The South Korean economy is expected to grow 3 percent in 2016 from this year on the back of increased corporate investment and a recovery in domestic demand, the state-run Korea Development Bank said Wednesday.

In its latest economic outlook, the policy lender said that Asia's fourth-largest economy will likely "pull off a better performance next year than this year's 2.6-percent expansion as companies are expected to invest more and consumer spending should pick up."

The forecast is rosier than most of the private think tanks whose forecasts hover below 3 percent due to a sluggish growth in exports and weak consumer spending, while the government expects the local economy to grow 3.1 percent and the Bank of Korea presented a 3.2-percent projection.

According to the KDB, outbound shipments are forecast to grow 4.7 percent in line with the modest recovery in advanced economies, and imports are to rise 6.2 percent on the back of the improvement in consumer confidence at home.

It also expected private spending to grow 2.5 percent thanks to the government's supportive measures, up from this year's 1.9-percent growth.   

Facility investment, however, would come up short of this year's growth of 5.8 percent to come to 2.8 percent next year, the KDB said, noting that the sluggish growth in shipbuilding, steel and chemical fields will offset the investment by carmakers and display manufacturers, among others.

As for financial markets, the bank projected that the stock market would come out of this year's range-bound move, while the central bank is forecast to freeze its benchmark rate to sway the bond market.

The KDB also predicted the global economy to continue its low growth trend and expand in the low 3 percent range next year under the weight of sluggish demand and overcapacity. (Yonhap)