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South Korea cuts economic growth forecast and plans stimulus as MERS hits spending

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SEOUL, South Korea — South Korea's finance ministry said Thursday that economic growth will slow this year as the outbreak of Middle East respiratory syndrome saps spending and tourism.

The ministry cut its forecast for South Korea's growth to 3.1 percent from 3.8 percent. Asia's fourth-largest economy grew 3.3 percent last year.

The outbreak that began last month is having a bigger effect on South Korea's economy than a deadly ferry disaster last year that plunged the country into mourning.

MERS has killed 29 people in South Korea and thousands are quarantined. People are avoiding busy public spaces. Overseas tourists, Chinese especially, are staying away.

The ministry said the MERS outbreak has derailed a recovery in consumption in particular. Revenues at department stores plunged 30 percent during the first two weeks of June and more than 120,000 visitors cancelled trips to Korea.

"Even after the MERS outbreak calms down, there could be a negative impact on the entire economy," Finance Minister Choi Kyung-hwan said in a televised news conference. "We can't say the MERS situation has completely come to an end unless the economy revives."

The ministry said it is planning $13.5 billion of economic stimulus to ensure that growth doesn't fall below 3 percent. The stimulus will target businesses that were hit by the MERS outbreak as well as a recent drought.

South Korea's central bank earlier this month cut its key interest rate to a record low of 1.5 percent.

PHOTO: Tour buses are idle at a parking lot after schools cancel excursions due to concerns over the spreading of Middle East Respiratory Syndrome in Seoul, South Korea Thursday, June 25, 2015. South Korea's finance ministry said Thursday that economic growth will slow this year as the outbreak of MERS saps spending and tourism. (AP Photo/Ahn Young-joon)
Tour buses are idle at a parking lot after schools cancel excursions due to concerns over the spreading of Middle East Respiratory Syndrome in Seoul, South Korea Thursday, June 25, 2015. South Korea's finance ministry said Thursday that economic growth will slow this year as the outbreak of MERS saps spending and tourism. (AP Photo/Ahn Young-joon)

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PHOTO: Tour buses are idle at a parking lot after schools cancel excursions due to concerns over the spreading of Middle East Respiratory Syndrome in Seoul, South Korea Thursday, June 25, 2015. South Korea's finance ministry said Thursday that economic growth will slow this year as the outbreak of MERS saps spending and tourism. (AP Photo/Ahn Young-joon)
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