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North Korea GDP Sees Surprising Growth

By Patrick Higgins  |  21/07/2017 14:52
North Korea's economy grew an unexpected 3.9% in 2016 per data released by the Bank of Korea, despite heavy international sanctions.  Such massive growth was driven by increased developments in energy capacities and exports.
 
Such increases in GDP have not been observed since 1999, and many speculate they are tied to the events in North Korea's nuclear programme.  Despite being under UN sanctions over illegal nuclear tests since 2006, North Korea continues to fund its ballistic and nuclear programmes.  Increases in electricity production and component manufacturing (suspected to be for missile construction) have been observed.  Additionally, North Korea's trade with its superpower neighbour China rose by 4.6%, the largest growth since 2013.  China, North Korea's largest export partner by far, took in a whopping 92.5% of all North Korean exports in 2016.  Whether this level will remain constant in 2017 is still unknown, as the effects of China's ban on North Korean coal imports (as well as on oil exports to North Korea) have yet to be observed.  Additionally, any growth this year will be hampered by drought, as North Korea continues to suffer from the biggest lack of rainfall since the mid-1990's.  North Korea's dependency on domestic agricultural production for food supplies will cause GDP growth to take a serious hit this year. 
 
China's import ban will profoundly affect North Korea's weak economy, as coal exports accounted for 40% ($1.2 billion) of total revenue in 2016.  Likewise, restrictions on oil exports will disrupt North Korean heavy industry such as mining and manufacturing, which currently accounts for 33.2% of the heavy industry in the country.  Whether this will hurt Pyongyang's nuclear programme, seemingly resilient to any attempts at shutting it down, is questionable.
 
North Korea's flouting of international condemnation of its nuclear programme has been possible due to the silent support of China.  China, while a begrudging ally, cannot afford for North Korea to fail, due to geopolitical and humanitarian concerns. China has long been a beneficiary of cheap North imports, and has used North Korea as a secure export market for years, but has faced heat from the US and the rest of the international community.  This pressure culminated in Chinese bans on various commodity trading, but these measures have not forced North Korea to the table.  In fact, they have spurred Pyongyang to move quicker towards the development of nuclear weapons.  This heightened rush towards nuclear maturity is in part due to the enduring presence of South Korea, both North Korea's estranged sibling and biggest fear.  South Korea has for years sought to encourage the North Korean populace to rise against their government and has regularly supported leaflet drops, advocating democracy and Southern reunification efforts, into North Korea from across the Demilitarised Zone (DMZ).  A testament to the massive influence the South exerts on the North are the disparities in economic development.  In 2016, the South Korean economy stood at $1.34 trillion in real GDP terms.  Despite strong growth overall, North Korea's total GDP amounted to a paltry $28.5 billion, almost 50x smaller than the GDP of the South.  With excellent reason, North Korea fears China will eventually be forced to withdraw all support under international pressure, and leave Pyongyang to crash and burn.  Reunification with the richer and democratic South would mean an end to the Kim regime. Therefore, the North Koreans see nuclear weapons as a bulwark against any possible intrusions on its sovereignty.
 
However, as long as North Korea has open valves to let off steam, the secretive state will continue to limp along in existence while simultaneously pursuing full nuclear capability.  Nonetheless, signs of a slowdown in Pyongyang's nuclear development due to drought and famine will be watched for closely this year.  Any changes in the status quo from abroad will be caused by China, who seems unlikely to bow to pressure from the US and the rest of the international community any time soon.
 

 

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