Lee Myung-Bak, in a New Year speech, said his administration would create more than 70,000 quality jobs for young people over the next 12 months.

"This year's budget is focused on creating jobs and we will spend more than 10 trillion won ($8.6 billion) to make more jobs," he said.

The government would create 14,000 new posts at state agencies and provide more help for small and medium-sized companies to hire new workers, he added.

"As we enter the era of slower growth typical for an advanced economy, there are fewer new jobs available for young people," Lee said.

The jobless rate hovered around 3 to 4 percent last year but youth unemployment, those aged between 15 and 29, remained at about 7 percent.

The export-dependent economy is feeling the squeeze from the eurozone debt crisis and the sluggish US economy.

The government last month slashed its economic growth forecast for 2012 to 3.7 percent from 4.5 percent, saying slowing global demand was hurting exports and even domestic consumption.

Lee also pledged to keep inflation at the low three percent range this year, saying rising property prices were putting "great pain" on low-income families.

"Growth is also important but now we will focus on inflation," he said, adding the government would provide more affordable homes for rent.

Consumer prices last month rose more than the targeted maximum four percent for a second straight month.

Lee's Finance Minister Bahk Jae-Wan separately predicted a tougher 12 months.

"Last year, our economy went through one unexpected challenge after another," Bahk told his staff and employees in a New Year speech.

"This year will pose tougher problems. The economic conditions are expected to become difficult and uncertain," he said, citing the eurozone debt crisis and other factors.