[비즈한국] On the 10th, the Asian Development Bank (ADB) projected South Korea’s economic growth rate for this year at 0.9%. This is a 0.1 percentage point increase from the 0.8% forecast issued in September. Along with the ADB, various international economic organizations, the Bank of Korea, and government agencies have maintained or slightly upwardly adjusted their growth forecasts, predicting that the year will conclude without further deterioration of the economy.
However, since these institutions’ projected growth rates are barely hovering around the 1% mark, the economic reality felt by ordinary citizens remains icy. In fact, the situation for the self-employed is rapidly worsening. The number of self-employed individuals working alone without staff or running shops with family members has dropped to a five-year low this year, as the number of business closures has surged. With the loan delinquency rate among the self-employed reaching an 11-year high, the default rate for government policy funds supporting them has also spiked.
On December 10, the ADB raised its growth forecast for South Korea to 0.9%, citing stimulus measures by the government, a recovery in global semiconductor demand, and the conclusion of tariff negotiations with the United States. Prior to this, the Organisation for Economic Co-operation and Development (OECD) presented a 1.0% growth rate on the 2nd, matching its September forecast, while the International Monetary Fund (IMF) also maintained its 0.9% projection on the 24th of last month, unchanged from the previous month.
In its economic outlook released on the 27th of last month, the Bank of Korea projected a 1.0% growth rate, an increase of 0.1 percentage point from its August forecast. The Korea Development Institute (KDI), a state-run research institution, also set its growth forecast at 0.9% on the 11th of last month, up 0.1 percentage point from its August projection (0.8%).
While this implies that the economy is estimated to be slightly better than initially expected, the growth figures themselves do not suggest a positive situation. The forecasts from these domestic and international institutions, ranging from 0.9% to 1.0%, represent the lowest growth rate since the negative growth (-0.7%) experienced in 2020 due to COVID-19. In terms of positive growth, it is as poor as the performance seen during the 2009 global financial crisis (0.8%).
The direct hit from this year's sluggish economy has fallen on the self-employed. Small-scale self-employed individuals, the group most vulnerable to economic downturns, are closing their doors one after another. According to the National Data Agency, the number of self-employed individuals without employees this year (January–November) reached 4.185 million, a decrease of 38,000 compared to the same period last year (4.223 million).
If this trend continues, the number will fall below 4.2 million for the first time in five years since 2020 (4.159 million). The number of self-employed individuals without staff hit a low of 3.987 million in 2018, rose to 4.068 million in 2019, and climbed steadily until reaching 4.269 million in 2023. However, following the start of a downward trend last year—the first in six years—it is certain to fall for the second consecutive year.
Even those who have not shut down their businesses are struggling to pay off debts and interest on time due to sluggish domestic demand. According to the Financial Supervisory Service, the delinquency rate for sole proprietors stood at 0.61% as of the end of the third quarter of this year, a sharp increase of 0.15 percentage points compared to the same period last year. This delinquency rate for sole proprietors (as of the end of the third quarter) is the highest in 11 years since 2014 (0.65%). The delinquency rate had consistently declined afterward, falling to 0.25% in 2020 and 0.19% in 2022. However, due to high inflation caused by rising benchmark interest rates and stagnant consumption, it surged to 0.46% in 2023 and surpassed the 0.6% level this year.
The increase in business closures and debt delinquencies among the self-employed is also driving up the default rates for various government-guaranteed loans, placing a burden on government finances. According to the National Assembly and other sources, the default rate (delinquency of over 3 months) for the "Credit Guarantee Fund," which guarantees loans for small business owners, reached 4.3% as of July this year. The default rate for Credit Guarantee Fund loans was only 2.0% in 2021, but jumped to 3.6% in 2023 and rose to 4.2% in 2024.
The situation is even worse for the "Korea Technology Finance Corporation (KOTEC) Guarantee," which provides debt guarantees for technology-intensive small businesses. As of July, the default rate for KOTEC guarantees stands at 9.77%. The KOTEC default rate was only 4.58% in 2021, but it rose rapidly, exceeding 8% at 8.22% in 2023, and has now spiked to a level approaching 10% this year.