The recovery pace of the local service industry remains slack though the fallout of the Middle East Respiratory Syndrome outbreak has waned, with the economy facing external risks such as a possible U.S. rate hike, the finance ministry said Tuesday.
  

The viral disease, first confirmed on May 20, has claimed 36 lives and infected 186 people, although no new cases have been reported since July 4.
  

In its latest economic report called the Green Book, the ministry said the MERS outbreak is offsetting gains in industrial output and investment and even hurting employment in the service sector.
  

"The economy is growing, but the pace is weak as private spending and some service sectors are feeling the pinch of the MERS scare," it said.
  

Industrial output in the mining, manufacturing, gas and electricity industries gained 2.3 on-month in June, with facility investments also jumping 3.8 percent compared with the month before. On the other hand, service sector output and retail sales contracted 1.7 percent and 3.7 percent, respectively, in June vis-a-vis the previous month.

Tourism, which had been growing in recent years, took a beating from the MERS outbreak that made foreign tourists shun South Korea.
  

On exports, a key growth engine for Asia's fourth-largest economy, the ministry said numbers for ships, steel products and semiconductors rose in June, but overseas demand for refined petroleum goods, automobiles and wireless equipment fell, causing outbound shipments to decline 3.3 percent on-year.
  

Because imports contracted more than exports, the country's trade surplus stood at $7.76 billion, the ministry said.
  

The ministry said the local stock market backtracked on uncertainties surrounding China in July. A weak stock market can affect consumer sentiment and hold up growth.
  

On future prospects, the ministry said, the ill effects of MERS are subsiding, although the service sector as a whole has been slow to recover.
  

"The possibility of the United States raising its key rate and continuing worries surrounding China's economy is exerting downward risks that may influence future growth," it said. (Yonhap)