SEOUL - SOUTH Korea's top economic officials were meeting on Sunday to review falling financial markets and the economy and discuss any further steps to try to shield it against more damage from the spreading global downturn.

'An unprecedented scale of financial crisis is spreading to the global economy,' Prime Minister Han Seung Soo said at the beginning of the talks. 'We need financial support for small companies and exporters.'

The meeting is being attended by the country's top three financial officials - Finance Minister Kang Man Soo, Bank of Korea Governor Lee Seong Tae and Financial Services Commission Chairman Jun Kwang Woo.

Swiss bank UBS last week forecast that a heavy debt burden will make the economy contract by 3 per cent next year, for South Korea's first recession since the Asian financial crisis a decade ago.

The prediction is considerably more gloomy than a market concensus of around 2 per cent growth in 2009.

South Korea's financial markets and the corporate sector have been especially hard hit by the global credit squeeze and sell-off of emerging market assets, with the Seoul stock market index nearly halving and the won diving almost 40 per cent against the dollar this year.

The government has already unveiled an extra 14 trillion won stimulus package to support the real economy and measures to help the sliding construction sector.

Authorities are now discussing a 10 trillion won (S$10.2 billion) fund to invest in corporate bonds to ease liquidity problems for companies.

The Bank of Korea is holding a special meeting on Monday to discuss its possible role in the planned fund. -- THOMSON REUTERS