South Korea’s new finance minister and the central bank chief agreed on Monday to work together to sustain economic growth at their first official meeting in a closed-door session.

Finance Minister Choi Kyung-hwan and Bank of Korea Gov. Lee Ju-yeol also shared views on the growing downside risks, such as sluggish domestic demand, in the wake of the April 16 Sewol ferry disaster, the two organizations said in a joint statement. This was their first meeting since Choi took office last week. 

Since Choi’s nomination in June, market watchers have speculated that the new finance chief would push the central bank to cut the base rate in line with his plan to prop up sluggish domestic demand and the housing market.

Choi, however, told reporters Monday there was no discussion on interest rates during the meeting. He also reiterated that interest rate policy is the BOK’s “inherent right.”

“(The finance ministry) will do its best to carry out its role. The BOK also has its own distinct role. I believe that things will go well if we think hard and cooperate,” he told reporters ahead of the meeting.

The meeting of the country’s top two economic policy officials came amid growing concerns over whether the level of growth in Asia’s fourth-largest economy is sustainable.

The economy grew 0.9 percent for two quarters until March as shipments of technology and petrochemical products fueled exports, but recent indicators show the economy lost pace in the April-June quarter in the wake of the Sewol disaster.

The Bank of Korea earlier this month lowered its growth outlook from 4.0 percent to 3.8 percent, citing growing downside risks and sluggish domestic demand.

The Ministry of Strategy and Finance, under Choi, is now seeking to raise the loan-to-value ratio to 70 percent from the current 50 percent for home buyers nationwide.

Choi also appears to be seeking ways, including taxation and incentives, to help funnel the growing cash reserves held by local conglomerates.

“(I) am working on devising a systemic device that helps corporations’ income to flow to households via dividend payments and wages,” Choi told reporters after his inauguration last week. The Finance Ministry is due to release a set of economic policy goals for this year later this week.

By Oh Kyu-wook (596story@heraldcorp.com)