The Bank of Korea: "North Korean Economy Completely Isolated... Residents Must Endure Even Harder Lives"

'North Korea's Economy and Future Prospects Over the Past 5 Years' Report
North Korea's Foreign Trade Plummets to Unprecedented Levels
Urgent Need to Create an Investment-Friendly Environment for Foreign Capital Inflow

[Image source=Yonhap News]

The Bank of Korea evaluated that North Korea's economy has shown a stepwise decline over the past five years, leading to complete isolation from the international community. It explained that going forward, North Korea's economy is expected to contract due to capital aging and low technological levels, and North Korean residents will have to endure even more difficult lives.

On the 5th, the Bank of Korea explained this in its BOK Issue Note titled "North Korea's Economy in the Recent Five Years (2017?2021) and Future Prospects." According to the report, during this period, North Korea's real Gross Domestic Product (GDP) shrank by an average of 2.4% annually, and especially after 2020, even light industry and private services, which represented North Korea's marketization, deteriorated significantly.

Additionally, North Korea's foreign trade plummeted to $710 million last year, an unprecedented level that is the lowest in real terms since 1955. Due to border closures caused by COVID-19, imports of essential consumer goods from China were halted, causing prices of related goods to surge and exchange rates observed in North Korean markets to show highly abnormal movements.

The Bank of Korea stated, "The shocks from sanctions and border closures have had a comprehensive impact on North Korea's economy, likely severely worsening residents' income, consumption, and welfare levels." However, it added, "Compared to the economic crisis in the 1990s known as the Arduous March, the current economic situation in North Korea is still judged to be better."

It noted that North Korea's future potential growth rate is unlikely to exceed 1 to 1.5% even with generous estimates, emphasizing that "for North Korea to overcome the current difficulties, it is urgent to create an investment environment favorable to foreign capital inflow to enable sufficient capital accumulation and to break free from the trap of low productivity through a revolutionary change in the economic system."

However, based on past responses, the Bank of Korea predicted that North Korea is likely to strengthen internal control while escalating military tensions and economically endure the hardships to some extent.

The Bank of Korea assessed that North Korea's economy stands at a crossroads between recovery and continued crisis this year. It explained, "Due to spring drought and a surge in COVID-19 patients, economic recovery in 2022 is not expected to be smooth," and added, "(North Korean authorities) will seek to expand trade and acquire foreign currency again when they judge the COVID-19 spread to be controllable, but the scale of trade expansion will be limited due to constraints on foreign currency reserves."

This content was produced with the assistance of AI translation services.