"In the second quarter, we will see the effects of increased government spending, the temporary holiday and the tax-cut program."

According to latest central bank report, the country's gross domestic product expanded 0.5 percent in the January-March period from the previous quarter, slowing from a 0.7-percent on-quarter expansion three months earlier.

The government has churned out a series of boosting measures to bolster domestic demand and prop up the entire economy, while South Korea's exports, the key economic driver, have fallen every single month since January last year.

It frontloaded some 40 percent of the annual budget in the first three months and extended an excise tax-cut program on passenger cars to June. It also designated a temporary holiday in early May to give the public a four-day break in order to boost private consumption.

As a result, the domestic side is showing some positive signs as retail sales moved up 4.2 percent on-year in April on the back of brisk sales of automobiles.

Earlier on Thursday, the Bank of Korea unexpectedly cut the key rate to a record 1.25 pct for the first time in 12 months in an apparent move to fuel the economic improvement.

But the finance minister said it is not enough to push the economy further upward due mainly to faltering exports.

"Sluggish exports weigh heavily on the production side, dragging down corporate investments and facility operation rate," said Yoo, who presided over the ministerial meeting as deputy prime minister on economic affairs. "The manufacturing industry is decreasing employment as it is hit hard by waning exports."

He said he will carry out sweeping reform in the business and labor sectors to help the economy become more competitive.

On Wednesday, the government announced a comprehensive plan to inject 12 trillion won into state-run policy lenders to support financing the troubled shipbuilding and shipping industries. (Yonhap)