In 2024, the South Korean economy showed a modest recovery following two years of subdued growth. Real GDP expanded by 2.0%, driven mainly by an export rebound in semiconductors and automobiles, while domestic demand remained weak due to persistently high interest rates and subdued household spending. Corporate debt continued to rise steadily, reaching KRW 1 350 trillion by the end of 2024, as firms, particularly large enterprises, relied more heavily on bank loans amid tighter bond-market conditions and elevated funding costs.
Despite monetary tightening, SMEs maintained positive loan growth. Outstanding SME loans increased from KRW 993 trillion in 2022 to about KRW 1 086 trillion in 2024, supported by policy-based financing and credit guarantees. However, the higher interest-rate environment constrained profitability and borrowing capacity, especially for domestic-oriented firms. The average lending rate for SMEs rose to 5.0% in 2024, compared to 4.1% in 2022, while the spread with large-corporate loan rates narrowed to around 0.1 percentage points, indicating a near convergence in borrowing costs.
Venture investment, after peaking at KRW 7.68 trillion in 2021, contracted to KRW 6.76 trillion in 2022 and KRW 5.40 trillion in 2023 before recovering slightly to KRW 6.63 trillion in 2024. Early-stage companies continued to attract the largest share of new investment, supported by government-backed funds targeting AI, green technologies and mobility sectors.
After nearly a decade of steady improvement, credit quality showed mild deterioration as policy forbearance measures wound down. The SME non-performing loan (NPL) ratio, which fell from 1.8% in 2015 to 0.56% in 2022, increased to 0.83% in 2024, while the average payment delay on short-term SME loans lengthened to about 9.8 days, reflecting persistent liquidity pressures.
Since April 2020, the government’s Loan Maturity Extension and Repayment Deferral Program has remained the central support mechanism for SMEs and self-employed businesses. As of late 2024, the outstanding balance of extended or deferred loans had declined to KRW 53 trillion, with repayment schedules allowed until September 2028. Complementary measures, including the Soft-Landing Debt Adjustment Program, Hope Loan Step-Up, and special guarantees for low- to medium-credit borrowers, continued to provide targeted relief and refinancing options for viable but financially strained firms.