How the coronavirus may impact the North Korean economy (Updated 18/2/2020)

By: Benjamin Katzeff Silberstein

Yesterday (February 12th), North Korea announced it is prolonging its self-imposed isolation to protect the country from the coronavirus. KCNA:

The spread of the epidemic comes to be a serious problem with the possibility of international disaster.

In this regard, the Non-Permanent Central Public Health Guidance Committee of the DPRK discussed the issue of prolonging the isolation period and strictly enforcing it in order to completely cut off the inroads of Covid-2019 and ensure the life of the people and safety of the state, and submitted it to the Presidium of the Supreme People’s Assembly

The Presidium of the Supreme People’s Assembly of the DPRK examined, approved and decided the proposal of the Non-Permanent Central Public Health Guidance Committee according to the law on prevention of epidemics.

According to the decision urgently adopted at the SPA Presidium, the isolation period in the territory of the DPRK shall be prolonged to 30 days for the time being.

All the institutions and fields of the state and foreigners staying in the DPRK should obey it unconditionally.

The KCNA website doesn’t allow for direct links, but the above was published on February 12th at their website. The country’s quarantine seems to amount to a near-total shutdown of cross-border traffic. So far, North Korea has not confirmed any deaths from the virus, but sources from inside the country have claimed that at least a handful of people have died from the virus. It seems highly doubtful that these sources could know for sure that the coronavirus, and not regular pneumonia, was the cause.

The government’s measures are rather stern, but a border shutdown is perhaps the most reasonable measure the government can take since it doesn’t have the resources to properly monitor the situation inside the country. KCNA also reported on February 12th that the local Red Cross “organized training courses for Red Cross volunteers and sent them to relevant areas.” A press statement (not on their website) from the Red Cross confirms this and says that the “Red Cross has also sent volunteers on bikes to these remote areas to share coronavirus awareness messages.” (Updated Feb 15 2020 with link to the press statement.)

How is all this impacting the North Korean economy? We don’t know for sure, but here are some possibilities:

The markets appear to be under a great deal of pressure. The border trade shutdown isn’t exactly total, as items such as fuel is likely still coming through pipelines. Certainly, some other goods are getting through as well, we just don’t know how much. But most consumer goods are kept out, and the authorities are even cracking down heavily on smuggling that it usually turns a blind eye to, resulting in drastic price rises over the past few weeks. According to some reports, perhaps exaggerated, economic activity is at a virtual standstill along the border. Prices have not reacted this strongly to any sanctions-related measures throughout “maximum pressure”, or really any international event that I can recall. All this points to the border closure measures being seriously and strictly enforced. The ban on tourism is also a significant blow to the economy. Tourism from China has been growing steadily as a source of income for the past few years and it’s a particularly crucial revenue stream of foreign currency at a time when many others have dried up in the wake of sanctions.

In addition to the international border crossing, the government has also banned travel between regions inside North Korea, to prevent the virus from potentially spreading through the country. One has to assume that this ban is at least as strictly enforced as the one on the Chinese border. If so, internal market trade may well be  severely hampered, as traders can no longer easily move goods between regions. This would obviously be a big problem, particularly for agricultural goods but also for the manufacturing sector. The North Korean market economy, which a majority of North Koreans are in some way dependent upon for their consumption, needs a well-functioning transportation network to operate with even a minimum level of efficiency. It is no coincidence that transportation as a sector has gone ahead of many others in North Korea’s marketization process. The government has now reportedly instituted price controls. These are unlikely to be respected perhaps even in the short run, and certainly will not be in the longer run. More traders will sell on the black markets, which will grow perhaps beyond any scope they’ve been since the early 2000s when the state began incorporating the markets into the official system.

One North Korean source quoted by Radio Free Asia puts the government’s dilemma regarding the virus and the economy brutally but clearly:

According to the third source, the poor are angry that the rich care about their health, but don’t seem to care if they have eaten.

“They say they might die from a disease, but they could also die from starvation because they are unable to make enough money to support themselves for a day,” said the third source, adding that the working class say there is no difference between the two because they are dead either way.

At the end of the day, there will come a time when keeping the border shut and domestic travel and transportation paralyzed just won’t be worth it or even possible, at least without massive humanitarian aid coming in to compensate. Something will have to give eventually, and when it does, the real challenge of virus containment may truly begin.

Update 18/2/2020:

Reuters reports that North Korea seems to be planning to hold the Arirang mass games by August, counting on the virus crisis to have eased by the summer:

The Mass Games are due to return on August 15, which is celebrated as Liberation Day on the anniversary of Japan’s defeat at the end of World War Two, Young Pioneer Tours, which runs tours to the North, said in a statement.

Despite the name, the Mass Games are large performances involving tens of thousands of dancers, gymnasts, martial artists and singers acting out familiar propaganda themes.

Another firm, Koryo Tours, quoted sources in North Korea as saying the games were expected to be held over major holidays, perhaps starting on August 15 and including October 10, the 75th anniversary of the founding of the ruling Worker’s Party of Korea.

No further details were known, and tickets are always sold on site rather than in advance, said Koryo Tours general manager Simon Cockerell.

“Tourists still can’t enter North Korea but when the virus issue dies down the border will open again,” Cockerell told Reuters. “It’s a reactive policy, so it will depend on what happens in China, basically.”

North Korea revived the Mass Games in 2018 to sell an image of international engagement and peace while raising much-needed foreign currency.

Source: Josh Smith, “North Korea looks to hold ‘Mass Games’ this year despite coronavirus fears: tour companies,” Reuters, 18/2/2020.

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