The Democratic People’s Republic of Korea (DPRK) remains one of the world’s most centrally directed and regressive countries in the world. The country is notorious for its strict policies and it is difficult to get information about what is going on within its geographic boundaries. The country is run by third-generation authoritarian ruler Kim Jong Un, whose government received criticism for its strict policies during the wake of the COVID-19 pandemic with deepened isolation.
The government of North Korea imposes strict rules for its citizens to abide by. The government does not accept pluralism and bans any form of civil organizations, trade unions, and independent media. According to Human Rights Watch, the government systematically denies all basic liberties, including conducting peaceful assemblies, freedom of Expression, and freedom of religion and belief. So how exactly does a country with rigid rules and regulations, a country that isolates itself from the world so much, sustain its economy?
North Korean Economy
If we could explain the present status of the economy of North Korea in a few words, it would be ‘Not good’. The country’s economy is one of the world’s least open and faces persistent economic problems. In 2022, the country’s economy shrank for the third consecutive year as the Covid restrictions and U.N sanctions imposed continued to pull down the economic activity. However, foreign trade posted a record rebound after being low for most of the time during the pandemic.
The Gross Domestic Product (GDP) declined by 0.2% in 2022, according to the Bank of Korea. This is followed by a 0.1% decline in 2021 and a 4.5% fall in 2020. This is recorded as its worst contraction since 1997. The Bank of Korea’s estimates are considered to be among the most authenticate indicators of the economic status of North Korea. The recent data by BOK also showed that industrial output plunged by 1.3% while the income from agriculture, fishery, and forestry dropped 2.1%. The service sector on the other hand increased 1.0%, marking the biggest rise in eight years.
The trade volume had bounced back by a record margin of 122.3% reaching $1.59 billion. By August 2021, North Korea had officially declared an end to the COVID-19 spread in their nation after closing its doors to the rest of the countries. The nominal national income in 2022 of North Korea was estimated to be $1,116 per capita. The Bank of Korea has been publishing the economy of North Korea since 1991.
Income sources.
The main industries in North Korea are machine building, military products, metallurgy, food processing, and tourism. The main exports include minerals, textile products, metallurgical products, and agricultural and fishery products. The imports include machinery, petroleum, textiles, and grain. Various data shows that the industry accounts for almost half of GDP, closely followed by agriculture and services. Reports of new types of sugar in the local markets, more cargo ships sailing off, and trains now crossing borders all point to ways North Korea’s opaque economy is trying to get more income.
Russia started sending oil to North Korea for the first time since 2020, according to the reports of the United Nations. This was followed by a restart of grain shipments. However, this is not sufficient to restore a frayed economy and bring it back powerfully. But this will be enough to keep the economy stable.
Who are North Korea’s Trading Partners?
According to the UN Comtrade Database, goods worth $1 billion had been traded in and out of North Korea in 2022. Reuters report also suggests that imports from China to North Korea increased in April after also increasing in 2022 due to the lifting of a trade freeze caused by Covid. During the whole year, China was responsible for nearly 99% of the goods sent to North Korea. This was worth around $894 million. The imports again rose in April by $166 million compared to the same month in 2022.
China is undoubtedly dominating the imports to North Korea, but the exports are mixed. China has nearly 70% share of almost all North Korean exports for the country, making it the biggest player. Some European countries are also interested in North Korean products.
Poland imported plastic, iron, and steel products and pharmaceutical products among other items worth $ 10 million in 2022. Netherland’s imports were worth $8 million in total, and it consisted mainly of nickel and nickel products with some amounts of airplane parts.
Living Standards
North Korea’s population is around 25 million, living under the authoritarian regime of Kim Jong Un. Citizens mostly struggle to make ends meet and many suffer from malnutrition and poor living conditions. Due to the government restrictions on water, and electricity and strict policies on cross-country migrations, many have no clue about the happenings of the outside world. But they participate in the workforce. Reports of forced labour also have created controversies.
Why is the economy going down?
In 2022, the economy shrank for the third time due to Covid 19 restrictions. When we look at history, the official economy was based on heavy industry on North Korea’s east coast. At least until the 1970s, North Korea was one of the two main industrial nations in Asia. The other powerful nation was Japan. North Korea had also received benefits from the Soviet-led Council for Mutual Economic Assistance even though it was not a member.
The collapse of the Soviet Union and a sequence of climate disasters saw the downfall of the industrial sector during the 1980s. This again intensified during the next decades, leaving the economy in a pretty rough state. Along with all this, the country also suffered from oil shortages. The oil they used to receive from the Soviet Union is no longer available. With the overdependence on fertilizers, the agriculture sector suffered a great loss. It is however difficult to get information on North Korea’s economy. But along with natural disasters, strict rules, and regulations under an absolute ruler with a limited open economy hinder its future growth prospects.
