- GDP (PPP):
- $40.0 billion
- -4.1% growth
- -0.8% 5-year compound annual growth
- $1,700 per capita
- Inflation (CPI):
- FDI Inflow:
North Korea’s economic freedom score is 4.2, making its economy the 180th freest in the 2020 Index. Its overall score has decreased by 1.7 points due to drops in the scores0 for property rights and government integrity. North Korea is ranked 42nd among 42 countries in the Asia–Pacific region, and its overall score is the lowest in the world.
The economy of North Korea is severely repressed and has been the lowest-ranked in the world since the inception of the Index in 1995. GDP growth is estimated to have been negative in 2018 and very weak during the previous four years.
Beset by chronic structural problems in one of the world’s most centrally commanded and least open economies, North Korea’s despotic military regime has tolerated modest development of markets and limited private entrepreneurship in order to boost government revenue. In a country that lacks even the most basic policy infrastructure of a free-market economy, economic freedom is nearly impossible.
Founding President Kim Il-sung’s family has ruled the Democratic People’s Republic of Korea with an iron fist since 1948. After years of self-imposed isolation, Kim Il-sung’s grandson, Kim Jong-un, burst onto the international diplomatic stage in 2018, initiating summits with South Korea, China, and the United States. Kim’s offer to discuss denuclearization raised hopes for a long-sought diplomatic solution, but they were subsequently dashed when Pyongyang made it clear that it refuses to disarm unilaterally as required under U.N. resolutions. Despite repeated attempts at engagement, no progress toward denuclearization has been made. After decades of economic mismanagement and resource misallocation, the DPRK has faced chronic food shortages since the mid-1990s.
Almost all property belongs to the state. Government control extends even to chattel property. There is no functioning judiciary, and the rule of law is weak. Corruption and bribery are rampant throughout the government, and state institutions are opaque. The ruling Workers’ Party, the Korean People’s Army, and members of the cabinet run all companies earning foreign exchange.
No effective tax system is in place. The government commands and dictates almost every part of the economy and directs all significant economic activity. The government sets production levels for most products, and state-owned industries account for nearly all of North Korea’s GDP. Large military spending further drains scarce resources. Despite the state’s attempts to crack down on them, black markets have grown.
North Korea is a strictly controlled autocratic state in which the regime dominates all business activities. The regime views all business activities through the lens of maintaining political control and holds an iron grip on labor activity, preventing the emergence of any semblance of a labor market. The monetary regime is completely controlled, leading to price distortions, while China continues its extensive subsidies of the country’s food and energy.
Formal trade is restricted and minimal. The stricter enforcement of U.N. sanctions had an intended impact on North Korea’s external sector. China continues to be the DPRK’s main trading partner. Inter-Korean trade remains constrained. Limited foreign participation is allowed in the economy through special economic zones where investment is approved on a case-by-case basis. The closed financial sector is tightly controlled by the state.