Half of Export Companies Say "Difficult to Secure External Funding"

Martial Arts '4th Quarter Trade Industry Financial Difficulties Survey'
13% Responded 'Very Deteriorated' on Overall Funding
49.6% Responded 'Difficult' on External Fundraising

Due to the prolonged high interest rates, half of the export companies find it difficult to secure external funding.

The Korea International Trade Association (KITA) announced the results of the "4th Quarter Trade Industry Financial Difficulties Survey" on the 28th. This 4th quarter survey was conducted in December targeting 514 companies in the trade industry. Since the 4th quarter of last year (December), KITA has been conducting quarterly surveys on trade industry funding related to the prolonged high interest rates.

The survey results showed that the response rate for overall financial conditions being "very deteriorated" rose by 0.3 percentage points from 12.7% in the 3rd quarter (September) to 13% in the 4th quarter. The proportion of companies responding that securing external funding is "difficult" increased by 3.7 percentage points from 45.9% in the 3rd quarter to 49.6% in the 4th quarter.

Afternoon of the 1st at Sinsundae Pier, Nam-gu, Busan.
[Photo by Yonhap News]

The main cause of worsening financial conditions was "increase in raw material and component prices," with a response rate of 64.1%. This was followed by sluggish sales (57.1%), interest rate hikes (50%), and rising labor costs (28.8%). KITA stated, "It appears that the cost burden has increased further due to the economic downturn and other factors."

The response rate for interest expenses being "equal to or exceeding operating profit" rose by 2 percentage points from 51.5% in the 3rd quarter to 53.5% in the 4th quarter. KITA explained that the response rate was higher among companies with sales under 10 billion KRW. KITA added, "The burden of high interest rates is greater on small and medium-sized enterprises than on large corporations."

The most common measures to overcome financial difficulties were loans from primary and secondary financial institutions (70.4%), use of policy finance (54.9%), and reduction of daily expenses (25.9%).

Regarding difficulties in using policy finance, the response rate for "application timing concentrated in the first half of the year" rose to 27.8%, up from 1.3% in the 3rd quarter. KITA analyzed, "Due to the exhaustion of financial institutions' budgets, it was difficult to meet corporate funding demands in the second half of the year."

The comprehensive funding condition index (TF-BSI) for next year was 76.8. The index for the first quarter of next year was 74.5. A figure above 100 indicates an expectation that overall funding conditions will improve next year compared to now, while a figure below 100 suggests they will worsen.

Jeong Manki, Vice Chairman of KITA, said, "Financial difficulties for companies have not been resolved due to the prolonged high interest rates," adding, "The government and financial sector need to implement policies more carefully to prevent the export industry from shrinking due to the burden of high interest rates and financial costs."

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