The government is considering lowering South Korea’s growth outlook for this year due to sluggish domestic demand hurt by the ferry disaster in April while it studies measures to revive the national economy, senior officials said Sunday.

The Ministry of Strategy and Finance is monitoring the aftermath of the ferry sinking and its impact on domestic consumption to reflect them in this year’s outlook as it prepares to announce economic management plans for the second half of this year. The announcement is expected late this month.

“The ministry is analyzing economic activities of the first half of the year and reviewing this year’s economic outlook to set the policy direction for the latter half of this year,” a senior ministry official said, asking for anonymity. “We are considering whether to downgrade this year’s economic prospects as the Sewol ferry disaster occurred unexpectedly.”

The Sewol ferry sank off the southwest coast on April 16, killing nearly 300 people. Most of those on board were students on a school trip. The search efforts are still ongoing to find the missing 14 passengers.

To cope with weakened domestic demand, the economic management policies for the latter half will focus on supporting the service sector and small businesses to minimize the negative effects from the ferry disaster, officials said. The size of the support has not yet been determined, but the measures will be for revitalizing consumer sentiment, they said.

Among the measures under consideration are employment subsidies and tax breaks for small businesses, as well as tax cuts and financial support for the service industry, to boost investment and expand employment.

The government in late May forecast South Korea’s economy to grow 3.9 percent this year, which is equivalent to 4.1 percent when reflecting recent changes in the calculation methodology for gross domestic product.

The state-run Korea Development Institute last month lowered the estimated economic growth to 3.7 percent due to weakened domestic demand that was struck by the ferry incident, a 0.2 percentage point downgrade from the previous growth outlook unveiled in November last year.

The revisions were announced as the ferry tragedy dented local consumption, with people mourning the tragedy staying home and avoiding group gatherings and shopping.

Many businesses have canceled high-profile activities, such as new marketing strategies and promotional events, as an atmosphere of mourning pervaded the country.

Downturns in the retail, leisure, restaurant and accommodation industries were stronger than in other industries.

Service industry production and retail sales fell by 1.0 percent and 1.7 percent on-month in April, respectively.

Economic activities in the private sector were also sluggish during the most recent reporting period. Private consumption grew 0.2 percent, which is 0.1 percentage point down from the estimated outlook by the Bank of Korea. (Yonhap)