Bangladesh’s apparel export growth expected to slow to ‘normal’ 15% this year

DHAKA, Aug 10 (Reuters) – Growth in Bangladesh’s garment exports could fall to around 15% this year after an unusually strong expansion of more than 30% in 2021, two industry leaders told Reuters on Wednesday, as US and European customers are struggling with costs. pressures of life.

The garment industry accounts for more than 80% of Bangladesh’s total exports, which sells to customers such as Walmart (WMT.N), Gap Inc (GPS.N), H&M (HMb.ST), VF Corp (VFC. N), Zara and American Eagle Outfitters (AEO.N) – some of which have already reported weak sales as their customers favor basics. Read more

The slowdown follows a surge in sales in 2021 after the easing of coronavirus lockdowns and government stimulus measures left consumers with spare cash, leading to what some experts have dubbed “the revenge purchase.

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“We should have about 15% growth for the calendar year – it will be a normal year,” said Miran Ali, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). “Last year was an abnormally high jump.”

Bangladesh, the world’s second-largest garment exporter after China, saw exports soar 30.4% to $35.8 billion last year, the biggest year-on-year increase in about 25 years . BGMEA data since 1994 shows that a strong increase in exports in one year is generally followed by slower growth the following year.

Fazlul Hoque, managing director of Plummy Fashions and former chairman of the Bangladesh Knitwear Manufacturers and Exporters Association, said he too believes exports will increase by around 15% this year.

INPUTS COSTS

Hoque said his customers were delaying orders by about a month and reducing order sizes. A large US customer, whom he declined to name, initially wanted a small shipment due to leave this month to be delayed until December.

The customer then requested a delay of just one month after Plummy warned him of penalties and other charges for holding the stock longer.

“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.”

The other concern is rising input costs, after Bangladesh hiked fuel prices by around 50% on Saturday amid high international prices. Fuel accounts for about 10% of total costs for garment businesses, Hoque said, adding that the use of diesel generators has increased due to long power outages.

“After the abnormal rise in oil prices, production costs will rise sharply,” said Shahidullah Azim, another BGMEA vice president. “We will have to bear the losses for the order already placed.”

He said exports could hit between $38 billion and $40 billion this year – growth of 6% to 12% – and next year “could be even worse if the global economy tumbles into recession”.

Bangladesh last month became the third South Asian country after Pakistan and Sri Lanka to seek a loan from the International Monetary Fund as its foreign exchange reserves dwindled and the trade deficit soared. Read more

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Reporting by Ruma Paul in Dhaka and Krishna N. Das in New Delhi; Editing by David Holmes

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Michael O. Stutler