South Korea's economy is expected to contract 1 percent in 2020 from a year earlier due to the coronavirus pandemic, a private think tank said Thursday.

The latest growth projection by the LG Economic Research Institute (LGERI) is much lower than its previous estimate of 1.8 percent expansion made in September last year.

The think tank, affiliated with South Korea's fourth-largest conglomerate LG Group, predicted Asia's fourth-largest economy will recover and grow 2.5 percent on-year in 2021.

This year, South Korea is forecast to suffer from slumping private consumption and exports, the economy's twin growth engines, in the wake of the devastating outbreak of COVID-19.

Private consumption is projected to decline 2.8 percent in 2020 from a year earlier. In the first half, private consumption fell an estimated 4.4 percent and is projected to drop 1.3 percent in the second half.

"South Korea's consumer spending is expected to recover gradually in the second half of the year, but the impact of the coronavirus on low-income workers will likely crimp its recovery," LGERI said.

South Korea's exports are forecast to sink 7.7 percent on-year in 2020 after falling 11.3 percent in the first half and 4.1 percent in the second half.

"It will be difficult for South Korea's exports to swing to an upturn in the second half as global demand is likely to expand slowly," the think tank said.

Corporate capital expenditures are predicted to expand 2 percent on-year in 2020, while construction investment is tipped to increase 0.2 percent.

South Korea's consumer prices are expected to increase 0.6 percent in 2020 from a year ago and 1 percent in 2021.

LGERI predicted the world economy will shrink 4.5 percent this year due to the fallout from the pandemic before expanding 3.7 percent next year. (Yonhap)