SEOUL, Nov. 25 (Yonhap) — The South Korean economy is expected to expand 3.3 percent on-year in 2021 on the back of a recovery in consumption and exports, a local think tank said Wednesday.

The Korea Capital Market Institute (KCMI) also predicted Asia’s fourth-largest economy will shrink 1 percent this year from last year amid the fallout from the coronavirus pandemic.

KCMI said next year’s economic growth will be bolstered by a rebound in domestic demand and overseas shipments.

South Korea’s consumer prices are forecast to increase 1.1 percent in 2021 from this year due to stable international oil prices and weak demand.

The think tank projected South Korea’s stock market to remain bullish in the coming year, driven by the local economy’s recovery, with the benchmark Korea Composite Stock Price Index (KOSPI) likely to reach up to 2,900 at the end of next year.

Powered by strong foreign buying, the local stock market has recently been on a roll. The KOSPI finished at an all-time high of 2,617.76 on Tuesday on hopes of an economic recovery and new coronavirus vaccine development.

KCMI predicted the South Korean currency to change hands at a range of 1,050-1,130 won against the U.S. dollar next year.

In a separate report, the Korea Institute for Industrial Economics & Trade (KIET) forecast South Korea’s gross domestic product to expand 3.2 percent on-year in 2021, driven by a gradual improvement in domestic demand and exports.

The local economy is likely to contract 0.9 percent on-year in 2020 due to the pandemic impact, compared with 0.1 percent expansion estimated in June.

The state think tank said South Korea’s exports and imports will climb 11.2 percent and 9.6 percent on-year, respectively, in the new year, with its trade surplus reaching $52.1 billion.

Domestic demand is projected to increase 3 percent on-year in 2021, but high household debt and a slowdown in wage growth could weigh on the South Korean economy, KIET said.