By Choi Sung-jin
The North Korean economy is estimated to have recorded negative growth last year, the Bank of Korea reported Friday.
The central bank said the North’s gross domestic product is estimated to have fallen 1.1 percent last year compared with 2014, marking negative growth for the first time since Kim Jong-un took office in 2012.
The gap in per capita income between South and North Korea widened from 21.3 times to 22.2 times, according to the BOK report.
Some experts, however, rebutted the central bank’s estimation, saying the North’s GDP might have grown given the progress in the “marketization” of the reclusive regime’s economy.
According to the BOK, it was the first time in five years that North Korea recorded negative growth. The North’s GDP marked growth rates of -0.9 percent for 2009 and -0.5 percent for 2010, but recorded positive growth rates for the following four years, ranging from 0.8 percent to 1.3 percent. The estimated -1.1 growth rate for last year was also the lowest since 2007 when the isolationist regime recorded a growth rate of -1.2 percent.
The BOK said that although North Korea’s construction industry expanded last year, its agriculture-forestry-fisheries, mining-manufacturing and electricity-gas-water industries contracted. As the North’s hydro power generation declined because of a long drought last year, it also affected the country’s steel and machinery production adversely, the report said.
North Korea’ total nominal income stood at 34.5 trillion won ($30.3 billion), or 2.2 percent that of South Korea’s. Per capita gross national income edged up to 1.39 million won, compared with 1.38 million won in 2014, but stopped at 4.5 percent that of the South’s, with the gap widening from 21.3 times to 22.2 times.
North Korea’s foreign trade (aside from inter-Korean trade) plunged 17.9 percent to $6.25 billion last year, from $7.61 billion in 2014, hit by declines in the international prices of iron ore and the drop in China’s imports of the North’s anthracite coal.
North Korea’s exports fell 14.8 percent to $2.7 billion. The shipments of textile goods rose 5.3 percent but those of mineral products dropped 14.7 percent. Imports plunged 20.0 percent to $3.56 billion. The gap in foreign trade between South and North Korea also widened from 144.3 times to 154.1 times over the cited period.
According to the Unification Ministry, trade between the two Koreas rose 15.7 percent to $2.71 billion last year.
The central bank has released estimates of North Korea’s economic growth since 1991 but controversy about its credibility has not ceased, mainly because of the difficulties of getting correct data concerning the reclusive country.
Citing contraband trade along the Sino-Korean border and the rapid spread of (private) “marketplaces” within the isolationist state, experts have often expressed doubts about the BOK’s estimates.
In a 2013 interview in Foreign Policy, Marcus Noland, vice president of Peterson Institute for International Economics, said, “It is hard to trust when we see decimal points in North Korea-related statistics. I sometimes find Bank of Korea’s statistics on North Korea’s economic growth untrustworthy.”
Korean experts are not much different. “The BOK estimates seem to have failed to properly reflect the progress in the marketization of the North’s economy,” said Lim Eul-chul, a Kyungnam University professor. “North Korea’s economy can be seen as having grown, considering the growth of its services industries through private markets and the high added value created by its construction industry.”
In response, BOK official said that the central bank has reflected the increases of private markets in the statistics and other domestic experts have checked them. “We are experiencing difficulties in estimating statistics due to the shortage of basic data on North Korea but our estimates do not deviate from overall trends” said Kim Hwa-yong, a BOK director.