Bangladesh’s exports in key destinations – which include the United States, European Union and Germany – performed poorly in the first half of FY24 compared year-on-year, owing to persistent economic headwinds in both local and global arenas.
Despite the setback, Bangladesh barely managed to retain its export earnings growth by 0.84 per cent, and earned $27.54 billion in the July-December period, considering overall exports to all destinations, show latest Export Promotion Bureau (EPB) data.
Exports could not retain growth in its single largest export region the European Union (EU), single largest destination country the USA, and third largest destination Germany, one of the largest trading partners India, key EU destination Italy, and North American country Canada.
These countries and the EU region occupy more or less 80 per cent of Bangladesh’s export share.
This downturn surfaced at a time when Bangladesh has already been facing a severe shortage of forex reserves, and the readymade garment sector, the country’s 84 per cent export shareholder, implemented a new wage structure last December.
Industry insiders and experts say though almost all countries faced sloth export growth due to the ongoing global economic trouble, Bangladesh could have done better.
The country failed due to the over-dependency on the apparel sector and domestic issues such as a shortage of power and energy, political instability and labour unrest.
They, however, are optimistic that the export sector would bounce back as soon as the major destinations, especially, the US and the European Union (EU) are able to rein in inflation, and brands and buyers are able to release their stocks from last Christmas.
Commenting on the matter, Research and Policy Integration for Development (RAPID) Chairman Mohammad Abdur Razzaque said, “The declining trend in major export destinations is caused by both the suppliers', and the buyers' ends.
“Bangladesh has been witnessing a gas supply shortage, forex crunch and high inflation, which in turn led to an increase in production costs, lead time. These issues affected the overall supply towards destination countries.”
Not only Bangladesh, but Vietnam and other competitive countries saw a declining trend in their exports as well, he added.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “Due to the ongoing global economic headwinds, almost all our export destinations faced severe inflation, and they hiked interest rates to tackle the situation.
“In recent times, most of these countries’ economies have improved, and they are more likely to reduce interest rates soon. I am optimistic that we will receive a good number of orders from the last quarter of this FY.”
Exports to US
The US is the single largest export destination for Bangladesh, and the country helped Bangladesh touch the billion USD club in FY22 for the first time. But earnings started to slip since FY23, which still continues.
Industry insiders said the USA has been affected by the ongoing global economic crisis, which resulted in high inflation there. To tackle the situation, the US government increased bank interest rates. This however reduced the consumers’ purchase capacity.
That is why the country reduced sourcing goods from exporters, and this severely impacted Bangladesh’s export earnings. EPB data show that Bangladesh’s exports to the USA slipped to $4.5 billion in the first half of FY24, down from $4.9 billion year-on-year.
Sparrow Group Managing Director Shovon Islam said, “The volume of orders and queries we are currently receiving from the USA have already gone up as inflation in the country is declining.”
Exports to EU and UK
Thanks to the GSP facility, the EU usually contributed nearly 50 per cent to Bangladesh’s export sector. But when the Russia-Ukraine war started, the region – which is home to 27 countries – fell into a severe economic crisis marked by high inflation and sluggish GDP growth.
Germany, the largest economy of this region, witnessed mild recession in the last quarter of 2022 and first quarter of 2023. The crisis impacted the entire EU economy, as well as Bangladesh’s export sector.
EPB data show that the earnings from the EU in the first six months of FY24 dropped to $12.13 billion, from $12.44 billion recorded in the same period of FY23. In the first half of FY24, apparel sector earnings dropped to $11.36 billion, which was $11.504 billion compared year-on-year.
In the July-December period of FY24, Bangladesh’s earnings from the Germany market dropped by $644 million to $3.03 billion. The figure was $3.67 billion in the same period of FY23.
In Spain and France, the country’s exports also rose slightly to $1.86 billion and $1.6 billion consecutively in the first half of this FY, up from $1.76 billion and $1.58 billion respectively in the same corresponding period last FY.
Exports to Italy saw a negative trend in the first half of FY24. Bangladesh’s exports declined to $1.14 billion in FY24, from $1.17 billion in FY23. In the Netherlands, exports stood at $1.13 billion in FY24, up from $1.06 billion in FY23.
Amid the global economic crisis, Bangladesh did well in the United Kingdom, where exports grew to $2.8 billion in H1 of FY24, up from $2.5 billion posted in H1 of FY23.
Non-traditional markets
Exports in India saw a sharp decline to $982 million in the first half of FY24, compared to $1.14 billion in the same period last FY. Bangladesh experienced the same trend in Canada, where exports decreased to $812 million in this half, down from $863 million in H1FY23.
In Japan, the country’s exports rose to $949 million in H1FY24, up from $910 million during the same corresponding period in previous FY.
‘Focus on inflation, conduct reforms’
Razzaque, also an expert in international trade, said, “Now, the Bangladesh government should focus on inflation and conduct reforms seriously. Otherwise, competitiveness will rise in the global market, and reserves will affect imports. This could cause further decline in exports.”
“Measures taken by the government are not enough for ensuring macroeconomic stability in the country. We do not see seriousness regarding reforms, and we already had wasted much time. If the government conducts reforms wholeheartedly, exports in every sector and the overall economy will bounce back within the next two-three years.”
