More Thai factories are expected to close this year than in the past two years, according to Kasikorn Research Center (K-Research), citing a weakening manufacturing sector and several ongoing economic challenges.
According to the think tank, the rate of factory closures was higher than 100 per month last year for the second year in a row. The highest rate of closures was for small and medium enterprises (SMEs), attributed to their limited capital.
On average, the registered capital of companies that closed their factories in 2024 was 3.8 times lower than for those that shuttered plants in 2023.
The total registered capital of companies that closed factories last year was 47.8 billion baht, down from more than 180 billion baht in 2023.
From 2021 to 2022, there were 4,855 factory closures and 1,818 new factories opening, resulting in a net of roughly 127 plants closing per month over the two-year period.
From 2023 to 2024, there were 4,302 closures and 3,034 new factories opening, resulting in a net of roughly 53 plants closing per month.
The furniture, electronics, garment, automotive and steel industries had the most factory closures during this period, K-Research noted.
The centre said several internal and external factors have contributed to factory closures, such as sluggish Thai economic growth, fragile purchasing power, and structural problems in the manufacturing sector that continue to weaken the competitiveness of domestic SMEs.
US-China trade tensions, lower global demand and tougher competition from both domestic players and imported goods also dampened the competitiveness of Thai business operators.
K-Research said new factory openings could help absorb workers from some of the plants that closed, despite a growing trend of reduced working hours and overtime payments.
On average, each new factory absorbed 36 workers, compared with 52 workers losing their jobs when a factory closed.
Meanwhile, the centre reported an increase in the number of employees whose working hours declined last year. In the first half of 2024, the number of factory workers with fewer than 40 hours per week rose to 457,000, up 11% from 412,000 workers year-on-year.
“This impacts low-income employees in the manufacturing sector, weakening their purchasing power. We anticipate more factories will close this year than last,” noted K-Research.
The prediction aligns with the decline in the country’s manufacturing index. In the fourth quarter of 2024, the index decreased by 2% year-on-year.