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S. Korea to spend W20.8b to combat spread of coronavirus

Fiscal chief vows to monitor economic impact of the coronavirus outbreak, draw on W2tr reserves if necessary

Deputy Prime Minister and Finance Minister Hong Nam-ki speaks during an emergency meeting in Seoul, convened Tuesday to discuss the spread of the Wuhan coronavirus in Korea. (Yonhap)
Deputy Prime Minister and Finance Minister Hong Nam-ki speaks during an emergency meeting in Seoul, convened Tuesday to discuss the spread of the Wuhan coronavirus in Korea. (Yonhap)

South Korea will use 20.8 billion won ($17.7 million) of its national budget to contain the new Wuhan coronavirus, while keeping a close watch for potential negative effects on the local economy from the outbreak, the top fiscal policy chief said Tuesday.

“Of the budget allocated for this year, 6.7 billion won set aside for building a quarantine system, 5.2 billion won for diagnosis and 2.9 billion won for isolated treatment -- culminating in a total of 20.8 billion won -- will be executed swiftly,” said Deputy Prime Minister and Finance Minister Hong Nam-ki at an emergency meeting with related ministries.

Hong said the government was preparing to send chartered flights to Wuhan to evacuate Korean citizens from the epicenter of the outbreak, with a previously secured budget of 1 billion won.

The government decided later in the day to send chartered flights to Wuhan on Thursday and Friday.

The government will spend an additional 2 trillion won that it holds in reserve for contingencies, if the 20.8 billion budget is deemed insufficient, according to Hong.

On the possible economic impact of the outbreak, Hong said the government is closely analyzing the effects it could have on “China’s consumption and productivity, the global economy and Korea’s exports.”

But it has had a limited impact on the nation’s domestic consumption and economic activities so far, Hong noted, saying the government would continue to monitor the situation.

Hong recalled the outbreaks of the severe acute respiratory syndrome in 2003 and the Middle East respiratory syndrome in 2015 and said the government would refer to those cases when devising measures to minimize the effects of the new virus on the local tourism and services sectors.

Those outbreaks dealt a blow to Korea’s economy, with SARS cutting the nation’s annual gross domestic product growth rate by 0.25 percent in 2003, according to a report from the Korea Institute for International Economic Policy on Jan. 15. It caused Hong Kong to incur social costs of $1.7 billion and Singapore’s GDP growth rate to drop between 1 and 1.5 percent in 2003 as well.

The 2015 MERS outbreak caused Korea’s GDP to drop 0.2 percent that year, according to data from the US Centers for Disease Control and Prevention.

In line with the government’s efforts, the Bank of Korea said Tuesday that Gov. Lee Ju-yeol had ordered the launch of a special team of top officials from the central bank to monitor and counter the financial risks stemming from the recent outbreak.

The outbreak of the coronavirus has dampened the mood of improved trade ties with China, which had been boosted by news of Chinese President Xi Jinping’s plans to visit Korea in spring.

China accounts for more than a quarter of Korea’s total exports as Korea continues to struggle with outbound shipments. Asia’s fourth-largest economy saw its exports decline 10.3 percent last year, weighed down by risks stemming from the US-China trade war.

Korea confirmed its fourth case of the coronavirus as of Tuesday morning, with 15 suspected cases. The number of deaths in China believed to be caused by the virus has exceeded 100 and more than 4,000 are infected, Chinese health authorities said Monday.

By Jung Min-kyung (