The North Korean economy is experiencing growing instability due to a sharp increase in the exchange rate, with food shortages persisting and uncertain prospects for 2025.
In 2024, North Korea underwent changes such as strengthening economic cooperation with Russia, a surge in the exchange rate, and the implementation of policies to revitalize regional economies, showing signs of recovery. However, assessments suggest that these strategies remain focused on crisis management rather than substantial economic growth.
According to the January 2025 North Korea Economic Review published by the Korea Development Institute (KDI), North Korea significantly strengthened its cooperation with Russia in 2024 in an attempt to reduce its dependence on China. Following the Putin-Kim Jong-un summit in June 2024, the two countries signed a comprehensive strategic partnership agreement, which led to increased food and energy support from Russia.
KDI’s analysis indicates that increased trade with Russia had a positive impact on the North Korean economy. Despite international sanctions, North Korea sought to secure foreign currency by providing weapons and labor in exchange for refined oil and food support. However, it is uncertain whether this cooperation will lead to sustained economic growth, as China still holds an overwhelming share of North Korea’s foreign trade. Moreover, North Korea’s trade with China declined by 3.7% in 2024, maintaining instability in its trade structure.
Furthermore, the North Korean won experienced a drastic increase in exchange rates in 2024, contributing to economic instability. The won-dollar exchange rate, which had been stable since Kim Jong-un’s rise to power, began to rise in the second half of 2023, exceeding 20,000 won by the end of 2024. The North Korean government’s policies to control foreign exchange transactions and maintain an official exchange rate have been ineffective as market demand-supply imbalances intensified, leading to skyrocketing exchange rates. The increase in exchange rates resulted in a rise in the cost of imports for essential goods, triggering inflation in North Korea. As of the end of 2024, the price growth rates for major items were 72.5% for rice, 69.4% for corn, 104.0% for pork, and 73.7% for gasoline. The KDI warns that if exchange rate instability persists, it could severely constrain economic growth.
In January 2024, North Korea announced the “20×10 Policy for Local Development,” aiming to build local industrial plants in 20 cities and counties annually to bridge the economic gap between Pyongyang and other regions. By September 2024, North Korea claimed that 90% of the local plant construction in 20 cities and counties was completed. However, questions about the policy’s effectiveness have arisen, with external satellite imagery analyses showing that some plants remained inactive or produced minimal output post-construction. Additionally, soaring exchange rates have increased the cost of procuring imported construction materials, raising doubts about the sustainability of the project.
The food shortage in North Korea remains critical. In 2024, the production of food crops slightly decreased to 4.78 million tons from 4.82 million tons in 2023. Although North Korea has secured some food via cooperation with Russia, overall supply has decreased, potentially exacerbating the food crisis. Experts suggest that North Korea is focusing its foreign trade policy on “preventing a large-scale humanitarian crisis,” and that further trade expansion requires improved relations with China. However, the delayed recovery in North Korea-China trade makes finding a fundamental breakthrough unlikely.
As 2025 marks the conclusion of North Korea’s five-year economic plan, the government may emphasize economic achievements. However, the continuous surge in exchange rates, food shortages, and external economic uncertainties suggest a low likelihood of substantial economic recovery. It is crucial to evaluate the long-term impact of intensified cooperation with Russia on the North Korean economy. Should North Korea continue receiving economic support in exchange for military cooperation, international sanctions might intensify, limiting expanded trade with China.
In 2025, the key variables for North Korea’s economy will include the continuation of North Korea-Russia cooperation, the potential stabilization of the exchange rate, and the speed of trade recovery with China. It remains to be seen whether North Korea can simultaneously achieve economic recovery and sustainability.