Small, midsize construction firms log record delinquency rate in 2025 as sector slump drags on
Published: 23 Feb. 2026, 16:53
Updated: 23 Feb. 2026, 18:14
![An apartment construction site is seen in Seongbuk District, central Seoul, on June 19, 2025. [YONHAP]](https://koreaseafood.online/data/photo/2026/02/23/4f4261ac-a397-4814-9927-5e14079ea888.jpg)
An apartment construction site is seen in Seongbuk District, central Seoul, on June 19, 2025. [YONHAP]
Small and midsize construction firms are struggling to repay loans as the construction sector stays in a prolonged slump, according to recent data.
At the Industrial Bank of Korea, both the delinquency rate and the amount of virtually uncollectible loans have reached record highs.
The delinquency rate for small and midsize construction firms at the Industrial Bank of Korea, based on loans overdue by more than one month, stood at 1.71 percent at the end of 2025, up 0.49 percentage points from a year earlier, according to financial industry sources on Monday.
The figure marks the highest year-end level since 2011, based on the bank’s investor relations data.
The delinquency rate in the construction sector remained below 1 percent through the end of 2022. It rose to 1.14 percent at the end of 2023 and 1.22 percent at the end of 2024 before jumping to 1.71 percent last year.
On a quarterly basis, the rate peaked at 1.76 percent at the end of the first quarter of 2024, the highest level since the third quarter of 2012. It then fell to between 1.32 percent and 1.34 percent through the first three quarters of 2025 before rising again to 1.71 percent at the end of that year.
The financial strain is extending to related sectors.
![An apartment construction site is seen in Seocho District, southern Seoul, on Dec. 29, 2025. [YONHAP]](https://koreaseafood.online/data/photo/2026/02/23/6113c993-b10d-4bf1-aa68-e3914fff8403.jpg)
An apartment construction site is seen in Seocho District, southern Seoul, on Dec. 29, 2025. [YONHAP]
Small and midsize firms in the real estate and leasing sector saw their delinquency rate climb to 0.87 percent at the end of 2025, more than double the 0.34 percent recorded a year earlier.
That figure marks the highest year-end level since 2013. The rate rose to 1.16 percent at the end of the third quarter of last year, the highest level since the first quarter of 2013, and remained high afterward.
The weakness in construction is weighing on the broader economy. Construction investment, including building and civil engineering projects, fell 3.9 percent in the fourth quarter of 2025 alone, according to the Bank of Korea (BOK).
On an annual basis last year, construction investment fell nearly 10 percent and reduced Korea’s annual GDP growth by 1.4 percentage points. Without the decline in construction investment, the country’s annual GDP growth would have increased from 1 percent to 2.4 percent.
A quick rebound appears unlikely. The BOK projected in its economic outlook released in November last year that construction investment will rise 2.6 percent this year and 1.9 percent next year. Analysts say much of the projected increase reflects a rebound from last year’s low base and expect only a gradual recovery.
![Apartments are seen from Mount Namsan in central Seoul on Feb. 23. [NEWS1]](https://koreaseafood.online/data/photo/2026/02/23/3420a298-a50d-4901-a33a-af0e89989ee7.jpg)
Apartments are seen from Mount Namsan in central Seoul on Feb. 23. [NEWS1]
External factors such as raw material prices could also drag actual growth below the forecast.
As more firms miss payments, the amount of loans at risk of not being repaid is increasing.
Loans classified as “estimated loss” at the Industrial Bank of Korea reached 638.9 billion won ($443 million) at the end of last year, up 19.7 percent from 533.8 billion won a year earlier, marking a record high. The bank classifies estimated loss loans as credit that is effectively considered uncollectible.
The amount has risen steadily from 290.8 billion won at the end of 2021 to 335.2 billion won at the end of 2022, 424.3 billion won at the end of 2023 and 533.8 billion won at the end of 2024.
“Profitability at regional small and midsize construction firms has deteriorated sharply as local construction markets contract,” a financial industry source said. “With the benchmark interest rate on hold, the strain of interest continues and firms face difficulty returning to financial stability.”
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JEONG JAE-HONG [[email protected]]
with the Korea JoongAng Daily
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