Export plunges to a 26-month low
Exports earnings fell to $3.76 billion in October, the lowest in 26 months, as shipment of apparel items became the last major victim to the falling global demand as consumers tighten belts amid higher inflation.
The receipts were 13.64 percent lower year-on-year, the first decline since April, data released by the Export Promotion Bureau (EPB) figures yesterday.
Readymade garments, which make up more than 80 percent of total takings, slumped around 14 percent to $3.17 billion last month, according to the data compiled by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
With the fall, garments joined the group of major decliners, which included frozen and live fish, agricultural commodities, leather and leather goods, jute and jute goods, and home textiles.
After recording a fall in the last fiscal year of 2022-23, earnings from export by all these sectors, except garment, have fallen consistently in the current fiscal year.
"We have been forecasting such a downward trend in exports for quite a long time. In fact, the pulse of the global market is showing depressed sales and demand caused by record inflation followed by the Russia-Ukraine war," said BGMEA President Faruque Hassan.
To curb inflation, advanced economies have raised bank interest rates, limiting the purchasing power of consumers and reining in the demand for goods.
"The ongoing Israel-Hamas war has added further fuel to the crisis," Hassan said.
He said in 2023, the garment sector will not be able to sustain the trade level seen in the previous year.
"There will be some decline in 2023 and we will have to face the heat of it to some extent."
The export fall comes at a time when the pressure on Bangladesh's external account remains high and the foreign currency reserves are on the decline as export and remittance earnings collectively continue to fall behind the requirement for international payments, including import bills.
In October, remittance inflow stood at $1.98 billion, a four-month high, as banks stepped up efforts to woo more remittance buoyed by a relaxed central bank rule on incentives, giving some relief.
The decline in exports has eroded that gain.
"We are stuck in a kind of situation. We don't see any dynamism," said MA Razzaque, research director of the Policy Research Institute of Bangladesh.
"We need sustained improvement for many months."
The shipment was off to a flying start at the beginning of the current financial year and registered a 15 percent growth in July. But the pace lost steam in the following months to hit 9.5 percent in the first quarter.
Overall proceeds from export, however, grew 3.52 percent year-on-year to $17.44 billion in the four months to October, EPB data showed.
In July-October of 2023-24, export earnings from frozen and live fish, agricultural commodities, leather and leather goods, jute and jute goods, and home textiles were lower than the same period in FY23.
Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, said consumers in Europe and the US, Bangladesh's main markets, were cutting back on expenditures in the face of the higher cost of living.
In addition, the cost of production for exporters has soared because of a spike in raw materials and utility costs. Buyers are paying higher but they are not willing to adjust the rates in proportion to the hike in the cost of production, he added.
Razzaque said the export of woven garments has been under pressure owing to a supply chain disruption. The gas crisis could be one of the reasons.
He said the US economy has grown despite recession fears, meaning consumers are spending there. However, the shipment to the world's biggest economy has been under strain.
"This is surprising. The export to Germany has slowed too."
The economist said other developing countries such as Pakistan have devalued their currencies at a rate that is higher than in Bangladesh, and this has given them a competitive edge over Bangladesh.
"As a result, the export is coming stress. The competitiveness of exporters may erode further if higher inflation can't be controlled."
Another issue is political uncertainty, according to Razzaque.
"The economy will remain under pressure if the political situation worsens."
MCCI's Islam said the current political crisis has created uncertainty among entrepreneurs and buyers. "It will affect the economy."
The entrepreneur, however, thinks the order flow will recover next year as the inflation situation is improving in major economies and buyers choose Bangladesh as a sourcing hub.
"But it will all depend on political stability."