Introduction

According to a report issued by the BOK in 2017, North Korea’s real gross domestic product (GDP) appears to have increased by 3.9% in 2016 from the previous year, which is the highest yearly growth since the 6.1% in 1999.

This notable growth comes as a surprise given the ongoing sanctions against North Korea. It was the manufacturing sector that contributed a great deal to North Korea’s GDP growth in 2016, especially the rise in the heavy and chemicals industry’s production volume. That is, the 6.7% growth in the heavy and chemicals industry fully compensated for the 1.1% growth in the light industry, bringing an increase in the overall production.

Based on this estimation of North Korea’s economic growth, we suspect that North Korea’s military industry advanced significantly in 2016 since much of North Korea’s heavy and chemicals industry is connected to the country’s military industry, producing weapons and equipment for the North Korean armed forces. Therefore, if the growth rate of the heavy and chemical industry reached 6.7% in 2016, that of North Korea’s defense industry would have recorded a similar level of increase. North Korea’s missile tests in 2016 support this reasoning, and it is likely that the development and production of various kinds of missiles in 2016 led to the expansion of the defense industry to expand.

* This article is part of 2017 The DPRK Economic Outlook

For more, please refer to the attached file.