Kim Jong Un of North Korea is likely to seek new impetus to spur growth at a ruling party convention in January after the pandemic added to the pain of sanctions that leave him with a smaller economy than the one he took over nine years ago.
After closing its borders in response to Covid-19, North Korea’s gross domestic product likely fell 8.5% in 2020, according to a projection by Fitch Solutions. It would be the biggest contraction in data since 1990, and would leave the economy about 9% smaller than when Kim took power with the promise of improving people’s living standards.
The numbers indicate an accelerated need for Kim to come up with a new five-year economic plan to survive the crisis and ensure he maintains a firm grip on power. On Tuesday, Kim reviewed preparations for the convention to be held in early January, state media reported.
Kim could hint at changes to the pipeline in an upcoming New Years address or in a report from Tuesday’s meeting that will be scrutinized for clues to his stance on the Biden administration and the measures that it might take to consolidate the economy.
“Kim Jong Un faces his toughest test on how to improve economic performance and management,” said Bradley Babson, a former World Bank economist who now sits on the Korean Economic Institute’s advisory board from America. “It is too early for North Korea to read how the Biden administration will relate to this situation, but the party convention at the end of January will be a critical moment that will set the stage for at least the next two years. “
Kim has already made a rare admission that economic policy was insufficient when he replaced his chief economic officer over the summer. A campaign to complete a showcase hospital in central Pyongyang in time for the ruling party’s 75th anniversary in October also failed, highlighting tensions in the planned economy.
Among the measures Kim might consider at Congress to regain momentum are a gradual reopening of borders, a return to some small-scale market liberalization reforms, and subsequent resort development, although much will depend on the trajectory of the pandemic.
North Korea says it has no cases of the coronavirus – a claim questioned by U.S. and Japanese officials – but has nonetheless taken drastic quarantine measures that have exacerbated the regime’s economic woes.
Its border remains closed with China, which is by far North Korea’s largest economic partner. Trade between neighbors has likely fallen an additional 80% this year, according to the Seoul-based Korea International Trade Association.
Popular exports like wigs, shoes and watches fell the most, while trade shifted to natural resources like graphite, which poses less of a risk of spreading the virus, according to KITA.
It is also unclear how Kim might pursue the search for renewed sources of aid or a relaxation of sanctions.
If Kim makes an offer for talks, it could start with South Korea. Trade between the two neighbors had already bottomed out before the pandemic, following the closure of a joint industrial zone in Kaesong that contributed $ 2.7 billion in trade at its peak in 2015.
The closure of Kaesong in 2016 came in a pivotal year that saw Pyongyang perform two nuclear tests and the start of an economy slippage after total growth of 6.9% in the first five years. by Kim.
North-South relations hit a new low in June when Kim blew up a liaison office after criticizing Seoul for partnering with the Trump administration on sanctions. Still, a call from Seoul Unification Minister Lee In-young to share Covid vaccines suggests the South is ready to continue listening.
The measures announced at the congress will only be partially effective without progress in reviving trade with China and easing nuclear tensions with the United States, according to Anwita Basu, analyst for Fitch.
With President-elect Joe Biden less willing to embrace President Donald Trump’s type of high-level and face-to-face diplomacy, North Korea is likely to set the bar high for any concessions on its nuclear weapons while leaving the door open. to the talks.
“North Korea will not give up its nuclear weapons entirely, but it may offer a freeze to seek a long-term solution,” said Hong Soon-jick, North Korean researcher at the Seoul National University Asia Center. “And as long as he stays away from something provocative to gain attention, his chances of getting outside economic aid might improve.”