South Korea's central bank forecast the economy to contract by one-point-three percent this year as the country is gripped with a new wave of the COVID-19 epidemic.

In its latest report on Thursday, the Bank of Korea(BOK) revised down its growth estimate from minus point-two percent as projected in May to minus one-point-three percent.

The South Korean economy has seen negative growth only twice in the past - minus one-point-six percent in 1980 and minus five-point-one percent during the Asian financial crisis in 1998.

Assessing that the economy has continued in a slump amid weakened private spending, investment and employment, the central bank said recovery is likely to be slow, due largely to the new spread of the COVID-19 epidemic.

The BOK predicted the economy to expand by two-point-eight percent next year, point-three percent lower than its previous projection of three-point-one percent.

The bank said it will maintain its accommodative monetary policy stance as growth is expected to be sluggish and inflationary pressure will likely remain weak.