South Korea's economy is recovering slowly on increased domestic spending, but it is facing stiff challenges from falling exports and the outbreak of Middle East Respiratory Syndrome, the finance ministry said Tuesday.
  

In its latest report on Asia's fourth-largest economy, the ministry said low fuel prices and a surge in home transactions are contributing to a rise in consumption that has been weighing down growth.
  

In May, home purchases jumped 40.5 percent from a year earlier, it said.
  

The ministry, however, said the weak Japanese yen, slowing global trade and MERS are all adding to downside risks for the economy.
  

A weak Japanese yen usually hurts the price competitiveness of South Korean exports, which dropped 10.9 percent on-year in May.
  

MERS, in particular, is worrisome because it can pour cold water on domestic spending. Since its outbreak on May 20, the respiratory disease has sickened 95 people, claiming seven lives.
  

"Economic indicators, such as industrial output, and investments in facilities and in the construction sector have all declined, posing challenges to the economy," the ministry said.
  

Weak investment is starting to hurt the local job market that only added 216,000 new positions in April, compared with 338,000 in March, it added.
  

According to the report called Green Book, retail sales for April advanced 1.6 percent on-month and 4.9 percent compared with the year before. For the first quarter, private consumption rose 1.5 percent on-year and was up 0.6 percent from the fourth quarter of 2014.
  

Department store sales rose 3.6 percent on-year in May, with discount chain sales edging up 0.3 percent.
  

Sales of domestically produced passenger vehicles, on the other hand, dipped 0.2 percent last month from May 2014, with sales of gasoline and diesel fuel, another barometer of spending, falling 2.2 percent.
  

Payments made by credit cards jumped 7.1 percent on-year last month, according to the report. (Yonhap)