By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) - Thailand's factory output shrank more than expected in June as sluggish global demand crimped exports amid an uncertain outlook for industry as political uncertainty after May elections drags on, a ministry official said on Thursday.
The manufacturing production index (MPI) dropped for a ninth straight month in June, down 5.24% from a year earlier, compared with a forecast in a Reuters poll for a fall of 2.5% for June.
The output has been impacted by a global economic slowdown, although domestic consumption has increased due to strength in the tourism sector, the industrial ministry said.
In the first half of 2023, factory output shrank 4.6% on-year. Industrial goods account for about 80% of total exports which have declined for nine straight months.
The ministry now expects the MPI to drop for the full year, compared with a previous forecast of zero to 1% growth, Warawan Chitaroon, head of the ministry's Office of Industrial Economics, told a press briefing.
A delay in forming a new government after the election will also impact the manufacturing sector as it holds up measures to support industry and Southeast Asia's second-largest economy, she said.
"The more delay, the bigger impact," she said. "The industrial sector has already been affected by slowing foreign orders while oil prices have not come down much".
Thailand's parliament postponed on Tuesday a vote for the next prime minister by the two houses of the legislature, as a political deadlock drags on more than two months after the election.
Separately, the Federation of Thai Industries (FTI) said on Thursday that the sector was worried that the delayed government formation and political conflicts would hurt the economy in the second half of the year, slowing investment and denting foreign investor confidence.
The finance ministry on Thursday lowered its economic growth outlook to 3.5% this year from 3.6%, predicting weaker exports and smaller foreign tourist spending.