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Südkorea: Grenze zu Nordkorea (DMZ) bei Paju
Image: picture-alliance/D. Kalker

Rockets boost North Korean economy

July 21, 2017

Despite global sanctions over its weapons programs, North Korea's economy grew at its fastest pace in 17 years thanks to a jump in exports and increased production in mining and other industries.


Even though North Korea is increasingly isolated and in the midst of its worst drought since 2001, the economy as a whole is doing better than it has in years, according to a report released by South Korea's central bank on Friday.

The Bank of Korea said the North's gross domestic product (GDP) grew 3.9 percent last year - the fastest since 1999.

Overall for 2016 North Korea's GDP in real terms stood at 32.0 trillion won ($28.50 billion, 24.5 billion euros), with mining and manufacturing accounting for over 33 percent of its economy. Exports rose 4.6 percent and imports were up 4.8 percent. 

Read more: South Korea's president wants rare talks with North

The hermit state does not officially release economic data; but the Bank of Korea bases its annual estimates on data compiled from private organizations and state bodies like their intelligence service and the Ministry of Unification.

Poor in the north

Although the economy seems on the up, the North's per capita gross national income in 2016 was just 1.5 million won ($1,136), which is less than 5 percent of the comparable number in South Korea.

Nordkorea - Angeblicher Test einer Interkontinentalrakete
North Korean leader Kim Jong Un supposedly watching a rocket test in July 2017Image: Picture alliance/dpa/Uncredited/KRT/AP

The robust economic growth may partly be due to the North's active nuclear and missile development program, as the government has spent heavily on manufacturing components, according to Shin Seung-cheol, an official at the Bank of Korea.

Some also think the North's economy has expanded due to the recent proliferation of hundreds of state-endorsed private markets where vendors sell everything from food to electronic gadgets imported from China.

Analysts estimate that the private sector, broadly defined, could be responsible for anything from a quarter to half of the North's gross domestic product.

Defying all logic

Despite the rosier outlook, North Korea has been under United Nation sanctions since 2006 over its ballistic missile and nuclear programs and the Security Council has ratcheted up the measures in response to five nuclear tests and long-range missile launches.

Read more: North Korea defector returns home calling South 'capitalist hell'

The North's long-range rocket test last February also led to the closure of the Kaesong Industrial Zone, a joint economic area the North shared with the South along the border. The shutdown led to a drop of 87 percent in cross-border trade between the two Koreas.

Nonetheless, the country keeps defiantly pushing to develop nuclear weapons regardless of international sanctions, mainly with the backing of neighbor China - its sole ally and biggest trading partner.

Chinese friends

In 2016, after contact between North and South was cut, China accounted for over 90 percent of all North Korean trade, according to data from the Korea Trade-Investment Promotion Agency (KOTRA).

But even China's patient was tested and this past February they banned all imports of coal from its reclusive neighbor, cutting off its most important export. China has however continued to trade other commodities including iron and iron ore, providing a lifeline to the lonesome regime.

China is reluctant to rattle the North's status quo, fearing an influx of refugees and the potential presence of American troops along its border in a unified Korean peninsula.

In response the United States is mulling new sanctions on Chinese firms and banks doing business with Pyongyang on top of trying to get China and Russia to back a new U.N. Security Council resolution imposing stiffer sanctions on North Korea following its latest missile test.

"North Korea can bypass some sanctions but coal is critical for their economy and it is something that's difficult to smuggle," said Kim Suk-jin, a research fellow at the state-run Korea Institute of National Unification.

Only a coordinated effort by China, South Korea, Russia and America can bring North Korea in line with international norms. In the meantime its citizens will continue to suffer while its leaders are more concerned with weaponry than human dignity and food supplies.

US warns China over North Korea

tr/uhe (Reuters, dpa, AFP)

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