North Korea’s Economy Hit Harder Than It Has Been in Decades

Brazil to hold public consultation on General Satellite Regulation
December 18, 2020
Caught Between Police and Protesters, Macron’s Centrist Balancing Act Falls Apart
December 18, 2020
Show all

North Korea’s Economy Hit Harder Than It Has Been in Decades

In a photo provided Wednesday by the North Korean government, workers disinfected the Pyongyang Information Technology Bureau to curb the spread of the coronavirus.

Photo: /Associated Press

SEOUL—North Korea’s all-out push to halt the coronavirus has exacted a brutal blow to its already-tattered economy, contributing to a slide that will likely be the worst in a generation.

Pyongyang had little choice but to mount a heavy-handed defense. Its dilapidated health-care system left it vulnerable to the highly infectious disease.

But nearly a year into the pandemic, the pain caused by the Covid-19 measures has become visible. To ward off outbreaks, Pyongyang has locked down entire provinces and shut down foreign tourism—one of the regime’s last sources of outside income amid international sanctions.

Trade with China, the North’s main benefactor, has plunged 75% in 2020 versus the previous year, according to data from China’s customs office. It withered to less than $1.7 million in October, a 99% drop from the same month a year earlier.

North Korean exports of wigs, watches and shoes stopped that month, an official at the Seoul-based Korea International Trade Association said, as authorities on both sides of the border tried to minimize human contact. Pyongyang’s imports of food and medical equipment from China also ground to a halt in October, he said, citing Chinese traders and North Korean defectors.

North Korea has restricted movement and trade on the border all year to guard against the pandemic. In August, Pyongyang tightened border security further, ordering its customs officials to take extra precautions disinfecting goods and ratcheting up penalties against smugglers bringing in goods that hadn’t been properly cleaned. That has led to longer delays for imports and a likely decrease in smuggling, North Korea watchers say.

In November, a North Korean border town known for smuggling, Hyesan, was locked down after regime authorities found a stack of foreign cash had been brought in without being properly disinfected, according to South Korean lawmakers who were briefed by Seoul intelligence officials.

Prices of food staples, like sugar and condiments, have quadrupled in recent weeks from earlier this year, according to the lawmakers.

The North Korean won, which has remained steady even amid international sanctions, has surged twice this year relative to the U.S. dollar, rising 20% recently. The increase is likely the result of government attempts to prevent depreciation. Authorities have tried to limit the use of U.S. dollars and Chinese yuan by threatening imprisonment. At least one major foreign-currency dealer was executed this year, South Korean intelligence officials told lawmakers last month.

It is all contributing to what could be a 10% economic slide this year, according to a recent estimate from Kim Byung-yeon, a professor of economics at Seoul National University, who has studied the North Korean economy for close to two decades. To calculate his forecast, he used figures from South Korea’s central bank, which has data going back to 1990. North Korea hasn’t faced an annual slide of that magnitude during that period. The closest the country came was in 1992, on the eve of a nationwide famine, when the economy shrank by 7.1%, according to the bank’s data.

The tough economic times, however, don’t likely portend a collapse of the Kim Jong Un regime or any dramatic shift in Pyongyang’s appetite to re-engage in denuclearization talks with Washington, which have stalled this year, security experts say. At an Oct. 10 military parade, the North showcased waves of new weapons and military gear.

In recent weeks, Pyongyang’s state media has championed an 80-day campaign leading up to a Workers’ Party Congress meeting in January, asking North Koreans to help the economy by boosting agriculture and equipment production. Some 300,000 party members were praised for volunteering to rebuild thousands of homes in North Korean regions devastated by summer floods.

But signs of strain have been showing. Mr. Kim made a rare admission of defeat on the country’s economic policy over the summer. Late last month, he berated top officials for failing to come up with new ideas. He has rejected outside offers for relief, while urging citizens to embrace self-reliance.

Instead, Mr. Kim’s regime has pointed to its claim of having zero Covid-19 cases as its big achievement this year.

Over the decades, North Korea and the ruling Kim family have shown resilience through famine, other public-health scares and rounds of sanctions. Pyongyang has developed a multitude of sanctions-evading methods to keep generating cash that don’t pop up on official trade data, from cyber shakedowns to illicit ship-to-ship transfers.

This year, China has purchased millions of tons of North Korean coal, despite United Nations sanctions that ban such exports from Pyongyang. Those deals could have provided over $400 million to the Kim regime this year.

China won’t let the Kim regime collapse, though its generosity will be limited, said Zhao Tong, a senior fellow at the Carnegie-Tsinghua Center for Global Policy, in Beijing.

“Enough to help avoid an internal crisis,” Mr. Zhao said of China’s potential assistance.

An employee assembled leather shoes at a factory in Wonsan, North Korea, in October. North Korean exports of shoes and other items stopped that month.

Photo: Jon Chol Jin/Associated Press

The drop in trade with China is partly explained by the North’s preparations ahead of the January Workers’ Party meeting, where officials are expected to outline the regime’s next economic plan. Anticipating a gathering of thousands of the country’s elite, including Mr. Kim, the uptick in prevention measures is protection against potential virus spread, North Korea watchers say.

Prices of antipyretics and antibiotics have surged as imports from China have all but disappeared in recent months. From August to October, a dose of penicillin more than doubled in price, while aspirin cost rose by a third, according to a report from the Korea International Trade Association.

“Chinese customs officials are going to the office as usual—without much work to do,” said a Chinese trader at the border city of Dandong, according to the report.

Write to Andrew Jeong at andrew.jeong@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Leave a Reply

Your email address will not be published. Required fields are marked *