The Federation of Thai Industries (FTI) says most of the industrial sector remains resilient this year and is expected to perform even better next year, largely due to massive state investment in infrastructure projects.
In the first nine months of this year, industrial production capacity rose by 0.9%, slightly below the 1% in the same period of last year, mainly because of weak exports.
"The overall Thai economy was revived in the second half of the year, when problems caused by drought subsided and more private investment lent support," according to the FTI report.
Private investment grew by 0.6% in the first nine months, well above a contraction of 3.2% in the same period last year, led by massive state investment in infrastructure.
Investment value approved by the Board of Investment (BoI) was worth 675 billion baht, up 2% year-on-year.
The industry confidence index rose to 86.5 in October from 84.8 in September.
The FTI expects to see improved exports in the last quarter of this year, due to demand in major trade partners such as the US, Europe and Japan ahead of the New Year holidays.
"That would also lend support to the industrial sector to rev up its production capacity during the year-end period," the FTI report said.
In 2017, the FTI expects a more successful year for Thai industries from continued government spending and investment in infrastructure projects, increasing tourist arrivals, greater private spending and improving consumption as farm prices also rise.
The government's flagship policy to promote new investment in the Eastern Economic Corridor, as well as the push for Thailand 4.0, are expected to help industries grow substantially next year, the FTI said.
"The construction and building materials sector are also expected to benefit from new private and government investments in the CLMV group, which will help boost Thai construction companies and building materials," the report said, referring to Cambodia, Laos, Myanmar and Vietnam.
Food and food-processing industries are also expected to grow continuously in line with improving domestic consumption and exports, while good crops will provide raw materials for the sectors.
The auto sector is also expected to continue to expand, with rising production to meet rising demand both in domestic market and export.
The FTI forecasts Thai car production this year to reach the target of 2 million units. Car exports are forecast to be flat next year at 1.22 million units, compared with 1.2 million expected to be exported in 2016.
The electronics sector is forecast to grow substantially next year as growth in the construction and property sectors drive demand for electronics appliances. Electronic exports are expected to improve due to higher demand in major importing countries such as the US, EU and the Middle East.
The garment and textile industry is also forecast to have a better year from the revival of the domestic economy, as demand for black attire surged due to the passing of His Majesty King Bhumibol Adulyadej.
The petrochemical sector is also expected to grow in line with the economy next year. The FTI said demand in Asean countries is expected to play a role in supporting petrochemicals next year.
Despite the overall positive forecast, the FTI said uncertainties will persist next year over new economic policies in the US, the Brexit impact on the global economy and major trade partners' fragile economies.