Exports hit 26-month low in October
BGMEA chief says workers’ unrest leading to factory shutdowns was reflected in reduced shipment
Merchandise exports hit a 26-month low in October, plummeting by 13.64% to $3.76 billion, according to data released by the Export Promotion Bureau (EPB) on Thursday.
The significant decline is in stark contrast to the $4.35 billion recorded in the same month the previous year.
Dismal export performance was extended across all major categories, encompassing ready-made garments, jute and jute goods, leather and leather goods, home textiles, and agricultural products, experiencing negative growth.
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These performance numbers pose a significant challenge to the government's attempts to bolster foreign exchange reserves, which have been dwindling for months and now stand below $20 billion, equivalent to only three months' worth of import bills.
Exporters attribute this decline to subdued demand in key markets, particularly the United States and the European Union and geopolitical tensions.
Besides, ongoing labour unrest in Bangladesh's garment manufacturing hubs, Ashulia and Gazipur regions, since 23 October, impacted the shipment of goods.
Talking to The Business Standard, Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the apparel sector experienced adverse trends in October, showing negative growth both on a year-on-year and month-on-month basis.
He disclosed that apparel shipments in October declined by a significant 12.5% when compared to September, and the year-on-year drop was nearly 14%.
He attributed this unwelcome situation to two primary factors: diminishing global demand and supply chain disruptions stemming from ongoing labour unrest.
Workers' unrest leading to over 500 factories stopping production was clearly reflected in the reduced shipment value, said the BGMEA president.
A decline in exports leads to reduced foreign exchange earnings, which can strain the country's ability to pay for imports and service foreign debt, experts said.
Furthermore, a continued decline in exports can worsen the trade balance, potentially leading to trade deficits, currency devaluation, or higher borrowing costs.
The readymade garment sector is labour-intensive and export declines can result in job losses, affecting workers' livelihoods, and leading to further unrest, they feared.
Dr Mohammad Abdur Razzaque, research director of the Policy Research Institute of Bangladesh (PRI), said, "We are trying to build our reserves but we are not in a hopeful situation and have no good news despite doing well in remittance earnings in October."
Two major markets are in decline, he noted. "The US market is not doing well and the German economy is also in a slowdown, which is reducing apparel demand in those countries."
The ongoing political uncertainty and workers' unrest are also likely to disrupt their supply chain, the economist added.
"If the situation does not improve, there will be another major supply chain disruption, which will be reflected in November export earnings," feared Dr Razzaque.
To address low demand of apparel products and depressing economy in the global market, many competing countries such as Sri Lanka and Pakistan devalued their local currency more than Bangladesh, another factor to negatively affect Bangladesh apparel export, he explained.
Furthemore, Bangladesh has higher inflation than its competing countries, which means Bangladesh's cost of production is higher than others, he added. "We have not controlled inflation but everyone else did it," he added.
He further explained that Vietnam has not devalued their currency like Bangladesh did but managed their inflation which keeps them competitive.
"If Bangladesh does not manage these factors, the pressure will grow at a time when we want to build our reserves and bring stability in the macro economy," said Dr Razzaque.
Poor show of major exports
According to the EPB, the garments sector, the driving force of Bangladesh's exports, accounted for $3.16 billion in exports with a 13.9% decline in October this year compared to the same period of last fiscal.
Knitwear exports saw 7.8% drop to $1.91 billion and woven items fell 21.9% to $1.25 billion in October this year.
Among the other sectors, agricultural products and jute and jute goods saw 1.3% and 16.1% YoY drop respectively.
Besides, leather products and home textile exports also fell 42.2% and 38.9% respectively.
On the other hand, only cotton and cotton products and engineering products experienced 36.4% and 15.5% growth respectively.
Still July-October data positive
Despite the decline in October, the overall export performance for the July-October period of the current fiscal remained positive, showing a growth of 3.52% compared to the same period in the previous year.
However, this growth fell short of the government's target by 9.31%.
