A think tank under a major business lobby forecast the domestic economy to expand two percent this year, close to the level seen before the COVID-19 pandemic.

In a report on Friday, the Korea Economic Research Institute(KERI) under the Federation of Korean Industries(FKI) said the growth rate is expected to recover this year in line with export expansion due to a boost in the global economy.

The institute said domestic demand will likely recover during the second half of the year, when interest rate cuts are expected to begin.

It then called for smooth management of the debt risk among the people that will likely determine this year's growth trends, adding downturn of the real economy and weakened policy support capacity could adversely impact recovery.

The report said the two-percent growth may not be possible if China's economic downturn extends by a longer term.