The South Korean economy is showing a slow and fragile recovery as faltering exports and rising global uncertainties weigh heavily on Asia's fourth-largest economy, despite a modest gain in domestic consumption, a state-run think tank said Thursday.

"Korea's domestic demand has improved gradually, but sluggish exports and mounting external uncertainties are encumbering the economic recovery," the Korea Development Institute said in its monthly evaluation of the country's economic conditions.

"Exports have deteriorated, resulting in decreases in most industrial production and the manufacturing capacity utilization rate, implying that the recovery momentum has gained only in a limited range."

South Korea posted an on-year drop in outbound shipments every single month last year, with its annual figure plunging 7.9 percent on-year to reach $527 billion amid low oil prices and slow global growth.

Against the backdrop, industrial output dropped 0.3 percent in November due to a sharp fall in production of key exporters like automakers and information technology firms, while the manufacturing capacity utilization rate fell to 72.7 percent, marking the lowest level since the 2008 global financial crisis.

Some indicators, however, have recently shown mild improvements in domestic consumption on the back of the government-led sales boosting programs, including a special consumption tax reduction, noted the KDI.

"Domestic demand has improved as private consumption rose relatively sharply following the previous month's trend and the services industry moved upward," it said.

The retail sales index grew 5.5 percent on-year in November, slightly down from a 8.4 percent on-year jump in the previous month. Output in the service sector climbed a solid 3.1 percent in the same month.

"As 2016 starts with escalating external uncertainties, such as concerns over the Chinese economy, Korea's exports are expected to remain stagnant, possibly posing a hindrance to improvements in industrial production," the KDI said. (Yonhap)