China rail link likely to boost North Korea economy despite Covid outbreak

North Korea’s economy will probably eke out growth this year after shrinking for two straight years as the impact of a restored rail link with China outweighs the hit from the country’s virus outbreak, according to Fitch Solutions.

The country’s gross domestic output failed to recover ground last year from a 4.5% contraction in 2020 as pandemic border closures hurt an economy already struggling under sanctions, according to a Bank of Korea report this week.

Trade between North Korea and China, by far its biggest market, briefly increased earlier this year to its highest level since late 2019 following the restoration of the rail link. The border had been officially closed since early 2020 as a pandemic response. Beijing said the rail connection reopened in January.

“The formal rail links between North Korea and China only resumed earlier this year meaning that we will likely see positive growth in North Korea on the back of that,” said Anwita Basu, a longstanding expert on North Korea at Fitch Solutions who is now head of Europe country risk coverage after handling Asia until recently.

Still, several headwinds exist, including the virus outbreak and a likely significant slowdown in China’s economy this year, she said. Almost all of North Korean exports go to China, its biggest ally. 

Fitch didn’t provide a specific forecast for this year’s economic growth.

Leader Kim Jong Un acknowledged rocketing cases of “fever” in May. Pyongyang’s claims that the situation is under control after beefing up quarantine efforts have been questioned. 

Despite the uptick in trade with China, official shipments there are still way below their value before global sanctions on Pyongyang were tightened following a nuclear test in September 2017.

Getting an accurate picture of North Korea’s economy and health situation is a challenge for outside experts as the nation strictly controls the flow of information.