URGENT PF CRISIS

● Domino Effect, Construction Firm Failures, Real Estate PF

2025 Real Estate PF Crisis and Financial/Corporate Debt Threats: Thorough Examination from Construction to Finance

1. Accumulation of PF Insolvency Issues and Crisis in the Construction and Financial Sectors

Focus on the PF (Project Financing) issue before discussing the real estate market in areas like Gangnam.
The accumulation of uncollected payments between construction companies and financial institutions has already become prominent, reaching a scale of 30 trillion KRW.
Since 2017, starting with the Legoland incident, insolvency has been gradually accumulating over time, potentially intensifying around 2025.
If the insolvency of banks and construction companies is not properly restructured, there is a significant risk of financial crisis spreading, similar to the Japanese case where zombie companies and banks are intertwined.

2. Corporate Debt and Government’s Stopgap Measures

The weakness of the Korean economy lies in excessive corporate debt.
The government is relying on stopgap measures, such as buying unsold apartments in local areas, to resolve the real estate PF crisis.
However, with household and corporate debt exceeding 1800 trillion KRW, it is difficult to present fundamental solutions.
If the perception that ‘it will be resolved over time’ does not change, there is a risk of leading to long-term stagnation.

3. Spread of Financial Sector Risks and the Role of Savings Banks

Among financial institutions, non-bank depository institutions, in particular, have high delinquency rates and ratios of substandard loans.
Savings banks continue to pursue high-risk, high-return businesses by expanding loans to small and medium-sized local construction companies.
On the other hand, community credit cooperatives (credit unions) have been actively managing risk by expanding loan loss reserves, while savings banks are showing a decrease in reserve ratios.
As a result, the possibility of real estate PF insolvency spreading to a financial crisis is gradually increasing.

4. Delayed Restructuring and Decline in Global Economic Competitiveness

If restructuring is delayed, as in the case of Japan, collusion between banks and companies will deepen, and overseas investors may bear the burden.
Although Korea has entered the digital age, its technological capabilities to lead future growth engines such as AI and robots are likely to be subordinate compared to China and the United States.
If the government and financial sector rely solely on short-term postponement measures, it will inevitably lead to missed opportunities and long-term economic stagnation.
Economic actors must develop strategies to fundamentally improve the corporate debt problem and overall PF insolvency.

5. Conclusion: Need to Establish a Turning Point for Solving Structural Problems

This PF insolvency issue acts as a risk factor that goes beyond a simple construction company crisis and spreads to a financial crisis.
If the government’s stopgap measures and the financial sector’s risk exposure continue, it is unlikely that long-term stagnation can be avoided after 2025.
Therefore, corporate debt reduction, restructuring, and proactive risk management are emerging as urgent tasks.
In particular, innovative financial strategies are needed to review existing lending systems and temporary measures in order to strengthen the global economy and competitiveness.

< Summary >
Focusing on key words such as economic outlook, global economy, financial crisis, real estate PF, and corporate debt, we explore the most vulnerable link in the Korean economy in 2025: the real estate PF insolvency issue.
We explain in detail the problems such as the accumulation of uncollected payments between construction companies and financial institutions, excessive corporate debt, and delayed restructuring due to the government's stopgap measures.
In the financial sector, savings banks are accumulating risk by continuing to aggressively expand high-risk loans.
Using the Japanese case as an example, we warn of the possibility of a financial crisis spreading due to restructuring insolvency and mention the possibility of leading to long-term stagnation.
Ultimately, fundamental financial structural reforms and innovative measures are urgently needed, rather than short-term measures.

*YouTube Source: [경제 읽어주는 남자(김광석TV)]

– 중소 건설사 파산 도미노? 부동산 PF가 불 지핀 금융불안 | 부동산 100분토론 2편

● Currency Turmoil – Buy This Asset Now

Global Economic Outlook: Dollar, Exchange Rates, Gold, and Global Investment Trends

Exchange Rate Fluctuations and Changes in Investment Sentiment

In Korea, it is observed that demand increases when the dollar exchange rate rises.

Typically, demand should decrease when prices rise, but Korean investors tend to buy more dollars, anticipating higher peaks.

There is a psychological expectation that the exchange rate will rise to 2,000 won when it exceeds 1,400 won and 1,500 won.

As exchange rate volatility increases, attention should be paid to assets that deviate from existing currency patterns, such as dollars, yen (JPY), and gold.

Korean Economic Growth Rate Outlook and Monetary Policy

The Bank of Korea has presented this year’s growth rate forecast at 1.5%.

Over the past 25 years, excluding crisis situations such as the COVID-19 pandemic or financial crises, 1.5% is a low level.

Growth rates may be revised downward due to various factors, including tariffs, protectionism, and sluggish domestic consumption.

Accordingly, the review of benchmark interest rate cuts and the government's balanced budget and supplementary budget consensus provide justification for economic stimulus.

In the second half of the year, a gradual recovery from the short-term crisis is expected, but overall, low-growth taxation is likely to continue.

US Interest Rates, Capital Outflows, and the Strong Dollar Trend

As the interest rate reversal with the US prolongs, US interest rates remain high, while Korea maintains low benchmark interest rates.

As a result, the attractiveness of dollar assets increases relatively, and pressure for capital outflows intensifies.

While the floating exchange rate system partially absorbs capital outflows, the strong dollar trend is likely to continue in the future.

Predicting the short-term level of exchange rates is difficult, and portfolio diversification is essential due to the long-term strong dollar trend.

Overseas Investment and Currency Diversification Strategies

As exports to China decrease and overseas investment expands simultaneously, the inflow of dollars from exports is decreasing.

When considering overseas investment, it is important to include not only dollars but also other currency assets such as yen and gold in the portfolio.

In particular, gold, as a physical asset, serves as a safe asset to prepare for the instability of paper currencies.

Investment schemes should be selected after thoroughly reviewing fees and tax issues for each asset.

Yen (JPY) and JPY Carry Trade Liquidation Trends

The strengthening of the yen is more pronounced during the liquidation of JPY carry trades and periods of instability in global financial markets.

When Japanese interest rates rise or global risks increase, JPY carry trade liquidations proceed rapidly, causing the yen's value to rise.

This phenomenon particularly acts as a factor that increases demand for the yen as a safe asset in crisis situations.

Investment Strategies and Risk Management

Investors need to construct long-term currency diversification portfolios rather than short-term exchange rate predictions.

To avoid the risk of excessive concentration in one asset, it is necessary to diversify investments into various assets such as dollars, yen, and gold.

Considering exchange rate fluctuations and global economic uncertainty, long-term investment strategies are more advantageous for generating stable returns than short-term trading.

It is important to comprehensively consider individual investment tendencies, taxes, and fee issues to select the optimal investment scheme.

Summary

From the perspective of investors, buying sentiment is strengthened when the dollar exchange rate rises in Korea.

The Bank of Korea's 1.5% growth rate forecast, low benchmark interest rates, and interest rate reversal with the US suggest that the strong dollar trend is likely to continue.

Amid expanding overseas investment and sluggish exports to China, a strategy of diversifying investments into various assets such as dollars, yen (JPY), and gold is essential for portfolio diversification.

In particular, investment strategies should be established reflecting global investment, economic outlook, and exchange rate and gold trends from a long-term perspective rather than short-term predictions.