The government has sounded a positive note about the local economy, saying the exports slump is easing despite external uncertainties such as the slowing Chinese economy and low oil prices. 

In its latest economic outlook released on Wednesday, the Ministry of Strategy and Finance also expected an uptick in domestic demand.

Analyzing recent industrial output data, the ministry said production in mining and manufacturing was more sluggish in January than a month earlier, while domestic demand in sectors such as service industry and retail sales also faltered due to one-time factors, including the ending of individual consumption tax cuts on cars.

But, the ministry said the drop in exports is showing signs of alleviation. It also said the government’s decision to extend cutting individual consumption tax on vehicles will have a positive effect on domestic demand.

It said it will enlarge the size of its budget to be front-loaded in this year's first half to 21 trillion won or more in order to encourage a recovery in domestic demand and spur job creation.