Sanctions leave North Korean economy on brink amid predictions GDP may have shrunk by 5 percent
New statistics indicate that international sanctions have pushed North Korea’s economy to the brink of collapse, although analysts have pointed out that previous predictions of economic crisis triggering the collapse of the regime in Pyongyang have failed to materialise.
The North Korean economy contracted by 3.5 percent in 2017, a sharp reverse from the 3.9 percent growth in the previous year, The Korea Times reported, while the figure for 2018 is almost certain to be worse due to sanctions imposed on the regime for its nuclear and missile programmes.
A report issued by the Korea Institute for International Economic Policy estimates that the North’s GDP could have shrunk by as much as 5 percent when the figures for 2018 become available.
A second study, produced by the Korea Development Institute, said the North’s critical trade with China was hit hard by sanctions, falling more than 50 percent in 2018 to a value of $2.46 billion from $4.98 billion in the previous year.
China has been the North’s primary export market for resources such as coal and a range of consumer products, but sanctions have curtailed that trade. Exports totalled $220 million in 2018, an 87 percent decline from the $1.65 billion reported one year earlier.
Imports from China also suffered, falling 33 percent to $2.24 billion in 2018. As a consequence, North Korea’s trade deficit with its neighbour and closest ally climbed to $2 billion in 2018, the highest deficit ever recorded between the two nations.
“The year 2019 will be particularly gruelling for the country, given that sanctions will remain in place”, Jeong Hyung-gon, a KIEP researcher, said in the study,
“As the US will maintain maximum pressure without tangible denuclearisation steps by the North, the regime will suffer much more seriously than what has been seen thus far”, he added.
Stephen Nagy, a senior associate professor of international relations at Tokyo’s International Christian University, said Mr Kim’s “gamble” of demanding that the sanctions be lifted in return for minimal concessions on his nuclear arsenal during his summit in Hanoi with US President Donald Trump backfired.
“I think he expected the US president to be in the mood to bargain because of his domestic political problems and the need to score a political win”, he told The Telegraph. “But Mr Kim lost that bet”.
Yet Mr Nagy says the previously predicted collapse of the economy, which would theoretically bring down Mr Kim’s administration, is no closer.
“I do not believe it will go under because the Chinese do not want the North to collapse and they would throw it a lifeline in a worst-case scenario”, he said. “A collapse in North Korea is too big a risk for China, which worries about the direction of the regime that replaces Mr Kim, questions over his nuclear weapons and stockpiles of other weapons, a flood of refugees across the border.
“That, for China, is the nightmare that would threaten regional stability”.
