N. Korea's economy is booming — and that could be bad news for denuclearization

WSJ: arms deals with Russia, Chinese support drive growth

Taxi apps, QR payments, Chinese EVs now common in Pyongyang

Bank of Korea estimates North's economy grew 3.7% last year, fastest in 8 years

Economic recovery may weaken US leverage in denuclearization talks

Debriefing: The Korea Herald's international desk breaks down the hidden stories behind the hottest global issues. We want to hear from you — leave your questions in the comments.

A woman makes a phone call from a public telephone booth in Pyongyang, North Korea. [TASS]

North Korea is enjoying unexpected economic growth despite sweeping international sanctions, the Wall Street Journal reported. Arms deals with Russia, expanding trade with China and sanction-busting imports have driven the recovery, analysts say, giving the Kim Jong-un regime its strongest economic footing since coming to power.

The WSJ on Sunday called North Korea "the world's most surprising economic success story," shining a spotlight on the changes taking shape in and around Pyongyang.

The paper said the North Korean economy has been growing at a pace rarely seen in recent years. Key drivers include weapons sales to Russia, the deployment of troops to support Moscow's war effort, Chinese financial and material support, and imports of energy, components and raw materials routed around international sanctions.

The Bank of Korea estimates the North Korean economy grew 3.7 percent last year — the highest growth rate in eight years.

Stephan Haggard, a North Korea economy specialist at the University of California San Diego, said the North Korean economy is "in the best shape it's been since Kim Jong-un took power" and is likely in better condition than at any point during the Kim Jong-il era.

Russian President Vladimir Putin, left, and North Korean leader Kim Jong-un hold summit talks on June 19, 2024. [AP]

Analysts point to North Korea's deepening ties with Russia as the single biggest factor behind the recovery. Pyongyang has supplied ammunition and weapons for Russia's war in Ukraine and dispatched more than 15,000 troops. Seoul's Institute for National Security Strategy estimates North Korea has earned billions of dollars through those arms sales.

From the summer of 2023 through the end of last year, North Korea earned more than $10 billion from weapons supplies to Russia — a substantial cash injection for an economy whose gross domestic product is estimated at around $27 billion.

Chinese flags line a street in Pyongyang on Monday, as Chinese President Xi Jinping arrived for his first official visit to North Korea since 2019. [AFP]

Trade with China is also expanding. Monthly North Korea-China trade volumes recently hit their highest level in eight years. Chinese consumer brands continue to operate in the North Korean market despite concerns over sanctions violations, and the smart devices underpinning North Korea's nascent digital economy rely almost entirely on Chinese-made components.

North Korean hacker groups are also playing a significant role in financing the regime. The international community and cybersecurity firms believe Pyongyang has secured billions of dollars through cryptocurrency exchange hacks and other cyberattacks.

China and Russia, both permanent members of the UN Security Council, have consistently pushed to ease sanctions on North Korea. Kim Jong-un has moved to strengthen ties with China, Russia and Belarus, building a network of diplomatic allies.

The changes in Pyongyang are particularly striking. Rowan Beard, an Australian tour operator who recently visited North Korea, said he watched a local guide summon a taxi using a smartphone app called Samhung. Riders could track the vehicle's location in real time.

"Before, you'd wait a long time to get a taxi, but now the car arrives within minutes," Beard said. "It was really surprising."

Restaurants serving wood-fired pizza and chicken wings have appeared in Pyongyang, and mobile payments via QR code are now available. Chinese electric vehicles ply the streets, and the city has pet shops, internet gaming cafes and even a BMW dealership, the WSJ reported.

A construction boom is also underway. North Korea added 10,000 new housing units in Pyongyang alone last year — more than Los Angeles or Chicago built in the same period, the WSJ reported.

At a Workers' Party congress in February, Kim Jong-un claimed credit for the economic gains, saying they had been achieved despite what he called a "barbaric blockade" led by the United States.

Street lights illuminate a waterfront in Pyongyang, North Korea. [TASS]

North Korea does not publish official economic statistics, but South Korean and overseas research institutions say the signs of improvement are real. Domestic research bodies analyzing satellite imagery found a sharp rise in the use of oil storage facilities and higher parking lot occupancy rates across the country. Nighttime light intensity has also increased roughly threefold compared with five years ago.

The WSJ noted that Pyongyang residents can now order food, make payments and even purchase medicine through smartphone apps, concluding that "the North Korean regime has never been richer."

Outside Pyongyang, however, conditions remain dire. The UN estimates that nearly half of North Korea's roughly 26 million people suffer from malnutrition. The country's GDP is still less than 1 percent of that of the United States.

Experts say the economic recovery is likely to reduce the prospects for denuclearization talks with the United States. Washington has long used the promise of sanctions relief and economic support as negotiating leverage, but the stronger North Korea's economy becomes, the less incentive Pyongyang has to abandon its nuclear program.

mokiya@heraldcorp.com