Bangladesh, which has experienced a miraculous increase in exports in 2021, is experiencing a deceleration in the growth of clothing exports.
According to foreign media reports, two Bangladeshi garment industry leaders predict that after experiencing unusually strong growth of more than 30% in 2021, Bangladesh’s garment export growth may fall to around 15% this year as consumption by US and European customers cools down. .
Bangladesh is the world’s second largest apparel exporter after China. The apparel industry’s exports account for more than 80% of Bangladesh’s total exports. Its customers include large retailers and fast-moving clothing such as Walmart, Gap, H&M, Zara, and American Eagle Outfitters. dealers, some of which have seen weak sales in Europe and the United States.
While demand is slowing, the regional energy crisis is also weakening the delivery capabilities of Bangladesh’s garment industry. Energy supply is key to timely delivery of products, but currently Bangladesh has to take some load shedding and limiting power production measures to save electricity.
Cui Fan, a professor at the School of International Business and Economics at the University of International Business and Economics and director of the Research Department of the China WTO Research Association, told reporters that countries such as Bangladesh are indeed relatively vulnerable when it comes to exports, facing the problem of insufficient raw materials and various supporting capabilities. Energy crises, etc., can easily lead to deficits.
Decrease in orders from overseas customers
Affected by the epidemic, Bangladesh’s garment exports were hit in 2020, with exports amounting to only US$27.45 billion, a year-on-year decrease of 17%, lagging behind Vietnam.
Beginning in the second quarter of 2021, Bangladeshi garment manufacturers began to receive more orders from Europe and the United States. In the first ten months of the 2021/22 fiscal year (July to April of the following year), Bangladesh’s clothing exports reached US$35.362 billion, exceeding that of the fiscal year Target of $35.144 billion.
According to statistics from the Bangladesh Export Promotion Bureau, from July 2021 to April 2022, Bangladesh’s clothing exports increased by 35.98% year-on-year. Knitted clothing is still better than woven clothing. During this period, Bangladesh’s knitted clothing exports were US$19.242 billion, a year-on-year increase of 37.49%, and woven clothing exports were US$16.119 billion, a year-on-year increase of 34.23%.
However, the good news that Bangladesh’s garment exports achieved its target for this fiscal year in just 10 months did not extend to the second half of the year.
Since entering July, Bangladesh’s garment industry has faced the problem of declining orders.
Fazlul Hoque, managing director of Zara supplier Plummy Fashions and former chairman of the Bangladesh Knitwear Manufacturers and Exporters Association, said that new orders in July fell 20% year-on-year, and retailers in European and American markets have either postponed the shipment of finished products. goods, or postpone the order.
He revealed that his customers had delayed orders for about a month and cut back on order sizes. One large U.S. customer, which he declined to name, initially wanted to delay a small shipment this month until December.
Customers later asked for just a one-month delay after Hogg warned them about potential penalties and other fees for long-term stocking. “If they want to delay such a small order for a few months, that means things are not good,” he explained. “They can’t even accommodate such a small order.”
Hogg said he believes the growth rate of Bangladesh’s garment exports will slow down to about 15% this year.
Miran Ali, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), also said: “Our growth rate this year should be around 15%.” However, he said: “This will be a normal year. Last year’s growth was an unusually high jump.”
Rising energy prices increase production costs
Another concern for Bangladeshi exporters is rising input costs. As of the 6th, Bangladesh had increased fuel prices by about 50% amid high international oil prices.
Hogg estimates that energy accounts for about 10% of a clothing company’s total costs, and businesses have increased their use of diesel generators due to prolonged power outages.
“After the abnormal rise in oil prices, production costs will rise sharply.” Shahidullah Azim, another vice president of BGMEA, said, “We will have to bear losses on the orders we have received.”
He estimated that Bangladesh’s garment exports this year may be between US$38 billion and US$40 billion, an increase of 6% to 12%. Next year, “if the global economy falls into recession, the situation may be worse.”
Cui Fan explained to reporters that many exporting countries do not have strong pricing power, which has also become an important factor restricting their profits.
Bangladesh Petroleum Corporation (BPC) Chairman ABM Azad recently said that there are currently enough diesel stocks to meet demand for 32 days. He said that the Bangladeshi government has also determined its fuel import plan for the next six months, and a ship carrying 50,000 tons of octane will arrive soon. At present, Bangladesh’s gasoline inventory is 21,883 tons, which can meet the demand for 15 days; octane inventory is 12,238 tons, which can meet the demand for 9 days; furnace oil inventory is 85,041 tons, which can meet the demand for 32 days; aviation fuel inventory is 62,891 tons , which can meet the demand for 44 days.
Last month, Bangladesh became the third South Asian country after Pakistan and Sri Lanka to seek a loan from the International Monetary Fund (IMF) as its foreign exchange reserves shrank and its trade deficit soared.
The latest data shows that Bangladesh’s trade deficit surged to a record of more than $33 billion as of June 30 due to increased imports. And be promotedBangladesh’s foreign exchange reserves fell below $40 billion last month for the first time in two years, weighed down by rising fees and a weaker taka driven by a surge in the dollar in recent months. According to data from the Bangladesh Bank, the country’s foreign exchange reserves soared to US$48 billion in August 2021. However, after an abnormal increase in imports, its foreign exchange reserves fell to US$41.86 billion in late June 2022.