Kang Seung-woo is the Business Desk editor at The Korea Times. Prior to this position, he covered politics, national affairs, finance and sports.
Can virus-hit North Korea economy survive sanctions?
By Kang Seung-woo
Experts expect China to help Pyongyang avoid economic collapse
By Kang Seung-woo
North Korea's economy has been a years-long issue.
Many believe it has been pushed to the edge due to a series of United Nations sanctions imposed on the reclusive state for its nuclear and missile programs, coupled with the recent worldwide outbreak of COVID-19 that has had impacts on its trade after its border closure.
The pandemic has shut down the totalitarian regime already beset by its decades-long self-imposed isolation, further highlighting its economic vulnerability and lack of fiscal resources.
North Korea's recent fiery rhetoric against South Korea is also mostly believed to be an apparent sign from its leader Kim Jong-un, who is in the hot seat over the sluggish economy and ensuing public outcry, in order to urge Seoul and Washington to discuss Pyongyang's economic challenges.
Diplomatic analysts believe the North's economic situation is probably worse than average due to the coronavirus pandemic as well as the sanctions. But, for various reasons, they did not agree that the country's economy will fall victim to these difficulties.
“It is difficult to tell how bad off the North Korean economy is at the moment. Three major forces are coming together that are making this a difficult time: the continued impact of economic sanctions over its nuclear program; closing down trade ― both legal and illegal ― with China due to COVID-19; and the usual cycle of the agricultural sector where food stocks from last year are dwindling until this year's harvest starts to come in,” U.S. Naval War College professor Terence Roehrig told The Korea Times.
Joseph DeTrani, a former U.S. special envoy to the six-party talks, echoed Roehrig's view.
“The economic situation in North Korea is bad, exacerbated by the border closing with China, in response to the COVID-19 pandemic. Thus trade with China, the North's principal trading partner, has decreased significantly,” he told The Korea Times. In the wake of the coronavirus crisis, the North Korean regime sealed off its border in January.
According to the South Korean National Intelligence Service, the trade volume between the North and China in the first quarter of the year was $230 million (276 billion won), a 55 percent decline compared to a year ago, and in March alone it recorded $18 million, down 91 percent year-on-year.
A recent Fitch Solutions report forecast the North Korean economy would contract 6 percent this year, the worst figure since 6.5 percent recorded in 1997 during the “Arduous March,” a famine that lasted in the North from 1994 to 1998 where at least 300,000 died from starvation and hunger-related illnesses. A Korea Development Institute report in May also said the North Korean economy this year shows a similar trend to that of 1994 when the famine started.
“Coupled with this is the fact that sanctions are biting, restricting crude oil and petroleum imports and affecting North Korea's ability to sell fisheries, textiles and precious metals, to name a few,” DeTrani said. “So, yes, North Korea's economy is hurting.”
Despite the bad economic situation, it is premature to predict economic collapse in North Korea, according to the pundits.
“Analysts have long been predicting North Korea's economic collapse yet it has managed to plod along and survive,” Roehrig said. “Circumstances are not as dire as the famine years of the mid-90s, and the North Korean people have shown they can be resourceful and creative in the face of these hardships.”
Liang Tuang Nah, a research fellow of S. Rajaratnam School of International Studies in Singapore, said the North has two unique factors that could help it survive the economic difficulties.
“Firstly, its citizens have been so deeply indoctrinated to be loyal to the Kim regime. Secondly, they have a rather high tolerance for material deprivation. For instance, the Arduous March in the mid- to late 1990s, caused by a series of natural disasters, inflicted horrible suffering on North Koreans,” he said.
“Hence, if the people are conditioned not to blame the government for any difficulties arising from sanctions, and are mentally hardy enough to accept increasing hardship, Pyongyang might be able to politically cope with economic deterioration for at least a few more years.”
DeTrani said, “I believe North Korea can muddle along, even with these sanctions, during this stressful period of COVID-19. I'm confident China will provide a safety net to North Korea to assist during this period ― and indefinitely until there's some peaceful resolution of issues with North Korea.”
Roehrig said despite the border closure, there is still likely a level of illegal trade that manages to make it into North Korea.
“Can North Korea continue to do this indefinitely? The answer is not clear, but if one is betting on the economic collapse of North Korea anytime soon, I think you will lose your money,” he said.