Thai Manufacturing Under Pressure, Car Production Plummets

Thailand’s manufacturing sector remains under pressure, with factory output contracting again in May 2026, a deeper decline than analysts had forecast, indicating a still-fragile industrial recovery. The Ministry of Industry reported on Tuesday that the manufacturing production index fell 0.8% year-on-year in May, worse than the 0.34% drop projected in a Reuters poll. The contraction was, however, slightly better than the revised 0.94% decline recorded in April. The government attributed the weakness primarily to a slump in automotive production and persistently high inflation. Data from the Federation of Thai Industries showed vehicle production plunged 17.94% in May compared to the same period last year. Ongoing geopolitical tensions also weighed on the sector, driving up energy and transportation costs and disrupting the procurement of certain imported raw materials, thereby increasing production and logistics expenses for manufacturers. On the positive side, the government noted that economic stimulus measures and strong export performance continued to support industrial activity. The Ministry of Industry is maintaining its forecast for manufacturing production growth of 1% to 2% for the full year 2026. Last week, the central bank held its benchmark interest rate steady and raised its economic growth projection for 2026 to 2.3%, buoyed by the prospect of exports surging 14% throughout the year.