South Korea’s corporate debt grew at the second-fastest pace among the world’s 34 economies in the third quarter as businesses wrestle with high interest rates amid global monetary tightening.

According to a recent report released by the Institute of International Finance (IIF) on Sunday, Korea’s debt ratio to gross domestic product (GDP) in non-financial companies stood at 126.1 percent in the third quarter, the third highest among the world’s 34 economies after Hong Kong and China.

Korea’s debt ratio grew by 5.2 percentage points from the second quarter of this year. It was the second-fastest gain after Malaysia (28.6 percentage points).

The surge in domestic corporate debt was due to the global tightening of monetary policy, which forced companies to suffer financial crunches.

Korea also showed the biggest corporate bankruptcy among the surveyed economies.

According to the report, which assessed the number of companies that crashed into bankruptcy in the past year across 17 major economies, the insolvency rate in Korea was about 40 percent, making the economy second on the list.

The IIF said that companies with lower credit ratings have become vulnerable financially as private loan issuance fell in many economies, including Europe.

Korea’s ratio of household debt to GDP was the highest at 100.2 percent, the only economy with a ratio above 100 percent.

The sovereign debt to GDP ratio in Korea reached 48.9 percent, ranking 22nd. But the growth ranked fourth with an increase of 4.7 percentage points.

Private debt from households and companies continue to rise during the fourth quarter. The loan balance recorded by the country’s top five lenders as of November 16 reached 689.5 trillion won ($531 billion), up 3.5 trillion won from the end of October.

By Ryu Young-wook and Han Yubin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]