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SEOUL: South Korean President Lee Myung-Bak Thursday called for "pre-emptive" government steps after official data showed that Asia's fourth largest economy was teetering on the brink of recession.
The instruction came as President Lee presided over an Emergency Economy Management Council meeting at an underground "war room" at his office, spokesman Lee Dong-Kwan told a briefing.
"It is highly possible that the real economy could begin to stagnate full-scale from now on, so we need to take more thorough and pre-emptive countermeasures," President Lee was quoted as telling the council.
The meeting focused on encouraging bank loans for households and small firms which are vulnerable to the liquidity crisis, the spokesman said.
President Lee's comments followed a monthly economic outlook report from the Ministry of Strategy and Finance on Thursday, which said that South Korea faced a growing risk of recession amid slow exports and demand due to the global downturn.
"Despite easing inflationary pressure, the economy has a growing risk of going into recession as the real economic indicators are worsening, including slumping production, anaemic domestic demand and exports," it said.
Exports in December plummeted 17.4 per cent year-on-year with the contraction likely to accelerate in January amid the globally intensifying downturn, it said.
With weak demand at home and abroad, industrial output fell 14.1 per cent year-on-year in November, the biggest ever year-on-year contraction, the report said.
Consumption edged up 1.1 per cent year-on-year in the third quarter to November, down from a 2.3 per cent growth in the previous quarter.
Financial authorities have lowered key interest rates and created a 50-trillion-won (US$38 billion) fund to encourage lending in a bid to fortify the economy, but banks are reluctant to offer loans for fear of a possible credit crunch.
"The government has to do utmost in creating jobs and stimulate the real part of its economy, helping smaller companies and low-income people cope with toughening living and business conditions," the report said.
The jobless rate was 3.1 per cent in November, up from 3.0 per cent the previous month, it said.
In his New Year policy address, President Lee said he would ease regulations, cut taxes and spend 60 per cent of the 2009 budget in the first half of the year to bolster the slumping economy.
He said the economy could shrink in the first half of this year for the first time since the 1997/98 Asian financial crisis.
- AFP/yb
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