Introduction

Never before has North Korea received such intense notoriety from the outside world. Indeed, every move made by the country not only on military and security issues, especially nuclear and missile programs, but also in regards to its economy is closely observed and scrutinized. Incidentally, fueling the intrigue are the international sanctions - the last non-militaristic means to block Pyongyang’s development of nuclear weapons - that were imposed on the North in 2016, and the global community’s curiosity over how it will be affected. Still, discussions on the subject have been significantly lacking thus far and important questions remain on where the North Korean economy is headed and whether the sanctions will have any effect.

The primary purpose of this paper is to provide an overview of the North Korean economy in 2016. Indeed, it will offer a dry, matter-of-fact description of North Korea’s macroeconomic performance and trends of the year using a variety of statistical and non-statistical data. Besides, two additional tasks will also be undertaken: one, to establish a hypothetical framework for the current characteristics of the North Korean economy and the other, to discuss the effectiveness of the economic sanctions imposed in 2016. At first glance, these might not seem directly interconnected with the primary purpose of this paper. In practice, however, they are essential to understand the very nature and structure of the current North Korean economy, and thus its performance and trends in 2016. In return, an elaborate and correct overview of the North Korean macroeconomic performance and trends helps to establish realistic hypotheses for the economy, and estimate the precise effects of the sanctions. In sum, all three purposes of this paper are complementary to and closely linked with each other.

The remainder of this paper are organized as follows. Section 2 presents an overview of North Korea’s macroeconomic performance and trends in 2016. This includes an analysis of the country’s external trade, insights on domestic production and consumption, and assessment of the overall economic conditions. Section 3 develops a hypothetical framework to grasp and explain the major features of the current North Korean economy. The framework will be based on two major concepts: dollarization and dual economy. And Section 4 discusses the effects of the economic sanctions, primarily based on various findings from Section 2. For discussion, both the quantitative measures and qualitative analysis on the effects of the sanctions are considered. Finally, Section 5 concludes by summarizing the above.

* This article is part of 2016 The DPRK Economic Outlook

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