The Thai economy is in a much worse condition than the Government feared just a few weeks ago. The gross domestic product (GDP) contracted by 7.1 percent in the first quarter. The worst may yet to be come.

Thailand’s economy shrank the most in more than 10 years and has entered its first recession since the Asian financial crisis. Exports and spending slumped in the first three months of the year and revenues from the tourism sector shrank for the first time since 2005.

image Exports, which is Thailand’s main economic driver, sank 16.4 percent last quarter, prompting companies such as General Motors, Canon and Toyota to cut production and fire workers. The central bank said last week there are signs the contraction is moderating, and the stock market is poised for its best quarterly advance since 2003 if the current trend continues.

The National Economic and Social Development Board (NESDB) revised downward its forecast for the year to a contraction of between 2.5 and 3.5 per cent. This is significantly lower than its previous forecast of between zero growth and minus 1 per cent.

Its secretary-general, Ampon Kittiampon, expressed concern at a press conference on Monday that the Thai economy could fall even more steeply than predicted if the the political instability continues.

“The tardiness in public investment would have a tremendous influence on economic recovery. The key is the government must accelerate its mega-projects in a bid to build up business confidence and lead to private investment," said Ampon.

“We can see light at the end of the tunnel. We hope the government’s second stimulus package can jump-start the economy by the fourth quarter. If the political situation doesn’t deteriorate, I would say we have bottomed out," said Ampon Kittiampon.

“Business was really bad after the riots,” said Doris Gerecht, general manager at Bangkok’s Montien Hotel to Bloomberg. He added that occupancy has averaged about 50 percent so far this year compared with 75 percent a year ago.

“We’re starting to see a bit of a pickup in corporate bookings, but things are still far from good,” said Ms. Gerecht.

Thailand’s economy hasn’t shrunk for two straight quarters since the first three months of 1999. That was the last of eight quarterly contractions triggered two years earlier, when the nation cut a peg to the dollar that had overvalued the baht and slashed exports.

"We think the central bank’s policy rate is going in the right direction. The economic driver for the rest of the year should rely on government spending," economist Nuchjarin Panarode of Capital Nomura Securities said in a comment.

Two quarters of falling GDP is the common definition for recession. GDP measures summary value of goods and services generated in a relevant country or region. A region’s gross domestic product, or GDP, is one of the ways for measuring the size of its economy.