North Korean Economy Watch

NOTE: I have not seen this report yet, so I cannot directly comment.  If you see a copy, please send it to me.

Here is the story in the Daily NK:

If 1995 represented a baseline level of 100 for the North Korean economy, then by 2009 it had declined to 86.5 following sharp reductions in inter-Korean aid over the preceding year, according to newly released economic analysis.

The analysis, ‘Research into the State of Inter-Korean Change Seen through Statistics,’ was produced by the Sejong Institute pursuant to a request from Statistics Korea, the South Korean state statistics body.

The report incorporated ten different statistical variables, including North Korea’s estimated food and electricity production, trade and finance volumes and levels of international aid.

During the March of Tribulation, the mid-1990s famine that killed hundreds of thousands of North Koreans, the economy declined to a nadir of 70.3 (in 1998), according to the report’s findings; conversely, at the very peak of ‘Sunshine Policy’ aid deliveries in 2007, it reached a level of 104.7.

Elsewhere, North Korea’s food production had risen to 119 by 2009, while coal and electricity production had reached 107.6 and 102.2 respectively, it also reports. Conversely, steel production declined to 81.8, marine production to 63, and oil imports to 47.1.

Analyzing the situation, it goes on, “Steel and electricity production, the core of the North Korean command economy, did not change much so they could not have much of an effect. The decline of industrial facilities is serious, and due to this worn out equipment mineral production is slumping and there is never enough electrical power for smelting.”

The report notes pessimistically that current difficulties are set to continue, adding that even if North Korea embarked on root and branch reform tomorrow, in many cases it would already be too late for recovery without massive and sustained investment.

“In a society like North Korea where politics dominates everything else and the biggest impediments to state development, dictatorship and the 3rd generation succession, normal economic development is impossible,” it concludes.

The Donga Ilbo also reported on the study:

North Korea`s economic prowess has deteriorated due to stalled inter-Korean relations since peaking in 2007 due to expanded aid from South Korea and trade with China, a report released Monday in Seoul said.

The North`s economic ability peaked to 104.7 in 2007, up from the benchmark score of 100 in 1995, but plunged afterward to as low as 86.5 in 2009, the Sejong Institute said in the report prepared at the request of Statistics Korea. The Stalinist country`s economic prowess was based on 10 indicators including steel and electricity production, trade volume, state budget and the value of the South’s assistance to the North.

The North Korean economy began to deteriorate from the mid-1990s, when millions of people starved to death due to famine, and the economic ability figure fell to as low as 70.3 in 1998. It rose again, however, and reached 104.7 in 2007.

South Korean assistance to the North surged to raise the indicator to a high of 236.9 in 2007, a huge leap from the baseline score of 100 in 1995. The communist country`s trade volume also jumped 43.4 percent due to the expansion of trade with China.

The North`s economy began to shrink from 2008, when the South halted aid. Notably, the indicator fell to as low as 86.5 in 2009 to tie the record-low set in 2000. Due to deterioration of inter-Korean relations, the volume of South Korean government assistance to the North tumbled over the period to 36.2 in 2009, down 84.7 percent from that in 2007.

A decline in external trade except with China due to tougher international sanctions against Pyongyang also hastened the deterioration of the North Korean economy. Due to the participation by Singapore, one of the North`s top five trading partners, in the sanctions, the combined volume of the North`s trade fell about 10.7 percent, resulting in the indicator falling from 186.3 in 2008 to 166.3 in 2009.

The think tank said,“Considering that production of steel and electricity, the cornerstone of the centrally planned North Korean economy, remained largely unchanged, the recent deterioration of the North Korean economy stems from reduction of South Korean aid and contraction of the North`s overall trade volume.”

Here is a link to the Statistics Korea page on North Korea.

Read the full stories here:
NK Economy Lagging Heavy in 2009
Daily NK
Cho Jong Ik
2012-01-09

N.Korean economy plunges after hitting high in 2007: report
Donga Ilbo
2012-1-9