The South Korean economy is expected to expand 2.8 percent in 2016 from this year, fueled by the gradual recovery in both domestic demand and exports, a leading private economic think tank said Sunday.

In its 2016 economic outlook, the Hyundai Research Institute predicted Asia's fourth-largest economy to grow 2.7 percent in the first half of next year and 2.8 percent in the second half.

HRI's full-year projection is 0.3 percentage point higher than its growth estimate of 2.5 percent for this year.

But it is lower than the South Korean government's 2016 growth forecast of 3.3 percent and the International Monetary Fund's 3.2 percent.

The think tank predicted the world economy to expand around 3 percent in 2016 from this year, backed by the gradual recovery of the United States, Japan, the eurozone and other advanced economies.

According to the HRI, South Korea's private consumption is expected to climb 2.1 percent next year from 2015, and construction investment is estimated to rise 3.4 percent.

Exports are projected to increase 3.9 percent on-year in 2016, with imports likely to gain 3.4 percent.

South Korea's current account surplus will likely reach US$110 billion next year, with consumer prices predicted to move up 1.2 percent on-year.

The think tank cautioned that the South Korean economy could face such downside risks as a Chinese slowdown, a U.S. rate increase and possible foreign currency crises in commodity-exporting emerging economies.

In order to brace for a prolonged low-growth period of the world economy, the Seoul government should continue structural reforms of the Korean economy to foster its growth potential, the HRI said. (Yonhap)