By Jack Kim and Christine Kim
SEOUL (Reuters) - An outbreak of Middle East Respiratory Syndrome (MERS) threatens to deal a blow to South Korea's economic recovery, Moody's Investors Service said on Thursday, as the Health Ministry reported three new cases, the lowest daily increase in 17 days.
The World Health Organization (WHO) said the outbreak was a "wake-up call" but does not constitute a global emergency. The WHO also described South Korean authorities' efforts to contain the spread "very impressive".
There have been signs that the outbreak, the largest outside of Saudi Arabia may be slowing. The daily number of new cases has dropped to single digits this week compared to as many as 23 last week. Three were reported on Thursday - the lowest increase since June 1.
"The spread of the illness is credit negative for the sovereign, because it is dampening consumer confidence amid already-weak domestic demand, threatening to undermine an incipient recovery in economic growth," Moody's said.
The outbreak has kept consumers from visiting malls and parks, spelling a drop in consumer spending. Worried by the economic impact, President Park Geun-hye and other leaders have urged the public and the business community to return to normal.
The finance minister has said it was considering a possible supplementary budget to bolster the economy, which is Asia's fourth-largest.
The blow from the MERS outbreak is unlikely to be serious enough to prompt a sovereign ratings downgrade, said Park Sang-hyun, a senior economist at HI Investment & Securities. South Korean debt is currently rated at Aa3 positive by Moody's, well within investment grade territory.
"A ratings change will not have a big impact on the markets, even if it does happen."
A total of 165 people have been infected and 23 have died in the outbreak that has been traced to a 68-year-old man who returned from a trip to the Middle East in early May.
The WHO said it expected new cases in coming weeks.
More than 6,700 people are in quarantine, either at home or in health facilities.
All of the infections known to have occurred in South Korea have taken place in healthcare facilities. Three hospitals have been at least partially shut and two have been locked down with patients and medical staff inside.
MERS is caused by a coronavirus from the same family as the one that triggered China's deadly 2003 outbreak of Severe Acute Respiratory Syndrome (SARS).
The vast majority of MERS infections and deaths have been in Saudi Arabia, where more than 1,000 people have been infected since 2012, and about 454 have died.
(Additional reporting by Seungyun Oh and Yeawon Choi; Editing by Simon Cameron-Moore)
