Industrial sector confronts looming labour crisis

Thailand's industrial sector faces an uncertain future as employment declines and factories close. According to the Joint Standing Committee on Commerce, Industry and Banking, layoffs are expected to reach half a million this year due to a slowing manufacturing sector and an increasing number of factories shutting down. The government's relief measures may not be enough to mitigate the impact on personal incomes and household debt, which could reach perilous levels.

Kasikorn Research Center predicts that the unemployment rate and factory closures will worsen throughout the year. The think tank expects the unemployment rate to rise to 0.9% in the first quarter of 2026, and factory closures to outnumber new factory registrations for the first time in 10 quarters. Over 12.2 million workers covered by Section 33 of the Social Security Act have seen layoffs, with a 7% compound annual growth rate between 2022 and 2025.

The Federation of Thai Industries highlights the challenges faced by the industrial sector, including the influx of cheap foreign goods through e-commerce platforms and the steel sector's declining capacity utilisation. Chinese steel exports have surged to a record high of 119 million tonnes in 2025, driven by China's slowing economy and reduced domestic demand for steel.

To combat this, the FTI proposes a "Made in Thailand" initiative to promote local production and increase government procurement budgets for Thai products.

The automotive industry is also struggling, with domestic sales of internal combustion engine pickups falling by 4.7% to 70,141 units in the first half of 2026. This trend is attributed to stricter lending criteria, high household debt, and surging oil prices. Meanwhile, textile and garment manufacturers are relocating production to neighboring countries, while food delivery services have become an alternative for working-age laborers.

K-Research anticipates that manufacturing, which recorded the highest number of layoffs (24%), will continue to struggle as it attracts new investments. These investments may not be sufficient to absorb the unemployed workers, as rising industries like electric vehicles, data centers, and semiconductors generally require fewer employees.