The Bank of Korea (BOK), the central said, said Thursday that it expects South Korea's economy to continue facing a "mild" slump in the near future.
BOK said despite solid exports growth in the emerging markets, weak domestic consumption and corporate investment put a downward pressure on growth.
"Exports are posting solid growth, but private spending and corporate investment remained in a slump," the central bank said.
"Employment is weak due to slumping domestic consumption," it added.
According to the BOK, the South Korean economy is showing signs of slipping into stagflation.
The country's economy grew 4.8 percent in the second quarter from a year earlier, the weakest pace in more than a year.
Meanwhile, consumer price gained 5.7 percent in August breaching BOK's target range of 2.5-3.5 percent for the ninth consecutive month.