SEOUL: South Korea’s economy slowed in the second quarter, with consumer spending stifled by an outbreak of Middle East Respiratory Syndrome (MERS) and exports failing to lift from a lengthening slump.
Asia’s fourth largest economy grew 0.3 percent in the April-June period, down from 0.8 percent in the first quarter, the Bank of Korea said Thursday.
The central bank put year-on-year growth at 2.2 percent—the slowest pace for more than two years and below analyst forecasts.
Thirty-six people died in the MERS outbreak that infected 186 people following the first diagnosis on May 20.
Local businesses including shopping malls, restaurants and cinemas reported a sharp drop in sales as people shunned public venues with large crowds.
The government recently announced a 22 trillion won ($19.8 billion) stimulus package, much of which was aimed at supporting businesses hurt by the MERS crisis.
The tourism industry was hit particularly hard, with the number of foreign visitors plunging by over 40 percent in June compared to a year ago, and a further 60 percent in the first two weeks of July.
Seoul plans to spend up to 30 billion won on campaigns to lure back travellers including free promotional tours and large concerts by big-name K-pop stars, vice tourism minister Kim Chong told foreign reporters on Thursday.
“We are particularly eager to bring back Chinese tourists,” Kim said.
Earlier this month, the Bank of Korea cut its 2015 economic growth forecast for the third time this year, from 3.1 percent growth to 2.8 percent.
Citing sluggish exports and weak domestic consumption—exacerbated by the MERS outbreak—the bank has kept its benchmark interest rate unchanged at a record low of 1.5 percent.
While no additional MERS infections have been reported since July 4, central bank
governor Lee Ju-Yeol said Wednesday that the economic impact of the deadly disease would last through August.
Exports, which count for more than half of the economy, have fallen every month this year, partly due to the Korean won’s strength against a declining Japanese yen and euro.
The global dive in oil prices also had a hand in the export decline, damaging South Korea’s overseas markets for processed petrochemical products.