Moody's warns of Mers impact on South Korean economy
Outbreak dampens consumer mood amid weak demand, straining recovery, rating agency says
An outbreak of Middle East respiratory syndrome (Mers) threatens to deal a blow to South Korea's economic recovery, Moody's Investors Service said yesterday, as the Health Ministry reported three new cases, the lowest daily increase in 17 days.
World Health Organisation director general Margaret Chan said the country's response, although initially slow, had been "exemplary".
"The Mers outbreak in [South Korea] can be stopped, although it may take a little longer than everyone would like to see," Chan, who arrived in South Korea yesterday to attend a conference, told a media briefing.
There have been signs that the outbreak, the largest outside Saudi Arabia, may be slowing. The daily number of new cases has dropped to single digits this week compared to as many as 23 last week. Three were reported yesterday - the lowest number since June 1.
The outbreak has kept consumers from visiting malls and parks and led to more than 100,000 tourist visit cancellations, denting consumer spending. Worried by the economic impact, South Korean President Park Geun-hye and other leaders have urged the public and the business community to return to normal.
"The spread of the illness is credit negative for the sovereign, because it is dampening consumer confidence amid already-weak domestic demand, threatening to undermine an incipient recovery in economic growth," Moody's said.
Hotel Shilla said yesterday it had shut its hotel on the holiday island of Jeju after it learned a guest who had stayed there last week has been diagnosed with Mers.
The spread of the illness is credit negative for the sovereign, because it is dampening consumer confidence amid already-weak domestic demand, threatening to undermine an incipient recovery in economic growth
The finance minister has said the government was considering a possible supplementary budget to bolster Asia's fourth-largest economy.
The blow from the Mers outbreak was unlikely to be serious enough to prompt a sovereign ratings downgrade, said Park Sang-hyun, a senior economist at HI Investment & Securities. South Korean debt is rated at Aa3 positive by Moody's, well within investment grade territory.
A total of 165 people have been infected with Mers and 23 have died in an outbreak that has been traced to a 68-year-old man who returned from a trip to the Middle East in early May.
More than 6,700 people are in quarantine in South Korea, either at home or in health facilities.
