— This is the script of CNBC's news report for China's CCTV on June 11, Thursday.
Welcome to CNBC Business Daily, I'm Qian Chen.
South Korea's central bank has cut its policy rate by 25 basis points to a record-low 1.5 percent to offset any potentially harmful economic effects from an outbreak of the Middle East Respiratory Syndrome (MERS).
[JAMES P. ROONEY, Advanced Capital Partners Chairman] "06:50:54 On the service side of the economy, Korea has just successfully become a major tourist destination for Asia, and that's very helpful to its economy. But this clearly gives a setback to that, because people far away from Korea are natually going to be very nervous about travelling here. 06:51:14"
[MICHAEL NA, Nomura Korea Strategist] "09:47:21 Mers is definately weighing down the domestic consumption, which means we could expect another rate cut after this. 09:47:29"
Analysts told CNBC that the MERS outbreak could stop Korea's economic improvement in its tracks in the short term.
According to Michael Na, strategist from Nomura, tourism for the second half of this year would fall by 30-40%, which could cut annual GDP by 40-50 basis points.
Morgan Stanley expects Korea's retail sales to drop 10% and restaurant sales decline 15% in the current month.
On the market front, South Korea's Kospi index has been declining since the end of last month, but held on to modest gains today, following the central bank's monetary policy decision.
Analysts noted that the downturn in tourism to South Korea and the fact that the outbreak had come at a time when exports were struggling.
[JAMES P. ROONEY, Advanced Capital Partners Chairman] "06:52:34 The problem of course is that interest rate cuts don't do a whole lot to solve tourism problems or social health problems. And I suppose the good news for Korea at the moment is that at least the Korean won has moved from a position of a relative strength to a position of relative weakness for the last few weeks, giving a little relief to the exporters. 06:52:55"
And if the outbreak gets out of control, which is the worst case scenario, the Korean economy would tumble into recession.
CNBC's Qian Chen, reporting from Singapore.