Slow recovery following sluggish domestic consumption is prompting institutions to slash their growth projection for the Korean economy.
Much of it has to do with consumers spending less after the Sewol-ho ferry disaster in April which the Korea Economic Research Institute says has raised red flags.
"Forecasts for private consumption and household spending fell and they're not expected to pick up any time soon. Private consumption has not increased in the past two quarters as it was fueled by negative consumer sentiment following the Sewol-ho disaster."
The state-run economic policy think tank, the Korea Development Institute has cut the country's growth forecast to 3.7-percent this year, down point-2-percentage point from previous estimates.
Finance minister Hyun Oh-seok also voiced concerns that a freeze in consumer sentiment could slow down the Korean economy.
Retail and leisure sectors were among those most affected by the ferry incident according to reports by the Bank of Korea released on Wednesday.
A need to contain this sentiment from further spreading into the corporate circle is gaining weight as it could add uncertainties, hampering business investments.
Senior researcher of the K-E-R-I, Byun Yang-gyu, suggests getting a verdict on some 3-hundred bills stalled at the National Assembly concerning labor laws that could make it harder for employers to lay off employees and shorten working hours.
Kim Ji-yeon, Arirang News.