The state planning agency said on Monday there was a 2.1% contraction in January-March, compared with the previous three months, while the first quarter shrank 0.6% from a year earlier.
The National Econimic and Social Development Board (NESDB), which compiles gross domestic product data, also chopped its 2014 GDP growth forecast to a range of 1.5% to 2.5% from 3% to 4%.
The on-quarter contraction was the first in a year and the on-year performance was the weakest since the end of 2011, when the economy shrank 8.9% due to devastating floods.
A Reuters poll of economists had forecast GDP in January-March to shrink by 1.6% from the previous quarter on a seasonally adjusted basis and the economy to have growth of 0.1% on an annual basis.
The planning agency revised its figure for 2013 fourth-quarter growth from the previous three months to 0.1% from 0.6%. It left year-on-year growth for October-December at 0.6%.
Thailand, the second biggest economy in Southeast Asia, is the only regional one to be contracting. Malaysia reported annual growth of 6.1% in the first quarter while Indonesia, the largest economy, this month announced its slowest growth in years, but January-March's annual pace was still 5.21%.
Since December, Thailand been run by a caretaker administration with limited fiscal powers and there is no end in sight to the political crisis as protest groups seek to install an unelected government.
The economic outlook for the current quarter and beyond is grim.
In the first quarter, private consumption and investment growth were worse than expected, "signalling that the impact from the current political impasse on the economy may have been greater than we thought," said Gundy Cahyadi, an economist with DBS Bank in Singapore.
"Chances are we are going to see another technical recession in the economy, given that the second-quarter GDP number is likely to be rather poor as well," said Mr Cahyadi, who now expects 2014 full-year growth of less than 2%.
"The longer the economy is without a functioning government, the more the drag to economic growth," he added.Pressure on central bank?
Given the lack of a functioning government and the worsening economy, there may be increased pressure on the central bank to cut its benchmark rate at its June 18 policy meeting after leaving it unchanged at 2% in April.
"The weaker-than-expected GDP data will put the spotlight back on the Bank of Thailand," said Benjamin Shatil, economist with JP Morgan in Singapore.
"But when domestic activity is being weighed down by falling sentiment amid an uncertain political environment, there is only limited support that monetary policy can provide to the economy," he added.
Consumer confidence is at a 12-year low, tourists are staying away from Bangkok and public spending has been delayed. Many parts of the economy are feeling the pinch, even the property sector, which proved resilient during previous bouts of unrest.
"If the political crisis drags on until the end of this year, the overall sector could see a contraction of as much as 10%," Rutt Phanijphand, chief executive of home builder Quality Houses, said last week.Airline 'severely affected'
The political turmoil is also hurting Thailand's big auto sector, which accounts for 11% of GDP and is the largest in Southeast Asia. Domestic car sales are falling and some 30,000 industry jobs have been lost his year.
Thai Airways last week reported a quarterly loss and expects more red ink in the second and third quarters as "we have been severely affected by the politics", chairman Prajin Juntong said.
Tourism accounts for about 10% of GDP and visitors dropped about 5% in January-April from a year earlier.
This month, the Tourism Authority of Thailand cut its forecast for 2014 tourist arrivals to 26.3 million, the lowest in five years, from 28 million.
Pornthip Hirunkate, vice-president of the Tourism Council of Thailand, said unrest had probably cost about 100 billion baht in tourism revenue so far.Exports to the rescue?
More than 60% of Thai GDP comes from exports, and some analysts expect these to start to pick up on the back of a global recovery. So far, the political unrest has been largely contained to Bangkok and has not disrupted ports and factories.
But the state planning agency on Monday cut its projection for export growth this year to 3.7%, down from an earlier 5-7%.
"The unrest has had a minimal impact on shipments and most exporters are still confident about business," said Nopporn Thepsitthar, chairman of the National Shippers' Council. He expects exports to grow 2-3% in the second quarter from a year earlier.
In January-March, exports fell 0.8% from a year earlier and about 0.5% from the previous three months, central bank data showed.