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The government will iron out a special measure to boost an economy hit by the Middle East Respiratory Syndrome (MERS) outbreak.
The Ministry of Planning and Finance said on June 25 it will earmark 10 trillion won (US$8.9 billion) for a supplementary budget and spend an additional 5 trillion won (US$4.5 billion) from state funds in the second half of the year.
The government also revised its 2015 GDP growth outlook down to 3.1 percent from its earlier forecast of 3.8 percent, with second quarter growth likely coming in at less than 1 percent. “We expected the economy to grow 1 percent in the second quarter, but this will be difficult now due to MERS,” said Deputy Prime Minister and Finance Minister Choi Kyung-hwan.
At a news briefing, Finance Minister Choi said that the extra budget was inevitable due to the MERS outbreak, which dealt a serious blow to private consumption and some industries from late May to June. He added that it had no other option but to cut its growth forecast, as MERS had damaged consumption and the services sector, saying that the government will carry out full-fledged efforts to ensure that economic growth stays above 3 percent this year through the increased budget.
An official at the ministry said, “If we don't take measures such as the supplementary budget plan, the economic growth rate for this year is expected to fall to below 3 percent.” He added that even if the MERS outbreak stabilizes, weak consumer sentiment will continue for the time being, affecting the whole economy.
The outbreak is estimated to have reduced economic growth by between 0.2 and 0.3 percentage points.
The government expects a supplementary budget and an improving global economy to help the economy regain momentum in the latter half of the year.
The extra budget is scheduled to be proposed to the National Assembly next month.