms (10.8%), and in 2023, 4,350 firms (11.6%).
FKI noted, "As weak economic conditions caused by delayed recovery and high interest rates have worsened the revenue of domestic corporations, the number of weak corporations has significantly increased."
The probability of individual corporations transitioning to a weak state, known as the failure probability, has steadily risen from 5.7% in 2019 to a peak of 8.2% in 2024.
By sector, the failure probability was highest in the real estate and leasing industry at 24.1%. It was followed by the electricity, gas, steam, and water services (15.7%), health and social welfare services (14.2%), and arts, sports, and leisure services (14.0%).
Conversely, the manufacturing sector had the lowest rate at 2.8%. This was followed by wholesale and retail trade (4.1%), water supply and waste management (4.3%), and facilities management and support services (5.7%).
The extent to which the failure probability has increased compared to 2019 was largest in the construction industry. The failure probability in construction rose from 3.3% in 2019 to 6.1% in 2024, a 1.9-fold increase over five years. The professional sciences (1.8-fold), mining (1.6-fold), and information and communications (1.5-fold) followed in terms of rapid increase.
FKI identified high interest rates, high prices, poor construction orders, and the impairment of real estate project financing as the main reasons for the sharp rise in the failure probability in the construction industry.
Lee Sang-ho, head of the economic and industrial division at FKI, said, "As the number of weak corporations increases, the deterioration of the real economy and the expansion of financial market risks will heighten overall economic uncertainty," adding that it is necessary to re-discuss amendments to the Commercial Act in the National Assembly that hinder smooth business restructuring while reducing failure risks through easing funding costs and liquidity support.