Thailand's Manufacturing Production Index (MPI) is expected to grow by 1.5-2.5% next year, recovering from an estimated contraction of 1.6% in 2024 as a result of weak consumer purchasing power and a high level of household debt, says the Office of Industrial Economics (OIE).
Passakorn Chairat, director-general of the OIE, said he is upbeat about the MPI outlook, attributing the forecast to the continual growth of tourism, higher investment and an increase in free trade agreements, which should drive the country's exports.
"We believe these factors will increase the MPI and GDP in the industrial sector next year," he said.
This year the MPI is projected to contract by 1.6%, with GDP growth in the industrial sector of -1%. In October, the MPI continued its decline, falling by 0.91% year-on-year to 93.4 points, with the country's capacity utilisation only reaching 57.7%.
"In addition to weak purchasing power and household debt problems, Thailand also faced an influx of cheap products from foreign countries," said Mr Passakorn.
Local manufacturers bore the brunt as many people bought cheap imported products rather than locally made items, he said.
Domestic car sales are sluggish as banks and financing companies have maintained a cautious policy of using rigid lending criteria for car loan applicants, anxious about non-performing loans, said Mr Passakorn.
"Car manufacturing in Thailand has decreased for 15 consecutive months," he said.
In October, car production sank by 22.1% year-on-year, especially in the small passenger car and pickup categories, as a result of banks' strict auto loan criteria. Car exports slowed last month because of fewer purchase orders from trading partners, said Mr Passakorn.
Industrial officials are monitoring the sector for the remainder of the year as new commercial car registrations continue to decline.
The real estate sector is also slumping as the number of new houses constructed has decreased, he said.
Mr Passakorn warned of a possible economic slowdown in Europe and Japan as new US President Donald Trump is planning higher trade tariffs.
Industry Minister Akanat Promphan recently talked with executives from Japanese car companies on their investment direction in Thailand while he spearheaded a three-day investment roadshow in Japan, which ended on Nov 23.
"We are trying to solve difficulties in accessing car loans, which affects manufacturing and the auto parts business," he said.
Mr Akanat said the automotive industry should improve next year, given new state measures to lift the economy.