(2nd LD) S. Korea's economy continues slide amid global turbulence: report

(ATTN: ADDS, TRIMS finance minister's comments in last 4 paras)
SEOUL, March 5 (Yonhap) -- South Korea's economy continues to suffer in the wake
of ongoing global financial turmoil, hit by falling exports and domestic demand
amid recessions in key markets, a government report said Thursday.
"An economic downturn continues, hit by sluggish domestic demand and exports amid
worldwide financial turbulence and global recessions," the Finance Ministry said
in its monthly report on current economic trends.
The bleak assessment comes as South Korea's economy is widely expected to post
minus growth this year for the first time in more than a decade.
The government predicts that the economy will shrink 2 percent, compared with a
2.5 percent advance in 2008, though many think tanks say the estimate is still
too optimistic considering South Korea's export-focused economy.
Overseas shipments, the backbone of the nation's economy, plunged 17.1 percent in
February from a year earlier after reporting a 33.8 percent tumble a month
earlier.
Private consumption also remains sluggish, with consumer goods sales declining
3.1 percent in January from a year ago. Durable goods sales posted a double-digit
contraction, reflecting consumers' unwillingness to spend on big-ticket items,
according to the report.
Declining corporate investment and production cuts were cited as downside risks
to the local economy. In January, facility investment plunged 25.3 percent from a
year earlier, slowing further from the previous month's 23 percent decline.
Industrial output also plunged 25.6 percent in January from a year ago, the
sharpest decline ever since related data started to be compiled in 1970.
The figure has, however, inched up a seasonally-adjusted 1.3 percent from
December. The ministry expects that the month-to-month increase will continue in
February.
Still, consumer prices rose at a fast pace in February from a month earlier, the
first upturn in seven months and another drag on the government's drive to
bolster consumption and corporate investment. The stagnant job market is also
weighing on the economy, according to the report.
"Although some indicators are showing signs of recovery, the government needs to
remain vigilant on the economy and financial markets, and brace for a protracted
recession and other downside risks, such as renewed financial instability," the
ministry said.
"The government will intensify its drive to bolster frozen domestic demand with
an extra budget and push for effective corporate restructuring, while helping
ease the suffering of low-income people," the report said.
Finance Minister Yoon Jeung-hyun echoed the assessment in a meeting with
international reporters on Thursday, saying the circumstances surrounding Korea's
economy are "not favorable" as financial turmoil in the U.S. is spilling over to
developing economies. "The point is we are living through an ever-deepening
global slump."
Yoon also said that because export growth depends largely on how fast external
business conditions improve he would take every possible measure to bolster
domestic demand.
"I will take bold, swift, and preemptive fiscal and financial measures to boost
domestic demand," he said.
The minister noted that the government will finalize its extra budget plan, aimed
at promoting job growth and stabilizing people's livelihoods, "as soon as
possible." The plan will be submitted to the National Assembly by the end of this
month, he added.
kokobj@yna.co.kr
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