Accommodation and Restaurants Survive on Loans... Non-Bank Loans Up 23% in Q1

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] While the lodging and restaurant industry experienced the largest contraction on record in the first quarter of this year, loans continue to increase.

According to the Bank of Korea on the 22nd, the outstanding loans for lodging and restaurant businesses from deposit-taking institutions amounted to 64.7445 trillion KRW, a sharp increase of 14.1% compared to one year ago. In terms of year-on-year comparison, this is the largest increase since statistics began being compiled in 2008.

Among these, loans for lodging and restaurant businesses from non-bank deposit-taking institutions such as mutual savings banks and credit cooperatives reached 21.8475 trillion KRW, up 22.8%. As of the first quarter of this year, the share of loans from these non-bank institutions in lodging and restaurant business loans was 33.7%, the highest ever recorded.

The scale of lodging and restaurant business loans from non-bank deposit-taking institutions is half that of deposit banks (42.8969 trillion KRW) as of the first quarter of this year, but the growth rate is twice as high.

Loans for lodging and restaurant businesses from non-bank institutions have maintained a double-digit growth rate year-on-year since the third quarter of 2014. Although the growth rate rose to 35.8% in March 2017 and recently fell to the low 20% range, the first quarter growth rate (22.8%) was the highest in two years since the first quarter of 2018.

Although not as much as non-bank loans, the growth rate of deposit bank loans was also notable in the first quarter of this year. It increased by 10.1% compared to the first quarter of last year, marking the first double-digit growth rate in four years since the first quarter of 2016 (10.2%).

The lodging and restaurant industry, which is surviving on loans, is rapidly freezing up. The service production index (current index) for lodging and restaurant businesses in the first quarter of this year was 85.6 (2015=100), the lowest in 10 years since the first quarter of 2010 (84.7).

The service production index is calculated based on sales. Considering the production level in 2015 as 100, production in the first quarter of this year declined compared to 2015, meaning that the business conditions in the first quarter of this year were the worst in 10 years. It decreased by 15.5% compared to the same period last year, which is the largest drop since this statistic was first compiled in 2000.

This content was produced with the assistance of AI translation services.