Cover story of our latest newsletter: “Greetings from North Korea”
Stefano Francesco Fugazzi (founder of ABC Economics) reports.
Take your typical small open economy with access to the World’s largest single market and capable of attracting foreign investments and recording unprecedented levels of economic growth before 2008. Think of Ireland. Then think of the opposite. A closed, inward-looking, centralised economy. You must be thinking of North Korea, officially the Democratic People’s Republic of Korea (DPRK), right?
You may have heard of North Korea’s nuclear programme and their inclusion in America’s Axis of Evil. However, chances are that you have never read anything about the state of health of their economy. Even the International Monetary Fund (IMF) does not hold any information on North Korea in their economic database.
Information is scarce and biased as Western media seem to be exclusively interested in reporting on the flamboyant management style of the country’s supreme leader, Kim Jong-un. But never a word, or a true fact, on the economics of North Korea.
In this issue of The World of ABC Economics we attempt to shed some light on their economy.
The information displayed below was sourced from the Bank of Korea – the central bank of South Korea – which annually publishes conservative estimates for North Korea. The report – which provides an assessment as at 31 December 2014 – is compiled on a best endeavour basis.
The DPRK economy is growing!
According to the Bank of Korea, the DPRK gross domestic product (GDP) has grown approximately by 1% each year since 2011. In 2014 the economy expanded exactly at the rate of 1.0%.
Production in the agriculture, forestry & fishing sectors grew by 1.2% in 2014 (+1.9% in 2013) mainly thanks to fisheries and livestock production, partially offset by a contraction in cultivated crops.
Mining production expanded by 1.6% (+2.1% in 2013) boosted by an increase in the extraction of coal and non-metallic minerals.
Manufacturing – comprising both light and heavy industries – grew by 0.8% (+1.1% in 2013).
Electricity, gas & water production fell by 2.8%(+2.3% in 2013) mainly due to a contraction in hydroelectric power generation.
A 1.4% increase in the construction sector (-1.0% in 2013) was largely driven by growth in building construction, whilst civil engineering – such as construction of roads and electric power plants – contracted.
Overall, the services sector increased by 1.3% (+0.3% in 2013) mainly due to the public sector (+1.6%) in addition to a buoyant performance both in the transportation & communication (+1.1%) and retail & tourism (+0.8%) sectors.
Gross national income and external trade
North Korean gross national income (nominal GNI) was valued at 34.2 trillion KRW for 2014, whilst GNI per capita stood at 1.388 million KRW.
The volume of North Korea’s external trade (computed as the sum of exports and imports of goods, excluding trade between North and South Korea) amounted to 7.61 billion dollars in 2014, up by 0.27 billion dollars from 2013.
In 2014 exports decreased by 1.7% mainly due to products of mineral origin (-17.1%), partially offset by textiles (+24.7% year-on-year movement).
Imports grew by 7.8% year-on-year, an increase largely driven by machinery (+27.1%) and textiles (+14.6%).
Bilateral trade between North and South Korea
Bilateral trade between North and South Korea increased by 106.2% year-on-year to record 2.34 billion dollars in 2014.
North-to-South trade expanded by 96.1%, mainly due to electric & electronic goods (+112.2%), textiles (+89.0%) and daily supplies (+94.5%).
South-to-North trade grew by 118.3% year-on-year, particularly with regard to electric & electronic goods (+199.2%) and textiles (+87.9%). Ω