MERS outbreak in South Korea cuts economic growth

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The South Korea’s central bank cut its economic growth forecast blames on MERS outbreak,  government official on Thursday, citing a severe drought and the spread of Middle East respiratory syndrome (MERS-CoV).

MERS outbreak in South Korea / AFP: Jung Yeon-Je

The central bank forecast that South Korea’s economy will likely expand 2.8 percent this year, down from 3.1 percent forecast in April, Bank of Korea governor Lee Ju-yeol said.

The ministry blamed the MERS outbreak for sapping consumption and tourism,  pledged to spend 12 trillion won ($10.6 billion) in a stimulus package to aid growth for the rest of this year.

The central bank’s forecast cut follows a similar move by the finance ministry last month. Lee said the stimulus package will give 0.3 percentage point to annual growth.

“We were cautious about the forecast being cut significantly, but the scope of the actual adjustment was within expectations,” said Shin Eol, a fixed-income analyst at Hyundai Securities Co. in Seoul.

“The governor didn’t provide any signal on more easing and the rate decision was unanimous.” Shin added.

Hundreds of thousands of foreign visitors from China cancelled visits to South Korea after the outbreak of the disease in May.

Chinese tourists are a lifeline for many businesses in the country in the industry of cosmetics, hotel, transport and restaurant, the ministry said

The number of foreign visitors lowered 40 percent during the first four weeks in June, compared with a year earlier.

The governor said a recovery in the current quarter depends on whether foreign tourism bounces back from the MERS outbreak.

Meanwhile domestic consumption is expected to recover as MERS in South Korea is contained, he said.

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