President Moon Jae-in has been pushing for an 11.2 trillion-won ($9.9 billion) extra budget bill to prime the pump to boost South Korea's economy. The bill has been stuck in limbo for more than a month due to a political standoff.

Separately, Moody's Analytics said South Korean consumer sentiments likely fell to 108 in June from 111.1 the previous month, which was the highest level reached in more than five years.

"Households are feeling more upbeat" thanks to Moon's proposed generous welfare and employment spending, it said.

Moody's Analytics also said South Korea's industrial production likely improved in June to 1.3 percent from a 0.1 percent year-over-year expansion in May. It also said South Korea's retail trade likely ticked up a notch to 0.5 percent in June after the 0.9 percent month-over-month decline in May.

"Consumer confidence has surged since Moon's election, suggesting households will open their wallets a little more freely through the September quarter in anticipation of reaping the benefits of anticipated higher welfare and employment spending," Moody's Analytics said. "High household debt, in part fueled by the central bank's record low interest rates, will prevent a strong rebound in consumption."

Earlier this month, the Bank of Korea unanimously voted to keep the key rate at 1.25 percent, extending its wait-and-see approach for the 13th consecutive month.

South Korea's household debt stood at 1,359.7 trillion won as of end-March, a dramatic increase from 665 trillion won at the end of 2007, according to the BOK. (Yonhap)