South Korea's central bank said 30 July 2021 that North Korea's economy contracted by the biggest margin in more than two decades in 2020. It attributed the drop partly to Pyongyang's coronavirus-related restrictions. The Bank of Korea estimated the North's real GDP shrank by 4.5 percent in 2020. It was the first contraction in two years and the second-biggest drop since 1997, when North Korea suffered severe food shortages and saw its GDP reduced by 6.5 percent.
By sector, the mining industry is thought to have contracted by 9.6 percent. Agriculture, forestry and fisheries shrank by 7.6 percent and manufacturing by 3.8 percent. The central bank also said the value of the North's trade stood at 860 million dollars, down 73.4 percent from 2019. Bank officials said the drop is due to United Nations sanctions against Pyongyang, the North's border and trade restrictions related to the coronavirus, and natural disasters.
North Korea mounted a parade 10 October 2020 to mark the 75th anniversary of the founding of its ruling Workers’ Party. State news agency KCNA said the authority and security of North Korea hinged on “the huge nuclear strategic forces” shown in the parade. Kim Jong Un blamed international sanctions, typhoons, and the coronavirus for preventing him from delivering on promises of economic progress. “I am ashamed that I have never been able to repay you properly for your enormous trust,” he said. “My efforts and devotion were not sufficient to bring our people out of difficult livelihoods.”
Kim Jong-un did admit that his economic policy had been unsuccessful during a plenary meeting of the Workers’ Party Central Committee on 19 August 2020. At the meeting, North Korea admitted to the failure of the five-year economic development strategy and announced that the party would hold its eighth congress in January 2021 to establish a new economic plan. It was the first time that North Korea officially acknowledged economic failure since 1993.
North Korea’s five-year plan failed to meet economic growth goals. The North Korean economy is getting even worse lately, due to COVID-19, flood damage and typhoons. It is quite surprising that the top leader admitted to the failure of his economic policy. While he delegated some of his power to others to shift blame for the failed policy, he recognized that he should take ultimate responsibility. Many analysts saw the leader’s rare acknowledgement of the failure as a show of his confidence in the regime’s stable power structure.
Trade between North Korea and China from January to October 2020 remained only 25 percent of the amount during the same period of last year. According to South Korea’s National Intelligence Service, Kim Jong-un executed an influential currency trader in Pyongyang in late October 2020 for a sharp exchange rate fluctuation. It is also said that a North Korean official was executed in August 2020 for bringing prohibited goods in violation of tightened border regulations aimed at preventing the spread of COVID-19. According to Asia Press, which is a Japanese news outlet specializing in North Korean affairs, the North Korean currency to the U.S. dollar and the Chinese yuan exchange rates have fallen drastically as of late.
The North Korean won appreciated against the dollar radically. According to the spy agency in South Korea, a sharp decline in commodity imports from China in the wake of the COVID-19 outbreak has caused prices of sugar and other foodstuff to skyrocket in North Korea. North Korean authorities raised the value of the local currency in an effort to curb inflation. They also banned the use of foreign currencies. The move prompted complaints from dollar holders and plunged the market into turmoil. It seems the North turned growing criticism toward the currency trader and executed him to appease public displeasure.
North Korea initiated the 80-day battle at the 19th politburo meeting of the seventh Central Committee of the Workers’ Party on 05 October 2020. The purpose was to mobilize labor in a last-minute effort to fulfill the goal of the five-year economic development plan as much as possible in the remainder of the year before the eighth party congress in January. The regime is in a desperate need to do so, all the more because the leader admitted to the failure of the economic plan. North Korea seeks to use the mass mobilization campaign to allay public discontent over economic difficulties and to consolidate unity among the people.
In August 2020 Fitch Ratings lowered its 2020 growth forecast for the North Korean economy by two-and-a-half percentage points to negative 8.5 percent. In February 2020, Fitch had forecast growth of 3.7 percent, but revised that down to negative 6 percent in May due to the Covid-19 pandemic. Fitch took into consideration the continued international sanctions on the regime, growing global uncertainties and an economic slump in China, the North's largest trading partner.
North Korea's GDP in 2018 fell by over four percent compared to the previous year. The Bank of Korea said 25 July 2019 this is the biggest drop since 1997 when the regime went through a severe famine. Seoul's central bank attributed the poor growth to international sanctions and poor agricultural yields. The North's exports dropped by over 86 percent compared to 2017 and imports by over 31 percent, shrinking North Korea's overall trade volume by nearly half.
