The state-funded Korea Development Institute (KDI) assessed that the domestic economy faces expanded downside risks although the modest recovery continued.

The KDI gave the assessment in its August economic report released on Sunday.

KDI said the economy is on a moderate recovery track with the slowdown in the manufacturing sector eased but is facing heightened downside risks due to soaring prices and worsening external conditions.

The KDI issued a similar assessment of the current economic condition in last month's report but presented darker prospects for the future outlook in the latest report.

Consumer prices jumped six-point-three percent in July, the largest growth since November 1998. With soaring inflation, the Composite Consumer Sentiment Index plunged from 96-point-four in June to 86 in July.