MERS may hurt South Korean economy

The outbreak of Middle East Respiratory Syndrome, or MERS, may weigh down Asia’s fourth-largest economy says officials

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

The recent outbreak of Middle East Respiratory Syndrome (MERS) in South Korea has raised alarms in the country. The government has increased its measures to lower the effects and bring the coronaviruses under control.

Although there is no official data confirming the total effect on the country’s economy, the $30 billion tourism industry is expected to be hurt the most as media coverage continues to worsen the case.

MERS, is a coronaviruses which comes from the same family as Severe Acute Respiratory Syndrome (SARS), which first emerged in 2012. There is still no cure or vaccine which can eliminate the virus.

Korean President Park Geun-hye has commented on the negative impacts of MERS during a visit to the MERS response headquarters on Monday and said that it should not be a matter which should be “overlooked.”

"The effect from MERS on private consumption cannot be overlooked as spending and tourism are quickly shrinking," said Park. "We can say that the virus has been driven out completely only once the economic effects are minimized."

The country’s Finance Minister Choi also commented on the outbreak vowing to prevent any form of risks hitting the country’s growth.

"I am concerned over the negative influence the recent MERS outbreak could have on the local economy, including private consumption and investment sentiment," the finance minister said. 

"We will aggressively respond to mitigate the effect of MERS on the economy, including allocating necessary budgeting at the right time." he added.

If the current situation within the country continues for another month, "we expect retail sales to drop 10 percent and restaurant sales to decline by 15 percent in the current month. However, tourism would fall 20 percent for two months because it will take longer for tourists to come back. That could cut 2nd and 3rd quarter growth by about 0.5 percent and annual Gross Domestic Product by 0.15 percent," said Morgan Stanley's Sharon Lam, according to Business Insider.

After analysing the impact of the disease on the country, the government stated that it will provide $74.94 million worth of funding for small-to-medium sized businesses in the Gyeonggi Province, in which the virus has had the greatest impact.

Moreover, economists who have been observing the matter closely have recently called upon the urgent need for monetary easing as Bank of Korea policy makers will meet this week to form another policy review.

So far, 108 people have been diagnosed and 9 killed by MERS in South Korea and approximately 36 percent of  patients globally have died as a result of the disease‏. 

TRTWorld and agencies