A view of a construction site in Seoul. (Yonhap)
SEOUL, March 23 (Korea Bizwire) — The number of South Korean companies with liabilities exceeding their assets has surged to its highest level in six years, signaling deepening concerns over corporate health amid delayed economic recovery and persistently high interest rates.
According to a report released on Sunday by the Korea Economic Research Institute (KERI), 4,466 out of 37,510 externally audited companies — excluding financial firms — were in a state of complete capital impairment as of this year, accounting for 11.9% of the total. This marks the highest proportion since 2019, when the figure stood at 7.9%.
The number of insolvent companies has steadily climbed: 2,508 in 2019, 3,077 in 2020, 4,012 in 2021, and 4,350 in 2024.
KERI attributed the increase to ongoing sluggish business conditions and profit erosion brought on by high interest rates and slow economic recovery.
The probability of individual companies becoming insolvent has also risen, reaching 8.2% this year from 5.7% in 2019. Sectoral analysis shows that real estate and rental services carried the highest risk, with a 24.1% insolvency probability. This was followed by utilities (15.7%), healthcare and social services (14.2%), and arts, sports, and leisure services (14%). Manufacturing remained the most stable, with a 2.8% insolvency rate.
The construction industry showed the sharpest deterioration, with insolvency risk nearly doubling from 3.3% in 2019 to 6.1% in 2025. Other fast-rising sectors included professional sciences, mining, and information and communications.
KERI highlighted rising financing costs, weakening construction demand, and growing project financing (PF) defaults in the real estate sector as key drivers behind the construction industry’s growing vulnerability.
“The sharp increase in insolvent companies threatens not only the real economy but also financial stability, heightening overall uncertainty,” said Lee Sang-ho, head of KERI’s Economic and Industrial Policy Division. He urged policymakers to ease borrowing costs, bolster liquidity support, and revisit legislative proposals that could hinder timely corporate restructuring.
Ashley Song (ashley@koreabizwire.com)
