The projection came as President Moon Jae-in said he has proposed delaying the allies' joint annual military exercises, which the North denounces as a war rehearsal, in a bid to reduce tensions during the PyeongChang Winter Olympics.

The allies usually kick off the Key Resolve and Foal Eagle exercises in late February or early March. But they will likely coincide with the Winter Games to be held from Feb. 9-25 in PyeongChang, 80 kilometers south of the tense inter-Korean border. The Paralympics are slated for March 9-19 in the same location.

"North Korea may accept Seoul's proposed military talks to prevent accidental military clashes on the occasion of the Olympics," the KINU said.

It said that North Korea's latest replacement of the chief of the state sports committee is seen as a signal for possible participation by the North in the Olympics.

Choe Hwi has recently replaced Choe Ryong-hae, the de facto No. 2 man in the North, as the chairman of the National Sports Guidance Committee.

"Choe Ryong-hae is a heavyweight in the North. But (Seoul) could seek contacts over the Olympics with Choe Hwi, without big political burdens," said Hong Min, a research fellow at the KINU.

In 2017, North Korea conducted its sixth and most powerful nuclear test, and fired intercontinental ballistic missiles three times. It claimed that it has completed its "state nuclear force" after its ICBM launch in late November.

Next year is important for North Korea as 2018 marks the 70th anniversary of the establishment of its regime.

"The economic pinch felt from sanctions and pressure will intensify in earnest next year, and the North needs some accomplishments in the economic sector," the institute said. "Pyongyang will seek a peace offensive after achieving its economic feats as early as possible." (Yonhap)