North Korea's food production fell to a 10-year low in 2018, according to the United Nations. The regime harvested 4.9-5 million tons of grain duirng th year year and by 2019 at least 43 percent of their population was in need of humanitarian aid. Despite the growing need for assistance, donations had fallen as several aid groups were forced to curtail programs on North Korea due to international sanctions on the regime. According to the UN, the food shortage was caused by a lack of farmland, inefficient agricultural production, and a string of natural disasters.
According to UN entities operating in the DPRK, in 2019 almost 10 million people do not have access to safe drinking water and 16 percent of the population does not have access to basic sanitation facilities, increasing the risk of disease and malnutrition. People living in northeastern and rural provinces suffer most from the lack of basic services, and the 2018 Global Hunger Index classified the level of hunger in the country as “serious” and “bordering on alarming.”
Kim Jong Un inherited power in December 2011 and soon afterwards initiated reformist policies remarkably similar to China in the early 1980s, in the early years of Deng Xiaoping’s rule. But the North Korean media has not acknowledged that the country is reforming itself (with a measure of success). Little is actually left from the Soviet-style state socialism in present-day North Korea. Instead, there are nice-sounding euphemisms, like ‘economic improvement measures’ or ‘our style socialism’.
A typhoon hit at the end of September 2016, inundating villages near the Tumen River, along the border areas with China and Russia. Relief agencies reported that over 100 people were killed, 400 were missing and 70,000 have been displaced by one of the worst humanitarian disasters to affect North Korea, since the droughts in the 1990s that caused, in part, widespread suffering and starvation. The floods have destroyed 20,000 homes as well as numerous schools and hospitals, and washed away 30,000 hectares of crops that were nearing harvest. The North Korean government mobilized 200,000 people to help with the relief effort, and has committed to build 20,000 homes and other buildings before winter temperatures take hold. The South Korean government is not providing any flood relief to the North.
At the 7th KWP Party Congress in May 2016, Kim Jong-un announced a five-year economic plan, the first since the 1980s. Over the next five years, the North should "fly the flag of victory" and become a "scientific and technological, economic and highly civilized power," Kim said. He also called for efforts to improve the country’s power shortage crisis. Many analysts say increasing electricity output is key to reviving the North’s economy.
North Korea's unregulated "market economy" is responsible for over 28 percent of overall demand in the regime, including consumption and investment. That's the conclusion reached 02 November 2016 by South Korea's central bank after dissecting the relationship between North Korea's "Social Accounting Matrix," which studies the flow of economic transactions between households, firms and the government and the regime's "informal sector," or the self-employed economy that's not monitored by the central government. Researchers found that de-centralized economic production and consumption have been on a constant rise, in both the agricultural and the financial sectors, with the country's richest social class now using private financial institutions to invest in various construction projects. Twenty-eight percent is significantly higher than the range of 10 to 25 percent seen in the 15 Republics of the Soviet Union from 1965 until its demise.
South Korea's central bank estimated that North Korea's economy posted its sharpest decline in 20 years in 2017, due to tougher international sanctions. The Bank of Korea said on 20 July 2018 that the North's Gross Domestic Product is estimated to have contracted 3.5 percent last year from 2016 in price-adjusted real terms. The bank said it was the first negative growth since 2015. It said North Korea's mining sector contracted 11 percent. Coal output plunged after exports were banned by the UN Security Council in 2017. The heavy chemical industry shrank 10.4 percent. The agriculture, forestry and fishery sector fell 1.3 percent due to a drought. The country's total trade value dropped 15 percent to around 5.5 billion dollars. Per capita Gross National Income stood at about 1,250 dollars, about 4 percent of the level in South Korea. Bank of Korea officials said North Korea's economy has suffered for years from international sanctions, but it was hit harder in 2017 than previously, as its traditional ally China joined the trade restrictions.
The Bank of Korea(BOK) on 28 July 2017 estimated the 2016 North Korean economic growth, noting the relatively high growth in fact reflected a base effect stemming from the economic struggles faced by the communist regime in 2015 due in part to drought. The South Korean central bank said the average annual economic growth of the North in 2015 and 2016 was only one-point-three percent, emphasizing the North is continuing a low one-percent-range economic growth in recent years. The BOK also presumed the North’s nominal gross national income (GNI) in 2016 at 36.4 trillion won, only 1/45 that of South Korea. Per capita GNI of the North was projected to be 1,461,000 won, 1/22 that of the South.
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