industries-rate hikes
Shipbuilders, airlines, retails expected to face more interest payment burden amid rate hikes: report
SEOUL, March 14 (Yonhap) -- Shipbuilders, airlines and retail industries in South Korea are expected to be under more financial burden from rising borrowing costs amid the central bank's continued push to hike its policy rates, a report showed Monday.
The projection is an analysis of the interest-covering capabilities of 18 industries by Korea Investor Service, the Korean affiliate of Moody's Investors Service.
The report calculated ratios for each industry by dividing their earnings before interest, taxes, depreciation and amortization by interest costs. A lower figure indicates interest payment burden mounts at a faster clip than profit growth.
It also assumed the Bank of Korea will raise its policy interest rate by an additional 50 basis points this year following its combined 75 bps hikes since August of last year.
The average figure for the analyzed industries stood at 14 in 2021, but it will decline to 11.1 and 10.8 in 2022 and 2023, respectively, the report showed. Shipbuilders, hotels, airlines and retail industries saw their ratios decline more than other areas.
In particular, the numbers for airlines and retail industries fell from 5.6 and 5.9 in 2021 to 4.3 and 5.1, the report showed.
Meanwhile, Moody's Investors Service predicted in a separate report that inflation will be "more persistent" than it had previously expected due to commodities price increases caused by the outbreak of the Russian-Ukraine conflict.
"Commodity price increases since the outbreak of the Russia-Ukraine conflict have increased the risk that inflation will be more persistent than we had previously expected," Lillian Li, a Moody's vice president and senior credit officer, told a webinar.
"We expect central banks to remain on a tightening path, although the trajectory of interest rate increases may be less clear due to the increase in uncertainty."
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