Bangladesh’s apparel industry is likely to face a contraction in the short term. So says Cal, a capital market financial services company.

A slowdown in major apparel markets is expected to weigh down on the country’s apparel exports in 2023. Inflation will also push wage rates higher and a gas shortage will increase production costs, squeezing margins.

A fall in cotton prices stemming from waning global cotton consumption will, however, likely help ease price pressures, while the high local value addition and currency depreciation will benefit apparel exporters, says Cal.

Apparel exporters with higher exposure to the European markets will see a significant dip in revenue than those with higher exposure to the US markets as Europe proved weaker in averting the Ukraine war shocks. And companies with high fixed-cost structures may experience a substantial reduction in their bottom line, and companies with high debt exposure and high inventory, given a sharp decline in the cotton price, will struggle in 2023.

But shifting of orders by global fashion retailers from China will drive export market share expansion for Bangladesh apparel, says Cal. It expects Bangladesh’s export market share in major non-traditional markets to increase to ten per cent in 2026 from the existing eight per cent.