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[Outlook on Global Affairs 2026-Special Issue No.3] Assessment of the North Korean Economy in 2025 and Outlook for 2026 |
| December 11, 2025 |
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Eun-ju ChoiResearch Fellow, Sejong Institute | ej0717@sejong.org
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Since the border closures imposed during the COVID-19 pandemic in 2020, North Korea has gradually begun to emerge from a prolonged period of economic isolation. In this process, Pyongyang has sought to leverage the reshaped international environment—marked by intensified U.S.–China strategic competition and the protracted Russia–Ukraine war—as an opportunity to lay the groundwork for regime stability and for economic recovery and development. In particular, ahead of the 9th Congress of the Workers’ Party of Korea, expected to be convened in early 2026, the North Korean leadership is placing strong emphasis on highlighting its economic performance over the past five years. How the North Korean economy is assessed at this juncture therefore serves as a starting point for gauging the future direction of North Korea’s economic policy beyond 2026 and the associated domestic and external strategies.
Recent sources commonly note that the North Korean economy has moved beyond the sharp contraction that followed the COVID-19 pandemic and is now showing signs of a gradual recovery. In 2025, it is necessary to assess the level at which this recovery is unfolding, as well as the changes that residents are actually experiencing in terms of prices, exchange rates, and income distribution. At the same time, 2025 marks the final year of the Five-Year Plan for National Economic Development announced in 2021 and the period leading into the 9th Congress of the Workers’ Party of Korea in 2026. It is therefore important to evaluate what outcomes the various economic policies emphasized by the Kim Jong Un regime have produced, and what constraints and opportunities these results may create for policies pursued after 2026.
This paper seeks to identify the key characteristics of the North Korean economy in 2025 by examining the domestic and external environment as well as sector-by-sector performance and limitations. Based on this analysis, it further presents an outlook for the North Korean economy in 2026 and draws implications for the South Korean government’s policy toward North Korea. -
In 2025, North Korea’s economic management focused on completing the objectives set out in the 2021–2025 Five-Year Plan for National Economic Development, while placing particular emphasis on the “20×10 Regional Development Policy,” the construction of projects in Pyongyang and regional areas, and the agricultural sector, all of which the authorities have actively promoted in recent years. North Korea in 2025 continued to identify core economic tasks as increasing agricultural output, expanding the supply of basic consumer goods, and tangibly improving living conditions through the construction of local industrial facilities, housing, hospitals, and schools. In this sense, even in the final year of the planning period (2021–2025), the regime appears to be managing the recovery by maintaining and deepening existing policy orientations.
According to data released by the Bank of Korea in August 2025, the North Korean economy has shown signs of recovery over the past two years. North Korea is estimated to have recorded growth of 3.1% in 2023 and 3.7% in 2024, achieving growth in the 3% range for two consecutive years. Given that the broader structural environment—including external sanctions, the prolonged Russia–Ukraine war, and U.S.–China competition—has not changed significantly, this recovery trend is assessed as likely to continue broadly into 2025.1)
The primary drivers of North Korea’s economic recovery have been manufacturing and construction. According to Bank of Korea estimates, North Korea’s manufacturing sector grew by 7.0% in 2024 compared to the previous year, with heavy industry in particular increasing by 10.7%. The prolonged Russia–Ukraine war and the resulting expansion of arms exports to Russia are assessed to have significantly raised operating rates at North Korean munitions factories. Against this backdrop, increased output of metals, machinery, and chemical products is analyzed to have driven overall GDP growth. As this growth structure does not appear to have changed substantially in 2025, the combination of defense-related heavy industry and large-scale construction projects is assessed to have continued to underpin North Korea’s recovery during 2025.
