March 06, 2018 11:56
Harsh international sanctions are weakening the North Korean economy in an unprecedented way, according to economists.
"North Korean people's purchasing power and industrial production will dwindle significantly from the second half of this year," the Korea Institute for International Economic Policy predicted on Monday. And the Korea Development Institute said recently, "North Korea's exports are shrinking just like in a trade blockade."
North Korean leader Kim Jong-un has launched a charm offensive toward South Korea in a bid to weaken the sanctions, but so far to little avail.
◆ Depleted Foreign Reserves
North Korea's exports to China were worth US$1.65 billion last year, down 37 percent on-year, according to the KIEP's review. Anthracite exports to China shrank more than 66 percent on-year to a mere $400 million. They made up 45 percent of the North's overall exports in 2016. Exports of seafood and clothing dwindled 16 percent and 22 percent.
But the North still imported roughly the same amount of goods from China as in previous years at $3.33 billion, resulting in a trade deficit of $1.68 billion with its communist ally. The North's foreign reserves have therefore plunged from an estimated $4-5 billion to $2-3 billion.
"It's likely that the North will exhaust a considerable portion of its foreign reserves, as the country is expected to post a similar trade deficit against China this year," the KIEP speculated. "If the North cuts down on imports from China to rein in its foreign reserve depletion, it will lead to economic slowdown, hobbling industrial production, emptying open-air markets, and damaging people's livelihoods."
The institute added the U.S. has put maximum pressure on China, which reluctantly joined international sanctions against the North, and the North's exports to China "fell sharply each time Beijing announced plans to implement sanctions against the North."
◆ Growing Desperation
As the situation worsens, the regime has been spurring agencies on to earn hard currency.
North Korean trading companies are frantically sending out staffers to China, Russia, Southeast Asia and Africa, Radio Free Asia reported Sunday in an apparent bid to make up for the shortage. In some cases, border guards who are supposed to prevent smugglers from crossing the North Korea-China border are instead encouraging them.
Cho Han-bum of the Korea Institute for National Unification said, "Rumors are circulating among moneyed people in Pyongyang that a catastrophe is coming."
The institute said it is "vital to maintain the current sanctions and pressure to bring the North to the dialogue table."
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