July 19, 2024
BANGKOK – The Thai Industries Sentiment Index (TISI) has been dragged down to the lowest level in two years due to a rising number of factory closures, the Federation of Thai Industries (FTI) said.
The confidence index in June was 87.2, down from 88.5 in May.
FTI president Kriengkrai Thiennukul said on Wednesday that more than 600 factories closed down in the first five months of this year, with an average economic value of 27 million baht per factory.
In the same period last year, only 358 factories had ended their operations, he said.
Kriengkrai said it was clear that most of the factories that shut down this year are small and medium enterprises (SMEs), but they are the backbone of the country’s manufacturing sector.
“The main reason behind this trend is the changing global demands driven by geopolitical tensions, which have lowered the competitiveness of Thai products,” he said. “Besides, most Thai entrepreneurs have been exporting the same products for several years and this points to an immediate need to restructure the manufacturing sector.”
Kriengkrai also pointed out that the TISI has been on a downward trend for three consecutive months now due to several negative factors, including slow economic recovery across several sectors, weakening purchasing power of consumers, and rising costs of manufacturing and business operations.
“The rising NPLs [non-performing loans] especially in housing, auto, credit card and personal loans have significantly slowed down domestic consumption. This has caused SMEs to suffer from declining sales and lack of cash flow,” he said. “The problem was worsened when financial institutes began employing stricter loan criteria to curb bad debts, effectively limiting the sources of funds for SMEs.”
The FTI chairman added that other factors contributing to declining TISI include the shortage of shipping containers and rising international freight fees, as well as domestic issues like political uncertainty.