Bangladesh’s exports to the USA declined by 6.88 per cent year-on-year to $9.70 billion in FY23, as high inflation and economic crisis in the country forced US consumers to cut spending in favour of living costs.
The latest data from Export Promotion Bureau (EPB) show that Bangladesh’s exports to the USA had reached $10.41 billion in FY22. Meanwhile, in FY23, 17.46 per cent of Bangladesh’s total export earnings – $55.55 billion – came from the US market.
This figure was over 20 per cent in FY22. Bangladesh’s exports to the US market touched the $10 billion landmark that same year, posting a 49.38 per cent growth in the country’s largest export destination.
An analysis of EPB data for the US market shows that in FY23, Bangladesh’s exports earnings from apparel items declined by 5.50 per cent to $5.82 billion, compared to $9 billion a year ago.
Earnings from knitwear products recorded 13.61 per cent negative growth to $2.70 billion, which was $3.12 billion in the previous year. Woven products earned $5.52 billion, down by 1.17 per cent, compared to $5.89 billion posted in FY22.
Consumers under pressure
Soaring inflation and high interest rates are putting the consumers under economic pressure and squeezing their purchasing capacity. This in turn has cut the demand for consumer goods, especially for readymade garment products – which is Bangladesh’s key export item.
According to a survey conducted by CNBC and Morning Consult, a staggering 92% of Americans are pulling back spending. Moreover, retailers such as Walmart, Target, Home Depot and Best Buy have called out cautious consumer-spending shifts during the first quarter.
Clothing items came in as the number one nonessential category where consumers have cut back as part of inflation-fueled spending cuts.
Speaking to The Business Post, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Faruque Hassan said, “Clothing product exports to the USA have declined by almost 30 per cent in terms of quantity.
“Interest rate hike and high inflation has slowed down demand in that country.
He continued, “Not only Bangladesh, but other countries also recorded negative growth in exports to the US market. We however recorded slower negative growth compared to other nations.
“Though inflation has started to go down in the USA, Bangladesh’s exports there may continue to decline for a few more months unless their economy rebounds.”
Sounding a note of optimism, Hassan said, “We expect that apparel exports to the USA would rebound from December onwards. But it would not be easy as both the unit prices and exports volume declined by 19 per cent and 30 per cent respectively.”
‘Apprehension of recession’
Zahid Hussain, former lead economist of World Bank Dhaka office, said, “There was uncertainty in the economy and apprehension of recession. It is not over yet, but the risk and crisis are starting to decelerate.
“Besides, the employment rate in USA is improving, which may increase demand.”
According to the US Bureau of Labor Statistics, payroll employment in that country went up by 209,000 in June, but the unemployment rate dropped a little to 3.6 per cent.
Total nonfarm payroll employment in the USA rose by 209,000 in June. Employment continued to trend up in government, health care, social assistance, and construction. Meanwhile, inflation is showing a downtrend.
“So, there is hope, but we should look into the internal issues related to export,” said Zahid.
US consumer inflation fell for a third consecutive month to 3.8 per cent in June 2023, the lowest since April 2021, from 4.1 per cent in May.
Discussing issues faced by the export sector, Zahid said, “I think, there are problems in our supply side as the exporters are facing electricity and gas supply shortages. This is creating problems against ensuring the supply of goods within the deadline.
“While placing new orders, buyers consider issues like supply chain, and internal situations such as political instability.”
He then said, “To navigate through the crisis, as well as to recover from the negative export growth in the US market, the government should ensure a business friendly environment and smoother supply of gas and electricity.
“If such facilities cannot be ensured, exporters may fail or face difficulties to attract buyers and grab work orders.”
In FY23, Bangladesh earned $55.56 billion through exports, an increase of 6.67 per cent, compared to $52.08 billion posted in FY22. The apparel sector, which provides the lion’s share of export earnings, contributed $46.99 billion – which is 84.58 per cent of the total earnings.
