Pyongyang’s economy faces possible stagnation

Tongil Market in Pyongyang
Tongil Market in Pyongyang. Image: Daily NK

North Korean sources are reporting that there has been a drastic reduction in the number of merchants and items available for purchase in Pyongyang, amid reports that the country’s overall economy is facing increasing problems.

“Merchants are have a difficult time even in some Pyongyang markets,” said a Pyongyang-based source on April 17. “They can’t sell anything, so they increasingly can’t pay their market fees.”

Merchants are required to pay 1,000 to 3,000 KPW in fees each day, but the source added that even earning this amount of money is hard for them. She pointed to the “Red Street 2-dong Market” in Pyongyang’s Potonggang District as an example.

“Business is bad, so many stalls are increasingly empty,” she said. “There’s fewer than 1,000 stalls actually doing business now.”

The Korea Institute for National Unification (KINU) found in 2016 that there were 2,178 stalls in that same market. The source’s report suggests that only half of the stalls are continuing to do business.

Changes in Pyongyang’s markets are also evident in the goods being offered for sale. Most of what’s available for purchase is limited to food and beverages, standing in stark contrast to the range of products available in the past which included clothes, cigarettes, manufactured products and even electronic goods.

“Clothes and electronic goods don’t really sell nowadays,” said the source. “More than half of the merchants just sell food and beverages. That stuff sells because people need them, but it’s hard to sell much else because people just don’t have money to spare.”

There has also been a fall in the number of products entering Pyongyang recently, a separate source in Pyongyang told Daily NK. “Compared to last year, the numbers have fallen a great deal. It’s like the distribution sector has been suspended […] There are taxis and personal cars out and about, but few trucks.”

“There haven’t been many new products entering Pyongyang for a long time. Areas on the Sino-North Korean border are in better shape than Pyongyang. The effects of the sanctions are particularly bad here.”

The changes in what’s being sold at the “Red Street 2-dong Market,” the numbers of active merchant stalls, and the fall in distribution of goods suggests that North Korea’s economy is facing stagnation.

Market prices, however, have remained steady, with one kilogram of rice selling for 4,200 to 4,300 KPW in early April. The cheapest rice goes for 3,800 KPW. Corn goes for 1,500 KPW while one block of tofu goes for 1,000 KPW. Pork is sold at 15,000 KPW, while one chicken goes for 17,000 KPW.

North Korean commodity prices appeared to rise as the country experienced the perennial farm hardship period, but recently prices have remained similar to last year or even fallen.

“Saying that prices in North Korea are stable just shows ignorance of the economic system here,” an additional source in Pyongyang told Daily NK.

“Most people buy food, and before the sanctions people could buy rice even if prices were high. Since the sanctions came into effect, people are having trouble coming up with the money to even buy rice. Rice sellers aren’t selling as much as in the past so rice prices have fallen.”

The fall in rice prices is likely due to the fall in purchasing power, experts say. Lee Seog Ki, a senior research fellow at the Korea Institute for Industrial Economics & Trade (KIET) notes that, “the fall in income may have led prices to stabilize, and the increase in demand for corn, which is cheaper than rice, may have led to rice prices staying the same.”

“Recently, people are eating more corn than rice,” said the initial Pyongyang-based source. “They are using corn as a replacement because it’s cheaper.”

Kim Byong Yon, a professor of economics at Seoul National University, told Daily NK that that the fall in rice prices suggests a decrease in purchasing power.

“Rice is a must-have for people, so it’s the last product to feel the effect of sanctions or other external factors,” Kim said. “Clothes, electronics, cosmetics and other things have fallen in sales while foodstuffs have seen a rise. This suggests they were impacted by external factors.”

Analysts also note that the North Korean government’s active economic policies have stabilized prices. The authorities are using agriculture departments and business committees to prevent rises in grain prices.

The sources worry, however, that even Pyongyang may face a lack of food as government supplies of rations continue to fall.

Rations were not provided in November last year. They were provided during select holidays including Kim Jong Suk’s birthday in December, Kim Jong Il’s birthday in February and Kim Il Sung’s birthday in mid-April, but not at all in March. Rations to people living in Pyongyang’s Hyongjaesan District and Sungho District are nonexistent, and even those in the central districts of Pyongyang like Taedonggang, Potonggang and Mangyongdae face unreliable supplies of rations.

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