Apparel exports tipped to be lower by $ 2 b in 2020 despite recent pick-up

 Apparel workers likely to be hit by the COVID-19 downturn 

• Uncertain external environment still biggest challenge 
• Orders after August look bleak as COVID-19 shuts retailers 
• Industry unlikely to reach goal of $ 8 b exports by 2025

By Charumini de Silva

Despite picking up in recent months, apparel exports for the entirety of 2020 are likely to be $ 2 billion lower than last year, industry sources warned this week.

“The outlook for the rest of the year is still very gloomy. In the worst case scenario we forecast the apparel export earnings to decline by 40% which is about $ 2 billion and in the best case scenario we expect the earnings to drop by $ 1.3 billion to $ 3.3 billion by the year end,” Joint Apparel Association Forum (JAAF) Secretary General Tuli Cooray told the Daily FT.

Sri Lanka last year earned $ 5.3 billion from apparel exports, an increase of 5.1% from 2018. Prior to the COVID-19 pandemic the industry originally expected a 6% increase in exports for 2020. 

Whilst noting personal protective equipment (PPE) orders helped to boost overall apparel exports in June, Cooray stressed that the industry’s core business, fashion wear, also made a significant contribution.

He said the uncertain global situation was the biggest challenge at present for the industry, adding that it was tough to predict beyond August as economies were still moving at a very slow pace due to COVID-19 pandemic. “Beyond August, there is no visibility for the apparel sector as the order book situation has not changed much since June,” Cooray said.

“The COVID-19 pandemic has really put almost all economies navigating in uncharted waters. No malls are operating, retail shops are being closed and many brand owners are closing as they’ve gone bankrupt. It is a massive blow to the entire world,” he said.

Given the situation Cooray believes the EU market would work best for Sri Lanka’s apparel industry. “The US and EU are our top export markets. However, EU market is the best bet at this moment. Due to the current situation, it also seems like we will have a lot of problems with the US going forward,” he added. 

Exports to the EU grew by 5% Y-o-Y to $ 2.2 billion, while exports to the US grew by 3.3% Y-o-Y to $ 2.3 billion in 2019.

Cooray said JAAF was actively working towards ensuring the apparel industry succeeds in achieving the $ 8 billion export target by 2025. However he cautioned that with the sector heavily impacted by the pandemic, the realisation of the goal was daunting.

The apparel and textile industry accounts 44% to the total merchandise exports last year. Around 300 garment factories employ 990,000 workers, where over one million people are engaged in garment-related industries to earn livelihoods through indirect employment.