July 31, 2020 / 3:18 AM / 11 days ago

North Korea's economy grew for first time in three years: South Korea

SEOUL (Reuters) - The economy of isolated North Korea grew for the first time in three years in 2019 as better weather conditions boosted crop yields, but sanctions imposed to stop its nuclear ambitions kept factory output weak, South Korea’s central bank said.

Gross domestic product (GDP) in North Korea last year rose 0.4% in real terms from the previous year when the economy suffered the biggest contraction in 21 years, shrinking 4.1% due to a drought and sanctions, the Bank of Korea (BOK) said on Friday.

North Korea has been under U.N. sanctions since 2006 over its ballistic missile and nuclear programmes and the U.N. Security Council has been toughening measures in recent years.

“The sanctions have not become any tougher since 2017-end and weather conditions have been more favourable which helped output from the agriculture sector to improve,” a BOK official said.

“Even so, its too early to say (North Korea’s) economy is in a recovery” as its trade volume in recent years is half the levels seen before the international sanctions kicked in.North Korea’s economy grew 3.9% in 2016, the fastest pace in 17 years, but sharply contracted in the following two years.

Current leader Kim Jong Un vowed to switch the focus from the development of nuclear arsenal to economic development in 2018 before he held an unprecedented summit with U.S. President Donald Trump. The two leaders have met three times, but failed to find a compromise over the North’s nuclear weapons programme.

Estimates for North Korean economic data by the BOK are considered the most authoritative as the isolated nation does not disclose any statistics on its economy.

Since 1991, the BOK has used figures from intelligence agencies and the unification ministry data on everything from size of rice paddy crops, water flows at dams to traffic near the border to make estimates.

The BOK said output from agriculture, forestry and fisheries which accounts for about a fifth of North Korea’s economy increased 1.4% last year, while industrial production fell 0.9%, following a 12.3% drop in 2018.

However, North Korea’s trade volume jumped 14.1% in 2019, as exports of non-sanctioned items such as shoes, hats and wigs increased 43%, the bank said.

The BOK official said North Korea’s trade was expected to worsen significantly this year as the coronavirus outbreak would have curbed shipments to China, its biggest trading partner that accounts for more than 90% of North Korea’s total trade.

North Korea’s gross national income per capita stood at 1.408 million won ($1,184.79) in 2019, about 3.8% of that of South Korea.

In the 1950s North Korea’s command-driven economy posted a healthy an annual growth rate of 13.7%. But a focus on post Korean War military spending, the fall of the Soviet Union, and a famine in the mid-1990s that killed an estimated two million people, crippled the economy.

Reporting by Cynthia Kim; Editing by Michael Perry

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