Meanwhile, this recovery trajectory is being supported by structural projects promoted by the central authorities, particularly the 20×10 Regional Development Policy, construction initiatives in Pyongyang and rural areas, and concentrated investment in the agricultural sector. The government-led 20×10 Regional Development Policy is a plan to construct food and daily necessities factories, as well as housing and public facilities, in 20 cities and counties each year over a 10-year period, with the stated objectives of improving living conditions in provincial areas and strengthening the foundations of regional economic self-reliance. In the first year of implementation in 2024, local industrial plants were reportedly completed in 20 regions, and in 2025 second-year target areas, including Kangdong County, were selected and are under development. Reports indicate that the first group of facilities has begun operations, which is assessed to be expanding the local supply base for essential consumer goods.
Notable projects in the construction sector include the completion of Kangdong County Hospital, the construction of the Sinuiju Combined Greenhouse Farm and the completion and pilot operation of the Wonsan–Kalma Coastal Tourist Area. Kangdong County Hospital is the first hospital constructed in a locality designated under the 20×10 Regional Development Policy and is presented as a standard model for city and county hospital construction integrated with North Korea’s regional development strategy, with the intent that it be replicated across provinces and counties. Whereas the Pyongyang General Hospital has been framed as a symbol of the capital, Kangdong County Hospital is positioned as a representative case of improving provincial medical infrastructure, marking an intersection between Kim Jong Un’s “public health revolution” narrative and the regional development strategy.
The Sinuiju Combined Greenhouse Farm is intended to serve as a food and vegetable supply base for the border city along the Yalu River and as a project that could potentially be used in the future as a hub for agricultural cooperation in the North Korea–China border region. Kim Jong Un visited the construction site on multiple occasions in 2025 and publicly indicated that the project had surpassed 90% completion, suggesting that it is likely to be finalized within the year and presented as a major policy achievement. The Wonsan–Kalma Coastal Tourist Area, after repeated delays, was completed in 2025 and began operations. Although it was initially expected to accommodate foreign tourists upon opening, available reporting indicates that, with the exception of limited cases involving Russian tourists, the site has primarily been used by North Korean residents.
In the light industry sector, policy emphasis has been placed on expanding the production of food products, clothing, and daily necessities. However, given the constraints imposed by sanctions and shortages of foreign currency, further examination based on more concrete data is required to assess whether raw materials, components, and equipment are being imported at levels sufficient to support these goals. Nevertheless, as food, clothing, and consumer goods factories newly established in provincial and county-level areas under the 20×10 Regional Development Policy have begun full-scale operations, domestic supply of certain items—including soap, detergents, clothing, footwear, and processed foods—is estimated to have increased. This development may have contributed, at least in part, to easing shortages of basic consumer goods.
In the agricultural sector, North Korea has emphasized the introduction of improved crop varieties, expanded supplies of fertilizer and pesticides, rehabilitation of irrigation facilities and reservoirs, and the expansion of mechanization, greenhouse farming, and hydroponic cultivation as key policy directions. According to international organization assessments released in 2025, rainfall during the winter and spring cropping season and the main grain-growing period from mid-April to mid-August was above average and relatively well distributed, and no major natural disasters such as large-scale floods or severe droughts were reported. This suggests that recent agricultural production conditions were comparatively favorable. Nevertheless, structural constraints—including shortages of fertilizer, fuel, and agricultural machinery, soil degradation, and inefficiencies in the cooperative farm system—continue to limit productivity, indicating persistent barriers to achieving the food production targets North Korea itself has set.
In terms of external trade, North Korea–China commerce showed a renewed increase in 2025. From January to October 2025, North Korea’s imports from China totaled approximately $1.8 billion, while exports to China reached about $350 million, representing year on year increases of 21.4% and 23.1 percent, respectively. This marked a reversal from the slowdown observed in 2024.2) Compared to the sharp contraction during the COVID-19 border closure period, both trade volume and the composition of traded goods appear to have entered a phase of recovery. At the same time, structural vulnerabilities in trade have not changed. Exports remain concentrated in low value added raw materials and simple processed goods, while imports continue to be heavily focused on essential items. Economic relations with Russia have centered on cooperation in energy, food, construction materials, and infrastructure, with working level consultations reportedly underway on electricity and other industrial sectors. Although the officially reported scale of North Korea–Russia trade remains far smaller than that of North Korea–China trade, it carries particular significance as a supply channel for strategic commodities such as energy and food.
