From Recovery to Development: North Korea’s New Five-Year Economic Plan

According to South Korea’s Bank of Korea (BOK), North Korea’s gross domestic product (GDP) grew 3.5 percent in 2025, recording a third consecutive year of growth since 2023. The bank attributed this upward trajectory to expanded economic cooperation with Russia, a boost in trade with China, and national economic projects. Though less optimistic, the BOK’s assessment broadly aligns with Pyongyang’s own triumphant portrayal of the past five years as a period of significant economic progress.

Numbers, however, tell only part of the story. The more important questions concern how Kim Jong Un intends to pursue longer-term economic development while continuing to expand defense capabilities, and what that reveals about North Korea’s evolving approach to economic governance.

North Korea’s new five-year plan, revealed incrementally through the Ninth Party Congress in February 2026 and subsequent leadership statements, suggests that Kim is seeking to further strengthen centralized economic governance while retaining selected market-oriented mechanisms. His vision places greater emphasis on Party oversight, expands ambitious economic development initiatives, and pursues civilian development alongside continued growth in military capabilities. Whether this approach can deliver sustained improvements in living standards while accommodating growing defense commitments may prove one of the greatest challenges for Kim as he implements the new five-year plan. How the leadership manages these competing priorities will be an important indicator of the durability of its economic strategy and the regime’s longer-term political stability.

Overview of the New Five-Year Plan

Like the Eighth Party Congress report, the Ninth Party Congress readout was a summary, rather than the full text, of Kim Jong Un’s “report.” While still the single most important document on the country’s economic priorities for the next five years, it reflects only the information the leadership chose to disclose, making it difficult to place too much analytic weight on what was reported or omitted. Kim’s subsequent public remarks and high-level Party meetings, therefore, provide important insights into both the leadership’s broader economic vision and how it intends to implement the new five-year plan.

Recognizing the limitations of the Congress summary report itself, two notable features nevertheless emerged.

First, the Ninth Party Congress declared the “fulfillment” of the 2021-2025 economic plan and characterized the next five years as a “phase of stabilization and consolidation [안정공고화], a phase of gradual and qualitative development [점진적인 질적발전]” centered on stable and sustained economic growth and substantial improvements in living standards. This stood in contrast to the Eighth Party Congress in 2021, which acknowledged that the previous five-year economic plan had “failed” and put forward a strategy of “readjustment and reinforcement [정비보강]” to put the economy on a normal track.

Notably, despite portraying the previous plan as a success, the new five-year plan prioritizes stability and sustainability over rapid quantitative growth. However, Kim’s policy speech to the Supreme People’s Assembly (SPA) in March identified electricity and coal as key bottlenecks constraining broader economic growth and called for increasing industrial output by approximately 1.5 times during the new economic plan period, going beyond his Party Congress emphasis on strengthening the foundations for economic development.

Second, initiatives introduced after the Eighth Party Congress, namely the new rural development program and the 20×10 policy for regional development, were fully incorporated into the new five-year plan. Although heavy industry and economic modernization remained central priorities of the new five-year plan, the Ninth Party Congress directed significantly more attention to regional development, housing, health care, public services, and rural living conditions, reflecting a broader concept of economic development than the primarily production-oriented framework presented in 2021.

Kim’s Economic Vision: Pulling the (Hidden) Threads

While this policy direction reveals what North Korea intends to build, it says much less about how Kim Jong Un intends to govern the economy. Three broader questions emerge from the Party Congress report and subsequent leadership statements: how economic authority is organized, how the leadership intends to balance military and civilian priorities, and whether the strategy can deliver tangible improvements in people’s livelihoods. Although it is still early in the plan’s implementation and Pyongyang will likely continue to unveil additional details—and possibly new initiatives—the available evidence already offers important insights into North Korea’s evolving economic policy and its potential implications for regime stability.

Cabinet vs. Party Dynamic and Economic Management

North Korea’s characterization of “economic management” and the Party-state relationship have long served as indicators of the leadership’s approach to economic policy. Although the term “economic management” is not itself a codeword for market-oriented measures, North Korea’s discussions of economic management have often signaled the introduction of—or, at times, retrenchment from—measures associated with greater enterprise autonomy, initiative, and creativity.

Likewise, the Party’s leadership role over the cabinet, the state’s highest administrative organ responsible for overseeing the national economy, has been a recurring feature of official discourse. What matters analytically, therefore, is not the existence of Party leadership itself, but whether there has been a meaningful shift in official discourse on the Party-cabinet balance governing the economy. Historically, the cabinet has generally been associated with more pragmatic approaches to economic management, while the Party has tended to place greater emphasis on ideology. The post-Party Congress formulations provide a more explicitly articulated hierarchy than previously observed, in which the cabinet’s responsibility for unified economic management is reaffirmed while its subordination to the Party is more clearly defined.

