Corporate Bankruptcies Hit 4-Year High
By Kim Jae-kyoung
Staff Reporter
With more small firms going under amid the deepening economic downturn, the number of corporate bankruptcies rose to the highest level in nearly four years in December, according to the Bank of Korea (BOK).
The central bank reported Monday that the number of business failures came to 345 in December, up 48 from a month ago, the highest figure in 46 months since reaching 359 in March 2005.
After reaching 178 in August, bankruptcies increased to 203 in September and 321 in October. The number inched down to 297 in November.
``More companies have failed recently as they have had difficulty borrowing money due to the prolonged economic slump,'' a BOK official said. ``Banks have beefed up their credit screening and the trend will continue for the time being.''
Corporate bankruptcies in Seoul and provincial areas reached 120 and 225, respectively, from the prior month's 91 and 206.
The number of new start-ups increased from 3,331 in November to 3,797 last month. Newly established corporations outnumbered bankrupt ones by 16.4-to-1 in December, meaning 16.4 new firms debuted on the market for every one that filed for bankruptcy.
The dishonored bill ratio in provincial areas soared to a five-year high, reaching 0.2 percent, the highest figure in five years and three months since it posted 0.22 percent in September 2003.
The nationwide dishonored bill ratio edged up by 0.01 percentage point to 0.04 percent last month from a month ago.
``Business failures are likely to continue to rise as the economy heads further south in line with the global economic recession,'' a market analyst said.
The Korean economy grew 0.5 percent in the third quarter from three months earlier, the slowest growth in four years, as exports lost ground alonside weakening domestic demand. Growth is widely expected to dip into the 1-percent range this year.