BANGKOK, Thailand – Thailand’s economic recovery remains uneven, with a clear K-shaped pattern emerging across businesses and industries, while falling factory utilization highlights continued weakness in domestic demand, the Federation of Thai Industries (FTI) says. FTI President Pimjai Leeissaranukul said Thailand’s economy expanded 1.9% year-on-year in the second quarter of 2026, maintaining growth despite geopolitical tensions and pressure from higher energy costs. However, the recovery has not been evenly distributed, with stronger businesses and industries moving ahead while smaller firms and weaker sectors continue to struggle.
The latest figures show a growing two-speed economy. The July Thailand Industry Sentiment Index (TISI) stood at 105.5 among large businesses but only 75.3 among smaller enterprises. At the industry level, electrical and electronics recorded a strong 109.0, while chemicals fell to just 59.7 and remained the only sector to decline continuously. Private consumption grew 1.9% in the second quarter, slowing from 3.3% in the previous quarter. At the same time, average capacity utilization in the industrial sector stood at only 57.47%, down 3.2% from the same period last year. The second-quarter TISI averaged 86.1. Pimjai said low capacity utilization reflects three different situations requiring different policy responses.
The first involves industries facing structural pressure from energy and raw-material costs, combined with excess production capacity overseas. These include chemicals, petrochemicals, steel and construction materials. The situation has been further complicated by tensions in the Middle East, which have affected raw-material imports. The second involves industries whose production is being constrained by policy conditions. Oil refineries, for example, have traditionally operated close to full capacity. However, restrictions on exports combined with storage facilities reaching capacity have forced refineries to adjust production to match weaker domestic demand.
The third involves industries where production capacity is expanding faster than actual output following new investment. Electronics and printed circuit boards fall into this category, which the FTI considers a positive sign that a new investment cycle is gradually coming online.
Thailand’s export growth during the first half of the year was concentrated mainly in electronics, while exports of other products recorded more limited growth. This reflects the broader weakness in the manufacturing sector, which has yet to experience a broad-based recovery.
To strengthen the economy during the second half of 2026, the FTI is proposing two parallel approaches: stimulating domestic demand and removing constraints on industrial production.
The first is a “Buy Thai” campaign designed to encourage domestic demand for finished goods with high employment levels and substantial unused production capacity. Target industries include textiles, clothing, footwear, furniture and household goods, where capacity utilization currently stands at only around 37–50%.
These industries could increase production quickly when new orders arrive and employ large numbers of workers, making them particularly important for supporting the lower end of the K-shaped recovery. The FTI proposes expanding sales channels and encouraging consumers to purchase Thai-made products, while also addressing dumped imports to ensure more domestic spending circulates back to Thai manufacturers. The second approach involves removing policy barriers that are limiting production. The FTI is proposing that Thailand consider allowing surplus oil to be exported under appropriate conditions when supplies exceed domestic demand and required reserves. Domestic retail prices could continue to be managed through existing refinery-margin mechanisms, according to the proposal.
The federation is also calling for faster implementation of government construction projects and greater use of Made in Thailand (MiT) criteria. This could help revive demand for locally produced steel and construction materials while strengthening domestic supply chains.
Pimjai also stressed the need to improve raw-material security and address energy-pricing structures affecting manufacturers.
The FTI estimates that increasing industrial capacity utilization by five percentage points, from about 57.5% to 62.5%, could add around 140 billion baht to industrial GDP, equivalent to approximately 0.7% of overall GDP. Part of the increase could come directly from higher orders generated through Buy Thai measures, while another significant portion would come from removing policy restrictions affecting production. Investment remains one of the stronger areas of the economy. Total investment expanded 9.1% in the second quarter, while private investment increased 13.4%, accelerating from 10.1% in the first quarter.
The growth reflects stronger investment in high-potential industries, particularly technology, electronics, artificial intelligence and data centers.
However, the FTI says the key challenge is ensuring that these investments generate broader benefits for the domestic economy rather than remaining concentrated in a limited number of industries.
Projects approved for investment promotion during the first half of 2026 currently source around 42% of their raw materials and components domestically. The FTI wants to increase this proportion by connecting new investment projects more closely with Thai manufacturers and suppliers.
Greater use of Made in Thailand products could help domestic businesses participate more directly in new investment projects and strengthen local supply chains.
The FTI’s assessment is that Thailand’s economy is still growing, but the recovery remains uneven. High-performing sectors such as electronics and technology are benefiting from investment and export demand, while many smaller businesses and traditional industries continue to operate with substantial unused capacity.
Pimjai said stronger domestic demand, combined with measures to remove production constraints and connect new investment with Thai suppliers, would be essential to make the recovery broader and help push economic growth higher during the second half of 2026.
