February 25, 2024

China and North Korea’s economic future

If China’s economic fortunes are set for a downturn, where does that leave its dependent?

North Korea is routinely described as a “starving Stalinist economy,” but this oft-repeated cliché is both outdated and misleading. To start with, North Korea has a large private sector, which is now believed to be responsible for a large share of the country’s small GDP – between 25 percent and 40 percent, depending on whose estimates you believe. Second, it is not starving: The last decade was a time of modest but noticeable economic  growth. The pessimists in the Bank of (South) Korea estimate the annual growth at paltry 1.3-1.5 percent while optimists (largely in the embassies located in Pyongyang) put the figure higher, believing it to be close to 3 or even 4 percent.

At any rate, North Korean economy is growing, both in the privileged capital and in the countryside. Changes are visible: People are better dressed, there are more vehicles on the street (and even traffic jams occur sometimes), and a minor restaurant boom is unrolling in Pyongyang while computers – cheap Chinese models, often bought second-hand – are seen as something even teenagers of the mildly affluent families can and should afford.