North Korea’s economy is no longer booming

The economy needs to be this much bigger.
The economy needs to be this much bigger.
Image: KCNA via Reuters
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Sanctions are biting North Korea hard.

That’s according to South Korea’s central bank, which said today (July 20) that North Korea’s GDP contracted 3.5% in 2017, after growing by 3.9% the previous year. The Bank of Korea conducts research on North Korea’s economy as the secretive nation does not release economic data.

An official from the Bank of Korea said that North Korea suffered from a fall in mining exports and heavy-industry activity because of international sanctions leveled at the regime by the United Nations. The bank added that the effects of the sanctions would continue to be felt in 2018 despite the recent diplomatic thaws between North Korea and the international community.

Exports decreased 37.2% from a year ago, according to the central bank. In the fourth quarter of 2017, the IMF said, the value of exports from North Korea fell below $300 million, about a third of the amount in the same period a year earlier. The sharp drop can in large part be attributed to China’s increasing reluctance to buy resources like coal from its neighbor amid attempts to bring the rogue regime to the negotiating table and get it to suspend its nuclear weapons program. North Korean exports of coal, textiles, and seafood were banned under UN resolutions last year.

The United Nations sanctions not only ban trade with North Korea, but also stipulate that North Koreans working abroad, for example in construction or in restaurants, must return home by 2019. Russia, where tens of thousands of North Koreans work as laborers, said it would send all of them back by November next year.

Kim Jong Un has been eager to brand himself as an economic reformer who is concerned with the livelihood of North Korean citizens, even allowing the market to assume a greater role (paywall) in the country’s tightly controlled economy. Economic realities might give Kim pause should he continue on the trajectory of engaging with his neighbors, and of course the US.