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Garments industry slowdown is key 2023 risk for Bangladesh: Bloomberg

BTJ Desk Report
Garments industry slowdown is key 2023 risk for Bangladesh: Bloomberg

This year’s expected global slowdown could hit Bangladesh’s key garment industry hard. We see the sector’s export growth falling by roughly 3 percentage points in 2023 as world demand for clothing slows, analyzed Bloomberg.

This will add pressure on already-dwindling foreign exchange reserves and weigh on GDP. The damage could also be worse if persistent power outages at the country’s factories cause overseas buyers to shift orders elsewhere.

Growth in Bangladesh’s garments exports falls by 4 percentage points for every 1 ppt that global growth slows, according to our calculations.

In 2023, this should mean growth in apparel shipments decelerates to 24.4% from 27.6% a year earlier. The slowdown implies $1.5 billion less revenue than if shipments maintained last year’s pace.

The garment industry is key to the overall economy. It accounted for about 9.3% of GDP in the fiscal year through June 2022. The sector also made up 82% of total exports last calendar year, earning $45.7 billion, an amount exceeding the country’s FX reserves of $34 billion at the end of 2022.

The slowdown in clothing shipments will be the largest drag on the expansion in 2023, shaving an estimated 0.8 ppt from GDP growth. Overall growth will likely fall to 6.1% from 6.9% in 2022.

The damage could also be worse. Competitors like Vietnam could take market share. There is a heightened risk that overseas retailers will cancel existing orders with Bangladesh’s firms’ given power outages that have plagued the industry due to fuel shortages.

Our analysis only quantifies the impact of the expected slowdown in global growth (which Bloomberg Economics estimates falling to 2.4% in 2023 from 3.2% in 2022) and doesn’t account for these other risks.


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