Drop in the Loan Balance for Lodging and Restaurant Businesses

The loan balance has declined for the first time in 10 years as banks collected repayments from lodging and restaurant businesses, whose sales had dropped due to the economic slowdown.

The bank loans for the construction sector, which is suffering a recession, have also decreased for two straight quarters.

According to the “3rd Q (July-September) Industrial Credit Trend” released by the Bank of Korea on November 24, as of the end of September, the banking loan balance for lodging and restaurant businesses stands at 15.3863 trillion won, a 163.6 billion, or 1.1 percent, fall from late June.

This drop in the balance of loans for lodging and restaurant businesses is unprecedented since falling to $41.7 billion in the fourth quarter of 1994 (October-December). This indicates that the amount of repayment surpassed that of newly provided loans.

As of the end of September, the loan balance of the construction sector recorded 23.5326 won and fell to 365 billion won in the third quarter. It decreased by 69.3 billion won in the second quarter (April-June) and steadily declined for two consecutive quarters. The loan amount provided to the leasing and service sector dropped by 234 billion won in the third quarter.

Kang-Woon Lee kwoon90@donga.com