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North Korea's economy shrank most in 23 years amid COVID-19, sanctions - South Korea central bank

North Korea's economy suffered its biggest contraction in 23 years in 2020 as it was battered by continued U.N. sanctions, COVID-19 lockdown measures and bad weather, South Korea's central bank said on Friday.

North Korea's economy shrank most in 23 years amid COVID-19, sanctions - South Korea central bank

A local resident cycles past a mural depicting former North Korean leaders Kim Il Sung and Kim Jong Il in the North Korean port of Rajin July 18, 2014. REUTERS/Yuri Maltsev/Files

SEOUL: North Korea's economy suffered its biggest contraction in 23 years in 2020 as it was battered by continued U.N. sanctions, COVID-19 lockdown measures and bad weather, South Korea's central bank said on Friday.

Gross domestic product (GDP) in the isolated economy contracted 4.5per cent last year in real terms, the Bank of Korea (BOK) said on Friday, the worst since 1997 and reversing a 0.4per cent growth in 2019, the first expansion in three years.

"Along with the continued intense U.N. sanctions, North Korea's lockdown measures to fight the coronavirus pandemic ... and worsened weather conditions such as heavy rains and typhoons were the main drivers to the contraction," a BOK official told reporters.

"North Korea's COVID-19 measures included border blockades, 30-day quarantine for those who showed (COVID-19) symptoms, a ban on domestic travels and restriction on entry to Pyongyang," the official said, adding that these moves greatly impacted the manufacturing industry and the services sector.

Estimates for North Korean economic data by the BOK are considered the most reliable as the isolated nation does not disclose any statistics on its economy.

While North Korea has not officially confirmed any virus cases, its leader Kim Jong Un late last month said the failure to implement measures to tackle the coronavirus had caused a "great crisis".

In June, Kim said the country was struggling with a "tense" food situation, citing the pandemic and last year's typhoons.

A South Korean government source with close knowledge of the matter told Reuters this week that North Korea faces its worst economic crisis since a 1990s famine killed as many as 3 million.

But the source said few deaths have been reported from hunger in the latest crisis, thanks to Chinese aid and the release of military and emergency reserves.

North Korea closed borders and halted trade with China, its biggest economic lifeline, after the pandemic erupted.

The source said the two countries are expected to resume trade as early as August via cargo train services after scrapping plans to do so in April due chiefly to concerns over more contagious variants of the coronavirus.

The breakdown of Friday's data showed that industrial output, which accounts for 28per cent of the North Korean economy, decreased 5.9per cent, while output from agriculture, forestry and fisheries fell 7.6per cent.

The services sector, which accounts for a third of the economy, also shrank 4.0per cent.

The BOK has been publishing its estimates since 1991, based on information from various sources including the South's intelligence and foreign trading agencies and unification ministry data.

Meanwhile, North Korea's international trade volume plunged 73.4per cent to US$0.86 billion last year, as exports of the non-sanctioned items such as watches and wigs were estimated to have decreased 86.3per cent and 92.7per cent, respectively, on COVID-19 lockdown measures.

"Trade volume which took up about 21.9per cent of the GDP in 2016 ... was sharply reduced to 2.9per cent in 2020 after the COVID-19 lockdown impact added to the economic sanctions," the BOK official said.

(Reporting by Joori Roh; Editing by Raju Gopalakrishnan)

Source: Reuters

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