Gross domestic product contracted 0.3 per cent in the second quarter, after a 1.7 per cent contraction during January-March quarter.

Thai shares shed 3.3 per cent of their value on Monday after a government think tank revealed that the economy had entered a recession for the first time since 2008.

Gross domestic product contracted 0.3 per cent in the second quarter, after a 1.7 per cent contraction during January-March, the government’s National Economic and Social Development Board said.

The Stock Exchange of Thailand index ended at 1,398.08, down 47.28 points, or 3.3 per cent.

“Technically you can say we are in recession, because there have been a two quarters of contraction, but the contraction is due mainly to an abnormal surge in consumer spending last year due to the government’s populist policies,” said Charl Kaengchon, chief economist at the Kasikorn Research Institue.

In the last quarter of 2012, private consumption grew 12.4 per cent year-on-year, spurred by government tax waivers for first-time buyers of cars and housing.

“What we’re seeing now is a slowdown, because the government’s stimulus measures are over and household debt is up,” said Therdsak Taweethiratham, an analyst at Asia Plus Securities Company.

Current household debt is estimated at 8 trillion baht (258.0 billion dollars), or 80 per cent of GDP, according to central bank figures.

“It’s definitely a matter of concern,” Mr. Kaengchon said. “We will see tightening in money markets over the next 12 months and if interest rates go up that’s going to squeeze the debtors harder and harder.”

The government forecasts year-on-year GDP growth of 3.8 to 4.3 per cent in 2013.