The weak economic outlook and poor export performance have hurt Thailand's industrial sector, causing the manufacturing production index (MPI) to drop for a fourth straight month in June to the lowest level in 15 months, says the Office of Industrial Economics (OIE).
Director-general Nattapol Rangsitpol said the MPI fell 8% last month year-on-year after a 7.6% contraction in May.
The decline was driven largely by lower production capacity in segments such as hard disk drives, automotive, electronics and drinks including beer, with demand drying up both at home and abroad.
"Industrial capacity in the first half stood at 58.8%, down slightly from 60.6% in the same period last year," Mr Nattapol said. "But we're still concerned about how the MPI will be in the second half of this year, as the economy is unlikely to recover fully."
According to the OIE, first-half exports fell by 3%, while imports rose by 2.7%.
Electronics exports fell by 17.5% year-on-year in the first half due mostly to a weak global economic outlook that cut demand for tablets, notebooks and other devices.
"Major investors that move their production base from Thailand to Vietnam such as Samsung will also be a negative factor leading to a drop in production capacity in the electronic sector this year," Mr Nattapol said.
The OIE remains concerned the Samsung withdrawal could influence other companies as they mull investing further in Thailand or decamping to lower-wage countries.
Several Thai industrial sectors have been severely damaged by the weak global economy, with exports suffering from falling orders caused by weak demand and poor purchasing power.
In addition, the Thai economy itself has yet to recover as the government tries to stimulate the economy through infrastructure megaprojects.
The Industry Ministry plans to revise down its full-year MPI forecast next month and consider other changing factors that could affect the index in the second half.
The ministry earlier forecast that the MPI would grow by 3-4% from the previous year.
The revision of the MPI by the Industry Ministry is in line with the business sector, which also plans to revise down its view of the country's major economic indicators due mostly to poor export performance and the weak domestic economic outlook.
The Federation of Thai Industries is set to release its revised full-year forecasts for exports and GDP next week.