"A weak growth in wages drives down workers' disposable income, which in turn weighs on consumer spending and the central bank's monetary tightening policy," the report said.

In other trends, the HRI called on the Seoul government to maximize its own interests through practical diplomacy with major powers including the United States, China and Russia.

As the US Federal Reserve is widely expected to raise rates at least three times next year, Korean financial authorities need to fully prepare for any volatility in the financial markets, the report said.

The HRI said multinational companies may move their production facilities from emerging countries back home as advanced countries cut corporate taxes and offer more benefits. (Yonhap)