IMF warns of ‘zombie firms’ unable to pay interest; 10 Asian countries, including South Korea, at risk

[Financial News] The International Monetary Fund (IMF) warned that 10 Asian countries, including South Korea, are at risk, citing ‘zombie firms’ with so much debt they cannot pay interest.
According to the British newspaper the Financial Times (FT), the IMF said in its Global Financial Stability Report (GFSR), released on the 13th (local time), that zombie firms account for 21.4% of outstanding corporate debt across 10 Asian economies, including South Korea, India, Thailand, Indonesia and China.
Zombie firms are companies so heavily indebted that they have been unable to cover interest payments with operating profits for at least three years. Most rely on banks’ debt repayment deferrals. As the number of zombie firms grows, nonperforming loans accumulate throughout the financial system.
The share of zombie firms in 10 Asian countries was below 10% in 2008 but has roughly doubled. The report said the share was particularly high in Asia. In Latin America, Europe and Africa, an average of about one in eight companies was a zombie firm as of 2024. According to the IMF, corporate credit in Asia averaged 107% of gross domestic product (GDP) at the end of 2025, up from 81% before the 2007 global financial crisis. This was also higher than the current global average (93%) and the emerging-market average (99%).
Experts have argued in the past that the survival of thousands of economically unviable companies was a fundamental cause of Japan’s prolonged stagnation since the 1990s, known as the ‘Lost Decades,’ and the severe nonperforming-loan crisis of the early 2000s. The IMF did not identify any specific country as being at risk.
However, the FT recently analyzed Chinese companies as being at risk. Citing a report by French investment bank Natixis examining Chinese listed companies, the FT noted that the share of firms unable to cover interest with earnings rose from about 6% in 2019 to 12.5% in June 2026. That is about twice the global average of 6.5%.


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