North Korea’s economy continues to struggle amid increasing challenges

North Korea’s economy continues to struggle amid increasing challenges

FORUM Staff

North Korea’s economy remains stalled, and global sanctions, COVID-19 and heavy rain are placing further drag on the country’s economic recovery, according to South Korea’s Ministry of Unification, South Korea’s state-run Yonhap News Agency reported in late August 2020.

North Korea has been seeking to make gains before the 75th anniversary of the founding of its Workers Party on October 10 “but an economic slowdown continues amid the triple whammy of sanctions, coronavirus and damage caused by heavy rains” that hurt rice production, the ministry said.

By all accounts, including his own, Kim Jong Un has failed to deliver on his economic promises. In mid-August, he openly admitted that his five-year plan to implement his vision for a “great socialist country” by 2020 had failed, according to The New York Times newspaper.

Since Kim announced his plan in 2016, which spurred an expansion of about 3.9% that year, North Korea has been wracked by a series of woes, the largest of which was induced by Kim’s policies. His regime ramped up its weapons programs in 2017, engaging in banned activities such as testing intercontinental ballistic missiles and what it claimed was a hydrogen bomb, forcing the United Nations Security Council to implement stricter sanctions against North Korea. As a result, North Korea’s economy contracted by 3.5% in 2017, giving up most of its gains from 2016, South Korea’s central bank reported, according to The Wall Street Journal newspaper. The trend continued in 2018 with a 4.1% decline; 2019 saw growth of 0.4%, as the regime managed to increase construction and agricultural output, the newspaper reported.

In 2020, the COVID-19 pandemic quashed forecasts of growth. North Korea shuttered its border with China, through which more than 60% of its exports flow, according to Observatory of Economic Complexity, a website that tracks trade data. North Korean exports to China fell by 75% in the first six months of 2020, according to the Korea Institute for National Unification. A leading financial analyst group now predicts the North Korean economy will decline by as much as 8.7% in 2020, The New York Times reported. This would be its worst contraction since 1997, when the country was hit by famine, according to analysts.

The heavy rains in 2020 will likely cause North Korea’s food insecurity to continue. The nation struggled in 2019 after its 2018 harvest was the worst in a decade, according to a report by the International Federation of Red Cross and Red Crescent Societies. (Pictured: In an image released by the Korean Central News Agency, North Korean leader Kim Jong Un visits an area in South Hwanghae province affected by Typhoon Bavi in August 2020.)

In admitting his administration’s “shortcomings” in August 2020, Kim also acknowledged that North Korea was dealing with “two crises at the same time” — the pandemic and widespread flood damage. Still he mandated that North Korea refuse any international aid because it might exacerbate spread of the virus, The New York Times reported.

Moreover, the living standard of North Korea’s people has “not been improved remarkably,” according to a report by the Central Committee of the Workers’ Party during an August meeting in Pyongyang, North Korea’s official Korean Central News Agency reported.

Kim’s admissions come in stark contrast to his response to worsening economic conditions in June 2020 when North Korea blew up the U.S. $15 million liaison office built by South Korea in the North Korean border city of Kaesong, as well as to his family’s longstanding practice as rulers to never acknowledge failures.

North Korea plans to hold a Workers Party Congress in January 2021 to devise a new economic plan, Yonhap reported.

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