The local manufacturing sector is expected to improve following the Bank of Thailand's interest rate cut, in addition to positive signals from a rising Manufacturing Production Index (MPI), says the Office of Industrial Economics (OIE).
The central bank's decision last week to reduce the policy rate to 2% from 2.25% came as the MPI increased by 8.7% from December last year to 98.9 points in January, driven by state stimulus measures, growing exports, and more foreign tourists.
Though the indicator, which examines the health of the industrial sector, fell by 0.85% year-on-year from January 2024, Passakorn Chairat, director-general of the OIE, said he believes the MPI will improve in 2025.
"We expect the interest rate reduction to help increase GDP growth in the manufacturing sector by 0.1 percentage points," he said.
The OIE expects the MPI and GDP in the industrial sector to grow by 1.5-2.5% this year.
Lower interest rates should ease financial costs for entrepreneurs, causing the industrial sector to expand rapidly in the short run, said Mr Passakorn. Factory operators can reduce costs and enhance their competitiveness, selling products at cheaper prices as consumer purchasing power remains weak, he said.
Expenses for household loans should fall, especially for vehicles and property, which will strengthen their purchasing power, said Mr Passakorn.
"We set a goal for the manufacturing sector to increase GDP growth by at least 1% this year," he said.
According to the OIE, the January MPI was driven by many government stimulus measures, including the 10,000-baht cash handout for the elderly and the Easy E-Receipt tax rebate programme, which caused manufacturers to produce more goods.
In January, exports of industrial products expanded, with their value growing by 17% year-on-year, while more foreign tourists increased sales of clothes and food and beverages.
Negative factors included car manufacturing, which fell by 18.3% year-on-year, while non-alcoholic drink production dipped by 10.1% as manufacturers shifted to functional drinks, containing ingredients that claim some health benefits, to meet demand.
