Thailand's Manufacturing Production Index (MPI), which indicates the health of domestic industries, is expected to contract by 4% to 4.5% this year as tourism growth is lower than expected and geopolitical conflicts are weighing on the global economy, says the Office of Industrial Economics (OIE).
In July, the MPI was projected to contract by 2.8% to 3.8%.
GDP contraction in the industrial sector is expected to tally 2.5% to 3% this year, said the office.
Warawan Chitaroon, director-general of the OIE, attributed the outlook to a lukewarm tourism recovery, volatile exports, and the impact of wars between Israel and the Hamas militant group as well as Russia and Ukraine.
If the conflict in the Middle East continues, car exports from Thailand to the region may slow in the fourth quarter, according to the Federation of Thai Industries' Automotive Industry Club.
"The Thai economy is mainly driven by tourism currently, but foreign arrivals may miss the government target of 30 million. At present, the tally is around 20 million," said Mrs Warawan.
The Tourism Council of Thailand estimates between 25-30 million tourists visiting the country this year.
Amid uncertain economic circumstances, officials may need to consider revising the 2023 MPI again later this month, she said.
The MPI in September 2023 fell by 6.06% year-on-year to 91.60 points, while the country's capacity utilisation was 58.0%.
In the third quarter this year, the index decreased by 6.19% year-on-year to 91.37 points.
From January to September, the MPI dropped by 5.09% year-on-year to 94.31 points.
"We expect the economy to improve in the last quarter, driven by more active tourism during the high season," said Mrs Warawan.
Among the industries that propelled the MPI in September was sugar manufacturing, which increased by 74.6% year-on-year because of growing demand in domestic and overseas markets, especially after India restricted its sugar exports to 6 million tonnes as late rain affected sugar cane output.
Fruit and vegetable processing to make juices, coconut milk and canned corn increased by 10.8% year-on-year, driven by new purchase orders from foreign countries.
Synthetic fibre manufacturing expanded by 33.1% year-on-year thanks to higher demand for polyester products in China and India.
Electrical wire and cable production increased by 29.5% year-on-year because of new demand from state and private construction projects.