The apparel sector in Sri Lanka is confronted with substantial obstacles, including multi-year lows in exports and an ongoing downward trajectory. In April, exports plummeted by 24% to $318 million, exacerbating the year-on-year decline of 17% to $1.5 billion in the first four months of 2023. This decline affected all major markets.
April 2023 witnessed the lowest export value in recent years, except for the COVID-affected year of 2020, with the previous nadir recorded in April 2018 at $323 million. Similarly, cumulative exports in the first four months of 2023 reached their lowest level, aside from the COVID-impacted year, falling below the $1.6 billion range observed in both 2018 and 2021.
Sri Lanka's Apparel Sector Struggles
The decline in April surpassed the 11% drop observed in March, marking the fourth consecutive month with exports below the $400 million mark. Apparel exports have consistently dwindled year on year since September of the previous year.
Market analysis reveals a significant decrease in apparel exports to the US, down by 25.5% to $129 million in April. The EU (excluding the UK) experienced a sharp decline of 27.53% to $90 million, while exports to the UK dropped by 26.7% to $45.8 million. Additionally, exports to other countries decreased by 9% to $53 million.
Export Slump and Prolonged Downturn
Several factors contribute to this challenging situation, including heightened market inventories and escalating costs in Sri Lanka. Industry experts note that Sri Lanka's apparel sourcing has become comparatively expensive, leading customers to seek lower-cost alternatives in countries like Bangladesh, Egypt, and African nations. The country's loss of competitiveness is evident through higher prices and longer lead times, dissuading potential buyers.
Future Orders Bleak, Earnings Slump
Furthermore, the outlook for future orders appears bleak, with textile imports in the first quarter of 2023 declining by 31% to $604.6 million. While textile imports experienced a 16% growth in the first half of the previous year, overall growth stagnated at $3 billion for the entire year.
As a result, industry experts predict a substantial slump of $1 billion in Sri Lanka's apparel export earnings for 2023. This decline compounds the challenges faced by the crisis-hit country, grappling with a severe financial crisis triggered by a significant reduction in foreign exchange reserves.
The apparel sector, serving as Sri Lanka's largest industrial export, played a vital role in supporting the country during this crisis, generating $5.95 billion in earnings in 2022. However, the current situation presents a formidable challenge as Sri Lanka navigates through its worst financial crisis since independence.
