North Korea’s Economy Contracts for Third Consecutive Year, Trade Surges
North Korea’s economy experienced its third consecutive year of contraction in 2022, as COVID-19 restrictions and international sanctions continued to hinder economic activity in the isolated nation. According to estimates by the Bank of Korea (BOK), the country’s gross domestic product (GDP) shrank by 0.2% in real terms. This decline follows a 0.1% fall in 2021 and a sharp 4.5% plunge in the previous year, marking the worst economic performance since 1997.
The BOK’s estimates, which are considered reliable indicators due to the North Korean government’s lack of official data, highlight the significant challenges faced by the country. The pandemic, ongoing economic sanctions, border closures, and unfavorable weather conditions have all contributed to the continued decline.
However, an encouraging sign amidst the economic decline is the significant rebound in foreign trade. After a period of stagnation during the pandemic, trade volumes surged by a record-breaking 122.3% to reach $1.59 billion in 2022. This rebound primarily resulted from a resumption of trade with China, which accounted for a staggering 96.7% of the country’s total trade. Additionally, the gradual easing of border controls contributed to growth in the transportation and services sectors.
The data released by the BOK further revealed that the industrial output declined by 1.3%, and output from agriculture, forestry, and fisheries dropped by 2.1%. However, there was a notable 1.0% increase in the services sector, marking the sector’s largest gain in eight years. These sectors contributed 30.5%, 23.1%, and 33.4% to the North Korean economy in 2022, respectively.
While the rebound in trade volumes is undoubtedly a positive development, it is important to note that the figure still falls significantly short of pre-pandemic levels. In 2019, before the pandemic struck, North Korea’s trade volume stood at $3.25 billion, indicating that there is still a way to go before the economy fully recovers.
The official declaration of victory over the pandemic in August 2022, following three months after the first acknowledged COVID-19 outbreak in the country, allowed for some internal virus controls to ease. Nevertheless, the impact of economic sanctions, border closures, and adverse weather conditions persisted.
The Bank of Korea estimated North Korea’s nominal gross national income per capita in 2022 to stand at 1.43 million won ($1,116), equivalent to only 3.4% of South Korea’s per capita income of 42.49 million won. This substantial income disparity underscores the vast economic divide between the two neighboring nations.
As the international community closely monitors North Korea’s economic performance, these latest figures reveal the significant challenges the country faces in the midst of the ongoing pandemic and sanctions. The gradual loosening of border controls and the resurgence of trade with China provide a glimmer of hope for the nation’s economic recovery. However, it remains critical for North Korea to address the underlying structural issues and seek avenues for sustainable growth in the long term.
