A state-run research institute has lowered its growth forecast for the domestic economy, while significantly raising its inflation forecast.

The Korea Development Institute(KDI) on Wednesday projected the domestic economy to expand two-point-eight percent this year, revised down from a previous prediction of three percent.

Assessing that a mild recovery momentum will continue despite the effects of the pandemic and supply chain disruptions, the KDI made the adjustment to reflect a lower-than-expected private spending in the first quarter and rising raw material costs.

The KDI also gave a lower growth outlook for 2023 at two-point-three percent, projecting that the expansion of exports will slow down and uncertainties over the supply of raw materials will continue.

The think tank raised its inflation outlook for this year sharply from one-point-seven percent last November to four-point-two percent.

This comes after energy and food prices remain high amid the ongoing Russia-Ukraine war. The KDI predicted inflation will fall to two-point-two percent next year with global oil prices expected to stabilize.