Thai industry recovering – but slower than expected

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Thailand’s industrial sector is showing signs of recovery after the manufacturing production index (MPI) rose for three consecutive months, the Office of Industrial Economics (OIE) said.

Thongchai Chawalitpichaet, OIE director-general, revealed that July’s manufacturing production index rose by 3.12 per cent on June. Capacity utilisation was 56.01 per cent, up from 55.07 per cent in the previous month.

However, the MPI also fell by a bigger-than-expected 14.69 per cent in July from a year earlier. Reuters had forecast a fall of just 13.9 per cent in July.

Meanwhile capacity utilisation remains lower than its highpoint in March this year of 67.78 per cent.

“Capacity utilisation hit its lowest point at 51.27 per cent in April this year,” said Thongchai.

The factory output figures showed the industrial sector has bottomed out and begun to recover – provided a second wave of Covid-19 wave does not hit Thailand, he said.

However, Covid-19 and other crises also presented an opportunity for Thailand, he added.

The pandemic in partner countries, the US-China trade war and floods in China had disrupted the global supply chain, resulting in the relocation of production bases to diversify risk.

“This is an opportunity for Thailand to encourage foreign investors to relocate their production bases here for the skilled labour and effective containment of Covid-19,” said Thongchai, pointing to the Eastern Economic Corridor.

He said Thai industry is recovering steadily, with segments such as food and chemicals meeting growing demand and expanding by 2.7 per cent and 0.7 per cent year on year, respectively.

“We expect the industrial sector to return to normal in 2021,” he said.

Industries which expanded well in July this year were as follows:

Beer industry expanded by 24.96 per cent year on year as firms accelerated production to compensate for temporary closure during the lockdown period, and received orders from retailers, restaurants and entertainment venues allowed to reopen.

Chemical fertiliser industry expanded by 48.23 per cent year on year as the demand from farmers increased during the rainy season.

Animal food industry expanded by 9.68 per cent as demand for pet and fish foods grew steadily.

Household appliance industry expanded by 19 per cent as people stayed home during the Covid-19 crisis, while the export of household appliances increased after the countries eased lockdown measures.

Palm oil industry expanded by 14.53 per cent as production increased during the rainy season, and demand for biodiesel and palm oil remained robust.