Is MERS Killing the South Korean Economy?

June 18, 2015South Koreaby EW News Desk Team

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South Korea has been contending with an outbreak of Middle East Respiratory Syndrome (MERS) for several months. Economists fear the disease could harm the South Korean economy just as it has shown strong signs of recovery from the Global Recession of 2008.

According to a report by Reuters, Moody's Investors Service has been following the outbreak closely. According to a report by Moody's, the South Korean Health Ministry reported only three new cases, the lowest daily increase in 17 days. Similarly, the World Health Organization (WHO) praised South Korea's efforts to contain the outbreak, calling the event a "wake-up call" but noting that Korea's swift action was "very impressive" and kept the outbreak from escalating into a global emergency.

In economic terms, an outbreak of a disease like MERS can be detrimental, if not catastrophic. South Korea has Asia's fourth largest economy, but it has been slow to recover after the Global Recession. The spread of the illness in South Korea has had a negative impact on its recovering economy, pushing consumer confidence down and undermining the confidence of foreign investors, as well. Consumers feel afraid to visit public shopping facilities, like malls and grocery stores, for fear of catching the disease.

In response, the South Korean finance minister noted that the government was considering a possible stimulus supplement to the budget to bolster the economy. This should prevent any serious or lasting economic harm from the MERS outbreak and prevent a downgrade in the nation's overall credit rating.

To date, 165 people have been infected with MERS in South Korea, and 23 have died. The outbreak has been traced to a 68-year-old man who returned from a trip to the Middle East in early May. The WHO believes the epidemic has been largely contained, but said it still expects new cases in coming weeks. To prevent the spread of the disease, the government acted quickly to quarantine some 6,700 people. To date, all known infections have resulted in healthcare facilities, resulting in the shutdown of three hospitals, and the lock down of two others (with medical staff and patients still quarantined inside).

Although Moody's has kept a careful watch on the developing situation, it has not yet downgraded South Korea's sovereign ratings. The nation still ranks well within investment grade range. Even if a change did occur, most analysts believe it would have little lasting impact, and would likely right itself upon satisfactory elimination of the outbreak.

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