Strict sanctions saw GDP fall by an estimated 3.5% in North Korea in 2017

This article is more than 2 years old

This article is more than 2 years old

North Korea’s economy contracted at the sharpest rate in two decades in 2017, according to estimates from South Korea’s central bank, in a clear sign international sanctions imposed to stop Pyongyang’s nuclear and missile programmes have hit growth hard.



Gross domestic product (GDP) in North Korea last year fell 3.5% from the previous year, marking the biggest contraction since a 6.5% drop in 1997 when the isolated nation was going through a devastating famine, the Bank of Korea said.

North Korea’s coal-intensive industries and manufacturing sectors have suffered as the UN Security Council ratcheted up the sanctions in response to years of nuclear tests by Pyongyang.

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China, its biggest trading partner, enforced sanctions strictly in the second half of 2017, hurting North Korea’s manufacturing sector.

Industrial production, which accounts for about a third of the nation’s total output, dropped by 8.5% as factory production collapsed due to restrictions on oil and other energy resources coming into the country. Output from agriculture and construction industries also fell by 1.3% and 4.4% respectively.

“The sanctions were stronger in 2017 than they were in 2016,” Shin Seung-cheol, head of the BOK’s National Accounts Coordination Team said.

“External trade volume fell significantly with the exports ban on coal, steel, fisheries and textile products. It’s difficult to put exact numbers on those but it [the export ban] crashed industrial production,” Shin said.

The steep economic downturn comes as analysts highlight the need for the isolated country to shift towards economic development, moves that were announced by leader Kim Jong-un in April.

Kim vowed to switch the focus from the development of North Korea’s nuclear arsenal to emulating China’s “socialist economic construction” before he held an unprecedented summit with President Donald Trump in Singapore in June.

The BOK uses figures compiled by the government and spy agencies to make its economic estimates. The bank’s survey includes monitoring of the size of rice paddy crops in border areas, traffic surveillance, and interviews with defectors. North Korea does not publish economic data.

North Korea’s Gross National Income per capita stands at 1.46m won ($1,283.52), making it about 4.4% the size of South Korea’s, the BOK said.

Overall exports from North Korea dropped 37.2% in 2017, marking the biggest fall since a 38.5% decline in 1998, the BOK said on Friday, citing data from the Korea Trade-Investment Promotion Agency.