Despite seeing a mild recovery, South Korea's economy is bracing for downside risks.
The Korea Development Institute says the country's economy has been improving moderately, mostly led by increased manufacturing in the semiconductor and automobile industries.
However, the institute says the economy is bound to face a downturn, due to inflation and worsening external conditions.
Consumer sentiment dropped significantly last month as consumer prices jumped a record 6.3 percent in July.
Slowing economic growth in the United States and China, and fears over a potential global recession caused by rate hikes also add to the likelihood of an economic downturn.