Thailand’s industrial output fell more than expected in January and at the sharpest pace in more than a year, showing the trade-reliant economy continues to struggle amid weak global and domestic demand.
Stubbornly weak exports and domestic spending have been a big drag on the country. The industry ministry said on Monday its manufacturing production index in January contracted 3.3% from a year earlier after December’s revised 1.4% gain. A Reuters poll predicted a 0.2% drop.
Falling commodity prices and drought have also hit the farm sector. While government spending and tourism are picking up, some big public infrastructure projects have yet to get started.
“The weak external environment is expected to remain as one of Thailand’s key drags to economic growth,” said Barnabas Gan, an economist at OCBC in Singapore.
“The weak manufacturing print serves to reinforce this expectation, given that industrials react to the lower export prints.”
However, a recent pickup in consumption means Gan expects the Bank of Thailand to keep its interest rates unchanged at its next policy meeting in March.
January’s decline in output was led by lower production of autos, electronics, steel and apparel. Car production slipped 11.7% in January from a year earlier but car exports rose 1.4%.
The auto sector accounts for about 10% of gross domestic product. Thailand is a regional manufacturing and export hub for global automakers and major makers of hard drives.
Factory output has been weak for more than two years. Industrial goods account for nearly 80% of total exports, which tumbled 8.9% in January from a year earlier, the fastest pace of decline in more than four years.
Capacity utilization in January rose slightly to 63.93% from 62.89% in December.
