NKorea economy shrunk by most in 20 yrs

South Korea's central bank has estimated neighbour North Korea's economy contracted 3.5 per cent in 2017, the most since 1997.

North Korean leader Kim Jong Un, left, gestures during his visit to a shipyard in North Hamgyong Province, North Korea. Source: KCNA via KNS

North Korea's economy contracted at the sharpest rate in two decades in 2017, South Korea's central bank has estimated, in a clear sign international sanctions due to Pyongyang's nuclear and missile programmes have hit growth hard.

Gross domestic product (GDP) in North Korea last year contracted 3.5 per cent from the previous year, marking the biggest contraction since a 6.5 per cent drop in 1997 when the isolated nation was going through a devastating famine, the Bank of Korea said.

Industrial production, which accounts for about a third of the nation's total output, dropped by 8.5 per cent and also marked the steepest decline since 1997 as factory production collapsed on restrictions of flows of oil and other energy resources into the country.

Kim Jong-un and Donald Trump. Source: AAP

Output from agriculture and construction also fell by 1.3 per cent and 4.4 per cent, respectively.

"The sanctions were stronger in 2017 than they were in 2016," Shin Seung-cheol, head of the BOK's National Accounts Coordination Team said.

"External trade volume fell significantly with the exports ban on coal, steel, fisheries and textile products. It's difficult to put exact numbers on those but it (export bans) crashed industrial production," Shin said.

The steep economic downturn comes as analysts highlight the need for the isolated country to shift towards economic development, moves that were announced by leader Kim Jong-un in April.

Kim vowed to switch the focus from the development of North Korea's nuclear arsenal to emulating China's "socialist economic construction" before he held an unprecedented summit with US President Donald Trump in Singapore in June.

North Korea's coal-intensive industries and manufacturing sectors have suffered as the UN Security Council ratcheted up the sanctions in response to years of nuclear tests by Pyongyang.

China, its biggest trading partner, enforced sanctions strictly in the second half of 2017, hurting North Korea's manufacturing sector.

The BOK uses figures compiled by the government and spy agencies to make its economic estimates. The bank's survey includes monitoring of the size of rice paddy crops in border areas, traffic surveillance, and interviews with defectors.

North Korea does not publish economic data.