BoT flags prolonged manufacturing slump as competitiveness fades

Thailand’s economy showed clearer demand-side improvement late in 2025, supported by continued growth in goods exports and tourism. However, the recovery remains uneven as industrial production has continued to contract, reflected in broad-based declines across the manufacturing production index (MPI), amid both temporary factors and deeper structural weaknesses.

The baht’s strength and intensifying competition from imported goods remain key risks to watch in the period ahead.

Chayawadee Chai-anant, Assistant Governor of the Corporate Relations Group and spokesperson for the Bank of Thailand (BoT), said the ongoing weakness in manufacturing had, in the near term, been driven by several temporary factors.

These included planned shutdowns for factory and refinery maintenance, as well as temporary production halts at some plants due to flooding.

In November 2025, industrial output fell across multiple categories, with the MPI down 3.7% from the previous month, declining in almost all major groups. Petroleum output dropped due to scheduled refinery maintenance, with production expected to resume in December. 

The automotive category declined as passenger-car and pickup output fell in line with softer demand at home and abroad. Electrical appliances also weakened, led by lower production of air conditioners and small household appliances. 

Food and beverages edged down slightly, partly due to temporary stoppages during flooding in the South.

The BoT said the manufacturing decline reflected a mix of temporary disruptions—such as refinery maintenance, flood-related shutdowns, and a pullback in some technology-related output after earlier front-loaded production—alongside weaker agricultural output, particularly rice and animal feed corn, after a larger volume had already been brought to market in the prior month.

As a result, even though exports in some categories continued to expand, intermittent domestic production disruptions have kept overall manufacturing activity subdued.

However, the BoT stressed the contraction was not solely the result of short-term factors. It also points to structural challenges, particularly a gradual decline in underlying demand over time and a sustained erosion in Thailand’s manufacturing competitiveness, leading output in several categories to fall throughout the year.

Some manufacturing segments have also been hit by rising import competition, or “import flooding”, which has put pressure on employment in certain industries and added to the broader slowdown in domestic production.

The BoT said this underscores the need to prioritise structural reforms, focusing on helping businesses—especially SMEs—restructure, reduce burdens, and improve competitiveness, to support a more durable recovery in manufacturing.

Services and tourism remain the main tailwind

Looking ahead, Thailand continues to draw momentum from the services sector, particularly tourism. The BoT said tourism leading indicators have improved, including foreign online search interest in travel to Thailand and flight seat capacity, which, while easing slightly, remains high.

This trend aligns with rising revenue from foreign tourists, driven by higher spending per trip—especially among long-haul visitors—supporting hotels, restaurants, trade and transport. Over the next three months, tourism may begin to move into a lower season, which could soften the pace of support.

On the external front, export indicators have begun to improve, supported by stronger purchasing managers’ indices (PMIs) across several economies, including the United States, Europe and ASEAN, in line with late-year demand. 

China, however, is showing signs of slowing, which the BoT said warrants close monitoring.

At home, private consumption has some support from government measures and seasonal spending in December, though households continue to face pressure from high debt levels, income and job uncertainty, and the impact of flooding.

Private investment continues to expand, led by machinery and equipment, consistent with demand in some industries such as electronics, supported by the electronics cycle and data-centre-related demand.

Baht strength remains a risk

The BoT said another key risk is the baht strengthening beyond fundamentals at times due to external factors—such as a more accommodative US monetary policy stance—and Thailand-specific factors including bond inflows, tourism receipts and elevated gold prices. This could weigh on business sentiment and exports.

The central bank also flagged the potential impact of flooding on the recovery of businesses in some areas, the Thailand–Cambodia border conflict, and risks from US import tariff measures. 

While the overall impact on exports is not yet clear, some categories—especially agricultural products—have continued to contract and should be monitored.

November 2025: demand improved, supply remained weak

Overall economic conditions in November 2025 improved from the previous month, mainly due to demand-side drivers—especially goods exports and tourism income. However, supply-side indicators continued to decline, led by manufacturing, which was affected by multiple factors.

Goods exports increased 2% from the previous month, expanding across several major categories, including jewellery (notably shipments to India), electronics (telecommunications equipment to the US and computers to China), and metals (aluminium and copper to China). 

Some categories fell, including processed agricultural products (lower palm oil exports to India after earlier front-loaded shipments) and automotive exports (notably pickups to the Middle East, ASEAN and Mexico amid softer demand).

The BoT said the impact of US import tariff measures remains limited so far. Most exports facing “reciprocal tariffs” still increased, except agricultural products, which have continued to decline.

Tourism and services strengthened

Services indicators rose 0.5% from the previous month, in line with stronger tourism and trade activity. Hotels and restaurants improved on higher spending by foreign and Thai tourists, supported by state measures such as Tiew Dee Mee Kuen and Khon La Khreung Plus. 

Passenger transport improved as domestic airlines expanded routes, while trade firmed in line with higher imports of consumer goods and related logistics activity.

Foreign tourism receipts increased 5.3% from the previous month, driven by higher spending per trip among long-haul visitors, which offset weaker spending by short-haul visitors. 

The number of foreign tourists was 2.9 million, slightly lower due to declines from China, South Korea and Malaysia, partly linked to earlier front-loaded travel and flood-related constraints in the South. 

From the start of the year to December 21, 2025, cumulative foreign arrivals totalled 31.8 million.

Consumption dipped slightly; investment rose

Private consumption edged down 0.3% from the previous month, led by lower energy use (fuel sales and electricity consumption), although other consumption categories continued to expand, supported in part by Khon La Khreung Plus.

Durable goods consumption weakened, reflected in lower registrations of motorcycles and private passenger cars, with consumers likely waiting for year-end promotions.

Private investment rose 3.3%, driven by machinery and equipment, while investment in vehicles and construction declined. Government spending excluding transfers expanded, led by investment outlays by the central government and state enterprises, particularly in transport infrastructure.

Headline inflation stood at -0.49%, less negative than the previous month as fresh food inflation was less negative. Core inflation was 0.66%, broadly unchanged. The current account deficit narrowed to US$0.6 billion as trade and services balances improved, led by tourism income.