Factory closures in Thailand rose by 58% in the early months of 2026, as industrial leaders warned that rising energy costs, supply chain strain and weak demand could push the economy towards stagflation. The Federation of Thai Industries (FTI) said the sector is under intensifying pressure, with manufacturing and trade left in a fragile state.
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Kriengkrai Thiennukul, chairman of the FTI, said multiple challenges weighed heavily on industry in the first quarter of 2026. Among them were uncertainties over potential US trade measures, after Thailand climbed from 11th place in 2024 to seventh in 2025 among countries drawing Washington’s attention due to its growing trade surplus.
At the same time, unresolved tensions along the Thai-Cambodian border have kept checkpoints closed despite ceasefire talks, raising the risk of renewed clashes. Domestic political uncertainty during the election period has also continued to undermine investor confidence and delay business decisions.
Industrial data reflects the strain. Capacity utilisation stood at 58.21% in February, below the 60% threshold, while only 116 new factories opened in January and February, down 60.14% year-on-year. In contrast, 141 factories closed during the same period, marking a 58.43% increase and signalling slowing investment.
The situation has been compounded by the Middle East conflict, which has triggered an energy crisis and pushed up costs across the economy. Diesel prices had risen to 48.40 baht per litre, more than 60% higher than before the war, increasing production and transport costs for manufacturers.
Shortages of key raw materials, including plastic resin, chemicals and aluminium, have further strained operations. Prices for these inputs have risen by 10-30%, adding to the burden on businesses and contributing to expectations that economic growth in the first quarter will fall below 2%.
Kriengkrai warned that if the Middle East conflict continues beyond the 14-day ceasefire period, crude oil prices could remain above 100 to 120 US dollars per barrel. This would intensify cost pressures across supply chains, particularly as companies deplete existing inventories and face rising freight costs.
The Nation reported that if the Strait of Hormuz cannot reopen to normal commercial shipping, the impact could worsen, pushing industrial costs even higher. Product prices could rise by 8-10%, significantly increasing inflationary pressure in the second quarter and raising the risk of stagflation.
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Adapted by ASEAN Now Nation 15 Apr 2026