The Bank of Korea predicted 2.8 percent growth in its latest quarterly revision released last month, while the International Monetary Fund forecast a 2.7 percent expansion for Asia's fourth-largest economy.

The KDI cited the country's sagging exports as a major obstacle limiting the growth of the overall economy.

"In 2016, our economy will witness sluggish exports and facility investment due to a global slowdown, but its annual growth will come in the mid 2 percent range, similar to that of last year, as construction investment is expected to increase in the second half of the year on strong sales of new homes," the think tank said in a press release.

Korea's exports have dropped every single month since the start of last year, plunging 11.2 percent on-year in April alone.

"Exports are forecast to continue experiencing a slump due to sluggish global demand, while imports too are expected to show slow growth amid sluggish economic conditions," the KDI said.

The think tank warned that the country's economic conditions may further deteriorate following the start of government-led corporate restructuring.

"Domestically, a delay in the overhaul of insolvent firms may expand uncertainties, while effects from a massive layoff of workers in the process of restructuring may take a toll on the rest of the economy, slowing the overall growth of our economy," it noted.

The KDI said growing uncertainties will likely lead to worsened consumer sentiment, keeping the rise of consumer price inflation at bay.

"Externally, a continued decline in the growth of the global economy, a sudden or unexpected restructuring in China or a sudden collapse of the economy in newly emerging markets due to a U.S. rate hike may further limit our economy's growth," it added.

Meanwhile, the KDI forecast the Korean economy to growth 2.7 percent in 2017. (Yonhap)