Wed, Mar 20, 2013 - Page 6 News List

North Korea might have trade surplus, economists warn

AFP, SEOUL

After decades in the red, North Korea may be running a trade surplus, said two economists, warning that the breakthrough makes Pyongyang less vulnerable to pressure on its nuclear program.

Marcus Noland and Stephen Haggard, both North Korea experts at the Washington-based Peterson Institute for International Economics, say their research suggests the North’s current account went into surplus in 2011.

In a post on the institute’s Web site yesterday, they said the improvement had come “largely on the back of expanding trade with China” and that research also pointed to a surplus last year.

The findings will surprise many given the North’s reputation as an economic wreck caused by decades of mismanagement and ruinous military spending.

While acknowledging “significant uncertainty” in calculating the North’s account balance, Noland and Haggard said their conclusion was “bad news” for North Koreans and the rest of the world.

“It is bad news for North Korea because as a relatively poor country, they should be running a current account deficit, importing capital and expanding productive capacity for future growth,” Noland said.

Instead, they are exporting capital, presumably to fund the consumption habits of the ruling elite, Noland said.

“It is also bad news for us. If North Korea is running current account surpluses, then they are less vulnerable to foreign pressure,” he added.

The UN tightened sanctions on Pyongyang after its third nuclear test last month.

The economists’ median estimate shows the account in deficit throughout the famine-tainted 1990s as well as the following decade, before posting a surplus of about US$250 million in 2011.

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