Sri Lanka expects a 30 per cent drop in apparel exports during this month and the next month.
The main export markets, the United States and the European Union, gripped by inflationary pressures, are plunging into a recession stemming from Russia’s invasion of Ukraine. These global headwinds are expected to impact Sri Lanka’s apparel exports in the coming six months.
In addition, the removal of the dual corporate tax rate structure, which is set to increase corporate income taxes on exports to 30 percent up from the earlier 14 percent, also threatens the competitiveness of the country’s exports, in particular when competing with countries such as Bangladesh and Vietnam. The proposed changes to the personal income tax structure could also fuel brain drain from the country, further impacting the industry.
Sri Lanka’s fashion industry is facing a lack of young professionals since 2019 as many aspiring individuals are moving away due to the challenges faced by them following the pandemic and an unprecedented economic crisis. Economic crisis has hit the imports of fashion designing materials with only a few materials available within Sri Lanka like accessories and fabrics. Imports of nearly 50 percent of the designing materials have been banned as the country’s central bank wants to save dollars in the face of an acute foreign exchange shortage.