The outbreak of MERS (Middle East Respiratory Syndrome) has suddenly become a key downside risk to the near-term outlook for the Korean economy. The first case of MERS in Korea was reported on 20 May. As of 11 June, there were 122 known MERS infections, 3,805 people are quarantined at home or at designated facilities and 2,199 schools are temporarily closed.



According to Societe Generale, "The negative impacts of MERS fears on the economy last weekend, as people stayed at home and refrained from various activities like shopping, picnicking, movie-going, etc. Also, many group events have been cancelled and there are concerns that the number of foreign tourists could decline".



In terms of the economic impacts on Korea, MERS could be more serious than the previous epidemics of SARS (Severe Acute Respiratory Syndrome) and swine flu, or the Sewol ferry disaster, suspects SocGen. People are much more nervous about engaging in outside activities now than they were when SARS and swine flu emerged: there were only four confirmed cases of SARS in Korea in 2003, and swine flu in 2009 was more of a global epidemic.



Uncertainty over the duration of the negative impacts is likely to be far greater in the case of MERS compared with the Sewol ferry disaster. The retail sales series published before and after the events took place showed that:





1) SARS may have had negative impacts on consumption, although we can also interpret the decline in retail sales as being attributable to consumption weakness due to the credit card debacles





2) swine flu failed to show any clear impacts on retail sales





3) the Sewol ferry disaster did produce negative impacts on consumption but these were reversed the following month