It is reported that exports from Southeast Asia have begun to be hit by the economic challenges facing Europe, and exports have been declining since July.
Soaring inflation and energy costs, along with other economic fallout from the Russia-Ukraine conflict, could put the European economy in trouble over the next 12 months, with consumers cutting back on spending. This is expected to have a significant impact on Southeast Asian exporters, especially textile manufacturing, which accounts for the largest share of exports from several countries in the region.
Bangladesh textile loses $1 billion worth of orders
50 garment processing factories closed down
Textile mills in Bangladesh have largely halted production in recent months after losing $1 billion worth of work orders due to gas supplies. As a result, textile mill owners are reportedly ready to pay more for gas to ensure uninterrupted supply during the upcoming winter.
At a press conference, Bangladesh Textile Mills BTMA Mohammad Ali Khokon chairman proposed payment of Tk 22.83 per cubic meter of natural gas from the existing Tk 16.33 per cubic meter.
Notably, Pakistan is also facing a shortage of 2 million tonnes of regasified liquefied natural gas (RLNG), which could lead to a $5 billion drop in textile exports this fiscal year, according to industry estimates.
Russia’s ongoing invasion of Ukraine has led to higher global gas prices, making it difficult for emerging economies such as Bangladesh and Pakistan to import gas at affordable prices. As a result, the textile industries in both countries are in deep trouble due to shortages of production gas.
Bangladesh reported the closure of 22 garment factories in the past month and warned that another 27 were about to close due to a lack of electricity and gas. The disclosure was made at a business meeting in Dhaka on October 23.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, recently warned that garment exports could fall by 20% in the next two months due to energy issues and reduced demand in Europe.
27 EU countries and the UK in 2022
Coat imports fell for two consecutive quarters
Coat imports into the European Union (EU27) and the United Kingdom have been on a downward trend since January this year, with sharp declines in the last two quarters, mainly due to economic downturns, geopolitical tensions and seasonal changes. Data show that quarterly import value fell to about one-third, and volume fell by less than half.
According to market data from the FTF, the EU-27 and the UK imported a total of 45.626 million coats worth $691.129 million in the second quarter of this year, down from $1,029.135 million (67.84 million coats) in the first quarter of this year.
According to market data from FTF, the region imported 162.484 million coats worth $3,917.07 million in the fourth quarter of 2021. Inbound shipments in the third quarter were $3,103.417 million (144.387 million units), compared with $1,089.59 million (46.586 million) in the second quarter, and $1,763.105 million (78.341 million) in the first quarter last year.
Coat imports increased in the third and fourth quarters of 2021 compared to the previous quarter due to seasonal trends, but fell year-on-year due to the economic downturn and geopolitical tensions. The region imported coats worth $9.873 billion (431.8 million pieces) in 2021, compared with $8.705 billion (398.774 million pieces) in 2020 and $9.988 billion (472.938 million pieces) in 2019.
Spending falls across EU
Asian textile exports plummet
Asia’s textile exports to the European Union (EU) are likely to fall sharply due to lower European consumer spending due to inflationary pressures from the energy crisis caused by the Russia-Ukraine war, while GSP+ facilities may withdraw from non-compliance with human and labor rights new rule.
Textile associations in South and Southeast Asia are expecting tough times in 2023, saying a downward trend in exports has begun to spread starting in August.
Weak demand across Europe has hit textile exports hard, with exports plummeting across Asia. From Pakistan to Vietnam, export figures are declining rapidly, with no immediate prospect of a reversal.
Meanwhile, the World Bank, International Monetary Fund and Finch Solutions, along with the region’s major banks, are assessing declining growth patterns, from the region’s gross domestic product (GDP) to exports.
Currency depreciation against the dollar has wreaked havoc on the region’s cost of living, which has been worsened by curbs on spending in the European Union and the United States. The World Bank has warned of a global recession next year, followed by a series of financial crises in emerging market and developing economies. Likewise, financial research firm Fitch Solutions has earmarked funds in the United States at the end of 2023, while the International Monetary Fund forecasts euro zone growth of just 0.5% in 2023, compared with 3.1% in 2022.
Pakistan, India, Bangladesh, Cambodia, Vietnam, Thailand, Myanmar, you name it,Production suspension has become the new normal for the entire Asian textile industry.