Preemptive action neededThat the Middle East respiratory syndrome (MERS) outbreak has had greater negative ramifications for the economy than the Sewol ferry sinking was the general observation of experts from research centers at a recent meeting headed by Deputy Prime Minister for Economy Choi Kyung-hwan. The Korea Institute of Finance predicted the country’s gross domestic product would grow 2.8 percent this year after taking into account the effect of MERS on consumer spending.
Other research centers agreed the country will not achieve an annual growth of 3 percent. The Seoul city government estimated the number of people using public transportation plunged 22 percent since the MERS outbreak. Visitors to amusement parks and cinemas were halved. People avoid going out and foreigners have stopped coming. The domestic market is nearly dead.
Few experts believe the economy will rebound even though the outbreak shows signs of subsiding. Bank of Korea Gov. Lee Ju-yeol also said the economy could suffer even after MERS subsides. Consumer sentiment has sunk and companies are having a hard time improving profit figures because of sluggish exports. The external front also offers little comfort.
The global economy could be shaken again, depending on the outcome of final negotiations between creditors and Greece. If Greece leaves the eurozone, financial markets in Europe and elsewhere could be rocked by the fear of a domino effect on other troubled European countries like Spain and Italy. The crash in the Chinese stock market also suggests that exporters can’t expect relief from China. If the Chinese economy further slows due to stock volatility, it could affect all of Asia. The economy faces hard challenges at home and abroad.
The government is considering a supplementary budget of more than 10 trillion won ($9.11 billion). But Hyundai Research Institute suggests at least 20 trillion won would be needed to effectively stimulate the economy. Authorities must act fast and preemptively in order to avoid stumbling, as they have in response to the MERS outbreak.
JoongAng Ilbo, June 22, Page 30