North Korea’s Economy Contracted in 2015 Amid Nuclear Ambitions

  • Economic growth fell 1.1%, the biggest decline since 2007
  • Kim’s regime conducted fourth nuclear test at start of 2016

The bronze statue of Kim Il Sung stands on Mansu Hill in Pyongyang.

Photographer: Alexander Hassenstein/Getty Images

North Korea’s economy last year is estimated to have contracted the most since 2007 as its leader Kim Jong Un marshaled resources for nuclear tests and ballistic missile development.

The gross domestic product of the totalitarian state fell 1.1 percent in 2015 from a year earlier, when it expanded 1 percent, according to calculations released by South Korea’s central bank Friday.

Per capita income in the north was 1.39 million won ($1,223), or about 4.5 percent that of its southern neighbor’s. In the early 1990s, North Koreans’ income was about one-seventh that of South Koreans’.

The Bank of Korea in Seoul said it estimates North Korea’s economic growth by using “raw data compiled by related organizations” without providing details. The calculation has limits, with the BOK using South Korea’s data to substitute for information it can’t gather like prices when assessing nominal gross domestic product.

“North Korea had a drought since 2014, which weighed on agricultural production and hydroelectric power generation, which the economy relies a lot on,” said Kim Hwa Yong, a senior economist at the BOK. “Trade volume also fell, as exports to China in products like iron ore declined due to oversupply issues.”

In September 2015, North Korea’s state media said the regime threatened to use nuclear weapons against the U.S. and pledged to launch a satellite with missile technology.

North Korea conducted its fourth nuclear test on Jan. 6, followed shortly by the launch of a long-range rocket. In March, the United Nations Security Council voted to toughen economic sanctions against North Korea, already one of the world’s most isolated regimes. Pyongyang had more tests after authorities in Seoul and the U.S. agreed to place the Thaad anti-ballistic missile system on the Korean peninsula as a deterrent to North Korea’s nuclear ambitions.

Nuclear Costs

Yonhap News reported in 2013 after North Korea’s third nuclear test that the cost of developing the weapon may be as much as $1.5 billion, citing unidentified officials in the South.

The decline in North Korea’s GDP was driven by a 13 percent drop in utility output as hydroelectric power generation fell, according to the BOK. Outputs in the mining and manufacturing industries also declined owing to less production of iron ore, the BOK statement shows. Construction investment expanded about 5 percent.

North Korea’s main ally remains China, which has long been an economic benefactor through energy and other shipments. China accounted for 91 percent of North Korea’s trade in 2015, followed by Russia, India and Thailand, according to a statement from South Korea’s Trade-Investment Promotion Agency released in June. The agency compiles data from North Korea’s trading partners.

The value of North Korea’s trade in 2015 declined 18 percent to $6.25 billion from the previous year, the first contraction since 2009, Kotra said. This is a fraction of South’s $963 billion in 2015 trade. Exports and imports fell in the communist regime as prices and the volume of major trade products like coal and oil declined, according to Kotra.

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