Tea-Leaf Reading the North Korean Economic Statistics

The North Korean government has not consistently published relevant economic statistical data since 1965 due to confidentiality reasons. Only on an ad hoc basis were a number of official documents released, but these are widely considered to have been manipulated, as economic figures are regarded as state secrets in the Democratic People’s Republic of Korea (DPRK). Due to these outstanding circumstances, it is necessary to doubt whether the DPRK or any international economic analyst can accurately measure or estimate this economic data.


Tongil Street Jangmadang in Pyongyang[1]

Beginning in the mid-1980s – when relations with the USSR started to deteriorate – North Korean socialist government’s central distribution mechanism fell into decline, and marketization from below began as substantial shares of economic activity shifted into the unregulated market economy. Moreover, recent reports from TV Chosun on the activation of the jangmadang (장마당), or general market, in Pyongyang support the view that these unregulated markets play significant roles in the North Korean economy. Even if North Korea did not regard its economic statistics as state secrets, activities stemming from unregulated markets would make it virtually impossible to publish precise and accurate economic statistics data. The official DPRK economic statistics are, therefore, suspect to tampering and vulnerable to deliberate misinterpretation for the state’s own sake. One can only be skeptical of the official data.

In response to the blackout of North Korean economic data, many scholars, institutions, and think tanks have attempted to estimate the level of North Korea’s per capita income with various methods (refer to figure 1). One of the most recent analyses has been conducted by a South Korean think tank, the Hyundai Research Institute (HRI) which estimated that the North Korean GDP per capita adjusted for purchasing power parity is about 720 US dollars in 2011. HRI has used the infant mortality rates reported by the UN and yearly grain outputs reported by the Food and Agriculture Organization (FAO) to estimate the North’s per capita GDP from 1970 to 2011. Although infant mortality rate and grain output are correlated with GDP, these two variables alone do not yield reliable annual GDP estimates. Plus, many scholars have questioned the credibility of FAO’s reports, according to which the DPRK has continuously been in famine for the past ten years. Any careful North Korean watcher, in fact, would doubt the FAO’s pessimistic reports.

The Bank of Korea, the United Nations, and scholars like Byung-yeon Kim have employed different statistical methods to make time-series estimations of the North Korean national income. While every method has its own internal consistency and highlights noticeable fluctuations, the estimations are conducted on the basis of admitting that they all lack precision.


Figure 1: Time Series Estimates of North Korean Per Capita GDP[2]

While the internal data are believed to be highly unreliable, in theory, calculating the trade statistics is relatively straightforward and is done by examining the “mirror statistics,” of North Korea’s trade partners. In other words, by adding up what other countries claim to have imported from the DPRK, we can calculate its exports.

Unfortunately, challenging the common notion that analyses of the North’s trade statistics are relatively reliable, economists have cast doubts. The economists often observe an unbelievable increase in a country’s trade with the DPRK, which turns out to have resulted as the country has confused North and South Korea. For example, if one of the DPRK’s trade partners claims to have imported smart phones and automobiles from the North, it is very likely that someone in the country’s statistics bureau has accidently confused the amount of imports from the South with that of the North’s.

The most commonly cited trade statistics of the DPRK are released by the Korea Trade-Investment Promotion agency (KOTRA). However, KOTRA excludes the North’s trade record with many Middle Eastern countries. Consequently, the North Korean trade statistics from KOTRA exaggerates the significance of the trading countries that it records. Marcus Noland has suggested that this is why the New York Times and the Washington Post report that China accounts for about 80 percent of North Korea’s trade, while he believes that the actual percentage is roughly about half as much.

It is, therefore, not a simple task to analyze the Republic’s economic data. In fact, even in the midst of the statistical blackout we can find out information about the North Korean government’s military and economic policies. Nevertheless, the assessment of the North Korean economic statistics is an important assignment that can affect policy decisions such as the amount of aid that we should provide, and whether we should retaliate or negotiate with the Republic. More importantly, without an accurate and updated assessment of the North Korean economy, it is difficult to assess the costs and benefits of the unification.

[1] Photo Credit: Yonhap news

[2] Figure 1 is a property of the author; Source: Hyundai Research Institute.

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