By Kim Jae-kyoung
Staff Reporter
With the economy slipping into a deeper downturn, an increasing number of individuals and companies are going belly up, putting further constraints on the faltering economy.
What is of more concern is that a series of bankruptcies are concentrated on smaller companies and those in the low-income bracket in provincial areas.
According to the Bank of Korea (BOK), the dishonored bill ratio in South Chungcheong Province soared to 1.1 percent in October, the highest level since November 1998, when it stood at 1.27 percent. The ratio in Jeju also jumped to 1.04 percent.
``A dishonored bill ratio of higher than one percent is an alarming level,'' a BOK official said.
The number of companies and individuals filing for bankruptcy protection has also been rising quickly.
According to Seoul District Court, the number of corporate court receivership filings reached 87 in the year up to November, more than three-fold the 29 filings for the whole of 2007.
Individual bankruptcy filings are also on the rise, with the number reaching 99,218 between January and October. The number of visits by credit defaulters to the Credit Recovery Committee for advice was 365,000 for the first 10 months of the year, compared with last year's 251,948.
The upward spiral in the number of individual and corporate bankruptcies is the result of the deepening economic downturn. If this trend persists, private spending, investment and production will continue to shrink, taking a heavy toll on the economy.
Local financial firms are busy curbing the rise in the overdue payment rate.
The average overdue rate on loans extended by local savings banks reached 16 percent in September, up two percentage points from June. The comparable rate for real estate project financing also jumped to 17 percent from 14.3 percent during the same period.
``During the 1997-1998 financial crisis, the country was insolvent in all economic segments. In comparison, insolvency is now being concentrated on weak segments of the economy, such as smaller firms and builders in provincial regions,'' a market analyst said.
``This means that more delicate, microeconomic approaches are needed, not macroeconomic policies such as rate cuts,'' he added. ``The government should come up with remedies tailored for each specific case based on in-depth analysis.''