By contrast, despite signs of recovery in real economic activity, exchange rates and prices directly affecting household livelihoods have remained unstable since 2024. Through the first half of 2025, rice prices in local markets reportedly remained in the range of 8,000 to 9,000 won per kilogram. In the third quarter, however, prices rose sharply to around 21,000 won, and further increased to approximately 23,000 won in the fourth quarter. This represents an increase of about 2.8 times compared to the end of 2024 and about 4.5 times compared to 2017 levels. Over the same period, the exchange rate reportedly rose from the low 20,000 won range to the mid to high 30,000 won range, also reflecting an increase of roughly 4.5 times compared to 2017. These trends illustrate a stark contrast between the period of relative stability from 2017 to 2023 and the sharp escalation observed in 2024 and 2025.
In this context, the sharp depreciation that occurred in 2024 appears to have transmitted into a surge in rice prices in the second half of 2025, suggesting that exchange rate and price shocks have entered a phase in which their effects are being directly felt in household livelihoods. Compared with the pre-COVID period, current price and exchange rate levels are estimated to be roughly three to four times higher, weakening real purchasing power and increasing the burden of daily living costs.
In sum, North Korea’s economy in 2025 has exhibited visible economic outcomes as a result of the advancement of the 20×10 Regional Development Policy, the expansion of county and municipal level infrastructure projects such as the Sinuiju Combined Greenhouse Farm and the Kangdong County Hospital, the completion of the Wonsan–Kalma Coastal Tourist Area and the attraction of Russian and domestic tourists, and the expansion of external economic relations through exchanges with China and Russia. At the same time, however, the sharp rise in exchange rates and prices, together with the strengthening of a state store centered distribution structure, has constrained market based livelihood activities, creating conditions under which income inequality and social stratification may intensify. Overall, while the real economy in 2025 appears to have moved beyond the immediate post pandemic contraction and entered a phase of recovery, price and monetary instability indicate that recovery and vulnerability are coexisting rather than giving way to sustained stabilization. -
In assessing the outlook for North Korea’s economy in 2026, the most significant factor will be the 9th Congress of the Workers’ Party of Korea and the new Five-Year National Economic Development Plan expected to be adopted at that meeting. North Korea stated that the implementation of the 2021–2025 Five-Year Plan will be reviewed and a new national economic development plan to take effect beginning in 2026 will be presented. Accordingly, 2026 should be understood not as a year of simple continuity, but as a transitional point at which the conclusion of the existing plan coincides with the launch of a new planning cycle.
The Five-Year National Economic Development Plan announced in 2021 was formulated on the assumption that the COVID-19 pandemic and the prolonged continuation of sanctions against North Korea would persist. Its core objectives were to secure production capacity through the repair and reinforcement of production facilities and infrastructure, and to gradually improve living standards in ways that would be perceptible to the population. While the level of targets set in the new plan will depend in part on how the authorities internally assess performance under the plan through 2025, it can be broadly anticipated that the new Five-Year Plan to be presented at the 9th Party Congress is likely to be designed to raise overall goals somewhat above those of the previous plan.
With sanctions against North Korea continuing, the country is likely to remain focused on expanding its productive capacity through domestic efforts. At the same time, the easing of pandemic conditions and the reopening of borders have widened, relative to the recent past, the scope for utilizing external economic relations, a factor that is likely to be reflected in planning beyond 2026. Accordingly, the new Five-Year National Economic Development Plan is likely to be designed around a strategy that maintains self reliance as its central principle while simultaneously pursuing selective and limited external opening.
