South Korea's central bank has cut its key interest rate to 4.25% from 5% at an emergency meeting in an attempt to boost the economy.
The Bank of Korea said the cut was needed "to guard securely against the possibility of a sharp contraction of real economic activity".
However, some analysts think the bank may be forced to lower rates again early next year.
South Korean shares closed higher on Monday for the first time in several days, while the won continued to fall against the US dollar.
President Lee Myung-bak told parliament the government was going to cut taxes and increase public spending.
He said the current situation could not be compared to the 1997-98 financial crisis.
Earlier this month, South Korea announced a $US135 billion government package to help struggling banks, and cut interest rates by a quarter of a percentage point.
