S.Korea govt says ready to counter economic impact of MERS

By Christine Kim

SEOUL (Reuters) - The South Korean government on Monday said it is ready to take swift measures to counter the negative effects on its economy from an outbreak of a deadly respiratory disease, suggesting that worried policymakers may soon deliver monetary and fiscal stimulus.

President Park Geun-hye said the negative economic effects from the outbreak of Middle East Respiratory Syndrome (MERS) should not be overlooked, while Finance Minister Choi vowed to take steps to offset any hit to growth.

"The effect from MERS on private consumption cannot be overlooked as spending and tourism are quickly shrinking," Park said on Monday during a visit to the MERS response headquarters.

"We can say that the virus has been driven out completely only once the economic effects are minimised."

Her comments mirrored concerns expressed by Choi earlier in the day.

"I am concerned over the negative influence the recent MERS outbreak could have on the local economy, including private consumption and investment sentiment," the finance minister said.

"We will aggressively respond to mitigate the effect of MERS on the economy, including allocating necessary budgeting at the right time."

Backing the government's stance, Gyeonggi Province - where most of the infections are concentrated - announced on Monday it would provide 84.1 billion won ($74.94 million) worth of funding for small-to-medium sized businesses in the area.

The health ministry reported 23 new infections on Monday, bringing the total to 87 and making South Korea the second-most infected country in the world after Saudi Arabia. Six deaths have been reported.

The outbreak has prompted analysts to wager on another rate cut as early as at this week's Bank of Korea policy review, with some predicting more support from the government in the form of stimulus worth billions of dollars.

The finance minister, however, did not raise the possibility of a supplementary budget to support Asia's fourth-largest economy, which is already tottering amid a collapse in exports and slow consumption.

Earlier on Monday, the ruling Saenuri Party head Kim Moo-sung warned the outbreak could drive the economy into a bigger trough than the one triggered by a maritime disaster last year that killed hundreds of people and dented consumption.

"Over the weekend, tours and events were cancelled and places like markets, theatres and restaurants were empty," said Kim.

"If this continues, private consumption which was on the brink of rebounding could take a direct hit and we could face bigger difficulties than we experienced after the Sewol sinking."

($1 = 1,122.2500 won)

(Additional reporting by Brian Kim; Editing by Shri Navaratnam)