Growth of 2.1%—but Our Factory Is Missing from That Number

This week, Bangkok hosted the Annual Meetings of the IMF and World Bank. It was Thailand’s first time hosting again in 35 years, but the economic report card it received was far from encouraging. In its October World Economic Outlook, the IMF projected Thailand’s growth this year at 2.1%. Within ASEAN, only Myanmar and Brunei had lower forecasts. Vietnam’s projection was 8.4%, four times Thailand’s. Even Thailand’s figure was an upward revision from the 1.5% forecast in April, and the IMF expected similarly modest growth of 2.1% next year.

Manufacturing indicators tell a different story at first glance. On September 30, Thailand’s Office of Industrial Economics (OIE) added notebook computers, optical transceivers and uninterruptible power supplies to the Manufacturing Production Index (MPI). The MPI rose 4.0% year on year in January–August, but 3.3 percentage points came from optical transceivers alone. The OIE raised its forecast for manufacturing output growth this year from 0–0.5% to 2.75–3.75%.

Breaking down the numbers brings the picture into focus. Subtract the optical transceiver contribution from that 4%, and all other industries together contributed barely 0.7 percentage points. New, large export-oriented electronics factories are lifting the index while established small and medium-sized factories stand still. Average manufacturing capacity utilization in the second quarter was 57.47%. That means more than four out of every ten machines were idle.

There is another point worth watching. Even as the MPI fell 3.1% in June, soap, cosmetics and cleaning products were identified as industries supporting production, thanks to domestic demand. Demand for everyday consumer goods does not simply disappear when the economy weakens. But surviving is different from growing. In markets where demand holds up, price competition becomes even more intense.

What, then, can small and medium-sized manufacturers do?

First, look around the edges of growing industries. As electronics factories and data centers expand, they also create demand for hygiene products, consumables and everyday goods for employee welfare. The purchasing departments of large factories may be closer than we think.

Second, fill spare capacity with OEM production. Idle equipment is a cost in itself. Rather than insisting on an own-brand-only strategy, opening certified production lines to other brands can be better for cash flow. Certification such as GMP becomes a sales asset in its own right.

Third, expand into growing markets. Malaysia at 5.2%, Indonesia at 5.1% and Vietnam at 8.4%: all are within ASEAN, where the barriers to entry are relatively lower. There is no reason to look only at Thailand’s domestic market.

I also have a request for government and industry. Announcements of improving indicators must not become a policy illusion. Publishing industry-level MPI and capacity utilization figures more frequently and in a more accessible form would help SMEs understand where they stand. Support should also shift from extending loans toward measures that strengthen competitiveness itself: obtaining certification, opening export channels and automating equipment. The Bank of Thailand governor likewise pointed to a structural slowdown in the real economy at these meetings. If the diagnosis is structural, the remedy must be structural too.

An average is nobody’s reality. Whether the headline is 2.1% or 4%, the number that matters to a factory owner is how many hours the production line ran today. Let us plan our next move by looking at capacity utilization, not just the index.