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2020/2021 The DPRK Economic Outlook
CHAPTER 1. North Korea’s Economic Crisis, How Far will it Go?

July 08, 2021

KDI


Introduction


The fact that 2020 was a particularly harsh year for the North Korean economy is undisputed by most experts. The unforseen outbreak of Covid-19 dealt a heavy blow to the global economy, and North Korea was by no means an exception. Indeed, its plight was made almost papable by the extraordinary steps taken by Kim Jong-un to address the public and express his regret over the policy failures and poor economic performance. So, just how severe was the hardship and why? Will conditions improve in 2021 or will they deteriorate and place a heavier burden on the North Korean people?

The purpose of this paper is to discover how much of these questions can be answered with the data that is currently available. To that end, the observations on North Korean trends presented in jointly published papers were compiled and organized.1 And, based on the results, the overall conditions of North Korea’s macro-economy in 2020 were identified, and the economic implications were discussed. The outlook for 2021 was presented based on an analysis of diverse issues and questions.

Before delving in, however, it should be noted that there are limitations to this paper as doing so will help prevent any unnecessary controversy over methodology. Above all, there are obvious constraints with timing. This paper was written in January of this year which is, in truth, too premature to provide a detailed review of the economy in 2020 and systematic outlook for 2021. The data and information used for analysis are also limited. Specifically, there may be time series data that are incomplete, and data that lack sufficient verification. Moreover, questions may arise over the objectivity and/or generality of some of the non-numerical data. Finally, the analysis framework itself has its own limitations. The current status of the North Korean economy is both highly controversial and polarizing. Nonetheless, this paper does not sort through the dissent and discord to establish a general framework and make an analysis. Rather, it conducts its investigations based on specific views and approaches that could be perceived as controversial. It is, therefore, unclear how much impartial support a conclusion derived from such a method could garner.

Accordingly, the discussions presented henceforth should not be treated as the fruits of rigorous and scientific analyses, but as interpretations of the authors’ intuitive notions about the inner workings of the North Korean economy in 2020 and 2021. Still, this paper may help those interested in North Korea to gain a better understanding, and it is this author’s hope that it will be accepted with more generosity than criticism.

The following is divided into four sections. Chapter 2 begins with a summary of the various observations of the North Korean economy in 2020. For this, the economy was divided into trade, production, market and price variables, and finance to identify the changes, and the findings were used to identify the overall features of the macroeconomic conditions. Chapter 3 deals with the economic implications, focusing on the impact and significance of the changes in 2020 on the maintenance and management of Kim Jong-un’s new economic system. Chapter 4 presents the outlook for the basic direction of the economy in 2021, tackling such questions as: How much does the North Korean economy in 2020 and 2021 resemble that of the mid- to late-1990s?; Are North Korean markets in a normal state?; Is a humanitarian crisis on the horizon in 2021? Finally, a conclusion is delivered through brief summaries of the above discussions.

* This article is part of 2020/2021 The DPRK Economic Outlook

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Providing Economic Forecast and Macroeconomic Policy Direction, the Groundwork for a Brighter Future

The Department of Macroeconomics is conducting researches on the macro economy and macroeconomic policy, particularly focusing on suggesting the analysis of macroeconomic trends and current status of the economy at home and abroad, the economic forecast, and the policy direction of the macro economy. The Department is also in charge of establishing, sustaining and maintaining various econometric models, based on which it analyses policy effects and develops a long-term economic forecast.

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