Thailand’s manufacturing index set to drop 1% due to floods

Thailand’s Manufacturing Production Index (MPI) is projected to decline by 1% this year, according to the Office of Industrial Economics (OIE). The contraction is attributed to various economic issues and the severe flooding experienced in recent months.

OIE Director-General Warawan Chitaroon indicated that the best possible outcome for MPI growth is to remain flat. The office had previously adjusted its MPI growth forecast for next year from a range of 2% to 3% to 0% to 1%, but this was further revised yesterday, September 26 to between -1% and 0%.

From January to August, the MPI saw a year-on-year increase of 1.55%, with a capacity utilisation rate of 58.9%. However, the floods in North Thailand contributed to a 1.91% year-on-year decline in the August MPI, dropping it to 95.08 points.

The floods disrupted travel, transportation of goods, and border trade, causing some factories to halt operations. Tourist attractions in flood-prone areas were also closed for safety reasons, said Warawan

“If rehabilitation in flooded areas is slow, consumer purchasing power and manufacturers in affected regions will bear the brunt.

“Now we just don’t know when the floods will stop, so we can’t precisely assess all the damage.”

Sluggish domestic car sales also impacted the MPI in August. Car production fell by 18.4% year-on-year due to banks’ stricter criteria for granting auto loans amid high levels of household debt.

Car manufacturing continued to decrease for the thirteenth consecutive month.

The production of electronic parts and circuits, especially integrated circuits, dropped by 11.8% year-on-year due to weak demand in the global market.

Other industries were affected by an influx of low-cost products from overseas, Warawan added.

“The number of these imported goods kept growing, bought by people via online platforms.”

Despite these challenges, certain industries contributed positively to the August MPI. Manufacturers of canned food, particularly tuna, saw production soar by 41.6% year-on-year, driven by increased purchase orders from the US, Japan, and Australia.

These countries stockpiled products to avoid the impact of geopolitical conflicts on shipping, reported Bangkok Post.

Additionally, production of computers and peripheral products, especially hard disk drives, rose by 18.8% year-on-year, thanks to demand for new products to replace existing ones.