"I won't neglect even for a moment checking the economic situation and drawing up countermeasures and implementing them," Lee said. "It's time for us to unite."
Plummeting global demand for cars, ships and electronics coupled with dwindling domestic markets are putting pressure on an economy that analysts say may shrink by as much as 3 per cent in 2009.
That would be the first annual contraction to hit the export-dependent South Korean economy since the Asian financial crisis a decade ago.
Park Sang-hyun, chief economist at Seoul-based HI Investment & Securities, said the data would add to pressure on the central bank to announce a further cut in interest rates next week, from an already record low 3 per cent.
"I expect the Bank of Korea to lower rates to 2 per cent by the end of the first half, but we may see lower rates than that as the economy may post negative growth in the first quarter," Park told Reuters.
|The Singaporean economy shrank in the last quarter of 2008
The gloomy news from South Korea coincided with fresh data that showed Singapore's economy shrinking at a seasonally adjusted 12.5 per cent in the last quarter of 2008, far worse than market forecasts of just under nine per cent.
The figures mark the third consecutive quarter of decline, as the global financial crisis continues to batter manufacturers and the services sector.
In response the Singapore government has revised down its growth forecasts for 2009, saying it now expects GDP for the year to come in between a decline of 2 per cent and growth of 1 per cent.
Singapore's economy registered a relatively limp 1.5 per cent growth last year, after expanding 7.7 per cent in 2007.
In his New Year message on Wednesday, Singapore's prime minister warned that the global financial crisis had hit the city-state of 4.8 million people hard, and that the economic outlook was uncertain.
"We must therefore prepare for a difficult year ahead, and especially the first half of 2009. Our economy will probably contract further," Lee Hsien Loong said.
But some economists are predicting an even deeper recession than the government is warning of.
"If we are correct, 2009 will mark the most severe recession in Singapore's history, surpassing the Asian Financial Crisis (when GDP contracted 1.4 per cent) and the 2001 tech recession," said Kit Wei Zheng, an economist with Citigroup.
He told Reuters news agency he expected the economy to shrink 2.8 per cent in 2009.
"This sets the stage for more aggressive fiscal stimulus on the January 22 budget, and further monetary easing by MAS (the Monetary Authority of Singapore) in April, or even before."