By Yoon Ja-young
The country’s industrial output fell for three consecutive months up to May, hindered by sluggish exports. The government said that the indices may worsen in June due to the impact of the Middle East Respiratory Syndrome (MERS).
According to data released by Statistics Korea, Tuesday, industrial output dipped by 0.6 percent in May from the previous month.
By sector, production in mining, manufacturing, gas and electricity industries was down 1.3 percent. The decrease in automobile and semiconductor production, the sectors hit hardest by the slowdown in exports, was a root cause of the overall decline.
Korea saw a drop in semiconductor exports of 7.9 percent, automobile exports 3.5 percent and chemical product exports 4.3 percent.
“The automobile and semiconductor exports were sluggish in May. That has negatively affected the manufacturing indices,” said Jeon Baek-geun, an official in charge of industrial statistics at Statistics Korea.
Though MERS doesn’t seem to have affected consumption in May, the Ministry of Strategy and Finance said its impact will be felt in June.
“The indices could continue to remain weak or even worsen in June, with risk factors such as MERS and the fallout from the Greek crisis playing a part,” the ministry said. “The government should strengthen measures to prop up the economy, including quick execution of fiscal stimulus and an end to MERS, so that the economy can get back on track as soon as possible,” it added.
According to the central bank data released on Tuesday, the business sentiment index (BSI) of manufacturing firms stood at 66 in June, down 7 points from the previous month. It is the lowest figure since March 2009 and is also lower than the figures in May and June last year when the economy was hit by the sinking of the ferry Sewol which claimed 304 lives.
The Korea Institute for Industrial Economics and Trade said industrial output could decrease by between 4.5 trillion and 8.1 trillion won if the impact of MERS continues for three months.
“The weakening of consumer sentiment, triggered by uncertainties over the disease, is slowing down economic activities especially in the services sector, aggravating sluggish domestic consumption,” said Park Moon-soo, a director of the service industry research division at the institute.
He said the government should go on with diverse deregulation and develop diverse tourism packages for foreign tourists.