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NORTH KOREA NEWSLETTER NO. 271 (July 18, 2013)

All Headlines 10:28 July 18, 2013

*** TOPIC OF THE WEEK (Part 2)

N. Korean Economy Records Growth for Two Consecutive Years in 2012

SEOUL (Yonhap) -- The North Korean economy is believed to have grown at the fastest pace in four years in 2012 on the back of increased production from the manufacturing sector and favorable performances in the agriculture and fisheries industry, South Korea's central bank said on July 12.

The South's Bank of Korea (BOK) estimated that the socialist country's economy grew 1.3 percent in 2012 in terms of the gross domestic product (GDP), quickening from a 0.8 percent on-year gain in the previous year.

The 2012 growth was the steepest advance since 2008 when the North's GDP was estimated to expand 3.1 percent thanks to favorable agricultural production and international assistance of heavy oil. Last year, the South Korean economy grew just 2 percent, the slowest growth in three years.

In 2009 and 2010, the North's economy contracted 0.9 percent and 0.5 percent, respectively.

The North Korean economy has been in the doldrums as it suffers from chronic food and energy shortages, mismanagement and natural disasters. The socialist state has relied on international handouts since 1995 to help feed its 24 million people.

"The economic growth picked up last year as the North's light and heavy industries made a turnaround, along with increased agricultural products," said a BOK official.

By industry, production in the agriculture and fishery sectors recorded a growth of 3.9 percent, after gaining 5.3 percent in the previous year, the BOK noted.

The agriculture and fisheries industry, which accounts for 23.4 percent of North Korea's total GDP, recorded such a high growth thanks to the 12.3 percent growth in the livestock industry. Agricultural production, including rice and corn, also increased thanks to the expanded use of fertilizers and favorable weather conditions.

Its manufacturing sector grew 1.6 percent last year, after contracting for three years in a row. Production in the manufacturing sector turned to a minus growth in 2009 from a 2.6 percent gain in 2008 to record a setback of 3 percent in 2009, minus 0.3 percent in 2010 and minus 3 percent in 2011.

Light industry production rose 4.7 percent due to growth in the production of food stuff and tobacco while the heavy and chemical industry recorded a growth of 0.2 percent on year. The mining industry, which accounts for 14 percent of the GDP, also advanced 0.8 percent thanks to the increased production of coal.

North Korea's nominal gross national income (GNI) amounted to 33.5 trillion won (US$29.8 billion) last year, which is equivalent of 2.6 percent of South Korea's 2012 GNI of 1,279.5 trillion won, the bank said. The GNI gap between the two Koreas was the same last year from a year earlier although the gap in foreign trade reduced slightly.

North Korea's external trade, the volume of exports and imports excluding trade between the two Koreas, amounted to $6.81 billion last year, up 7.1 percent from 2011. Its exports rose 3.3 percent to $2.88 billion while imports grew 10.2 percent to $3.93 billion. South Korea saw a reduction of 1.1 percent in its foreign trade in the same period.

The North's favorable foreign trade last year reduced the gap with its southern neighbor to a 1 to 156.7 ratio in 2012 from a 1 to 169.8 ratio in 2011.

The trade between South and North Korea grew 15.7 percent last year to $1.97 billion. Imports and exports through the Kaesong Industrial Park took the lion's share of 99.5 percent of the total.

South Korea's shipment to North Korea grew 12.1 percent last year while the shipments vice versa gained 17.5 percent.

The BOK annually releases the economic growth estimate of the North based on data provided by Seoul's intelligence agency and other institutes specializing in North Korean studies.

North Korea's per-capita gross domestic product (GDP), meanwhile, rose 8.75 percent on-year in 2012 due to an improved grain harvest and expanded investment in the construction sector, according to a separate report released on July 11.

The North's per-capita GDP for last year is estimated at US$783, compared with $720 tallied in 2011, according to the report released by the Hyundai Research Institute (HRI), a South Korean private think tank.

The North's 2012 per-capita GDP amounts to a mere 3.38 percent of South Korea's per-capita GDP of $23,113 in the same year.

The increase came as North Korea's grain production improved on the back of favorable weather conditions, while the country also expanded its investment in the construction sector, the report said.

Other positive factors were North Korea's expanded trade with China and South Korea, as well as an increase in humanitarian aid to the country, it said.

"North Korea's economy still remains too weak to be self-sufficient," the think tank said. "(The two Koreas) must make efforts in narrowing the economic gap, as it may weigh down on unification costs in the future."

Other Asian countries with socialist regimes saw their per-capita GDP hover far above that of North Korea in 2012, with Vietnam and Laos posting $1,528 and $1,446, respectively, the report added.

Since North Korea's young leader Kim Jong-un took the helm of the impoverished country after the death of Kim Jong-il in late 2011, North Korea has made fixing its sagging economy its top priority.
(END)

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