Tougher stitch for apparel sector

Tuesday, 31 January 2023 03:21 - - {{hitsCtrl.values.hits}}

Ends 2022 with 22% growth in exports to $ 5.6 b and higher than pre-COVID’s $ 5.3 b but suffered dip in YoY growth in last quarter
Pick up in MoM performance between October and December but value trails 2022 peak performance of over $ 500 m from June and August
Analysts point to higher inventories both at store-levels and with consumers to low demand
Forecast subdued performance till 2023 first half
Greater access to emerging markets via FTAs could improve prospects for higher exports
Sri Lanka keeping costs down will help manufacturer and export competitiveness

The apparel industry has ended 2022 with a 22% growth in exports to $ 5.9 billion over 2021 but year-on-year growth dip in performance in last quarter has reinforced its struggle.

The 2022 exports figure points to the apparel industry doing better than the pre-COVID performance ($ 5.3 billion in 2019) but the 2022 last quarter exports value is lower comparatively.

Industry analysts pointed out that though growth is a high 22% between 2021 and 2022, in comparison to 2019, the improvement is only a low 5.3%.

Thanks to impressive performance in the earlier part of the year, exports overtook the 2019 figure within 11 months of 2022. However, the fourth quarter performance reflects the industry struggle. Though month-on-month exports have improved between October and December 2022, it is far below the peak performance of over $ 500 million exports between June and August.

One reason for the YoY dip in the last three months of 2022 is higher inventories both at store-levels and with consumers. Rising inflation in key markets is another factor.

Due to these factors industry analysts said Sri Lanka’s apparel exports could continue to be lower YoY basis until the first half of 2023.

In the short- to medium-term, if exports were to increase new markets or greater access to emerging or high potential markets is key. In this regard, early finalisation of proposed Free Trade Agreements proposed by the President Ranil Wickremesinghe-led Government is paramount, analysts stressed.

The other stimulant will be Sri Lanka manufacturers and exporters managing to keep their costs down for which the country’s macroeconomic fundamentals and indicators as well as ease of doing business need to improve.