Thailand manufacturing sector continues to attract foreign investors despite sluggish growth

In the past three years manufacturing in Thailand has almost stalled. If this trend continues, it will be quite alarming. The manufacturing sector is Thai economy’s biggest sector in terms of its contribution in the GDP. Around 16% of the labor force is employed in this sector. Slowdown in this sector suggests that growth in wages is not expected to rebound anytime soon, according to DBS Bank. However, foreign investors continue to be pulled towards Thai manufacturing sector.

For the past three years, foreign direct investment has averaged USD 4 billion per year in this sector. In spite of the sector’s sluggish growth in the past three years, 60% of applications for new investments in Thailand are for manufacturing. However, it should not be taken for granted that foreign investors’ interest in the country’s manufacturing will continue, noted DBS Bank.

In recent years, other nations in the region have also concentrated in boosting their manufacturing. Thailand’s competitive edge is required to be maintained, added DBS Bank. The competitiveness in the sector cannot be sustained by just tweaking of monetary policy as the slowdown in the sector coincides with Bank of Thailand’s inclination for a weaker currency in recent years, said DBS Bank.