North Korea economy shrinks for first time in 5 years: South's central bank

A giant screen broadcasts news in a public square in Pyongyang, on July 20, 2016.
A giant screen broadcasts news in a public square in Pyongyang, on July 20, 2016.PHOTO: AFP

SEOUL (AFP) - North Korea's economy contracted for the first time in five years in 2015, the South's central bank said Friday (July 22), undermining leader Kim Jong Un's stated policy of simultaneous military and economic development.

The isolated North's gross domestic product appeared to have shrunk 1.1 per cent last year - the first downturn since 2010 and the sharpest fall since 2007, the Bank of Korea said.

The figure was based on information compiled from state and private organisations, as Pyongyang does not make public its official economic data.

According to the estimate, almost all sectors except for construction and services suffered sharp declines, particularly mining and utilities including power and gas.

The mining sector contracted 2.6 per cent on waning production of magnesite and iron ore, while the utilities industry dived 13 per cent as a drought sapped hydropower production, the BOK said.

The downturn came during a period of rapid development for North Korea's nuclear weapons programme - topped by a fourth atomic test in January that resulted in a substantial tightening of international sanctions on Pyongyang.

Kim Jong-Un has repeatedly stated that economic growth enjoys the same priority as military development, but the BOK's assessment suggests the dual policy is well out of sync.

The tougher UN sanctions imposed in March were backed by North Korea's main ally, China, which has continued to provide an economic lifeline to its maverick neighbour, despite increasing frustration in Beijing with its nuclear ambitions.

China accounted for 91 per cent of North Korea's trade in 2015, followed by Russia, India and Thailand, a statement from South Korea's Trade-Investment Promotion Agency said in June.

According to the BOK estimate, North Korea's international trade was down 18 per cent at US$6.25 billion in 2015 - the first contraction since 2009.