Thai MPI faces contraction amid global conflicts and tourism slump

The Office of Industrial Economics (OIE) anticipates a contraction between 4% to 4.5% in the Thai Manufacturing Production Index (MPI) this year due to less-than-projected tourism growth and geopolitical conflicts impacting the global economy. In contrast, the MPI was projected to shrink by 2.8% to 3.8% in July.

The OIE further predicts a contraction of 2.5% to 3% in the industrial sector’s GDP this year. Director-General of the OIE, Warawan Chitaroon, attributes these projections to a slower recovery in tourism, fluctuating exports, and ongoing geopolitical conflicts, including the wars in Israel and Ukraine.

According to the Federation of Thai Industries’ Automotive Industry Club, continued conflicts in the Middle East may slow car exports from Thailand to the region in the fourth quarter, stated Warawan.

“The Thai economy is mainly driven by tourism currently, but foreign arrivals may miss the government target of 30 million. At present, the tally is around 20 million.”

The Tourism Council of Thailand anticipates between 25 to 30 million tourists to visit the country this year. However, due to uncertain economic conditions, officials may consider revising this year’s MPI later in the month, she added.

As of September, the Thai MPI fell by 6.06% year-on-year to 91.60 points, with the country’s capacity utilisation at 58.0%. In the third quarter of this year, the index decreased by 6.19% year-on-year to 91.37 points. From January to September, the Thai MPI dropped by 5.09% year-on-year to 94.31 points, said Warawan.

“We expect the economy to improve in the last quarter, driven by more active tourism during the high season.”

Industries that contributed to the Thai MPI in September include sugar manufacturing, which saw a 74.6% year-on-year increase due to rising demand in domestic and international markets, especially after India limited its sugar exports to 6 million tonnes due to late rain affecting sugar cane output, reported Bangkok Post.

Fruit and vegetable processing for juices, coconut milk, and canned corn production increased by 10.8% year-on-year, driven by new orders from overseas. Synthetic fibre manufacturing expanded by 33.1% year-on-year due to higher demand for polyester products in China and India.

Electrical wire and cable production also saw a 29.5% year-on-year increase due to new demand from state and private construction projects.

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