Key Takeaways:

- During President Vladimir Putin’s visit to Pyongyang in June 2024, it was revealed that bilateral trade had already grown by 54% year-on-year in the first five months of 2024.

- The People’s Economic Planning Law significantly reinforced state control over the processes of economic planning, implementation, and ex post review.

- This shift reflects a strategic policy choice to prioritize regime stability and control over economic growth.

I. A Recovery in the North Korean Economy

In 2024, North Korea’s economy expanded by 3.7%, marking a continued recovery following the contraction during the 2020-2022 border closures. The turnaround observed since 2023 can be attributed to three main factors.

A key factor underpinning this growth appears to be an improvement in the external environment, driven by stronger economic ties with Russia. According to Russian Presidential Aide Yury Ushakov, Russia-North Korea trade reached $34.4 million in 2023, a ninefold increase from the previous year. During President Vladimir Putin’s visit to Pyongyang in June 2024, it was revealed that bilateral trade had already grown by 54% year-on-year in the first five months of 2024. With likely further expansion in the second half of the year, total trade volume is estimated to have reached its highest level since Kim Jong Un came to power.

Deepening ties with Russia may also dilute China’s dominance in North Korea’s external trade, potentially reducing China’s share to below 90%. This shift is particularly significant for food and energy supplies, as expanded ties with Russia appear to have helped mitigate shortfalls in these sectors. A decline in food imports from China in 2024 suggests that Russian imports played a compensatory role. While trade with Russia cannot fully substitute for trade with China, it may have offered targeted relief in key areas.

North Korea’s economic recovery in 2023 and continued resilience through 2024 can be attributed in part to its deepening economic cooperation with Russia. Although significant structural challenges persist, the erosion of sanctions and greater trade diversification suggest that a degree of short-term economic stability may be maintained in the near term.

Despite severe flooding in July 2024, agricultural production remained relatively stable. Although the floods drew considerable media attention due to extensive damage in border regions, the actual impact on cultivated land was limited.

According to the Rural Development Administration (2024), North Korea’s food crop production in 2024 was estimated at 4.78 million tons, slightly below the 4.82 million tons recorded in 2023, yet above the average level. Favorable weather conditions, with the exception of the July-September period, likely offset the negative effects of the summer rains.

Several industries also demonstrated measurable progress in 2024. At the 11th Plenary Meeting of the 8th Central Committee, officials highlighted major achievements, including the modernization of the Kŭmsŏng Tractor Factory and the construction of an energy-efficient oxygen blast furnace at the Hwanghae Iron and Steel Complex.

Completion rates were reported for 12 key sectors, with six—rolled steel, nitrogen fertilizer, coal, rail freight transport, grain, and housing construction—recording higher completion levels than in 2023. Two sectors (cement and textiles) remained unchanged, while three (nonferrous metals, timber, and seafood) showed declines. Housing construction was also cited as a notable achievement, though no specific figures were released. As Rodong Sinmun serves as North Korea’s official state media, these reports may be subject to exaggeration. Nevertheless, they provide valuable indications of sectoral performance trends and areas of relative strength within the industrial sector.

Sectors such as metals, machinery, construction, and mining likely recorded gains, while food processing and services continued to lag. With 2024 marking the fourth year of the Five-Year Plan, policy efforts appear to have focused on maintenance and reinforcement, the active operation of defense-related factories, and enhancements in key industrial and agricultural targets, all of which likely contributed to these outcomes. Overall, North Korea’s industrial output in 2024 likely remained at or slightly above the 2023 level, reflecting limited but sustained recovery momentum.

Performance of the 12 Key Objectives: Comparison Between 2023 and 2024 (Unit: %)

Source: Jonkyu LEE(2025)

II. Limits of Recent Recovery

However, it would be inaccurate to conclude that the North Korean economy is characterized solely by positive developments. On the contrary, a number of structural and policy-related concerns persist, as discussed below.

A key recent feature of the North Korean economy is the authorities’ effort to strengthen the formal sector by tightening state control over informal economic activities. In parallel, official discourse has increasingly emphasized the central role of the Cabinet in economic management. The Cabinet is portrayed as the core institution responsible for organizing and guiding economic activities. Within this framework, economic activities conducted outside the official sector are not merely discouraged but are at times explicitly condemned as acts of treason.

These ideological and institutional shifts were accompanied by corresponding legal measures. Notably, the People’s Economic Planning Law significantly reinforced state control over the processes of economic planning, implementation, and ex post review.

A series of policy measures has been introduced, all oriented toward strengthening the formal sector. These measures include increases in official prices and wages, tighter regulation of trade, commercial activities, and food distribution, as well as efforts to extract greater fiscal resources from the informal sector. In addition, the authorities imposed a ban on foreign-currency transactions in domestic markets.

What, then, were the outcomes of these measures? Available evidence suggests that they were followed by a sharp depreciation of the domestic currency. The exchange rate began to rise markedly in the second half of 2024 and approached nearly 40,000 won by 2025.

Although overall price levels have risen more slowly than the exchange rate, recent data (Oct 2025) indicate noticeable increases in the prices of rice, gasoline, and diesel, with the notable exception of corn. The precise factors underlying this recent price increase remain unclear, underscoring the need for close monitoring in the period ahead.

The regime’s emphasis on strengthening the official sector is also expected to persist. During the most recent Supreme People’s Assembly session, the leadership reaffirmed this stance, declaring that “under the principle of the Cabinet-responsibility and Cabinet-centered system, all sectors and units must unconditionally obey and implement Cabinet decisions and directives.” This statement underscores a continuation of last year’s policy orientation, aimed at centralizing decision-making authority and reinforcing the Cabinet’s leading role in economic management.

A simplified distinction between the formal and informal sector helps clarify the regime’s intention to redirect resources from the population to the state since the border closure. This dynamic is illustrated in the figure below, which shows that if the total economy is assumed to equal 100, with the official sector accounting for 25%, its share amounts to 25. North Korea’s current objective is to expand the official sector’s share to 40%, even if the overall economy contracts to 81, thereby increasing the state’s portion to 32.4.

This shift reflects a strategic policy choice to prioritize regime stability and control over economic growth. Such reallocation, however, is unlikely to benefit the broader economy, as it would weaken market mechanisms, distort distribution and pricing structures, and reduce overall efficiency. More critically, it risks undermining economic dynamism by further constraining market autonomy. In essence, this approach suggests that the regime is prepared to absorb the costs of suppressing the informal sector, which had previously served as a key engine of economic activity during the early years of Kim Jong Un’s leadership.

North Korea's Policy of Strengthening the Official Sector and Its Impact (Examples)

Source: Jongkyu LEE(2025)