The Korea Development Institute's latest outlook is well below the government's revised growth forecast in June of 3.3 percent, and over a percentage point below a May prediction of 3.6 percent.

The country's exports dropped sharply for a second straight month in August, suggesting the export-reliant economy is struggling with shrinking demand overseas.

It said Asia's fourth-largest economy is expected to expand 3.4 percent next year, gradually recovering from the slowdown caused by slow exports and sluggish domestic demand.