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MERS deepens economic gloom in South Korea

Monday, July 6, 2015

Significance

Economic growth in 2015 has been slower than forecast, with exports slowing and domestic demand weak. Now the outbreak of MERS (Middle East respiratory syndrome) that began on May 20 has the potential to trigger a sharp, albeit temporary, downturn, similar to the impact of the Sewol ferry disaster in 2014.

Impacts

  • Domestic consumer spending and tourism will be the two sectors worst affected.
  • The Park government will face criticism, but the opposition is too weak and disorganised to make the most of this.
  • South Korea will manage its exchange rate to limit appreciation against the yen and head off competition from Japan.
  • Other tourism markets in the region may benefit from travellers avoiding South Korea.

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