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It is difficult to assess the state of the North Korean economy, but we have increasing anecdotal evidence from defectors with respect to the market and a somewhat firmer understanding of the country’s foreign economic relations. On the domestic front, there is increasing evidence that market activities are scaling up to include real estate, finance and larger-scale wholesale and transport activities. It is almost certain that state actors are deeply involved in this process, either as actors themselves or as providers of protection through corruption. This market economy has implications for reform going forward, including with respect to fiscal policy and possible developments at the upcoming Party Congress.
On the external front, North Korea’s foreign economic relations have narrowed substantially and with the closure of Kaesong are now focused almost entirely on China. The result is that if UN Security Council 2270 were vigorously enforced, the country could experience substantial distress in the form of a balance-of-payments crisis. Chinese strategy appears to be to exercise some discretion with respect to the sanctions in order to restart the Six Party Talks.
In this podscast, I speculate about the North Korean economy, including my forecast that North Korea is vulnerable to a balance of payments crisis, and how sanctions might affect negotiations on the nuclear question.
