MERS, drought stifled S. Korea growth in Q2: Minister

SEOUL - South Korea's economic growth in the three months to June will be "much lower" than the previous quarter due to drought and an outbreak of the MERS virus, Finance Minister Choi Kyung-Hwan said Tuesday.

Domestic demand had been gradually recovering this year, backed by the government's expansionary policies and efforts to bolster the real estate market, Choi told reporters.

"However the recovery was dampened by the outbreak of MERS and drought," he said.

"Taking these into consideration, we project that Korea's real GDP growth in the second quarter will be much lower than the first quarter," he added.

Thirty-six people died in the recent outbreak of Middle East Respiratory Syndrome (MERS) that infected 186 people following the first diagnosis on May 20.

Local businesses including shopping malls, restaurants and cinemas reported a sharp drop in sales as people shunned public venues with large crowds.

The government recently announced a 22 trillion won (S$27.2 billion) stimulus package, much of which was aimed at supporting businesses hurt by the MERS crisis.

Earlier this month, South Korea's central bank cut its 2015 economic growth forecast for the third time this year, lowering its forecast from 3.1 percent growth to 2.8 percent.

Citing sluggish exports and weak domestic consumption - exacerbated by the MERS outbreak - the bank has kept its benchmark interest rate unchanged at a record low of 1.5 percent.