South Korea will place its top policy priority on putting the economy back on the path of recovery, the finance minister said Friday, amid escalating concern over the fallout of the Middle East Respiratory Syndrome outbreak on growth.
In a meeting with the heads of the country’s leading economic think tanks in Seoul, Choi Kyung-hwan also said the government will come up with “sufficient” measures to prop up economic recovery if necessary.
Since the first outbreak was confirmed on May 20, MERS has claimed 24 lives and infected 166 people, with 5,930 currently in isolation. The outbreak has dampened consumer spending, dealing a harsh blow to Asia’s fourth-largest economy struggling with sagging exports.
“The government is committed to getting the country’s growth momentum back on track,” Choi told the meeting. “To revive the economy, the government will take firm steps to reinforce growth.”
He added the extent of any future action will depend on how serious the MERS fallouts are.
Before the MERS outbreak, the finance minister maintained that the economy is making steady recovery on the brisk stock and property markets and increased consumption.
Early this month, Choi predicted that the economy could grow in the low 3 percent range this year, compared with a 3.3 percent expansion last year.
Local think tanks such as Korea Economic Research Institute predicted that even if the respiratory virus is brought under control by the end of June, it will likely shave 0.26 percentage point off the country’s economic growth.
Choi, who doubles as deputy prime minister for economic affairs, said all available resources will be pooled to deal with MERS in the second half.
“Containing MERS will get priority consideration in the allocation of the budget,” the official said.
He told the economists that attention will be paid to counteracting falling exports and reviving investments. South Korea’s exports were down 5.7 percent on-year in the January-May period.
Choi said that before the health crisis, there were clear signs of recovery in private spending areas, but MERS and external developments have raised uncertainty.
Government data showed a sharp drop in sales and credit card usage coming into June, with certain service sectors like tourism and hospitalities being hurt the most.
Choi stressed the economy can regain vibrancy or experience hard times, depending on how the government responds to the current situation.
“Policymakers are fully aware of the gravity of the situation and will come up with decisive plans that will be followed through,” the minister said.
The government is expected to announce policy measures it will follow in the second half next week. Observers said that the government may also ask the National Assembly for extra budgetary funds at this time, to cover damages caused by MERS and the current drought. (Yonhap)
