Sri Lanka's apparel exporters are facing a challenging period as they witness a significant drop in orders due to an economic slowdown in the West. The orders have decreased by approximately 18 to 20 percent, leading factories to operate below capacity and make necessary adjustments. This decline in orders is not unique to Sri Lanka, as other exporting countries are also experiencing a fall in demand.
The recent closure of a factory by Sri Lanka's Hirdramani group, which was attributed to issues with the leased building, highlights the impact of these challenging market conditions. However, it's important to note that investors have not been closing factories and leaving Sri Lanka en masse.
The current situation can be traced back to the monetary accommodation measures implemented by the US Federal Reserve and the European Central Bank during the Coronavirus crisis. The surge in demand resulted in supply chain bottlenecks and inflationary pressures, reminiscent of the 1980s. As a response, Western central bankers are now increasing interest rates and withdrawing excess liquidity, leading to further economic slowdowns and recessions.
Sri Lanka's apparel exports, which amounted to approximately $5.6 billion in the previous year, have declined by 23 percent to $343 million up until April. Yohan Lawrence, the Secretary General of Sri Lanka's Joint Apparel Association Forum, attributes this decline to the global fall in demand that has impacted apparel manufacturing countries worldwide.
While some adjustments in headcount and temporary struggles for a few factories may occur, the industry as a whole is expected to continue. There are hopes for demand to recover in the second half of the year, and the recent efforts of Sri Lanka to strike Free Trade Agreements are seen as positive steps that can benefit all exports.