It is also significant that projects North Korea has already identified as medium to long term priorities are likely to continue after the Ninth Party Congress. The continuation of the 20×10 Regional Development Policy, construction of the Mount Paektu Tourism and Cultural Area, nationwide development of tourism zones, and the redevelopment project in Kangdong County have all been signaled in advance as ongoing initiatives. At the 9th Party Congress, these projects are likely to be reaffirmed as core pillars of the new Five-Year Plan, with more detailed targets and supporting policies for industry, finance, and manpower expected to be presented. Ultimately, the outlook for 2026 will hinge on North Korea’s capacity to mobilize resources, set credible priorities, and leverage external economic relations to sustain these long term agendas.
As the war in Ukraine continues, North Korea’s economic relationship with Russia is widely understood to operate on an exchange structure in which military supplies are compensated with energy and food. As long as the war persists, this basic framework is likely to remain in place in 2026, although the scale of exchanges may fluctuate. Under these conditions, North Korea would be able to sustain a certain level of operations in its munitions sector and heavy industry. At the same time, it could continue to secure relatively stable supplies of crude oil, refined fuels, grain, and construction materials from Russia, generating tangible economic benefits.
If the war were to end, a different set of possibilities would emerge. One such scenario involves the deployment of North Korean labor to postwar reconstruction projects in eastern Ukraine, including the Donbas region, with participation focused on construction and infrastructure development. Under this arrangement, North Korea could potentially secure substantial foreign currency earnings and access to equipment and materials, given its established practice of capturing a significant share of overseas workers’ wages. However, such a pathway would directly contravene existing UN sanctions, making it not merely an economic issue but a politically and diplomatically sensitive matter involving sanctions evasion and coordination among the parties concerned. From North Korea’s perspective, this would likely require reliance on previously established informal channels and, critically, on Russia’s political willingness to facilitate workarounds.
China-North Korea economic relations emerged as a critical variable for Pyongyang in the period extending from the second half of 2025 into 2026. Kim Jong Un’s attendance at China’s 80th Victory Day military parade in September led to the first North Korea China summit in more than six years. This was followed by Premier Li Qiang’s visit to Pyongyang on the occasion of the 80th anniversary of the founding of the Workers’ Party of Korea. From North Korea’s perspective, these developments constituted significant diplomatic achievements and helped establish a political foundation for a substantial expansion of bilateral economic cooperation after a period of relative stagnation.
The key question is whether these political signals can be translated into substantive economic ties. First, the resumption and expansion of Chinese tourism to North Korea would offer the most immediate source of foreign currency earnings and a direct boost to the service sector. If major tourism corridors such as Wonsan-Kalma, Mount Paektu, and the Pyongyang, Kaesong, and Sinuiju areas are reopened to Chinese visitors, this could support a recovery across accommodation, catering, transport, and related services. At the same time, tourism reactivation would likely interact with the 20×10 Regional Development Policy and the tourism zone development strategy, generating mutually reinforcing effects between regional construction projects and service sector growth.
Second, if the opening of the New Yalu River Bridge is accompanied by an expansion of customs clearance and logistics systems with China, this could create the basis for a qualitative and quantitative upgrade in China-North Korean trade. More efficient cross border infrastructure would facilitate the stable import of essential goods, including industrial equipment, components and materials, as well as consumer goods, food, fertilizer, and pharmaceuticals. Securing such inputs on a more reliable basis would be critical for implementing the new Five-Year Plan and sustaining long term construction projects.
However, China also operates under strategic constraints, including U.S. and international sanctions on North Korea and Beijing’s broader interest in managing tensions on the Korean Peninsula. As a result, a rapid shift toward large scale investment or financial projects that would clearly violate UN sanctions remains unlikely. Instead, North Korea in 2026 is more likely to pursue a gradual expansion of economic cooperation with China focused on tourism, trade, and limited small scale investment, operating within the narrow space permitted by sanctions enforcement and China’s cautious approach.
