The hermit kingdom’s economic outlook

Recent negotiations between North Korea’s Kim Jong Un and US President Donald Trump have provided a glimmer of hope for the hermit kingdom’s economic outlook. Markets are now watching to see whether the North Korean leader follows through with his pledge to denuclearize.

The next step will be policy reforms, which will open North Korea’s economy to foreign investors. Credit Suisse analyst Trang Thuy Le estimates North Korea could become a $100 billion economy within 10 years if it takes a path towards modernization.

And Le cited another interesting fact about North Korea: some industry experts speculate that it may be sitting on a vast amount of untapped natural resources. “South Korea’s state-owned mining company Korea Resources estimates that North Korea’s mineral reserves — coal, iron ore, zinc, lead, copper and rare minerals — could be worth in excess of $6 trillion,” Le said.

That amounts to 190 times North Korea’s 2016 GDP of around $32 billion.

To gauge how North Korea’s growth projections would look if it opens its economy, Le compared it to three other countries that went through a similar modernization process. “We take the experiences of South Korea in the 1970’s, China in the early 1990’s and Vietnam in the late 1990’s as guides to the potential for North Korean growth to rise,” she said.

Based on the experiences of those countries, Le said North Korea could generate real GDP growth of 7-8% per year in local currency terms. At that rate, the economy would grow to around $100 billion in size, which would see per capita income would rise from $1,258 to around $4,000.

[Business Insider]

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