Title : Market Prices in North Korea: 2006~2022

Author : Song Lim(BOK), SeungHyun Moon(BOK)

This paper reanalyzes the cost of living in North Korea, which has been discussed mainly concerning rice prices, through the price index. To this end, we conducted quarterly surveys from 2006 to 2022 on about 70 items of goods and services traded in the markets of five cities in North Korea through interviews with North Korean human rights organizations, media specializing in North Korea, and with North Korean refugees. Price data were collected to create a price index, and trends and characteristics of the index by total index, expenditure purpose, major item, and region, as well as the cause and background of price fluctuations, were all examined. The analysis results show that North Korea's market price fluctuations are a monetary phenomenon caused by changes in liquidity in the long-term, and in the short-term they are affected by internal and external environmental changes, such as natural disasters, failure of currency reform, strengthened international sanctions against North Korea, and the COVID-19 pandemic. During the period from 2006 to 2012, the evaporation of money for the purpose of making up for the fiscal deficit acted as a dominant factor in the rise in prices. After 2013, prices fluctuated mainly due to the supply and demand situation in the real sector, while North Korean authorities restricted any increase in liquidity. The downward stabilization of grain prices in the absence of significant fluctuations in grain production indicates that the income level of North Koreans improved during this period. Since 2016, international sanctions against North Korea have been strengthened, and imports from China have plummeted to an unprecedented level due to the 2020 COVID-19 pandemic. As a result, prices rose mainly for imported foodstuffs and medicines, and the price gap between regions seems to have widened as omnidirectional quarantine measures were taken, such as restrictions on movement between regions and the shortening of market operating hours. On the other hand, since 2013, when prices began to stabilize, a phenomenon in which rice prices have moved in a different direction from prices has been observed. The results of the correlation analysis with the total index show that the rice price trend since 2013 does not explain the change in prices. It is necessary to be aware that if the trend of falling rice prices even after the strengthening of sanctions against North Korea is understood as a decrease in prices, it could lead to a misinterpretation of the North Korean economic situation.