South Korea's exports are expected to contract some 3 percent on-year in 2015 due to slowing global trade and falling oil prices, a state-run think tank forecast Monday.

The Korea Institute for Industrial Economics and Trade also predicted that Asia's fourth-largest economy will grow 2.9 percent this year from 2014 as an export slump eases and domestic demand posts modest growth in the second quarter.

In its latest report on the economy, KIET said South Korea's outbound shipments will reach $555.1 billion this year, down 3.1 percent from a year ago, with imports likely to sink 9.7 percent on-year to $474.6 billion.

The country's trade surplus is thus expected to jump 70 percent on-year to $80.5 billion in 2015.

The overall trade volume will likely fall 6.2 percent to $1.3 trillion won, but will stay over the $1 trillion level for five years in a row, it added.

KIET also forecast that South Korea's real gross domestic product is expected to expand 2.9 percent on-year this year after growing 2.6 percent in the first half and 3.2 percent in the latter half. The economy registered a 3.3 percent annual gain for 2014.

KIET's growth outlook is lower than the central bank's 2015 forecast of 3.1 percent.

Private consumption is projected to grow around 2 percent on-year in 2015 with investment in new plants and equipment rising 5.2 percent and construction investment gaining 2.5 percent, it said.

"South Korea's exports will likely recover and domestic consumption will slightly pick up in the second half," KIET said.

"But the growth rate will slow down for all of 2015 amid sluggish exports and domestic demand."

KIET expected the world economy to grow 3.5 percent on-year in 2015, up from a 3.4 percent expansion last year, on the back of steady growth of the U.S. economy and monetary easing by Europe and Japan. (Yonhap)