Thailand Manufacturing Outlook: Entering 2022

13 Dec 2021   |  Thailand

Thailand's manufacturing and agricultural sectors are among the most highlighted industries during 2021, as they showed an accelerated speed of improvements, whereas other sectors are still in the recovery phase following the COVID-19 pandemic.

Thailand's manufacturing sector, specifically, grew significantly by 16.8 percent as exports reached pre-pandemic levels accounting for more than 60 percent of the country's total production. In parallel, the total domestic production expanded by 28.3 percent in the last quarter of 2021. The sector's growth has also shown consistent yearly remarks, with increasing metrics as the economy reopens and countries inoculate the COVID-19 vaccination to their residents.

Thailand Manufacturing Challenges

Thailand Manufacturing Outlook Entering 2022

However, the Bank of Thailand still decided to cut its forecast for manufacturing export growth for next year. The easing COVID-19 restrictions and lower infections have pushed factories to reopen their productions. The seemingly pessimistic perspective from Thailand's government is due to the lag in global supply-chain recovery, eventually leading to disruptions in the country's manufacturing output for several goods that require imported materials for its continuation.

The recent spike in COVID-19 cases by the Delta variant also pulled Thailand's forecast further. The variant has succeeded in surging the recorded instances due to its highly transmissible nature, leading to Thailand's drop in new manufacturing orders and production in August. Even though the cases have gone down as the government released responsive measures to contain the prolonged and overwhelming pandemic, several manufacturers in the country have expressed their hesitancy to maximize their production with concerns of further supply chain disruptions. For example, Toyota Motor has temporarily closed all its manufacturing activities in the third quarter of 2021.

Thailand Manufacturing Trends

Currently, Thailand's manufacturing industry is led by exporting industrial goods, such as auto parts, electronics, electric appliances, and plastics. The four dominant subsegments of manufacturing industries have shown an average growth of 13 percent year on year, owing to its success in China's substantial demands for the products.

Additionally, the weak peak of Baht during the Delta variant pandemic in September has pushed the government to release several significant trade promotions, eventually leading to the country's growth as other countries with recovering COVID-19 pandemic situation grabbed opportunities to buy Thailand's productions. Other notable exporters were the United States and Japan with a demand increase of 20.2 percent and 13.2 percent year on year, respectively.

Despite the ongoing supply chain issues, Thailand's import level has soared by over 30 percent compared to last year, eventually bringing a USD 0.61 billion trade surplus at the end of September.

As a result of the optimistic output of Thailand's manufacturing export in the last two quarters of 2021, the Federation of Thai Industries (FTI) has set out four groups for ten major export sectors based on the advantages and measures allowed depending on the possible different stages of the pandemic. The metrics include disease transmission to slowdown periods forecasted to happen in early 2022.

The accommodative regulatory approach for manufacturing sectors would help factories gain momentum and reduce uncertainties in the possibility of a prolonged pandemic.

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