Introduction

In 2025, the North Korean economy exhibited a clear contradiction: growth in the formal sector and a recovery in external trade coexisted with acute instability in domestic markets. Supported in part by deepening cooperation with Russia since the second half of 2023, the formal economy expanded, and trade with China rebounded following the lifting of border restrictions. Yet internal market indicators deteriorated sharply, reaching one of the most severe episodes of market instability since the failed currency reform of 2009.

The market exchange rate more than doubled within a year, leading to severe erosion in the won’s market value. Prices of essential goods such as rice and refined fuel surged to levels that threatened basic livelihoods. Market exchange rates reached levels around 40,000 won per dollar, while rice prices at times exceeded 20,000 won per kilogram―far above earlier levels when the exchange rate remained relatively stable near 8,000 won per dollar and rice prices hovered around 5,000 won per kilogram.

Although depreciation of the won and price inflation were already evident in 2024, both intensified significantly in 2025, further eroding household purchasing power. In contrast to 2024, when price increases lagged behind exchange rate movements, 2025 saw prices rise sharply in tandem. This shift suggests that the conventional expectation that the normalization of external trade would lead to market stabilization appears to no longer hold in the North Korean context.

Against this backdrop, this chapter traces the surge in exchange rates and the escalation of price instability in North Korean markets throughout 2025 using empirical data, and seeks to identify the underlying structural drivers. It interprets these developments not as a simple supplydemand imbalance, but as the outcome of policy shifts and distortions in market structure.

Changes in North Korea’s market indicators in 2025 reveal several structural features that distinguish them from earlier periods.
First, there has been a deepening of structural rigidity in foreign exchange supply. As trade has been centralized under state-owned enterprises and private channels for earning foreign currency have been curtailed, the widening trade deficit has not translated into greater foreign currency circulation in markets. This points to a breakdown of the trickle-down mechanism and suggests that closer ties with Russia have produced a segmented economic structure largely disconnected from the civilian economy.

Second, grain prices exhibit decoupling and polarization. The sharp depreciation of the exchange rate led to overshooting in prices of rice, which function more as a monetary asset, while prices of maize which is commonly treated as an inferior good relative to rice, remained relatively subdued. This indicates that inflationary pressures are being transmitted unevenly across income groups through differing consumption patterns.

Third, energy prices show signs of convergence, alongside rising demand from the formal sector. The narrowing gap between diesel and gasoline prices, traditionally distinct, likely reflects increased demand for diesel driven by state-led construction and military activities, including initiatives such as the 20×10 Regional Development Plan.

In this context, Section II analyzes the surge in market exchange rates, focusing on supply shocks and policy risks. Section III examines trends in grain prices, including rice and maize, as well as refined fuel prices such as gasoline and diesel, to assess their impact on the real economy. The analysis seeks to determine whether the “high exchange ratehigh inflation” regime observed in 2025 represents a temporary phenomenon or the emergence of a new equilibrium under strengthened economic controls.

* This article is part of 2025/2026 The DPRK Economic Outlook

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