The Federation of Thai Industries (FTI) has released the results of its Industrial Sentiment Index survey for August 2018, revealing a decline to a level of 91.3, down from July’s 92.3. This marks the second consecutive month of decline and the lowest point in a year. When dissecting the components of the index, it becomes apparent that nearly every element has experienced a decrease. This includes the index itself, overall orders, overall sales, production volume, and operating results, with the exception of operating costs.
The erosion of confidence in the industrial sector can be attributed to the export slowdown, a direct consequence of the global economic landscape and the waning purchasing power of key trading partners such as the United States, China, and Europe. This diminished demand for industrial products has taken a toll on Thailand’s exports.
Simultaneously, the domestic economy is grappling with a gradual recovery. Various risk factors loom, including elevated levels of household and business debt, along with rising interest rates on loans. These conditions have inflated financial costs and increased the burden of debt for entrepreneurs. Additionally, unstable weather conditions, driven by the El Niño phenomenon, have led to reduced agricultural production and farmer incomes, thereby pressuring regional purchasing power. Entrepreneurs are also apprehensive about steering the economy forward amid a coalition government.
Nevertheless, there are encouraging factors at play, particularly the growth of the tourism sector, which has bolstered domestic consumption. Moreover, the inflation rate has subsided.
Looking ahead to the next three months, the index is expected to decline further to 99.5, compared to July’s 100.2. Concerns revolve around the fragile and uncertain global economic environment, which continues to affect Thailand’s export sector in the latter half of 2023. This is coupled with a domestic demand recovery that is unfolding at a measured pace. Entrepreneurs also harbor reservations about potential new government policies that could impact production capital, such as minimum wage adjustments and energy policies.