Thailand's economy has shrunk for the first time in nearly a decade, with its tourism industry affected by political unrest and the global slowdown takes its toll.

Gross domestic product in the fourth quarter contracted 4.3 per cent from a year earlier in the last three months of 2008, the government's National Economic and Social Development Board said on Monday.

Southeast Asia's second largest economy grew just 2.6 per cent in 2008 and the department said it may contract as much as one per cent in 2009.

The last time Thailand's economy shrank was in the first quarter of 1999.

The government had previously forecast growth of as much as four per cent this year.

Exports and tourists

Last week, the government said exports, which account for 65 per cent of the country's GDP, posted their steepest fall - 26.5 per cent - in 12 years in January as demand for the country's cars, hard drives and electrical goods evaporated amid the global slump.

US car giant GM announced last week that 790 of its 3000 Thai workers would be laid off and Japanese car maker Toyota's Thai operations have dropped more than 1,000 temporary workers since late last year.

Tourism, which makes up about six per cent of the economy, was hard hit by anti-government protesters shutting down Bangkok's two main airports for a week just as the high season began late last year, resulting in a 19.4 per cent decline in tourist arrivals in the fourth quarter.

As many as 80,000 workers in the tourism industry may lose their jobs, excluding those in hotels, Apichart Sankary, president of the Association of Thai Travel Agents, has said.

The government of Abhisit Vejjajiva, the prime minister, has introduced measures including cash handouts to the poor, and long-term infrastructure projects to stimulate the economy.

Earlier this month, the Thai parliament approved a $3.3bn package to stimulate domestic demand and create jobs but Abhisit warned this week that the economy could contract until June despite the government spending.