South Korea's economy is expected to grow 2.8 percent this year due to a weakening in business investment, a non-governmental think tank said Sunday.

The Korea Economic Research Institute said it is lowering growth numbers for 2017 from the previous 2.9 percent, with its growth forecast for next year standing at 2.7 percent.

The institute under the Federation of Korean Industries, the lobbying group for large businesses, said that while facility investment surged 15.9 percent in the first half, this may fall to 8.7 percent in the period July through December. It said the drop can be attributed to gains in the interest rate and concerns over reduced tax deductions for various investments.

It said facility investment may edge up just 2.4 percent in 2018.

In regards to consumption, KERI said recovery in consumer sentiment and more welfare outlays by the state could lead to 2.2 percent growth in this crucial sector for this year and 2018. Exports for both products and services could move up 2.9 percent in the new year thanks to a general rise in global demand for key products made by South Korean companies. The corresponding numbers for this year are likely to amount to 2.3 percent growth.

The think tank, however, said that uncertainties surrounding the bilateral free trade pact between South Korea and the United States, the North Korean risk and terse relations between Seoul and Beijing over the deployment of US anti-missile defense systems could affect outbound shipments for Asia's fourth largest economy.

KERI added that next year's consumer prices may advance 1.8 percent compared to the 2 percent being predicted for 2017, with the current account surplus to dip to $83.3 billion from the $84.3 billion forecast for this year. (Yonhap)