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Business

South Korea cuts interest rates to contain MERS fallout

The central bank in South Korea has lowered its key interest rate to an historic low as the MERS virus continues to spread. It's feared the crisis could slow the economy and that precautionary measures are in order.

In a move designed to contain the impact of the ongoing MERS crisis on the economy, the Bank of Korea lowered its benchmark interest rate by a quarter of a percentage point to 1.5 percent, making it the second rate cut this year.

"We decided to cut rates today in a pre-emptive move to contain the economic fallout from MERS," Bank of Korea Governor Lee Ju-yeol told a media briefing.

In March, the bank had lowered the key rate and downgraded its growth forecast for Asia's fourth-largest economy.

Exports hit tangibly

The bank said that while consumption had been on track to recover, it had showed signs of contraction since the MERS outbreak. Exports are continuing to decline since the first case of MERS in South Korea was reported last month.

South Korean businesses including shopping centers, restaurants and cinemas have reported a sharp drop in sales as people shun public venues with large crowds.

More than 54,000 foreign travelers have also canceled planned trips to the country so far this month, according to the KoreaTourism Board.

So far,

122 people have been diagnosed with MERS

(Middle East Respiratory Syndrome), and nine people have died. The outbreak is the largest outside Saudi Arabia and started when a 68-year-old South Korean businessman brought the disease back from a trip to the Middle East.

ng/hg (AP, Reuters, AFP)

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