Thailand's Manufacturing Production Index (MPI) in March dropped by 2.54% to 115.68 points year-on-year, attributed to low purchasing power and bearish exports, says the Office of Industrial Economics (OIE).
Both were the result of a slowdown in the global economy, said Ittichai Yotsi, deputy director-general of the OIE.
This was the second consecutive month for a dip in the index.
"This contraction was caused by lower production of computers, steel and rubber products," said Mr Ittichai.
He said the nationwide drought is likely to affect many related sectors, such as food and agricultural products, but the OIE forecasts the drought will be short term before the rainy season.
"Businesses can handle this situation because the country's economy remains strong enough to expand further," said Mr Ittichai.
In March, overall capacity utilisation was at 74.4%, up from February's 69.1%, according to the OIE.
The index remained in the red in the first quarter, down 1.13% to 109.88 points year-on-year.
The OIE expects the MPI to rise 2-3% this year, after a 2.8% rise to 105.52 points in 2018.
For the steel sector, many plants conducted a maintenance shutdown in March, which brought overall capacity down by 11.3%.
The rubber industry decreased in March by 10.4% year-on-year, while computer-related products such as hard disk drives fell by 21.2% in the same month.
Mr Ittichai said the OIE is very optimistic about the overall economy, particularly the tourism sector, while the Eastern Economic Corridor (EEC) scheme is being implemented throughout 2019 in a bid to attract new investment flows.
The OIE is monitoring import tariff bans in four regional countries -- Cambodia, Laos, Myanmar and Vietnam -- because they have to comply with the Asean Free Trade Area (AFTA).
Under the AFTA, six members of Asean eliminated tariffs on nearly 8,000 items. The six countries are Malaysia, Indonesia, Singapore, the Philippines, Brunei and Thailand.
The four other member countries have a grace period to eliminate the tariffs.
"Thailand's border trade is very strong with those four countries, rising 5.1% in March, marking growth for 27 straight months," said Mr Ittichai.
"The main exports to those countries are automotive parts, medicines, milk products, petroleum and crude palm oil."
