South Korea's state-run think tank Sunday cut the nation's growth forecast for this year to 3.6 percent from 3.8 percent estimated in November, citing weakening demand amid a global slowdown.
The Korea Development Institute, in its twice-yearly economic forecast report, said however the global economy would likely pick up pace in 2013 to help Asia's fourth-largest economy to expand 4.1 percent that year.
"The local economy has been slowing from the second half of last year as domestic and overseas demand wanes in the wake of uncertain global economic outlook," the KDI said in the report.
South Korea's export-driven economy has recently been hit by sluggish demand from debt-hit Europe and its biggest trading partner China. Exports unexpectedly shrank year-on-year for two straight months in March and April.
The Bank of Korea in April also slashed the nation's growth outlook for this year to 3.5 percent from 3.7 percent estimated in December.
South Korea's gross domestic product grew 3.6 percent in 2011.
The KDI however said the global economy would gradually revive next year to fuel the country's overseas shipments and demand at home.
"Negative factors stemming from the global slowdown may linger for a while, but there's little need for now to shift our macroeconomic policies," it said, urging the central bank to leave a key interest rate unchanged for a while.
Consumer prices would rise 2.6 percent throughout 2012 compared to 4 percent last year due to slower growth and the government's financial support for costly childcare services, the KDI said.
The current account surplus is likely to dwindle to $18.3 billion this year and $12.2 billion in 2013 compared to $26.5 billion in 2011 due to gains in the value of the won, it added.
The account is the broadest measure of trade with the world.
-- Dow Jones Newswires contributed to this report --