SEOUL: The South Korean government on Friday agreed to inject $20 billion into the flagging economy, which has been hit by the MERS virus outbreak and sluggish consumption.

The 22-trillion-won ($19.8 billion) stimulus package was passed at a Cabinet meeting of government ministers, the finance ministry said.

“The extra budget will help revitalise the economy and stabilise the livelihoods of ordinary people who have been affected the most by the fallout from MERS,” Vice Finance Minister Bang Moon-Kyu was quoted as saying by Yonhap news agency.

As of today morning, the virus had killed 33 people and a total of 184 cases had been confirmed. Forty-two of those remain hospitalised with 12 in critical condition, according to the health ministry.

The 22 trillion won package includes an already-announced 15 trillion won supplementary budget and seven trillion won of other expenditures such as expanded investments by state companies and additional credits for exporters.

The extra expenditure is expected to raise the economic growth rate by 0.3 percentage point this year and 0.4 percentage point in 2016.South Korea forecasts its economy will grow 3.1 per cent this year and 3.5 per cent next year.

Moody’s said consumer sentiment had plummeted as a result of MERS, halting the recovery in domestic demand, as the external sector continues to drag on growth.

“Our tracking model suggests GDP growth slowed to 2.6 per cent year-on-year in the second quarter, which is lower than our 2.9 per cent estimate from May,” Emily Dabbs at Moody’s Analytics Ltd said in an article this week.

Confusion and secrecy over the MERS outbreak has fanned public uncertainty, and parallels have been drawn with the government’s poor response to the 2014 Sewol Ferry disaster, which subdued domestic demand for many months, Dabbs said.

Dabbs was referring to a ferry accident that claimed more than 300 lives, mostly teenagers.

The government of President Park Geun-Hye has also been criticised for inadequately responding to the MERS outbreak.

“Should the government fail to regain the public’s trust, the outbreak could take a larger economic toll. The outbreak has caused us to lower our GDP forecast to 2.6 per cent for 2015,” Dabbs said.

The central Bank of Korea this month slashed its benchmark interest rate by a quarter basis point to another record low of 1.5 per cent to stem the impact from the outbreak.

Despite lingering fears over MERS, the country is hosting two international sporting events this week — the World University Games in southern Gwangju City and the ITTF World Tour Korea Open in the western city of Incheon.