South Korean President Park Geun-hye and top economic policymaker of her cabinet vowed Tuesday to make all-out efforts to boost the economy, which was faltering after a deadly ferry disaster in April.
President Park said during a cabinet meeting that the new economic team should wage an "all-out war" to revive the economy with all available measures which the government can use, such as fiscal and financial tools.
Park stressed no need for higher economic indicators without effective recovery, saying that ordinary people must be able to feel the recovery through new stimulus measures.
The finance ministry planned to announce its new economic policy direction for the second half on Thursday when the ministry 's economic outlook for 2014 was widely expected to be downgraded.
Earlier this month, Bank of Korea (BOK) revised down its growth outlook for 2014 by 0.2 percentage point to 3.8 percent, citing weaker domestic demand after one of the country's worst maritime disasters.
The ferry Sewol capsized and sank off the southwestern coast on April 16, leaving more than 300 people, mostly high school students, dead or missing. Since then, many consumers refrained from entertainment and travel.
Choi Kyung-hwan, Deputy Prime Minister for Economic Affairs and Finance Minister, met with heads of five major business lobby groups Tuesday, urging them to increase investment and recruitment to bolster the economy.
Choi, who took office a week earlier, has repeatedly stressed the need for various measures of fiscal support as it will be inevitable to downgrade this year's growth outlook. He also pledged to unveil various measures to bolster the sluggish housing market.
The top economic policymaker vowed to consider institutional measures to let companies pay their excessive cash as local firms have cash holdings internal reserves "too much conservatively."
Kim Moo-sung, newly elected head of the ruling Saenuri Party, supported the policy direction of Choi, former third-term lawmaker of the party, saying that large corporations such as Samsung Electronics and Hyundai Motor were holding too much cash reserves that should be flowed out of there.
The new economic team believed that if local companies spend cash reserves as dividends, those cash would flow into the local economy and boost domestic demand.
BOK Governor Lee Ju-yeol told reporters after meeting with Choi Monday that he and Choi shared views over the economic conditions though he denied speculation that they talked about the need for policy rate cuts.
Asked about the possibility for lowering interest rates, Lee said Tuesday it would be better to judge the rate cut chance by considering all the things unveiled until now.
Lee also reiterated the need for policy coordination between the finance ministry and the central bank.