SEOUL -- Fearful of catching a deadly virus, consumers in South Korea are increasingly staying home rather than going to the movies or shopping, stoking concern among central bank officials about the country's economic health.
The Bank of Korea lowered its key policy rate to a record-low 1.5% Thursday in an attempt to cushion the impact of Middle East respiratory syndrome on the economy.
"Based on our comprehensive review of the economic conditions, we have concluded that the slump in exports and the impact of MERS have increased downside risks to growth," Lee Ju-yeol, governor of the central bank, told a news conference that day.
While exports had remained sluggish amid a Chinese economic slowdown and the strong won, signs of a recovery at home emerged recently, with the real estate market improving and household purchasing power increasing following a series of rate cuts. But the MERS outbreak suddenly took the air out of that recovery.
It is difficult to predict the outbreak's impact on this year's gross domestic product, Lee noted. But "the fact is that we now have factors that may push down economic growth" from the 3.1% projected in April, he said, hinting at a possible downward revision.
Even if the chaos associated with MERS subsides within a month and consumer sentiment recovers to a normal level, GDP growth would still be eroded by 0.15 percentage point, says Morgan Stanley.
Consumption is contracting as the death toll rises and cases of infection increase. Department store sales, which rose 0.8% on the year in the first two weeks of May, plunged 16.5% in the first week of June, according to the Ministry of Strategy and Finance. Large supermarkets recorded a 3.4% fall following a 4.1% rise.
Consumers are not going out much, particularly for leisure. The number of moviegoers tumbled 54.9% in the first week of June, while baseball game spectators plummeted 38.7%. No significant impact was seen soon after May 20, when the first case of MERS was confirmed. But consumers began avoiding outings after the first death from the virus was reported June 2.