Major foreign investment banks (IBs) and economic institutes have forecast South Korea's economy to shrink in 2020 due to the fallout of the fast-spreading novel coronavirus, a report showed on Tuesday.

According to the report by the Korea Center for International Finance, nine foreign IBs and economic think tanks predicted that South Korea's economy may contract 0.4 percent this year, up from a contraction of 0.9 percent that they predicted in late April.

Nomura raised its forecast to a contraction of 0.5 percent for the Korean economy, compared with its earlier estimate of 5.9 percent contraction.

On the contrary, Bank of America-Merrill Lynch cut its forecast to a contraction of 0.2 percent for the Korean economy, compared with its earlier estimate of 0.2 percent expansion, the report showed.

With exports and domestic demand in the doldrums, some foreign institutions have warned Korea's economic growth may fall to negative terrain in the first half of this year.

Exports dropped for the third consecutive month in May due to the growing economic fallout from the pandemic. Outbound shipments dove 23.7 percent to $34.8 billion last month, compared with $45.7 billion posted a year earlier.

The Organization for Economic Cooperation and Development (OECD) has predicted that Korea's economy could shrink 1.2 percent this year as the global economy is expected to have its worst year since the Great Depression of the 1930s due to the pandemic.

The world economy is expected to contract 6 percent this year, the OECD said. (Yonhap)