A state-run think tank has raised its 2016 growth outlook for the South Korean economy by zero-point-two percentage points to one-point-eight percent.

In its economic forecast for the second half of the year released on Tuesday, the Korea Development Institute(KDI) said the economy is likely to grow 1.8 percent next year due to a recovery in domestic demand.

The revised outlook matches that of the International Monetary Fund but is lower than the Organization for Economic Cooperation and Development's forecast of two-point-two percent.

The KDI based the projection on the premise of a gradual slowdown in global growth next year while domestic demand recovers due to falling market interest rates and expansionary fiscal policy.

The institute now expects the economy to grow zero-point-nine percent this year, up from the prediction of zero-point-eight percent it made in August, citing a stronger-than-expected semiconductor cycle that it expects to continue next year.