The Koreas

Did North Korea’s Economy Actually Grow While Under Sanctions?

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The Koreas

Did North Korea’s Economy Actually Grow While Under Sanctions?

That’s what one North Korean economist claims, and it’s not impossible.

Did North Korea’s Economy Actually Grow While Under Sanctions?
Credit: Flickr/ Clay Gilliland

Has North Korea’s economy been growing under sanctions? That’s what an economist in Pyongyang claims. In a recent interview with Kyodo (published here by Japan Times), Ri Gi Song at Pyongyang’s Institute of Economics at the Academy of Social Sciences claimed that North Korea’s GDP per capita grew by 3.7 percent in 2017, a year during which the country was virtually banned from selling its most crucial export goods, and faced very harsh conditions for importing crucial resources such as oil and fuel. When factoring in population growth, the GDP-growth-figure diminishes somewhat to 3.2 percent (see below), but it’s still firmly in the same range.

Strange as it may sound, it isn’t impossible to imagine North Korea’s economy at least not contracting severely during a year of sanctions. GDP growth alone is a poor way of measuring long-run, sustained economic growth and progress. While it may sound counterintuitive, the sanctions, while depressing the economy in certain ways, may have boosted it through other mechanisms. The ban on coal imports from North Korea, for example, may well have boosted certain industries, as I have covered in the past. Because exports have dwindled drastically, the price at which North Korean coal can sell – domestically as well as internationally – gets much, much lower than when it could be sold in greater quantities on a somewhat competitive market. So with lower prices for factors of production, industry could certainly experience growth in the short-run. But this would only be a temporary and meaningless boost, since the losses from unsold goods abroad would be much greater.

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