SEOUL (BLOOMBERG) - North Korea's economy grew in 2016 at the fastest pace since 1999, helped by a recovery from a drought in 2015.

Military spending, including on testing nuclear weapons and missiles, also boosted growth and raised tensions in the region.

Gross domestic product expanded 3.9 per cent from a year earlier, according to an estimate from the Bank of Korea. The expansion was concentrated in mining, manufacturing and utilities such as electricity, gas and water supplies.

Per capita income in the North was estimated at 1.46 million won (S$1,780) or about 4.5 per cent of that of its southern neighbour's.

The BOK said it estimates North Korea's economic growth by using raw data compiled by related organisations such as the intelligence agency and unification ministry. The calculation has limits, with the BOK using South Korean data such as prices to substitute for unknown information.

North Korea's missiles and development of weapons of mass destruction are measured as investment and production and support GDP growth, said Shin Seung Cheol, an official at the BOK's economic statistics department.

Missile tests could also be included in government spending, Shin said, adding that it is hard to tell from the data when the weapons were developed or how many weapons there are.

The expansion came despite progressively tighter sanctions that the international community has imposed as the North steps up tests of missiles and nuclear weapons. The UN Security Council passed a resolution in November that tightened sanctions, including cutting the country's coal exports, after the regime conducted its fourth and fifth nuclear tests.

The South Korean government also pulled out of the Kaesong industrial park in early 2016. The facility had been a key source of foreign capital for the North. The penalties have failed to deter North Korea, who said it successfully launched an intercontinental ballistic missile this month.

China accounted for 93 per cent of North Korea's trade in 2016, the Korea Trade-Investment Promotion Agency in Seoul said in a separate statement on Friday (July 21). The Pyongyang regime's overall trade volume increased 4.7 per cent last year to US$6.55 billion (S$8.9 billion), the data showed.

Mining increased 8.4 per cent on higher coal and lead production. Manufacturing expanded 4.8 per cent while utilities production jumped 22.3 per cent, the biggest gain since the BOK started releasing data in 1990, due to increased water and thermal power output.