South Korea's central bank is expected to lower its benchmark interest rate to a fresh record low in June on concerns over sluggish exports and the country's first-ever spread of the Middle East Respiratory Syndrome, but analysts were split on the outlook as heavy household debt lingers as a bugbear for Asia's fourth-largest economy, a poll showed Monday.
  

Nine out of 17 analysts and economists surveyed by Yonhap Infomax, the financial news arm of Yonhap News Agency, forecast the Bank of Korea will slash the base rate to 1.5 percent at its policy meeting on Thursday.
  

If the BOK implements the rate cut as forecast, it will mark the second rate cut this year following a surprise rate cut in March. It will also mark a cumulative rate cut of 1 percentage point since August last year.
  

The respondents who projected a rate cut said that while household debt concerns persist, the unprecedented spread of the respiratory disease may provide the BOK an opportunity to take action amid criticism that an additional rate hike will further stoke household debt.
  

South Korea has reported its sixth death from MERS on Monday, along with 23 new cases that brought the total number of people diagnosed with the disease here to 87.
  

"Consumption has been faring relatively well compared with sluggish exports and investments. But with the spread of MERS, consumption is likely to sour. MERS may provide an excuse for 'a pre-emptive rate cut,'" said Kim Sang-hoon, an analyst at KB Investment & Securities Co.
  

South Korea has seen its exports, the key engine of its growth, drastically sour over the past few months amid unfavorable currency conditions. Outbound shipments dropped 10.9 percent on-year in May, falling the most in nearly six years, according to trade ministry data released earlier this month.
  

Some analysts touched on the need to again join a global easing move to prevent sluggish exports from falling into a prolonged slump.
  

"The need to cut the rate is higher than ever as major economies are sustaining their easing mode. Also, even considering the BOK's 'data'-dependent' stance, economic indicators on consumption, investment and exports point to higher chances of a rate cut," said Kyobo Securities Co. analyst Kwon Han-wook.
  

Nearly half of the polled analysts, however, projected the BOK to extend its wait-and-see stance to another month to further gauge economic indicators as well as the impact of MERS.
  

"Since it is still uncertain how MERS will affect the economy, members may choose to wait another month to look for signs of deterioration before acting. Other immediate measures to contain the spread of disease are more pertinent at this time," said Barclays economist Leong Wai Ho.
  

Shin Dong-soo of Eugene Investment & Securities Co. echoed the view.
  

"While a feeble economic recovery and the MERS shock has heightened the case for a rate cut, the BOK is likely to take time to check additional economic indicators as it views the current growth path is within its forecast," he said, adding that the central bank may take action next month after reviewing further data.
  

The growing number of indebted households is another factor that may prompt the BOK to hold the base rate steady.
  

"Household debt is still an area of concern and possibilities of a recovery in consumer price and overall economy still remains intact," said Kiwoom Securities Co. analyst Ma Ju-ok, forecasting the BOK to hold the rate until the end of the year.
  

Household debt reached 1,040.4 trillion won ($927.5 billion) as of the end of March, rising 12.8 trillion won from the end of last year. A semi-annual survey of market watchers by the BOK showed that the household debt issue topped the list of key systemic risks. (Yonhap)