Seoul – South Korean companies experienced a decline in sales growth and profitability in the third quarter of the year, according to data released by the Bank of Korea (BOK) on Tuesday. This downturn is attributed to increased borrowing costs, higher prices for raw materials, and an overall economic slowdown.
According to Yonhap News Agency, The central bank's data, which reviewed 22,962 companies subject to external audits, showed that corporate sales dropped by 5.2 percent in the July-September period from the previous year. This decline is more pronounced than the 4.3-percent year-on-year dip recorded in the preceding quarter.
The decrease in sales and profitability comes at a time when companies are grappling with elevated borrowing costs and surging prices of raw materials, including oil. The challenging economic environment has led to a squeeze in corporate profitability.
The operating profit-to-sales ratio of these companies stood at 4.0 percent in the third quarter, a slight improvement from 3.6 percent in the previous quarter. However, the firms' average debt-to-equity ratio decreased marginally to 90.2 percent at the end of September, down from 90.8 percent a year earlier.
The BOK has maintained its key interest rate at 3.5 percent for the seventh consecutive time last month, following a series of rate freezes since February. This steady approach comes after the central bank implemented seven consecutive rate hikes from April 2022 to January 2023. Despite holding the interest rate steady, the BOK revised its growth outlook, maintaining this year's growth estimate at 1.4 percent but reducing next year's forecast to 2.1 percent from the earlier 2.2 percent prediction. The inflation forecast for the coming year was also raised to 2.6 percent from 2.4 percent, reflecting ongoing restrictive economic policies in major economies and continuing geopolitical risks.