The South Korean economy is expected to attain 2.6 percent growth this year, the same rate recorded in 2015, as sluggish domestic spending and shrinking exports continue to weigh on Asia's fourth-largest economy, a local think tank said Monday.

Its growth will likely slow to 2.4 percent in the second half following an estimated 3 percent growth in the first half, the Korea Institute of Finance said in a report.


"Private consumption is expected to post 1.4 percent growth in 2016, lower than 2.2 percent in the previous year, as the consumption tax cut has expired (at the end of the first quarter)," it said.

The nation's economy has also struggled to boost exports, another pillar of its growth.

Exports dipped 10.2 percent in July from a year earlier, the 19th consecutive month of decline amid the local currency's appreciation.

The KIF took note of the government's aggressive efforts to prevent a further downturn through the first quarter especially through a rate cut in June and the frontloading of massive extra budget.

Nonetheless, the effect of the measures will likely be limited as the recent economic slump is attributable to "structural factors," not just those associated with an economic cycle, said the institution.

With downside risks mounting, short-term policy responses are "considerably needed," it said.

An additional rate cut, more aggressive monetary easing and a reduction in cash reserve ratio may be needed, depending on future situations, it said.

In its previous report released in April, the KIF already forecast that South Korea's economy will grow 2.6 percent this year. (Yonhap)