South Korea's economy is expected to grow 3.4 percent on-year in 2014 following a recovery in the global economy, a local think tank said Wednesday, noting policy uncertainties still remain a challenge.

The prediction made by the Korea Economic Research Institute (KERI), a research arm of the Federation of Korean Industries, is faster than the 2.6-percent expansion estimated for 2013.

This year's growth outlook edged up 0.2 percentage point from KERI's earlier estimate of a 2.4 percent gain made in October, while the 2014 outlook remained the same.

KERI attributed the brighter outlook to a possible economic recovery in advanced countries sparked by a tapering of U.S. quantitative easing. It said the global economy is anticipated to expand 3.6 percent on-year in 2014, compared to a 2.9 percent growth estimated for 2013.

The institute said South Korea's consumer inflation is expected to stand at 2.2 percent next year, with the growth being limited by the stronger Korean won against the U.S. dollar and stabilized prices of raw materials.

South Korea's current account next year is estimated at US$63.3 billion, edging down from this year's $69.1 billion, due mainly to possible losses in the service sector amid the weak Japanese yen against the won.

KERI recommended that the Seoul government make efforts to minimize the negative impact of its latest labor policies, such as the extension of retirement and reform in the wage systems.

The remark also came as the nation's top court recently ruled that regular bonuses should count as part of ordinary wages that serve as the basis for other allowances. Business groups raised concerns that a groundbreaking ruling could impose a greater financial burden on local enterprises. (Yonhap News)