June 18 (Bloomberg) -- North Korea's economy contracted for a second year in 2007 as bad weather hampered agricultural production and led to food shortages.

The economy shrank 2.3 percent, after contracting 1.1 percent in 2006, according to an estimate published by South Korea's central bank today.

``Adverse weather conditions led to a decline in agricultural production, which was the main cause of the contraction,'' the Bank of Korea said. ``Lower food production has aggravated food shortages and has distressed the nation's overall economy.''

Aid agencies say that North Korea may experience a repeat of food shortages caused by floods and droughts that killed as many as 1 million people in the mid 1990s. The United Nations in April warned of a ``potential humanitarian crisis'' and the World Food Programme last month asked South Korea to provide food aid to the nation of 23 million people.

North Korea doesn't release official economic data. South Korea's central bank releases an annual estimate of North Korea's economic growth, based on trade figures obtained from the Korea International Trade Association, Korea Trade and Investment Promotion Agency, fuel and food aid figures from aid groups such as the International Red Cross and the World Food Program, as well as information provided by frequent visitors.

Nuclear Program

North Korea agreed with South Korea, Japan, the U.S., Russia and China in February last year to scrap its nuclear program in return for normalized diplomatic ties and economic assistance equivalent to 1 million metric tons of heavy fuel oil. It complained earlier this month about the slow pace of energy aid being delivered.

North Korea has so far received 390,000 tons of fuel aid, with another 100,000 tons on its way, Hwang Joon Kook, a director- general at the South Korean Foreign Ministry, said last week after negotiations on energy aid, as part of the six-nation talks aimed at scrapping the nuclear weapons program.

The six-nation talks have stalled since Kim Jong Il's regime missed a Dec. 31, 2007, deadline to declare its nuclear programs and materials. North Korea released more than 18,000 pages of documents last month in a partial fulfillment of its pledge. The U.S. said last week North Korea has ``performed on about 8 of 11'' disablement tasks set out in the accord.

North Korea's gross national income was valued at $26.7 billion last year, with its per capita gross national income at $1,152, according to the Bank of Korea. By contrast, South Korea's $971 billion economy grew 5 percent last year, giving it a per capita income at $20,045.

To contact the reporter on this story: Heejin Koo in Seoul at hjkoo@bloomberg.net

Last Updated: June 17, 2008 17:00 EDT