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Rising Debt From Mom-and-Pop Businesses Adds to Korea’s Woes

  • Borrowing by small businesses has jumped to a record high
  • Analysts say economic slowdown raises debt default risks
People eat dinner outside a restaurant in the Seomyeon area at night in Busan, South Korea.

People eat dinner outside a restaurant in the Seomyeon area at night in Busan, South Korea.

Photographer: SeongJoon Cho/Bloomberg
Updated on

Swelling debt at the rising number of mom-and-pop businesses in South Korea is adding to the challenges of an economy that is already burdened by record household borrowing and the restructuring of its once-mighty shipyards.

Debt of the self-employed has surged 9 percent in the past 12 months, to an all-time high of 256 trillion won ($225 billion), according to the Bank of Korea. That makes it more than one-third the size of household loans, which themselves may also contain some hidden borrowing for small enterprises, according to the central bank.