North Korea has been hailed as “the world’s most surprising economic success story” by the leading US financial daily, The Wall Street Journal.
Despite being tightly controlled, technologically backward, and subject to crippling Western trade embargoes, the country has recorded year-on-year GDP growth of more than 3%, of which many advanced economies could only dream. Their unlikely success story has been “aided by arms sales and troop deployments to Russia” to fuel the Ukraine war, support from China, and “the ability to flout international sanctions to import more energy, components and materials”.
What has changed?
Five years after making a rare admission that the nation’s economic policies were falling short, in February Kim Jong Un addressed the Workers’ Party Congress to celebrate a turnaround, declaring “everything has fundamentally changed”. But while the supreme leader may have triumphantly taken credit for the boom, in reality “he has Russia and China to thank”, said Forbes.
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Since the start of Russia’s invasion of Ukraine in 2022, North Korea has earned an estimated $14 billion providing military support to the Kremlin, and hundreds of millions in trade and foreign aid from China. North Korea’s “emergence as a modern-day pirate state on the back of its lucrative cryptocurrency theft operations” has also helped, Shreyas Reddy of Korea Risk Group, told the Financial Times.
The effect of this influx on the so-called hermit kingdom has been sudden and startling. The regime has used some of the windfall to modernise Pyongyang with new brightly lit shopping districts filled with luxury and high-tech goods, and high-rise apartments blocks. Cars, once a rarity, are increasingly common and frequently electric, and can even be hailed with ride-sharing apps.
Outside the capital, the regime’s ambitious “20x10” regional development initiative aims to build new factories, housing and public infrastructure in 20 counties each year over a 10-year period.
All of this is an “incredible accomplishment for a country that is this poor”, regional expert Stephan Haggard told the WSJ.
Can it last?
Due to a lack of reliable data and the regime’s complete control of the media, accurately assessing what is happening on the ground in North Korea is notoriously difficult, said WioNews. But “a closer look beneath the headlines reveals a more complicated picture than either Western critics” or the Pyongyang regime acknowledge.
While the growth over the last three years appears genuine, said the Financial Times, North Korea’s “economic resurgence fell short of a genuine transformation” in that it “was mostly being driven by participation in Russia’s war in Ukraine”.
Peter Ward of the Sejong Institute in Seoul said North Korea was in the throes of a “Russian sugar high” fuelling a slew of “shovel-ready, exciting-looking projects that will catch the eye of the leader, but aren’t necessarily sustainable”.
Ultimately, said Asia Business Daily, the racks of luxury goods and the Pyongyang construction boom are “merely an optical illusion”, in that they are enjoyed “almost exclusively by the leadership and a privileged class in Pyongyang”.
North Korea remains incredibly poor. Out of its 27 million citizens, 17 million are still believed to live in extreme poverty, and the UN estimates that more than 40% of the population are undernourished. Analysts are sceptical that Kim can turn the short-term gains brought about by the war in Ukraine into sustainable long-term growth. “Knowing the North Koreans, they probably haven’t fixed the roof while the sun is shining,” said Ward.
