South Korean Economy's Slide to Continue

South Korea's economy is still sliding, even though the pace has slowed, and it was not time yet for the government to change the current accommodative economic and financial policy, Finance Minister Yoon Jeung-hyun said.

Korea, Korean Flag
CNBC.com
Korea, Korean Flag

The government will be able to say if Asia's fourth-largest economy has bottomed out after gross domestic product data for the current quarter is released late next month, but GDP is not the only measure of the economic trend, he added.

"The economy is certainly still sliding, although the pace of decline is slowing," he said during a workshop with reporters late on Friday for publication on Monday. "Let me make it clear that we are not at the stage for a change in the aggressive fiscal stimulus and financial easing policy stance."

The remarks came after the domestic bond market plunged on Thursday and Friday on optimistic comments about the economy and warnings against inflation by the head of the central bank, which by law has the right to set interest rates.

More From CNBC.com

  • BRICs Will Not Mull New Reserve Currencies
  • Shipping Chief: China Craves Commodities
  • Yoshikami: The Next Menace — Stagflation
  • More Asia Pacific News

South Korea's economy barely averted recession -- defined as two successive quarters of contraction -- by expanding 0.1 percent in the first quarter after a 5.1 percent decline in the fourth quarter of 2008.

Since the current global crisis started late last year, South Korea's government has offered stimulus packages totaling some 7 percent of the annual GDP and the central bank cut interest rates by 3.25 percentage points to a record-low 2.0 percent.

Signs that the country's economy was stabilizing, or maybe turning around, have persuaded the Bank of Korea to hold the base rate steady for the past four months in a row and investors have already bet both the economy and rates have bottomed.