Alongside external variables, another key axis shaping North Korea’s economic trajectory in 2026 will be the direction of adjustments to its economic management system. As the economy has shown signs of stabilization, Pyongyang has once again publicly called on the Cabinet to formulate more realistic and rational measures to improve the overall system of economic management. Although the specific contours of these adjustments have yet to clearly emerge, several points warrant close attention.
The first issue concerns whether North Korea will maintain or expand its Enterprise Responsibility Management System (ERMS). This system, introduced under Kim Jong Un, aims to grant enterprises greater autonomy in production and management while linking responsibility and profits to performance outcomes. Until the mid-2010s, the system was referenced relatively frequently and promoted with some degree of enthusiasm, but its presence in official discourse declined significantly as the economy came under strain from the COVID-19 pandemic. If the 9th Party Congress highlights the advantages of the ERMS and proposes institutional refinements, it could incentivize higher productivity and encourage innovation at the on-site level. Conversely, if the system is effectively curtailed or shifted toward stronger administrative control, planning execution and state oversight may improve in the short term, but the long-term growth potential of the economy would likely be constrained.
The second issue concerns the expansion of the state’s regulatory capacity over commercial and distribution sectors. In recent years, North Korea has rapidly expanded various types of state-run stores, convenience facilities, and service industries, particularly in urban areas. This trend can be interpreted as an effort to draw household funds into state commercial networks and the formal financial system in order to broaden the fiscal base and reorganize distribution structures under state control. If such developments continue into 2026, the supply of goods and provision of services through official channels will likely increase, but this will inevitably be accompanied by a relative contraction of market actors such as markets, private shops, and informal service sectors.
As this process unfolds, a key challenge will be managing competing interests between those who benefit from the expansion of state-run stores and those who must continue to rely on market activities for their livelihoods. Given that recent spikes in market exchange rates and rice prices have been influenced not only by supply and demand factors but also by state policy intervention, the government’s capacity to stabilize and manage markets will remain essential even if the proportion of market participants declines to some extent. How effectively the authorities minimize friction and conflicts among stakeholders that may arise during the implementation of economic policies will constitute an important internal factor affecting economic management in 2026.
Ultimately, the central economic questions for North Korea in 2026 can be distilled into two points. First, can the country simultaneously sustain large-scale and long-term construction projects such as the 20×10 Regional Development Policy, development projects for Mount Paektu and designated tourist areas, and the redevelopment of Kangdong County, while also pursuing the industrial policies to be incorporated into the new Five-Year Plan for National Economic Development under limited financial resources? Second, how should priorities be defined to coordinate long-term growth potential and short-term performance in a manner that prevents the two from coming into conflict?
If an inflow of external financing were to materialize, this dilemma could be partially alleviated. However, given the current sanctions architecture and the broader geopolitical environment, North Korea cannot rely exclusively on external resources. Ultimately, the fiscal, monetary, and investment allocation strategy to be unveiled at the 9th Party Congress, along with the implementation capacity of the Cabinet and subnational governments, will function as decisive internal variables shaping the North Korean economy in 2026.
In summary, North Korea’s economy in 2026 is likely to experience limited growth with elevated volatility as the scheduled 9th Party Congress, the launch of the new Five-Year Plan for National Economic Development, and the continuing strengthening of relations with China and Russia converge. North Korea’s capacity to adjust economic policy will therefore become more critical than in previous years. While the recovery trend that began in 2023 is unlikely to collapse entirely, sanctions, financial constraints, price instability, and tensions between market mechanisms and the state commercial network will interact in complex ways. The manner in which North Korea balances growth and stability, and control and flexibility, will ultimately determine its economic performance in 2026. -
First, given that North Korea currently promotes a Two-State Theory and defines inter-Korean relations as those between hostile states, it is necessary to assess soberly the likelihood of resuming substantial inter-Korean economic and exchange cooperation in the near term. Recognizing this reality must serve as the starting point for policy formulation. Nevertheless, the “peace economy” and “shared prosperity” agenda declared by the Lee Jae Myung administration is oriented toward preparing for medium- to long-term cooperation based on peaceful coexistence, risk management, and mutual benefit. Accordingly, policy design at this stage should not focus on listing projects that can be implemented immediately, but rather on developing and refining cooperative initiatives that can be activated once the necessary conditions are established.