Although the Party Congress summary report did not explicitly discuss economic management or the cabinet’s role in implementing the new five-year plan, it called for “constantly intensify[ing] the work for ensuring the unanimous unity of action [일치한 행동통일] and establishing strong discipline throughout socialist construction.” A Party daily article published shortly afterward interpreted this directive as “continuously strengthening and perfecting a system in which the cabinet guides and manages economic work in a unified manner under the monolithic leadership of the Party center.”[1] While reaffirming the cabinet’s responsibility for unified economic management, a subsequent editorial also made clear that it would operate under closer Party supervision, directing the cabinet to “grasp without exception all issues … report them to the Party center, and handle them in accordance with its decisions.”[2]

Since Kim Jong Un has come to power, North Korea has grappled with striking the right balance between central control and lower-level economic units’ management rights, a hallmark of decentralization and one of the defining features of Kim Jong Un’s market-oriented policies. Concepts related to enterprise autonomy continue to appear alongside calls for stronger central control, indicating that tensions persist between the two and that market-oriented measures have not been abandoned altogether.

Kim’s March SPA speech stressed the importance of creating “conditions and environment favourable for the business activities of production sectors and units” and raising “the sense of responsibility and creativity of enterprises and, in particular, arousing the revolutionary enthusiasm and creativity of the producer masses,” all concepts commonly associated with greater enterprise autonomy and decentralization. However, the Party daily editorial also underscored the limits of that autonomy, declaring: “The decisions and instructions of the Party center must be received immediately and implemented unconditionally, completely, and within the prescribed time frame. All issues must be examined with Party policy as the absolute standard and resolved in strict accordance with it.”[3]

Similarly, North Korean economic discourse reflects tensions between material incentives and ideology as competing means of promoting productivity and innovation. State media have criticized egalitarian distribution while promoting differentiated material rewards for exemplary workers.[4] However, Kim has also accused Party officials of being “obsessed with the material and economic factors rather than the ideological factor in Party work.” While Kim’s remarks do not suggest abandoning material incentives, they reflect his view that ideology should remain the primary basis for public motivation. These developments suggest that, under the new five-year plan, Pyongyang is not seeking to completely abandon market-oriented mechanisms, but rather to keep them in a more tightly centralized economic system.

A New Byungjin Within Byungjin and Intensifying Resource Management Challenge

In July, North Korea held a highly unusual joint Party-government-military meeting accusing a former high-ranking Korean People’s Army (KPA) official of “plundering the maximum amount of state funds, materials and dwelling houses and squandering them in dissolute and depraved life” while again emphasizing “complete unity of action” in socialist construction. On the surface, the meeting served as a warning against corruption across the Party, government, and the military. More fundamentally, however, it appeared to reflect the leadership’s growing concern over controlling increasingly complex flows of state resources at a time when North Korea is simultaneously expanding investment in the defense industry and assigning the military a larger role in civilian economic projects. Directing greater resources to national defense will likely renew and intensify decades-long tensions over the prioritization of defense versus the civilian economy, while further complicating the cabinet’s responsibility for unified economic management as the military’s economic footprint continues to expand.

Despite the Ninth Party Congress report’s attention to economic development, North Korea has in effect declared that it will continue to prioritize defense over the next five years. In his March SPA speech, Kim said:

All these prove that our style of development strategy was very correct as we directed great efforts to the development of the State and the economy while giving priority to getting a security guarantee of our own and consistently carrying on the line of bolstering up our nuclear forces. [Emphasis added by author.]

Soon after his return home from a summit with Xi Jinping in September 2025, Kim Jong Un previewed a new byungjin policy of simultaneous nuclear and conventional forces development—essentially a new byungjin within the existing byungjin of simultaneous defense and economic development—indicating greater investment in national defense. The Ninth Party Congress report referred to the importance of “upgrading the conventional weapons” and the June Party plenum called for directing “great efforts to developing and producing powerful conventional weapons,” suggesting this new policy was put forward as part of the new five-year defense development plan. Reflecting North Korea’s emphasis on defense, Kim’s public activities in the first half of 2026 were concentrated in military and defense.

Pointing to North Korea’s alleged successes during the previous reporting period, a high-ranking official proclaimed at the Party Congress that there was “no longer any need to debate whether national defense or the economy should take precedence” and that North Korea “now must have both candies and bullets”—a euphemism for economic prosperity and strong defense. However, there still appears to be domestic sensitivity surrounding Pyongyang’s continued investment in defense. For one, unlike the 2013 byungjin policy, North Korea has not been observed to announce the new byungjin policy to its domestic public—the September report was carried only for external audiences, and neither the Party Congress nor the plenum report mentioned the policy by name.[5] Moreover, Kim’s public comments continue to emphasize economic or security benefits of major defense projects, which may, in part, reflect an attempt to justify continued focus on defense. Defense spending and the allocation of resources between the civilian economy and the defense industry have been a source of tension within the North Korean leadership for decades, with national priorities almost always ending up favoring defense spending.

