UPDATE 1-N.Korea's economy creeps ahead in black thanks to China trade

Fri Jun 27, 2014 4:39am EDT

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(Adds study on food supply, details)

By Christine Kim

SEOUL, June 27 (Reuters) - North Korea's closed economy rose last year at a slightly slower pace compared to 2013, South Korea's central bank data showed on Friday, even as the United Nations toughened sanctions over Pyongyang's nuclear and missile programmes.

Trade in the impoverished country, under the iron rule of the Kim family for more than 60 years, stood at an all-time high since records were first kept in 1990.

China, the North's main benefactor, continued to prop up the moribund economy, absorbing nearly 90 percent of all North Korean trade, the Bank of Korea estimated.

Beijing has been a reluctant player at best in the international sanctions regime supplying virtually all of the North's energy needs - much of it off the books - and being a willing buyer of the North's mineral resources.

Reclusive North Korea does not release economic data. The Bank of Korea across the border is the only official government entity that provides estimates about the economic performance of the North.

The slower pace of growth flew in the face of young leader Kim Jong Un's promise to bring prosperity and a higher standard of living to his people through a massive construction drive.

The authoritarian state is heavily sanctioned under U.N resolutions dating back to 2006 for its nuclear and missile tests, and its ties with South Korea have been cut back sharply after Seoul suspended most commercial projects and aide since 2010.

The Security Council's sanctions on Pyongyang target the country's missile and nuclear programmes and attempt to punish North Korea's reclusive leadership through a ban on the export of luxury goods to the country.

North Korea has conducted several nuclear and long range missile tests.

FOOD SHORTAGE CONCERNS

South Korea's central bank compiles the estimates from raw economic data gathered unofficially through the country's intelligence network and works with experts outside the government to arrive at the conclusion.

The bank said in a statement that the North's gross domestic product rose 1.1 percent in 2013, compared to an annual 1.3 percent incline in 2012, led by agricultural growth thanks to favourable weather conditions last year.

In broad terms, all major sectors posted positive growth in North Korea in 2013 on-year with the exception of construction.

Residential construction grew but it was offset by the fall in road pavement projects, the Bank of Korea said.

The industrial production sector, which has the heaviest share in North Korea's GDP index grew 1.5 percent, slightly faster than a 1.3 percent growth posted in 2012.

Farm production grew 1.9 percent on an annual basis last year, slowing down for a second consecutive year.

A separate study released on Friday said secretive North faced a sharp fall in food production in 2014, aggravating the country's chronic food shortages.

Food production could fall by as much as 740,000 tonnes this year, resulting in a shortfall of up to 2.1 million tonnes from the minimum requirement of 6.6 million tonnes, a study by the Hyundai Research Institute based in Seoul said.

North Korea's state media has reported that the country is facing the worst drought in over a decade, with some areas experiencing their lowest rainfall since 1961.

Trade in North Korea last year stood at a record high of $7.3 billion, with exports amounting $3.2 billion and import counting for $4.1 billion. A central bank official said 89.1 percent of trade in North Korea last year was with China.

The numbers pale in comparison to those of its southern rival, one of Asia's export powerhouses. South Korea's trade stood at $1.1 trillion last year, with exports amounting to $559.6 billion.

On an annual basis, North Korean trade was up 7.8 percent in 2013, while exports jumped 11.7 percent. (Editing by Jack Kim and Jeremy Laurence)

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