Second, the convening of the 9th Party Congress in 2026 and the launch of the new Five-Year Plan for National Economic Development will also represent an important juncture for South Korea’s North Korea policy. Under continued sanctions and the conditions created by the reopening of its borders, North Korea is likely to present a new development strategy that combines self-reliance with selective external opening, while continuing the medium- to long-term initiatives it has already been pursuing. This shift also carries potential opportunities to identify limited areas of engagement in non-military sectors such as public health, food security, local infrastructure, the environment, and tourism. South Korea will need to closely analyze North Korea’s economic and social policy adjustments around the time of the 9th Party Congress and prepare medium- to long-term scenarios by distinguishing between areas where change is possible and those constrained by structural factors.
Third, the restructuring of North Korea’s economic relations with China and Russia, as well as Pyongyang’s broader external economic outreach, does not constitute a solely unfavorable variable for South Korea. As North Korea deepens its economic ties with China and Russia, incentives may grow over time to diversify partners and improve the terms of cooperation. In such a scenario, South Korea will need to prepare projects that can be pursued within the existing sanctions framework and in coordination with neighboring countries, particularly in non-military fields such as public health, food security, climate, local infrastructure, and tourism. South Korea’s policy toward North Korea should therefore not view North Korea–China and North Korea–Russia economic relations exclusively as threat factors, but rather be designed to manage risks while exploring medium- to long-term cooperative domains and developing related policy plans.
Fourth, in order to operationalize the policy line of “peace economy” and “shared prosperity,” South Korea will need to continuously design actionable economic and livelihood-oriented cooperation options in advance and update them in accordance with evolving realities, so that they can be implemented once conditions permit. It will be necessary to distinguish between development cooperation models that can be pursued within the current sanctions framework in sectors such as railways, roads, energy, public health, agriculture, climate, disaster response, local development, and tourism, and medium- to long-term projects that could be expanded under conditions of sanctions exemptions or relaxation, and to develop a corresponding portfolio. This approach is not premised on the assumption that direct cooperation with North Korea will resume in the near term, but rather reflects medium- to long-term preparation to avoid a policy vacuum. In particular, pre-examining cooperation initiatives that can be linked to North Korea’s already-articulated economic and social agendas, such as the 20×10 Regional Development Policy, urban and county hospital construction, greenhouse agriculture, and the development of designated tourist areas, could strengthen South Korea’s ability to set and coordinate the agenda in the event of a future shift in inter-Korean dynamics.
Finally, although such economic and livelihood-oriented cooperation is unlikely to directly trigger an improvement in inter-Korean relations, it should nevertheless be reflected in South Korea’s North Korea policy because it can function as a buffer mechanism that reinforces the durability of any improvement once it occurs. Past experience has shown that even when breakthroughs were achieved in military or security agendas, the absence of substantive economic and social cooperation foundations often left relations vulnerable to regression or collapse following relatively minor disputes. In this regard, accumulating plans for economic and livelihood-oriented cooperation in advance should be understood not as a tool to immediately induce rapprochement, but as a safeguard that can enhance the sustainability and resilience of inter-Korean engagement if and when relations improve in the future.
| Sectoral Performance and Limitations of the North Korean Economy in 2025
| Outlook for the North Korean Economy in 2026
| Policy Implications for South Korea
1) Bank of Korea, https://ecos.bok.or.kr.(Accessed: 2025.11.28.)
2) Korea International Trade Association, www.kita.net.(Accessed: 2025.11.28.)
※ The contents published on 'Sejong Focus' are personal opinions of the author and do not represent the official views of Sejong Institue
