South Korea's economy is expected to deteriorate further in the second half of the year due to the prolonged coronavirus pandemic, a leading private think tank said Thursday.

Asia's fourth-largest economy is likely to contract 3.8 percent on-year in the July-December period, worse than a 2.9 percent contraction projected in the second quarter, according to the Korea Economic Research Institute (KERI).

After posting a negative growth rate of 0.7 percent in the first half, the economy is projected to shrink 2.3 percent for all of 2020, unchanged from its earlier forecasts made in the first and second quarters.

KERI attributed its gloomier growth outlook to slumping domestic demand and exports in the wake of the coronavirus outbreak that began in China in December last year.

South Korea's private consumption, which accounts for the bulk of domestic demand, is predicted to decline 4.1 percent from a year ago for all of 2020 due to a resurgence of COVID-19, a slowdown in wage growth and tougher social distancing measures.

Facility investments will likely expand only 1.5 percent on-year because of sluggish domestic demand and worsening economic conditions in major export destinations.

South Korea's exports are forecast to shrink 6.9 percent on-year in 2020 in the wake of unrelenting coronavirus outbreaks in major economies and escalating trade tensions between the United States and China.

KERI also expected the country's current account surplus to reach $51 billion this year, down $9 billion from the previous year.

South Korea's consumer prices will likely increase 0.4 percent on-year in 2020, unchanged from the previous year's gain, according to the think tank. (Yonhap)