South Korea's economic recovery momentum is slowing down as the service sector has remained sluggish amid a resurgence in new coronavirus cases, a state-run think tank said Sunday.

The country's manufacturing sector sustained a recovery due mainly to robust exports, but the service industry is suffering sluggishness due to a flare-up in COVID-19, according to a monthly economic assessment report by the Korea Development Institute (KDI).

"Despite the recovery in the manufacturing industry, the Korean economy remains subdued led by the service industry due to the rapid domestic resurgence of COVID-19," the English-language report showed.

The country's industrial output and facility investment rose in November from a month earlier as production of chips and display panels increased, propelling exports, according to the statistics agency.

South Korea's exports rose 12.6 percent on-year in December on the back of strong shipments of chips.

But the country's retail sales declined in November from a month ago, in a sign that economic recovery still remains weak amid the pandemic.

The KDI said slumps in the service sector appear to have been worsening since mid-November due to a nationwide uptick in virus cases and tougher social distancing measures.

On Dec. 8, South Korea tightened its virus curbs to Level 2.5, the second highest, in the Seoul metropolitan area, home to half of its 51.6 million population, and to Level 2 in the rest of the country.

"In December, credit card sales are expected to drop sharply due to the ramp-up of social distancing to Level 2.5 in the capital area," the KDI noted.

South Korea's new coronavirus cases hovered above 1,000 for a considerable time in December as cluster infections popped up across the nation. The country reported 674 more COVID-19 cases on Friday, raising the total to 67,360. (Yonhap)