The Bank of Korea claims the DPRK economy shrank in 2015 by 1.1%
This number has numerous drawbacks which I have discussed before.
According to the Yonhap:
North Korea’s economy is estimated to have contracted 1.1 percent last year amid negative growth in most industries, South Korea’s central bank announced Friday.
The Bank of Korea (BOK) has issued an annual report on the estimated gross domestic product (GDP) of one of the world’s most secretive nations.
It said the communist country’s GDP shrank 1.1 percent in 2015 from a year earlier, the first negative growth since 2010.
The bank cited a drop in crop and mining output by 0.8 percent and 2.6 percent, respectively.
The manufacturing sector suffered a 3.4 percent decline. The electricity, gas and tap water business also tumbled 12.7 percent due to a fall in hydroelectric power production attributable to a drought, according to the BOK.
But the construction field posted a 4.8 percent rise, and the service sector grew 0.8 percent.
The North’s mining and manufacturing industries accounted for 32.7 percent of its GDP, down 1.7 percentage points from 2014.
The BOK put the North’s gross national income (GNI) at 34.5 trillion won ($30.3 billion), 45 times less than that of South Korea. The North has around 25 million residents, half of the South’s population.
The data also showed that the North’s trade volume totaled $6.25 billion, down 17.9 percent on-year.
Exports slipped 14.8 percent to $2.7 billion, and imports shed 20 percent to $3.56 billion.
The North is under heavy U.N.-led economic sanctions for its nuclear and missile activities.
Since no accurate economic data from North Korea are available, the BOK said the statistics are based on estimates using methodologies applied to gauge South Korea’s own economy. Thus, it’s not desirable to directly compare the data with those of other foreign nations, added the bank.
Here is coverage in the Wall Street Journal:
North Korea’s economy likely shrank last year for the first time in five years, South Korea’s central bank said, potentially increasing the ruling challenge for leader Kim Jong Un, who has promised to boost prosperity while confronting the U.S. and other nations with nuclear weapons.
The Bank of Korea said Friday that it estimated North Korean gross domestic product fell 1.1% in 2015, the first decline since 2010 and the largest fall since a 1.2% contraction in 2007.
North Korea doesn’t release official statistics or allow outsiders to make assessments of its economy from within the country. As a result, the BOK’s estimate of North Korean GDP is often cited as the best guess. It bases its calculations on information from Seoul’s spy agency and other authorities that study North Korea.
The biggest recent economic setback for North Korea has come from a sharp fall in the price of coal, its main export product, and a slowdown in China, its sole major trading partner. The South Korean central bank said the North’s external trade was valued at $6.25 billion in 2015—down 18% from a year earlier.
New international sanctions on North Korea following its nuclear bomb test in January this year and long-range rocket launch in February may increase the economic pressure on Pyongyang. For the first time, United Nations sanctions target North Korea’s commodities trade, while the U.S. has sought to cut off Pyongyang’s links to the international financial system.
North Korea insists it will continue to pursue twin policy priorities of nuclear weapons development for its defense while seeking to boost its economy. In his first speech in 2012, Mr. Kim said North Koreans should “not have to tighten their belts again” and has regularly visited economic projects such as factories and farms.
However, output in nearly all North Korean industries contracted last year, including agriculture, fishing, mining and energy, the South Korean central bank said in its report.
Construction was a rare bright spot, growing an estimated 5%, as Mr. Kim has pursued the redevelopment of areas of central Pyongyang, including major new housing projects. The Bank of Korea also estimated a 0.8% increase in service-sector output, reflecting the emergence of unofficial market trading and underground financial services.
The North’s per capita income was around $1,224 in 2015, the bank said, compared with South Korea’s $27,200.
Here is coverage in Reuters:
North Korea’s economy contracted in 2015 at the sharpest pace in eight years, an estimate from the Bank of Korea showed on Friday, as low global commodity prices landed a blow to exports, a key driver for the impoverished country’s economy.
The gross domestic product in North Korea last year fell a real 1.1 percent, South Korea’s central bank said, which was the first fall since 2010 and compares with a 1.0 percent gain in 2014. It also marked the fastest decline since a 1.2 percent drop in 2007.
Isolated North Korea does not publish economic data.
All sectors except construction and services declined, a likely burden for North Korean leader Kim Jong Un already under pressure from international sanctions against multiple provocations including a nuclear test in January.
“The key reason for the GDP contraction looks to be trade as global commodity prices fell while China demand also declined,” said a Bank of Korea official, who declined to be named as he was unauthorized to speak to media.
“North Korea’s main commodity exports are coal and iron ore, which likely all declined last year.”
Neighboring China is North Korea’s chief trading partner.
The Bank of Korea data showed exports in North Korea fell 14.8 percent last year in annual terms as mineral product shipments slumped 14.7 percent. This was far worse than a 1.7 percent decline seen in 2014.
Imports dropped a faster 20.0 percent last year, compared with a 7.8 percent increase in 2014.
The central bank official said trade is expected to worsen this year as it becomes difficult for North Korea to boost shipments with other countries with international sanctions likely to grow heavier following Pyongyang’s continued missile launches and nuclear threats.
Construction rose 4.8 percent last year, accelerating from a 1.4 percent gain in 2014, the same data showed.
Meanwhile, a 0.8 percent gain in services last year reflects North Korea’s economic shift towards capitalism as the black market there has become more pervasive. Financial services have also grown, which likely contributed to the gain, the BOK official added.
The Bank of Korea has released GDP data on North Korea every year since 1991 based on information received from related sources, including the Ministry of Unification.