The institute said it downgraded next year's GDP projection due to protracted global trade tensions, monetary tightening in major economies and uncertainties in emerging markets.

"South Korea's economy is expected to grow at a slower pace in 2019 in line with weakening exports and a fall off in investments, coupled with the tepid domestic demand," the KIET said in its 2019 economic outlook report.
The think tank said Asia's fourth-largest economy is expected to face an unfavorable business environment in the face of rising trade protectionism, slowing growth in China and rising financial volatility in emerging economies.

At home, the Bank of Korea's rate hike, the lackluster job market and sluggish investment by local companies were cited as downside risks that can hold back growth.

The institute projected the nation's exports to rise 3.7 percent on-year to US$633 billion in 2019, sharply down from this year's growth projection for 6.4 percent.

The amount of annual imports may increase 4.5 percent to $559 billion next year, the KIET said, forecasting a fall in the nation's trade surplus.

Semiconductors, communication equipment and rechargeable batteries were expected to maintain the upward trend in line with the booming high-tech sectors.

In contrast, the auto, shipbuilding and steel sectors were likely to grapple with weak demand and protectionism, it noted. (Yonhap)