‘Trade missing’ North Korean economy… Will it survive in 2021?

The North Korean economy always seems to be in crisis, but last year was particularly serious. Last year, trade in North Korea, which was swept away by Corona 19, is at the level of’missing’. What about North Korea’s economy this year, with the Corona 19 crisis predicted to continue through the second half of 2021. Although some are concerned about the’risk of system collapse’, domestic experts believe that the North Korean economy has the capacity to withstand a certain level as long as the market is in good shape.

Russia’s ambassador to North Korea, Alexander Machegora, told Interfax news agency on the 8th (local time), “Imports were completely banned after the typhoon in September last year.” “The self-blocking (according to Corona 19) is It is also having a negative impact on life.” It is said that there is a serious shortage of supplies in North Korea, which has already closed its borders in January last year due to Corona 19.

In fact, the North Korean economy was already in a difficult situation due to international sanctions against North Korea, which began in earnest in 2017. As China bought less of North Korea’s exports, money went dry to North Korea. The pockets of the residents have worsened, and the informal economic activities known as’jangmadang’ have also been hit. In this situation, it was last year’s Corona 19 that broke out as a blow.

Infectious diseases do not determine whether a country is living well or not, but the damage left behind is different. If sanctions against North Korea, which began in 2017, affected exports to China, the hit of Corona 19 hurt trade rather than export. It is said that until 2019, there was little change in North Korea’s imports of consumer goods. However, according to the KDI’s North Korean Economic Review released last January, in 2020, when Corona 19 broke out, exports and imports fell by 78% and 81% compared to the previous year. North Korea’s trade with China exports $50 million, imports $490 million, and the total amount of trade was less than $600 million. North Korea set a 0.9% increase in budget revenue this year, the lowest since Kim took office and the first 0% increase. North Korea held the 8th Party Congress in January and confirmed the’New Five-Year Economic Development Plan’. At the time, the attention of the domestic and foreign media was the recognition that the economic plan that Chairman Kim had pursued for the past five years failed, rather than the goals set forth by the five-year plan such as self-reliance and balanced regional development.

■ Why is the dollar depreciating when the dollar is scarce due to the trade disappearance?

By the way. In 2020, North Korea became a very unusual phenomenon. From October 2020, the won’s exchange rate in the North Korean market will appreciate significantly. Normally, when the dollar is short, the value of the dollar rises and the value of the won decreases. As the trade shrank, the dollar was dry, but the dollar’s value fell. According to the Asian Press, a media dedicated to North Korea in Japan, the exchange rate of the North Korean won against the dollar fell 20.4% from 8170 won per dollar on October 23 last year to 6500 won on November 12. It is known that the exchange rate, which remained at the level of 8,000 won after Kim Jong-un took office, has not recovered until now, three months later.

The exact cause of the sharp rise in the value of the North Korean won in the short term is not known. The’artificial intervention theory’ is the most influential, such as the North Korean authorities banning the use of foreign currency and unifying the money spent on the residents in Korean won. These interventions temporarily disrupt the supply and demand balance of the dollar in the market. After October, when the won’s value rose, North Korea’s food prices stopped increasing and fell sharply. Yang Moo-jin, a professor at North Korean Graduate School, said in the currency, “North Korea centrally controls food prices and exchange rates. There are various reasons, such as to hide the situation inside the country from the outside, or to lower food prices. “Because there are no various indicators such as the underground economy, it is difficult to accurately evaluate the internal situation in North Korea by looking at the exchange rate only from the outside. It is questionable whether this phenomenon will continue. Daily NK, a North Korean media outlet, quoted an internal North Korean source in December of last year, and reported that “the North Korean residents are secretly buying dollars by taking advantage of the fall of dollars as an opportunity.” It is said that the North Korean authorities are re-normalizing attempts to artificially adjust the exchange rate as North Koreans are trying to secure more of a relatively stable dollar in a time when the value has fallen.

■Market economy seed’Jangmadang’… North Korea crisis breakthrough

How will the North Korean economy unfold in the future? Recently, among conservative scholars at home and abroad, the theory of the collapse of North Korea has reappeared. Victor Cha, chairman of the US Institute for Strategic and International Studies (CSIS) in South Korea, wrote in a post last month in the Washington Post, “Can the North Korean economy survive for another year from shutdown? “I don’t think it’s possible,” he said. “Illness (according to Corona 19) and a bad economy could shake the North Korean authorities’ control over nuclear weapons.” However, other domestic experts believe that the North Korean economy in 2021 cannot be a crisis enough to bring about a collapse of the regime. Professor Myung said, “There are some foods provided by China and Russia, but as the North Koreans’ dietary habits such as bread and fruit have changed, their dependence on rice has also decreased.” “The opinion that a lack of food and supply could lead to collapse is not convincing. I said.

Another difference from the past is that North Koreans have the’muscles’ that can withstand the economic crisis. The unofficially operated Jangmadang provides room to resolve the shortage of supplies brought about by Corona 19. Kim Yong-hyun, a professor at Dongguk University’s Department of North Korean Studies, said in the currency, “The market is operating even in the situation where the smooth distribution of goods is restricted, and North Korea is not in the worst state at the moment.” If there were enough residents to face the economic crisis, the current residents were well equipped with the mayor.” KDI agrees that the economic crisis of the 1990s and the current North Korea should be viewed differently. “In the North Korean economy in 2020, the Kim Jong-un regime, which asserts itself as a nuclear state, remains alive. And the current North Korean economy is dominated by the rapidly developed market. Even if a crisis occurs in 2021, it may be judged that the intensity and shape of the crisis will be different from that of the 1990s, given the authorities’ policy capacity to respond to it and the market reaction mechanism.”

Of course, due to intensive quarantine measures by the North Korean authorities, the Jangmadang is not operating as active as it was before Corona 19. According to foreign news sources, in accordance with Corona 19, North Korean authorities have restricted the operation of the marketplace to four hours a day and every other day since April of last year. The government is also carefully looking at what direction control over the marketplace will go. Unification Minister Lee In-young said at a plenary session of the National Assembly on the 4th, when asked about the prospect of a recession in the market economy in North Korea, Congressman Hong Seong-guk said, “It is true that certain control over the market economy has been strengthened. It’s good to see what’s going on and draw conclusions.”

Experts believe that control is inevitable due to measures such as quarantine, but the situation in which the North Korean authorities use the marketplace to respond to the crisis will continue. Professor Yang said, “It is highly likely to allow 400 marketplaces within the range of control.” KDI Research Fellow Lee Jong-gyu also said in the call, “The biggest feature since Kim Jong-un took office was that he used the economy rather than controlling the informal sector. I can see it.”