Is Corporate Lending in South Korea Accelerating in Q3?
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Synopsis
In South Korea, corporate lending surged in Q3, driven by the service sector's demand. However, the real estate and construction sectors are in a prolonged downturn. This article delves into the factors behind these trends and their implications for the economy.
Key Takeaways
- Corporate lending in South Korea increased significantly in Q3.
- The service sector played a crucial role in this growth.
- Real estate loans have declined for three consecutive quarters.
- Construction sector loans have also decreased continuously.
- Industry restructuring is affecting loan dynamics.
Seoul, Dec 5 (NationPress) Loans granted to businesses in South Korea experienced a significant uptick in the third quarter compared to the previous quarter, largely fueled by robust demand from the service sector. However, the construction and real estate industries are continuing to face a prolonged slump, as indicated by data from the central bank released on Friday.
The total amount of loans to local enterprises reached 2,014.1 trillion won (approximately $1.37 trillion) by the end of September, reflecting an increase of 20.2 trillion won from three months prior, according to the Bank of Korea (BOK) data, reported by Yonhap news agency.
This rise signifies an acceleration from the previous quarter, during which loans grew by only 14.5 trillion won amidst a struggling construction sector.
By sector, loans to manufacturing companies saw an increase of 4.1 trillion won from the previous quarter, totaling 501.5 trillion won as of the end of September.
In contrast, loans in the service sector soared by 15.7 trillion won, reaching 1,284.4 trillion won, while the amount of loans extended to the real estate sector declined for the third consecutive quarter, settling at 468.6 trillion won.
This decline marks the first instance since the BOK began tracking this data in 2008 that the real estate sector has recorded three consecutive quarters of falling loans.
Additionally, loans in the construction sector diminished by 1.0 trillion won to 102.8 trillion won, marking the fifth consecutive quarterly drop.
Kim Min-soo, the head of the BOK's financial statistics team, stated, "The reduction in real estate loans is attributed to the write-offs and sales of non-performing loans, a necessary step in industry restructuring due to the ongoing downturn in the property market in non-capital areas."
In terms of loan purpose, operating funds increased by 13.6 trillion won in the third quarter, following an 8.8 trillion-won gain in the second quarter.
Facility investment loans rose by 6.6 trillion won, showing an increase from the 5.7 trillion-won rise in the previous quarter, according to the data.
Point of View
It is crucial to highlight the contrasting trends in South Korea's corporate lending landscape. While the service sector's demand drives growth, the ongoing struggles in real estate and construction raise concerns about economic stability. Our analysis will continue to focus on these dynamics as they unfold.
NationPress
05/12/2025
Frequently Asked Questions
What is the current state of corporate lending in South Korea?
Corporate lending in South Korea has accelerated in the third quarter, with total loans reaching 2,014.1 trillion won, up by 20.2 trillion won from the previous quarter.
Which sectors are driving the growth in loans?
The service sector is primarily driving the growth in loans, with an increase of 15.7 trillion won, while manufacturing also saw a rise of 4.1 trillion won.
What is happening in the real estate sector?
The real estate sector has experienced three consecutive quarters of declining loans, marking a significant downturn.
How have construction loans been affected?
Loans in the construction sector have decreased for the fifth straight quarter, shrinking by 1.0 trillion won.
What factors are contributing to the decline in real estate loans?
The decline is attributed to the write-offs and sales of non-performing loans, part of the restructuring process in response to the prolonged downturn in the property market.
