After marking the steepest contraction in more than a decade amid the new coronavirus fallout, South Korea’s economy is likely to confront further shocks over the upcoming months, financial authorities warned Thursday.

“The production indexes for private consumption and service industries have hit their worst level since the (global) financial crisis,” Deputy Prime Minister and Finance Minister Hong Nam-ki said in a meeting of economy-related ministers in Seoul.

“The temporary recovery trend in investments and exports partly countered the slowing growth pace in the first quarter but possibilities are mounting that the global economic downturn will prolong in the second quarter to deliver further shocks to the real economy and the job market.”

Bracing for economic hardships ahead, the minister vowed to unveil the half-year economic policy road map and an additional extra budget bill plan by early June.

He also proposed support measures for five key industries which have taken the most extensive hit from the epidemic and consequent quarantines -- automobile, aviation, shipping, oil refining and shipbuilding.

The top fiscal policymaker’s gloomy remarks came shortly after the Bank of Korea announced that the country’ economy shrank 1.4 percent on-quarter in the January-March period, which was the sharpest fall since the 3.3 percent on-quarter drop observed in the fourth quarter of 2008.

Private consumption sank 6.4 percent on-quarter, recording the lowest figure since the 13.8 percent contraction in the first quarter of 1998, which was during the Asian financial crisis, data showed.

Exports slipped 2 percent on-quarter, while facility investment gained 0.2 percent and construction investment climbed 1.3 percent.

“The contraction pace of the domestic market has slowed down, but the employment situation which aggravated in March are likely to stay sluggish for a while,” said Park Yang-su, head of the central bank’s economic statistics department.

Despite recent predictions by credit ratings agencies and international organizations, the BOK suggested that the country might be able to keep its growth in the positive range this year, with some luck.

“Even if (the on-quarter growth) dipped below zero in the second quarter, there is a possibility of achieving a positive growth in the zero percent range, should the final quarter’s performance turn out to be similar to that of last year.”

The quarterly growth for October-December last year jumped to 1.3 percent, mostly on the back of the government’s active fiscal spending.

Earlier this week, Standard and Poor’s predicted that the Korean economy will shrink 1.5 percent this year but will post a recovery next year.

“We believe the current shock is only temporary and GDP growth will rebound strongly to 5 percent in 2021, supported by the release of pent-up consumption built during the pandemic and the government’s stimulus measures,” it said in a statement.

Korea has expanded the size of its financial aid package to 240 trillion won ($195 billion) this month, up 90 trillion won from the previous amount, to support coronavirus-hit businesses.

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