South Korea's Finance Minister Sees Economy Contracting

South Korea is expected to contract this year, the first time since the Asian financial crisis in 1997-98, the country's new finance minister said on Tuesday.

CNBC.com

Yoon Jeung-hyun, who replaces Kang Man-soo as the country's Ministry of Strategy and Finance, said the government planned to draw up an extra budget to revive Asia's fourth-largest economy with policy focusing on job creation by boosting domestic demand.

"The economy is contracting more quickly than expected as external conditions keep deteriorating. The economy is expected to contract 2 percent this year on falling domestic demand and exports," Yoon told reporters.

The government had previously said it would do whatever it could to achieve growth of around 3 percent by boosting domestic demand in Asia's fourth-largest economy.

Yoon said the fall is likely to mean the loss of 200,000 jobs this year, compared with a previous forecast of a rise of 100,000. The new figure represents nearly 1 percent of the workforce and would be the biggest decline in employment in a decade.

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The government plans to draw up a supplementary budget this month and submit it to parliament by the end of March.

The remarks come as global investors and governments keep an anxious eye on U.S. plans to stimulate the world's top economy and rescue its banks.

They also come ahead of Thursday's central bank interest rate meeting, when it is expected to cut its policy rate by 50 basis points to a new record low of 2.00 percent.

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