The government plans to frontload a 3 trillion won ($2.67 billion) stimulus budget in the first half of the year and raise an additional investment of 7 trillion won from both public and private sectors this year to spur the nation’s weak consumption and sluggish economic recovery, financial officials said Friday. 

On the U.S. Federal Reserve’s upcoming key rate hike, Bank of Korea Gov. Lee Ju-yeol said that the pace is more important than the timing.

“Our economy is showing signs of gradual improvement in employment and asset market recovery. Still, consumption and investments need to increase,” Finance Minister Choi Kyung-hwan said in a meeting with economic policymakers.

Officials said the additional investment will come from surpluses generated by low oil prices and the government’s sale of real estate properties last year.

Minister Choi also called for government efforts to reform the labor market, expressing worries about the growing unemployment rate among youth.

He was referring to the so-called dual structure of the nation’s labor market consisting of full-time regular employees and nonregular workers with less job security.

On the same day, BOK Gov. Lee also told reporters that “while the timing of the rate hike is important, we are paying more attention to its pace, as the move is likely to take place consecutively over several times.”

He also predicted that the Fed would hike the rate at a “gradual” speed, delivering a relatively mild impact on the market.

The bank chief’s comments came shortly after the Fed moved a step closer to increasing its key interest rates soon by removing the expression “patient” from its latest statement.

“But for now, it is uncertain whether or not the Fed will indeed announce the hike,” Lee said in a meeting with local bankers.

Earlier this month, the Korean central bank announced an earlier-than-expected key rate cut on the policy rate to a record low of 1.75 percent.

On the decision, Lee had said the BOK was readying to respond to the Fed’s rate hike, but it would not necessarily make an immediate move.

Meanwhile, participants of the day’s meeting said that they reinforced their management of foreign exchange liquidity to defend themselves from the uncertainties of the Fed’s rate hike and the resulting volatility in the global financial market.

They also spoke of the need to diversify their profit sources, as the BOK’s recent rate cut is expected to reduce the banks’ interest margin.

By Bae Hyun-jung (tellme@heraldcorp.com)