Thailand is expected to lose as much as 430 billion baht in revenue in the first half of the year due to the prolonged political protests.
The economy could also contract by 1% this year if a new government is not installed by the middle of this year, warns the latest joint survey by the Thai Chamber of Commerce and the University of the Thai Chamber of Commerce (UTCC).
"Last December, we forecast that the economy would probably grow by 4.5%. Now we forecast it will grow by only 2-3% or an average of 2.5% after the country has been caught in a political impasse," said Thanavath Phonvichai, UTCC's vice-president for research.
He said the latest projection is based on a functional government being established in the first half.
If a new government is not in place, it is highly likely that Thailand will experience an economic contraction of at least 1%, he said.
The study estimated the revenue loss to tourism and domestic consumption at about 250 billion baht, while investment has been hit by 50-100 billion baht.
The other lost revenue was expected to come from the government's 2-trillion-baht infrastructure development plan, now frozen after a court ruling.
Mr Thanavath said the economy in the first quarter is forecast to shrink by 1% due largely to the political crisis, with zero growth in exports.
However, the economy should recover in the third and fourth quarters as the cancellation of the emergency decree boosts tourism and domestic consumption.
The survey found that the North's economy shrank 1.1% in the first quarter of last year, with the Northeast contracting 2.1%, the South down 0.8%, the Central region falling 1.3% and Bangkok and surrounding provinces down 0.9%.
The contraction was mainly due to weakened domestic consumption, lower farm product prices and the impact of political turmoil and the declaration of the emergency decree.