Consumer confidence is down, risking further economic damage

In a rare display of cohesion, the opposition-led parliament pushed through the 4.5 trillion won ($3.8bn; �2.4bn) supplementary budget in a 228-1 vote on Tuesday.

The need for the extra money - almost 10% more than originally expected - was underlined on Monday by figures from the finance ministry showing that the economy shrank by 0.5% between April and June.

Given the 0.4% shrinkage in the first three months of the year, that leaves South Korea technically in recession, defined as two consecutive quarters of contraction.

The country's economic difficulties reflect a sharp slowdown in consumer spending and trade triggered in part by the deadly Sars virus.

There have not been two successive quarters of decline in South Korea since the 1997-8 Asian financial crisis, which decimated economies across the region.

Slowdown

Consumer spending has been the engine for keeping other economies around the world in the black.

But in Korea, shoppers have been put off by strikes earlier this year - especially one staged by employees at state-controlled Chohung Bank to protest against privatisation plans.

Continuing tension over whether North Korea has nuclear weapons may also have contributed.

Some economists say that since the strikes were hopefully a one-off, spending is likely to pick up later in the year.

But worries about the economy led the central bank to cut interest rates less than a week ago to 3.75%, its second quarter-point cut in two months after leaving rates unchanged for a year.