A major South Korean think tank on Wednesday projected Asia's fourth-largest economy to grow 2.8 percent this year, down from its earlier forecast of 3.7 percent, citing the stuttering economy from a slump in exports and the unexpected outbreak of Middle East Respiratory Syndrome.

Exports, the country's key growth engine, were forecast to grow 2.3 percent, slowing from a 2.8 percent increase in 2014, as unfavorable currency circumstances and weakening growth in China offset economic recovery in advanced economies, according to the Korea Institute of Finance.

The think tank forecast facility investment growth to slow to 4.4 percent from last year's 5.8 percent gain as companies scale back capital spending amid sluggish exports and weak investment sentiment.

KIF projected private spending to slightly pick up to 2 percent, from 1.8 percent last year, on the back of recovering consumer sentiment thanks to a boost from gains in the local stock and property markets.

The think tank, however, pointed out that growth will be strained by structural factors, as households cut back spending due to the growing household debt and uncertainties over life after retirement.

It also added that the MERS outbreak is likely to shave off gross domestic product growth by 0.1 percentage point based on a fall in spending in the service sector and retail sectors.

The revision is the latest in a series of economic forecast downgrades by institutions both home and abroad. The Korea Development Institute cut its forecast to 3 percent from 3.5 percent and the International Monetary Fund lowered its forecast to 3.3 percent from 3.7 percent.

The finance ministry and the central bank, which are both slated to release their revised economic forecast in coming weeks, are also expected to lower their previous forecasts after factoring in the MERS outbreak.

South Korea reported 162 infections and 20 MERS-related deaths as of Wednesday morning with an additional 6,500 in isolation for possible infection of the potentially fatal disease. (Yonhap)