The Office of Industrial Economics (OIE) says it may revise down the country's 2016 manufacturing production index (MPI) to 1%-2%, from the previous forecast of 2%-3% if the global economic slowdown persists in the second half of the year.
Verasak Supprasert, director-general of the OIE, which comes under the aegis of the Industry Ministry, said the MPI for the first half was dragged down by a 1% contraction in the first quarter.
However, the index rebounded to 1.5% in the second quarter, pointing to signs of a recovery.
"In June, the index stood at 0.8%, which is not a significant rise, so we need to closely monitor the index in the third and fourth quarters," he said.
He said there are several factors indicating that the global economy as well as the local economy have not yet fully recovered, which could lead the OIE to revise down the 2016 MPI forecast in the second half of the year.
Mr Verasak said automotive, electrical and electronics, steel, garment and textile and food processing are among the industrial sectors that continue to grow and lend support to the MPI.
"However, a slowdown in the government's investment budget disbursement is expected to have an impact," he said.
He added the OIE is banking on the global economy performing better in the latter half, helping to boost demand and push up Thailand's capacity utilisation to 70% in the second half, up from 66% in the first half.
As a result, the OIE is maintaining its forecast for full-year industrial GDP at 1.5%-2.5%.
Mr Verasak said the automotive and auto parts sector grew 18.5% on year in the second quarter, with car production of 486,000 units.
The electrical and electronics sector grew 7.39% on year, while the steel sector grew 2.26%.
"There is strong demand for steel from Cambodia, Laos, Myanmar and Vietnam. Their fast-growing economies have helped increase demand for steel for construction projects," he said.
Mr Verasak said the government is still concerned about certain industrial sectors such as garments and textiles, which need more innovation as well as research and development to increase their competitiveness in the world market.
