The International Monetary Fund (IMF) has warned of an increase in zombie companies in Asia. Zombie companies are defined as those that have failed to cover their interest payments with profits for at least three years.
On October 13, the IMF highlighted the risks posed by the phenomenon of corporate zombification in a special section of its Global Financial Stability Report (GFSR). The GFSR is an annual report published by the IMF in October that analyzes the global financial system and market conditions, as well as emerging market financial issues.
According to a report by the Financial Times, citing the IMF, zombie companies account for 21.4% of the corporate debt in ten Asian economies, including China, India, Thailand, Indonesia, and South Korea. This figure has nearly doubled from less than 10% in 2008.
In many cases, zombie companies survive due to lax debt management by banks, which can have a detrimental impact on the overall financial system.
The IMF noted that the proportion of zombie companies in regions outside Asia is relatively low. In Latin America, Europe, and Africa, approximately one in eight companies is classified as a zombie company as of 2024, with a concentration among a few large borrowers.
Corporate credit levels are also a concern. The IMF reported that by the end of 2025, corporate credit in Asia is expected to reach an average of 107% of GDP, up from 81% before the 2007 global financial crisis. This is higher than the current global average of 93% and the emerging market average of 99%.
The IMF pointed out, "The increasing corporate debt is becoming increasingly concentrated among companies that are unable to repay their debts."
* This article has been translated by AI.
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