ECONOMYNEXT – Sri Lanka’s apparel exporters are seeing a drop in orders amid an economic slowdown in the West, which is forcing factories operate below capacity and adopt strategies to cope State Minister of Investment Promotion Dilum Amunugama said.
“There is drop in orders of around 18 to 20 percent,” Amunugama told reporters. “When orders drop these private companies have to take decisions to adjust.
“Sometimes they have to stop a production line, or operate below capacity.”
A recent closure of a factory by Sri Lanka’s Hirdramani group related to a building leased.
Investors are not closing factories and leaving Sri Lanka, and other exporting countries are also experiencing, a fall in demand, he said.
As the US Fed and European Central Bank printed money and inflated the money supply, during the Coronavirus crisis, effectively accommodating a real shock through monetary means, there was as surge in demand triggering supply chain shocks and inflation.
The supply chain bottlenecks from the sudden surge in demand fired even more orders as companies ran up inventories to avoid stock-outs.
Eventually Western mainstream economic bureaucrats fired inflation not seen since the early 1980s, at the tail end of the Great Inflation period of the 1970s.
Western central bankers are now back peddling furiously, hiking rates and withdrawing excess liquidity, triggering slowdown and recessions.
Sri Lanka last year exported about 5.6 billion US dollars of apparel. Up to April exports were down 23 percent to 343 million US dollars, with price fall also contributing.
“The 20 percent decline in markets is because of the global demand falling that has affected most of the apparel manufacturing countries,” Yohan Lawrence, the Secretary General of Sri Lanka’s Joint Apparel Association Forum said.
“In the last seven months we have seen a decline in our exports and we expect that to continue for another 5 to 6 months”.
“In the US, from January to March 2023, their global apparel imports are down 20 percent which are coming from various countries like China, Bangladesh, Vietnam etc.”
“They have excess stocks in their stores. This will turn around in another 4-5 months.”
No firm has left the sector, Lawrence said.
“Obviously when companies have a sales decline of 20 percent for 7-8 months, maybe they are rearranging in some ways. But we have not seeing companies closing or pulling out from Sri Lanka.
“But factories there will be some adjustments in the head count and there will be one or two factories struggle but the industry will continue.”
The industry is expecting demand to recover in the second half of the year.
Lawrence welcomed Sri Lanka’s efforts to strike Free Trade Agreements in the past few months, which will help all exports. (Colombo/ May 27/2023)