Seoul: Loans extended to companies in South Korea grew at a slower pace in the second quarter compared with the previous quarter amid a sluggish construction sector and high base effects, central bank data showed Friday. The outstanding loans extended to local companies had come to 1,994.0 trillion won (US$1.43 trillion) as of end-June, up 14.5 trillion won from three months earlier, according to the data from the Bank of Korea (BOK).

According to Yonhap News Agency, the increase marks a deceleration from the previous quarter, when the loans expanded by 17.3 trillion won on surging demand for operating funds. By sector, loans to manufacturing firms rose 6 trillion won from three months earlier to 497.4 trillion won as of end-June. However, loans in the construction sector shrank by 200 billion won to 103.8 trillion won, marking the fourth consecutive quarterly decline, the longest streak of consecutive declines since 2010.

Loans in the service sector expanded by 7.2 trillion won to 1,268.8 trillion won, though lending to the real estate industry declined for the second consecutive quarter to 470.1 trillion won. "The decline in lending to the real estate sector came as restructuring for real estate project financing (PF) is ongoing amid sluggish property markets in regions," BOK official Kim Min-soo told a press briefing.

By purpose, operating funds increased by 8.8 trillion won in the second quarter, following a 9.5 trillion-won gain in the first quarter. Facility investment loans advanced by 5.7 trillion won, slowing from a 7.8 trillion-won increase seen in the previous quarter, the data showed.