COVID-19 debt piles up

The financial support that has been provided for small and medium-sized companies since the outbreak of COVID-19 has surpassed 250 trillion won. With the prolonged COVID-19 economic crisis, concerns are rising that the government’s schemes are a “ticking bomb.”

The Financial Services Commission reported Sunday that 250.9 trillion won was spent to help individual debtors, independent businesses and small and medium-sized companies as of November 20. Out of the 250.9 trillion won, 198.3 trillion won was spent on providing new loans and extending the terms of loans, while the rest was provided in the form of a government guarantee.

The government has rushed out emergency measures to help businesses that have been pushed to the brink by the pandemic. It offers low interest loans for small businesses and preferable loans for medium-sized companies. It also allows independent and small and medium-sized companies and individual debtors to extend their loan terms by June 2021.

The prolongation of the pandemic, however, has raised concerns that such measures would lead to a financial crisis, especially when government schemes including extended loan terms end early next year. The allowance for bad debts for commercial banks has increased by one trillion won in a year. Moody’s Investors Service revised its outlook for South Korean banks’ credit ratings on Friday to “negative,” citing possible deterioration in their soundness.


yunjng@donga.com