SEOUL - SOUTH Korean public companies will increase investment for next year by nine trillion won (S$10.3 billion) and spend more in the first half to boost the slumping economy, officials said on Tuesday.

Industrial output fell at the fastest rate ever recorded in November, amid growing concerns that weak domestic demand and exports could drag the economy into recession.

In a plan reported to President Lee Myung-Bak, 25 major public firms earmarked 57 trillion won for their investment next year, up 18.5 per cent from this year, the Ministry of Strategy and Finance said.

The companies will spend 61 per cent of their investment in the first half in a bid to help South Korea ride out an economic downturn early, it said.

Investment in roads, railways and other social infrastructure facilities will be increased from 33.4 trillion in 2008 to 40.4 trillion next year, it said.

Investment in energy-related facilities will rise from 12.1 trillion in 2008 to 14.7 trillion in 2009.

Nine state-run financial institutions set aside an extra 25 trillion won next year for loan support and an extra 55 trillion won to support export insurance and guarantees, it said.

The government has cut its 2009 growth forecast by one percentage point to three percent as exports shrink and the domestic economy stays sluggish.

President Lee Myung-Bak has said the economy could shrink in the first half of next year for the first time since the 1997/98 Asian financial crisis.

The National Statistical Office said Tuesday that industrial production shrank 14.1 per cent last month from a year earlier, following a 2.3 per cent slump year on year in October.

The November decline was the sharpest since data began to be compiled in 1970. -- AFP