Last year, the startup rate of corporations hit the lowest level since statistics began in 2011. By contrast, as of the year before last, the number of "extinct corporations," in which the absence of sales or regular employees persisted for more than a year, reached a record high. This suggests that Korea's economic dynamism is weakening.
According to the "2024 Administrative Statistics on Corporate Births and Deaths (provisional)" released by the National Data Office on the 23rd, the number of active corporations with sales or regular employees was 7,642,000 last year, up 103,000 from a year earlier. The increase in the number of active corporations last year was the lowest since the 2015 Middle East respiratory syndrome (MERS) outbreak.
During the same period, the number of new corporations was 922,000, down 33,000 (3.5%) from the previous year. By industry, education services increased by 2,000 (6.2%), but real estate, where a slump continued, fell by 16,000 (8.8%), and accommodation and food services fell by 14,000 (9.0%).
The startup rate, which refers to the share of new corporations among active corporations, was 12.1%, down 0.6 percentage points (p) from the previous year. This is the lowest level since the statistics began. The startup rate has continued to decline each year after recording 15.6% in 2020.
By contrast, as of 2023, the number of extinct corporations was 791,000, an increase of 40,000 from the previous year, marking an all-time record high. Extinct corporations increased in wholesale and retail trade by 17,000 (17,000·8.8%) and in transportation and warehousing (12,000·26.6%). The share of extinct corporations among active corporations was 10.5%, up 0.3 percentage points from the previous year.
This shows that Korea's economic dynamism is weakening. In general, ▲ when both the startup and extinction rates rise, economic dynamism strengthens; ▲ when both indicators fall, it stagnates; ▲ when the startup rate rises and the extinction rate falls, it recovers; and ▲ when the startup rate falls and the extinction rate rises, it is interpreted as a slowdown in dynamism.
Woo Seok-jin, a professor of economics at Myongji University, said, "It is a natural and positive phenomenon for uncompetitive corporations to exit the market," but noted, "However, it can be seen that the increase in new corporations is not large because the economic outlook is judged to be not bright."
Meanwhile, 4 out of 10 new corporations did not last a year after establishment. The one-year survival rate of new corporations in 2022 was 64.4%, down 0.5 percentage points (p) from the previous year, while the five-year survival rate was 36.4%, up 1.6 percentage points.
Also, the number of high-growth corporations with sales up 20% or more last year was 5,403, down 298 from the previous year. It increased in health and social welfare (up 62), but declined in major industries such as information and communications (down 175) and construction (down 108).