Choi said South Korea's main industrial sectors, including the auto industry, are facing "difficulties because their competitiveness has weakened."

The foreign trade environment is also expected to take a new turn due to a deepening trade spat between the United States and China, the official said.

Choi urged financial institutions to help local manufacturing firms raise their competitiveness.

Last month, the government said it will offer 1 trillion won (US$883 million) in credit guarantees to cash-strapped small and medium-sized auto parts firms.

Under the measure, the state-run Korea Credit Guarantee Fund will provide 700 billion won and the Korea Technology Finance Corp. will offer 300 billion won to auto components manufacturers, FSC officials said.

The credit guarantees allow banks to make more loans to small auto parts firms with limited collateral. (Yonhap)