South Korea’s central bank responded to the worsening MERS virus on June 11 by slashing its key interest rate to a historic low. With exports having taken a hit and household debt rising, the quarter of a percentage point cut should serve to mitigate, at least in part, the economic fallout.
Korean exports are down almost 11 percent on the year previous
The move marks the second time the central bank has slashed its key interest rate this year, and the fourth in under a year. The latest has come more in response to the recent MERS virus outbreak than anything else, and the announcement coincided with a reported 14 new cases. “We decided to cut rates today in a pre-emptive move to contain the economic fallout from MERS,” said the bank’s Governor Lee Ju-yeol at a media briefing.
The MERS virus, or Middle East Respiratory Syndrome, emerged in the Middle East in 2012, and has since reached 122 in South Korea, the largest number of infections outside of Saudi Arabia. Over 2,400 schools and kindergartens have been shut as a result, and thousands of travellers have chosen not to visit the country, for fear of contagion. The death rate currently stands at little under 40 percent, and there is as yet no vaccine to stop the spread.
The dip in exports is a worrying sign for a country that is still in large part dependent on them, and one that ranks currently as the seventh largest worldwide. Looking at the latest figures, Korean exports are down almost 11 percent on the year previous, representing the greatest year-on-year contraction since the height of the crisis in August 2009.