North Korea's economy contracted at the sharpest rate in two decades in 2017, South Korea's central bank estimated on Friday, in a clear sign that international sanctions imposed to stop Pyongyang's nuclear and missile programs have hit growth hard.

Gross domestic product in North Korea last year contracted 3.5 percent from the previous year, marking the biggest contraction since a 6.5 percent 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 percent and also marked the steepest decline since 1997 as factory production collapsed due to restrictions of flows of oil and other energy resources into the country. Output from agriculture and construction industries also fell by 1.3 percent and 4.4 percent, respectively.