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After Walmart warning Bangladesh’s garments exporters brace for slowdown

After recovering swiftly from the damages after the pandemic, Bangladeshi garment manufacturers are now anticipating a slowdown as sales at key customers such as Walmart are hit by a spike in inflation.
A garments factory when its orders slowed down
Figure: Bangladesh’s garments exporters brace for slowdown

Bangladesh’s garments exports last shrank in July 2021 when Covid-19 cases were high around the world. Since then, sales have surged, growing by a multi-month high of 60% year-on-year in March this year and 41% in June, according to BGMEA data.

The garments industry accounts for more than 80% of total exports for Bangladesh, which on Sunday became the third South Asian country after Pakistan and Sri Lanka to seek a loan from the International Monetary Fund as its foreign exchange reserves shrank and the trade deficit jumped.

Bangladesh’s $416 billion economy has been one of the fastest-growing in the world for years, but rising energy and food prices because of the Russia-Ukraine war have inflated its import bill and the current account deficit.

“Orders have slowed down,” said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). “Western countries are raising bank interest rates. That’s why people are giving priority to food and mortgages. Demand for clothing is less. This will hamper our export.”

Walmart, a US bellwether for the retail sector that caters to cost-conscious shoppers, cut its full-year profit forecast on Monday and pledged to reduce prices of clothing and general merchandise more aggressively than it did in May to reduce a spring backlog.

Two Bangladeshi garments suppliers to Walmart said other Western customers were also sitting on huge inventories. “If Walmart’s cut-price sales do not help, we are going to have a tough time,” said Siddiqur Rahman, owner of Laila Styles that supplies to Walmart, H&M and Zara. “Our orders could look up from October onwards for Christmas demand. But if retailers’ inventory is full, they will refrain from placing orders.” The European Union accounts for about 60% of Bangladesh’s total garments sales, followed by about 20% to the United States. Other buyers include Japan, Australia, India and China.

Industry players now hope sales to the smaller markets will help them see through the current slowdown without too much damage, while they try to optimise manufacturing. “Of course there are some price cuts, some discounting and some orders on hold – it’s a part of business,” said Abdus Salam Murshedy, managing director of the Envoy Group. Envoy Group sells to Walmart, VF Corp, Zara, American Eagle Outfitters and others.

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