According to the Kiatnakin Phatra Financial Group’s (KKP) research centre, Thailand’s industrial sector is experiencing a period of contraction or “premature deindustrialisation”, occurring earlier than anticipated and ahead of the country achieving high-income status, reports the Bangkok Post.
This deindustrialisation trend has increasingly weighed on the economy, preventing growth from returning to its previous trajectory, particularly during the post-pandemic period. Thailand is among the countries now confronting this structural shift.
“Thailand is the only country in Asean that has undergone deindustrialisation over the past five years, with the contraction driven largely by the automotive sector,” said KKP economist Lattakit Lapudomkarn. “Tougher competition from China, especially in the electric vehicle [EV] industry, has been a major factor.”
Thailand’s shift towards deindustrialisation is occurring at a lower income level than what advanced economies experienced in the past.
Moreover, productivity in the Thai industrial sector has continued to decline, in line with an ageing population and a weakening labour market. Technological disruption is another key pressure point.
Mr Lattakit noted that Thailand is the only country in the region facing a shrinking working-age population.
Given these structural challenges, he said Thailand must pursue economic reforms and identify new growth engines to support the industrial sector and the broader economy.
Thailand’s industrial sector developed strongly over past decades. However, the country must now embrace adaptation amid rising global competition and strengthen existing core industries ‒ particularly automotive, petrochemical, electronics, and food and beverages, he said.
Regarding the general election next year, political parties should prioritise structural economic reforms rather than short-term cash-handout schemes to reinforce the country’s economic fundamentals, said Pipat Luengnaruemitchai, chief economist at KKP Research Center.
KKP expects GDP growth to soften to 1.6% in 2026, down from the 1.7% projected for this year. Growth is forecast to return to its pre-pandemic level of 2.1% in 2027, matching the rate recorded in 2019.
Mr Pipat said next year’s slower growth will be dampened mainly by exports, following front-loading this year. Exports of goods are expected to grow by only 0.2% in 2026, compared with a projected 11.5% expansion this year.
Nonetheless, tourism will remain the key driver of economic growth next year. KKP forecasts 34.4 million international tourist arrivals in 2026, up from 33.1mn in 2025, with the figure expected to rise further to 35.1mn in 2027