North Korea’s prioritization of national defense—including Kim’s greater attention to the defense industry, naval expansion, and military modernization since August 2023 and more recently conventional weapons development, alongside nuclear development—also implies a larger role for the Second Economic Commission (SEC). Formally, the cabinet is responsible for planning and managing the national economy. In practice, however, its authority has been limited to the civilian, or “first,” economy, while the SEC oversees the military, or the “second,” economy” responsible for the planning, production, distribution and foreign sales of military products. Although the SEC reports to the Party and is organizationally distinct from the KPA, the two operate in close coordination. At the same time, the KPA itself plays a key role in civilian construction projects. In all, the growing importance of the military economy and the military’s expanding involvement in civilian development are likely to make it increasingly difficult for the cabinet to exercise unified oversight over the national economy.

The tension between defense and civilian spending is not new. What is different now is that Kim has made more ambitious promises on the civilian side while continuing to expand defense, which increases the political cost of failing to manage those competing demands. The significance of Pyongyang’s new five-year plan, therefore, goes beyond economic performance alone. How the leadership manages these competing demands, and how it responds if they become more difficult to reconcile, may ultimately be as important as economic indicators in assessing the durability of Kim’s strategy and the regime’s longer-term stability.

Implications and Conclusion

One recurring question surrounding North Korea’s economic initiatives, particularly Kim’s signature 20×10 regional development policy, is whether they can be sustained once construction is complete. Kim himself has acknowledged shortcomings in the operation and management of newly built facilities, criticizing that “they are not managed and operated as properly as they should be” and that guidance and supervision have been neglected. His comments suggest that the leadership recognizes construction alone will not guarantee tangible improvements in living standards and that implementation may prove as challenging as the projects themselves.

More fundamentally, however, North Korea’s civilian economic initiatives are as much political projects as they are economic ones, if not more so. They are intended not only to improve material conditions but also to reinforce the legitimacy of the socialist system by demonstrating the Party’s ability to deliver balanced national development. Kim underscored this objective again at the Ninth Party Congress by calling for the simultaneous and balanced development of “all regions of the country and all sectors of the national economy.”

That said, North Korea’s continued drive for defense development complicates these objectives. North Korea’s post-Congress emphasis on stronger Party oversight of the cabinet suggests it believes tighter centralized control is necessary to more effectively manage its growing economic and defense commitments. Yet, the persisting tensions between central control and enterprise autonomy and between defense and civilian spending are unlikely to disappear. Coupled with the military’s expanding role in civilian construction and the growing importance of the defense economy, these developments are likely to place additional strain on the cabinet’s ability to exercise unified economic management and deliver tangible improvements in people’s livelihoods.

For now, however, Pyongyang appears to have little incentive to alter its course. Kim has portrayed the munitions and defense industries as an engine of broader economic development, reflected in Kim’s use of the term “the national defense economy” and related formulations during his visits to munitions factories since August 2023. At the same time, North Korea’s economy has reportedly benefited from closer ties with Russia and increased trade with China; Xi Jinping’s commitment during the June 2026 summit to expand bilateral economic cooperation likely reinforces Kim’s confidence in his currency strategy.

Rather than altogether abandoning market-oriented measures, Pyongyang appears to be retaining them within a more tightly centralized framework. Whether this model can improve living standards in a sustained manner while supporting an increasingly ambitious economic and defense development agenda may prove one of the defining tests of Kim Jong Un’s new five-year plan.

This research was sponsored by The UniKorea Foundation.

1. [1]

   Ri Ho Song, “전면적발전의 새시대가 제기하는 5가지 중요요구를 깊이 새기자 [Let Us Deeply Internalize the Five Key Requirements of the New Era of Comprehensive Development],” Rodong Sinmun, March 4, 2026.

2. [2]

   “사회주의건설전반에서 일치한 행동통일을 더욱 철저히 보장하자 [Let Us More Thoroughly Guarantee Unanimous Unity of Action Throughout Socialist Construction],” Rodong Sinmun, July 24, 2026.

3. [3]

   Ibid.

4. [4]

   Rim Kwang Myong, “평균주의는 사회주의분배원칙과 인연이 없다 [Egalitarianism Bears No Relation to the Socialist Principle of Distribution],” Rodong Sinmun, November 11, 2025; Ryang Sun, “<당의 사상과 의도를 사업과 생활의 신조로 삼자> 인재들이 적재적소에서 활약하게 하여야 한다 [Let Us Make the Party’s Ideology and Intent the Guiding Principles of Our Work and Lives – [We Should] Ensure That the Right Talented People Are Put to Work in the Right Places],” Rodong Sinmun, June 9, 2026.

5. [5]

   In March 2013, North Korea announced a byungjin policy of “carrying out economic construction and building nuclear armed forces simultaneously” to both to domestic and external audiences, In April 2018—amid renewed diplomatic engagement with China, South Korea, and the United States—it again announced, to both audiences, a transition from byungjin to a “new strategic line” of “concentrating all efforts on socialist economic construction.” Following the collapse of the second US-North Korea summit in February 2019, however, Pyongyang appeared to gradually shift back toward byungjin, as reflected in the parallel five-year economic and defense plans unveiled at the Eighth Party Congress in January 2021. Unlike the 2013 and 2018 policy shifts, Pyongyang never formally announced this apparent return to byungjin, likely because of domestic political sensitivity.