South Korea announced on Thursday that it will pass a stimulus package of over 15 trillion won, or the equivalent of $13 billion, which includes a supplementary budget, to help cushion the impact of the Middle East Respiratory Syndrome (MERS) outbreak that has added pressure to the country's already shaky economy.
The finance ministry also adjusted the economic growth forecast of South Korea for this year from 3.8 percent that was projected late in 2014 to 3.1 percent. It also projected this year's inflation rate at 0.7 percent from the earlier forecast of 2 percent.
Finance Minister Choi Kyung-hwan said that while there were concerns that the supplementary budget could negatively affect fiscal soundness, it would be better for the country's economy long term.
"We were contemplating a supplementary budget to make up for tax revenue shortfall as global growth had been very weak from the start of the year. Then MERS happened and we had to do it," said Choi.
Choi said that much of the funding from the supplementary budget would be taken from sales of short-term treasury bond with the government aiming to present the finalized supplementary budget early next month.
Provincial authorities will be urged to spend more on infrastructure projects as part of the package. The amount will also address the effects of drought and create jobs as well as be used to contain MERS.
The MERS outbreak, which has so far infected 180 and killed 29 in South Korea, has had significant impact on the South Korean economy, the fourth largest in Asia. South Koreans have been keeping their wallets shut out of fear that they can contract the potentially deadly virus.
Store sales have declined by double digits in the previous two weeks when compared to average sales. The tourism industry was also affected as more than 120,000 tourists decided to cancel their trips to the Asian country following the outbreak of the disease in May.
"In the one and a half months after the outbreak of MERS, the negative impact started to appear quickly mainly in the consumption and services industries," Choi said. He also said that they can only say that they have overcome the MERS crisis once the country's economy rebounds.
First discovered in Saudi Arabia in 2012, MERS has no known treatment and vaccine that could prevent against infection.
Photo: Mario Sánchez Prada | Flickr
