Will the North Korean economy revive? – DW – 06/18/2024

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Will the North Korean economy revive?  – DW – 06/18/2024

In the middle of a serious Strain On the Korean Peninsula, Russian President Vladimir Putin He is heading to North Korea for a two-day meeting with the North Korean leader. Kim Jong-un. It was Putin’s first visit to North Korea in 24 years and a testament to the deep interdependence between the two countries. Putin and Kim held bilateral talks in Russia’s Far East in September 2023.

US and South Korean officials have accused North Korea of ​​secretly supplying Russia with military equipment to support its invasion of Ukraine, a charge both Pyongyang and Moscow deny.

But since August, North Korea has supplied Russia with numerous weapons, according to South Korea’s National Intelligence Service. Other reports, citing satellite images, suggest Pyongyang has also supplied ballistic missiles to the Russian military.

Overall, North Korea, the world’s most isolated country, is expected to return to economic growth this year for the first time since before the pandemic, as arms sales boost government coffers. That would be a big boost for North Korea’s small centrally planned economy, which will be worth just $24.5 billion (about 22.8 billion euros) in 2022, according to South Korea’s central bank.

The deal with Russia will offset the impact of sanctions and the pandemic

Covid-19 lockdowns have already slowed anemia growth, shrinking by 4.5 percent in 2020. International sanctions imposed in 2016 over Pyongyang’s nuclear program have previously affected its main export, coal. Both crises compounded the dire difficulties in a country where 60 percent of the population lives below the poverty line.

“The North Korean economy has been in decline for the past five years. So the arms deal with Russia will help it return to one percent positive growth in 2024,” Anvita Basu, director for Europe at Fitch Solutions Country Risk, told DW.

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Basu explained that his prediction was an estimate because Pyongyang does not report its economic data. Instead, many statistics are obtained from South Korea’s central bank and North Korea’s trading partners.

By 2023, North Korea’s trade with China — its largest partner — will recover to pre-pandemic levels of $2.3 billion, according to Beijing, after falling sharply between 2016 and 2018 following the application of sanctions.

The exchange of munitions, according to Basu, is a “mega deal” for Pyongyang, and the expert added that it is an “act of desperation” by Russia, which has been isolated globally because of its decision to invade Pyongyang. .

According to a report published by the Royal United Services Institute (RUSI) in October, the Think tank Pyongyang’s decision to supply munitions to Russia, the world’s oldest defense and security organization, “underscores the serious threat North Korea represents to international security.” Likewise, the document warned, the deal would have “profound consequences for the war in Ukraine and the security dynamics of East Asia.”

Russian President Vladimir Putin thanked North Korea for its support to Russia in its war against Ukraine.Picture: Mikhail Metzel/REUTERS

Defense sector is the engine of economic growth

North Korea’s defense industry is one of the largest sources of employment in the country of 26 million people, employing nearly two million workers. Industry contributes significantly to economic growth along with agriculture.

Although initially supplying only its own military, North Korea has found few foreign customers for its weapons and ammunition, mostly in former Soviet republics or sub-Saharan Africa. Most of the components are imported from other countries under strict sanctions, including China and Iran.

“North Korea has long wanted two things: one is legitimacy as a nation, which it doesn’t have, because the Korean War (1950-1953) has not ended. The second is the ability to maintain a stable military and defense sector. Its sovereignty,” Basu said, adding that the agreement with Russia covers both aspects. Helps to strengthen.

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Despite the importance of the defense sector, Basu expresses doubt that North Korean citizens will benefit from an arms deal with Russia. For years, the country has strictly refused to receive aid from other countries to feed its people, and many suffer from malnutrition and other health problems.

“Ordinary citizens are unlikely to benefit much from this because North Korea is a corrupt autocracy,” the expert stressed. “At the same time, additional income from the defense sector will improve the country’s fiscal capacity, so it will have easier access to food and technology imports.”

The sale of artillery shells to Russia is expected to net the government at least $1 billion. Bloomberg News This week, ballistic missiles ordered by Moscow typically cost several million dollars.

Basu questioned how much of the deal was cash receipts or part of a barter agreement for improved Russian military capabilities and economic assistance.

Ammunition deal leads to closer alliance

The Fitch Solutions economist noted that North Korea, along with Russia, is known for its advanced cyberattack capabilities and that the government trains thousands of hackers. “That may be another area where the two sides can work together in the future,” he said.

However, North Korea’s economic gains will be short-lived if achieved this year A Diplomatic Solution to the Ukraine WarOr if China, Pyongyang’s main ally, weakens its support for both North Korea and Russia.

What does Putin expect with North Korea?

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(cp/rml)

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