Thailand’s manufacturing sector hit by surge in factory closures

Picture courtesy of Ant Rozetsky, Unsplash

A surge in factory closures has heightened concerns over the weakening of Thailand’s manufacturing sector, as indicated by Kiatnakin Phatra Financial Group (KKP). KKP Research revealed that Thailand’s manufacturing production index experienced a decline over a 15-month span from December 2022 to March 2024, despite a global trade recovery commencing late last year.

Thailand has seen an increase in factory closures, particularly since the second half of last year. In 2021, the average number of factory closures per month was 57. This figure rose to 83 per month in 2022 and surged to 159 per month during the second half of 2023, stated the research house.

“From 2023 through the first quarter of 2024, about 1,700 factories closed, affecting roughly 42,000 workers.”

The rate of new factory openings has not kept pace with the rate of closures, leading to either a contraction or stagnation in the number of new factories. Between January 2023 and March 2024, the cumulative number of factory closures outstripped the number of new factory openings.

Related news

On average, 150 new factories per month opened from January to July 2023. However, this average dropped to around 50 per month from July 2023 to January 2024.

Factory closure

KKP Research highlighted that the frequency of factory closures and openings varied across different industries. Sectors such as leather, rubber, agriculture, wood, and machinery have encountered significant hurdles, experiencing both a reduction in manufacturing and higher closure rates.

The research centre pointed out that most closures involved large factories, while the majority of new openings were small factories. This trend indicates that structural issues are a significant concern rather than merely operational challenges. The closure of large factories highlights the escalating difficulties facing the country’s manufacturing sector.

Rising bad debt within the manufacturing sector has emerged as a critical concern, emphasising structural problems and deteriorating debt service capabilities. Factories classified as non-performing loans (NPLs) often end up closing, KKP Research reported.

“Factories classified as an NPL have continued to increase, indicating that more closures are likely.”

Despite a global economic and trade recovery, Thai manufacturing products with high potential and competitiveness, which account for about 47% of total manufacturing value, are expected to benefit. Products that amassed a relatively high level of inventory during the pandemic should recover in line with the global rebound.

However, some products, particularly hard disc drives and steel, which represent about 35% of the country’s manufacturing value, face increased challenges due to lower competitiveness, even amid the global recovery, according to the research house, reported Bangkok Post.

Following the US presidential election, KKP Research warned that heightened trade tensions between the US and China could further erode Thailand’s competitiveness, especially in the automotive segment, given the rise of electric vehicles produced by Chinese firms.

Business NewsEconomy NewsThailand News

Bright Choomanee

With a degree in English from Srinakharinwirot University, Bright specializes in writing engaging content. Her interests vary greatly, including lifestyle, travel, and news. She enjoys watching series with her orange cat, Garfield, in her free time.

Related Articles