IMF warns that one-fifth of Asian corporate debt is held by zombie firms
The IMF says financially distressed companies make up 21.4% of corporate debt across ten major Asian economies, raising concerns for banks and the broader financial system.
The International Monetary Fund’s October 2026 Global Financial Stability Report reveals that companies classified as "zombie firms"—those whose earnings have failed to meet interest costs for at least three consecutive years—account for 21.4% of outstanding corporate debt in ten Asian economies. This share has risen from under 10% in 2008 and is spread across China, Hong Kong, India, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand.
The IMF warns that banks with capital below the median in each country have 16% of their loan books exposed to these weak borrowers, versus 12% for better-capitalised banks. Corporate credit in Asia remains high, averaging 107% of GDP at the end of 2025. The fund estimates that nearly 23% of zombie-firm debt could be written off or restructured by 2025, representing more than 5% of total corporate debt and posing a future risk to bank earnings and balance sheets.
Why it matters
A large share of debt tied to non-viable firms could weaken banks and stall debt reduction across Asia.
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