Thailand’s manufacturing sector set to rebound by 2024 despite 2023 contraction

Picture courtesy of Bloomberg

Despite the economic slowdown causing a 5.1% contraction in Thailand’s Manufacturing Production Index (MPI) last year, it is expected to rebound in 2024. The forecasted improvement comes in response to an increase in the export of industrial products, which grew by 3.22% in December, marking the third consecutive month of growth, according to Warawan Chitaroon, the director-general of the Office of Industrial Economics (OIE).

“This can be a factor driving the MPI in 2024.”

However, she noted that the OIE will be monitoring the potential impacts of geopolitical circumstances on Thailand’s economy throughout the year. Several of Thailand’s trading partners, including the US, India, and Indonesia, are set to hold presidential and prime ministerial elections, which could affect international trade dynamics.

The presidential election in Indonesia is scheduled for February 14, while the US will hold its presidential election on November 5. Meanwhile, India’s general election is slated for April. These political events, coupled with the state of the Chinese economy, could potentially influence Thailand’s tourism sector and subsequently affect related businesses, reported Bangkok Post.

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Warawan attributed the contraction of the MPI in 2023 to the slow recovery of the Thai economy and the broader global economic slowdown. She noted that capacity utilisation was at a low 59% last year and that the domestic economy’s restoration has been slowed, partially due to high levels of household debt. Last year, household debt was estimated to account for over 90% of the country’s GDP.

“These factors led to sluggish manufacturing in the country last year.”

It wasn’t all bleak news for the manufacturing sector. The production of petroleum products, including jet fuel and diesel, increased by 7.2% year-on-year, buoyed by a recovery in the tourism sector. Similarly, the production of power cables surged 43.2% year-on-year due to an increase in domestic demand.

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