Sri Lanka’s apparel export earnings could slump by $1 billion USD this year, as slowing global demand hits the crisis-hit South Asian country.

Apparel is Sri Lanka’s largest industrial export and earned $5.95 billion USD in 2022, helping the country as it weathered its worst financial crisis since independence in 1948, triggered by a record reduction in foreign exchange reserves. But the industry’s first-quarter performance in 2023 has struggled with textiles and garment exports dropping 13.8% to $1.3 USD billion. Exports in March marked the lowest in three years.

Given the slowdown in demand that is being seen, a $1 billion USD reduction in exports this year is not unreasonable.

Shipments to the Unites States, the country’s biggest buyer, dropped by 22% to $470 million USD in the first quarter.

Exports to the European Union fell 13% to $344 million USD while first-quarter exports to the United Kingdom were down 10% to $167.7 million USD.

A steep 66% power tariff hike in February has also hit Sri Lanka’s competitiveness.

However, the industry is not expecting significant job losses from the downturn but small and medium companies could see difficulties as the sector adapts to deal with a slowdown in orders.