North Korea’s economy shrank in 2018 by the most in 21 years after being hit by punishing sanctions to curb its nuclear weapons programme and after drought damaged its farming sector, South Korea’s central bank revealed on Friday.

The gloomy financial news followed a stark warning last week from the International Federation of Red Cross (IFRC) and Red Crescent Societies that rates of malnutrition and disease are increasing because of the poor harvest.

The impact of natural and political crises will compound pressure on Kim Jong-un’s regime to move forward with denuclearisation talks with the US and growing frustration about the worsening economy could help fuel an escalation of tensions in the absence of any progress.

The bank’s estimates showed that North Korea’s gross domestic product (GDP) contracted by 4.1% last year in real terms, the worst since 1997 and the second consecutive year of decline after a 3.5% fall in 2017.

North Korea's international trade fell 48.4% in value in 2018 as toughened international sanctions cut exports by nearly 90%, the worst loss in exports since the central bank started publishing data nearly 30 years ago.

"Sanctions that were added and strengthened in 2017 had a severe impact as drought hurt the farming sector, which accounts for more than 20% of output," Park Yung-hwan, said head of the Bank of Korea's National Accounts Coordination Team, according to Reuters.