Growth in exports of the garment industry of Bangladesh could slow to about 15% this year following an unusually robust increase of more than 30 per cent in 2021, as U.S. and European consumers face cost-of-living challenges, according to a report by Reuters.
Bangladesh’s clothing industry accounts for more than 80% of overall exports, with clients like Walmart, Gap Inc, H&M, VF Corp, Zara, and American Eagle Outfitters, some of whom have already reported sluggish sales as their customers choose fundamentals.
The dip comes after a rise in sales in 2021 when coronavirus lockdowns eased and government stimulus measures left customers with extra cash, resulting to what some experts call “revenge shopping.”
“We should be at about 15% growth for the calendar year – this is going to be a normal year,” said Miran Ali, a vice president at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). “Last year was an abnormally high jump”.
Bangladesh, the world’s second-largest garment producer behind China, saw exports rise 30.4 per centy to $35.8 billion last year, the largest year-on-year increase in more than 25 years. Since 1994, BGMEA data show that a large increase in exports in one year is often followed by slower growth the next year.
Fazlul Hoque, managing director of Plummy Fashions and past president of the Bangladesh Knitwear Manufacturers & Exporters Association, predicted a 15 per cent increase in exports this year.
Customers, according to Hoque, were postponing orders by a month or so and reducing order volumes. One major US client, whom he would not name, first requested that a minor shipment scheduled to leave this month be postponed until December.
After Plummy warned them about penalties and other charges for keeping the stock for longer, the customer later requested merely a month’s postponement.
“If they want to delay such small orders for a few months, that means the situation is not really good,” Hoque said. “They can’t even accommodate the small volume.”
Another source of concern is growing input costs, as Bangladesh boosted fuel prices by roughly 50% on Saturday in response to high international prices. According to Hoque, fuel accounts for around 10% of total expenditures for clothing companies, and the use of diesel generators has increased due to prolonged power outages.
“After the abnormal oil price hike, production costs will go up sharply,” said Shahidullah Azim, another BGMEA vice president. “We’ll have to bear losses for the already placed order.”
He predicted that exports would increase to between $38 and $40 billion this year, representing a 6%-12% increase, and that the following year “may be considerably worse if the world economy swings into recession.”
Bangladesh became the third South Asian country, following Pakistan and Sri Lanka, to seek a loan from the International Monetary Fund last month, as its foreign exchange reserves dwindled and its trade imbalance increased.
(Adapted from Reuters.com)