Busan Startup Market Slumps for 3 Consecutive Months, Down 23.8% Year-on-Year ... Impact of Interest Rate Hikes

Busan Chamber of Commerce and Industry.

[Asia Economy Yeongnam Reporting Headquarters Reporter Hwang Duyul] Recent consecutive interest rate hikes have been pouring cold water on the local startup market.

The number of newly established corporations in July was 488, down 5.4% from the previous month and 23.8% compared to the same month last year, raising concerns about the prolonged stagnation of the local startup market.

According to the Busan Chamber of Commerce and Industry's July new corporation trend data, the number of newly established corporations has shown a clear decline for three consecutive months since May due to the impact of the base interest rate hikes.

In particular, looking at the past year, excluding February with 466 corporations, which had relatively fewer business days, July recorded the lowest number of the year.

This year, despite internal management difficulties such as the Russia-Ukraine war, China lockdowns and external adversities, the Serious Accident Punishment Act, and minimum wage increases, newly established corporations in Busan had continued to increase with expectations for the COVID-19 endemic.

However, as the challenging business environment with high inflation and a weak Korean won persisted, and funding conditions worsened significantly due to consecutive base interest rate hikes, the trend shifted to a decline starting in May.

Especially in July, influenced by the big step rate hike, the number of newly established corporations sharply decreased compared to the same period last year across almost all industries: construction by 38.5%, manufacturing by 34.2%, services by 17.9%, real estate by 8.8%, and distribution by 9.0%.

The real estate-related sector, which had led the establishment of corporations in the region, significantly decreased due to market contraction caused by the interest rate hikes.

By capital size, among the 488 corporations newly established in July, 392 (80.3%) were small-scale corporations with capital of 50 million KRW or less.

Corporations with relatively large capital of 300 million KRW or more numbered 26, accounting for only 5.3% of the total.

The small scale of newly established corporations in the region is because new corporations in industries such as real estate, distribution, and services, where small capital startups are easier, account for 70% of the total.

A representative from the Busan Chamber of Commerce and Industry’s Corporate Trend Analysis Center said, “Since the startup market is closely connected to the livelihood economy, active startup support measures such as expanding policy fund support and lowering guarantee fees are necessary from the perspective of revitalizing the local economy.”

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