NORTH Korea is insulated from the global economy because international trade and investment are tightly controlled by the government and owing also to multilateral sanctions. Central planning tightly regulates the financial and labour markets and the movement of people.
The country faces chronic economic problems. Industrial capital stock is depleting because of under investment, shortages of spare parts, and poor maintenance.
Large-scale military spending has pulled off resources needed for investment and civilian consumption. Industrial and power outputs have stagnated at a fraction of pre-1990 levels.
The economy has been hit by the UN Security Council’s multiple sanctions since 2006 for continuing to develop its nuclear weapons, the latest being in March this year.
Poverty is severe. The nation of 24m is one of the world’s poorest countries and it relies on foreign food aid. South Korea’s central bank estimated North Korea’s GDP at $29 billion in 2014.
The economy has experienced a rebound of sorts. South Korea’s central bank estimates that North Korea’s GDP grew about 1.3 per cent in 2012, 1.1 per cent in 2013 and 1 per cent in 2014.
It had a per-capita income of around $1,224 in 2015. The government has recently announced a five-year (2016-2020) strategy for economic development, its first since 1980s.
Both a private think tank and a Seoul government-run institution have indicated that the country will step up its economic reforms this year. But North Korea conducted its fifth nuclear test on September 9th. This shows that the international sanctions have no impact on North Korea’s ambition.
North Korea’s economy contracted for the first time in five years in 2015, when its GDP reportedly shrank 1.1 per cent. It was the first downturn since 2010 and the sharpest fall since 2007.
Almost all sectors except for construction and services suffered sharp declines, particularly mining and utilities including power and gas. The biggest recent economic setback for North Korea has come from a sharp fall in the price of coal, its main export product, and a slowdown in China, its major trading partner.
According to the Korean central bank estimates, North Korea’s international trade was down 18 per cent at $6.25 billion in 2015 — the first contraction since 2009.
But its demand for raw materials has lessened in 2015 as it moves away from manufacturing towards a more consumer-oriented economy.
Soft Chinese demand for Korean exports and sluggish growth in private consumption and fixed capital formation prompted economic activity to decelerate in the first-quarter.
However, recent data suggest that the economy shifted into a higher gear in the second-quarter. Industrial production has increased substantially and the manufacturing PMI registered mild improvement in June.
These developments suggest that Korean industries have likely left the tough times behind. The government will implement a $17 billion stimulus-package this-year to boost still sluggish economic growth and stabilise financial markets.
The 2017 budget proposal calls for a 3.7pc on-year rise with spending hitting $358bn. The focus is placed on creating more jobs and bolstering growth momentum by overhauling the economy’s structure.
But the government forecasters predict GDP to grow 2.5pc in 2016 and the following year, 2.6pc.
SINCE 2011, Cambodia has continued to grow at an average pace of seven per cent annually. Bolstered by a construction boom over the last few years, It has become one of the fastest-growing economies in Asia and is one of the few countries able to meet its Millennium Development Goals.
Cambodia has attained the lower-middle-income status as of 2015, with per capita gross national income (GNI) reaching $1,070. The garment sector, construction, and services have been the main drivers of the economy with GDP growth at 6.9 per cent in 2015 despite challenging economic circumstances caused by a Chinese economic slowdown and increased regional competitiveness.
Once predominantly driven by its agricultural sector, the industry sector grew 11.7 per cent making it the largest contributor to GDP while garments and footwear accounted for about 70 per cent of total Cambodia exports in 2015.
The economy shows signs of becoming more diversified within and across sectors, including garments and light manufacturing, and in export destinations but the base for growth remains narrow.
Industrial sector is expected to grow by 9.5 per cent in 2017, with focus on higher value added products. Growth is expected to remain strong in 2016, marked by recovering internal demand and dynamic garment exports, slow growth in agriculture and easing construction and tourism activity.
The National Bank of Cambodia is forecasting 7seven per cent and 7.1 per cent growth for this year and the next, buoyed by sustained growth from China and India. The ADB forecasts seven per cent growth in 2016 and 7.1 per cent in 2017.
The IMF has, however, warned that the real estate sector needs to cool as credit growth, at an average of 30 per cent year-on-year, will put growth at risk. The government says credit had already slowed from 34 per cent in 2014 to 30 per cent in 2015 and would drop further to about 22 per cent in 2016.
Published in Dawn, Business & Finance weekly, October 10th, 2016