Energy crunch, global competition push RMG exports lower

Garment exports posted a robust 21.52% year-on-year growth in June, reaching $3.39 billion. While the headline figure appears impressive, the export value was broadly in line with the sector's typical monthly average.

A low base effect largely drove the sharp increase as exports had fallen to $2.79 billion in June 2025 due to the 10-day Eid-ul-Adha holiday. As such, the June 2026 performance reflects a return to normal export levels rather than a structural improvement in the industry's momentum.

Despite the strong June showing, Bangladesh's ready-made garment (RMG) exports declined for the second consecutive fiscal year. Total exports stood at $38.70 billion in FY2025-26, down 1.64% from $39.35 billion in the previous fiscal year.

Among the two major segments, knitwear exports fell 2.53% to $20.62 billion, while woven garment exports declined by a comparatively modest 0.61% to $18.08 billion, indicating greater resilience in the woven segment.

The annual contraction highlights the industry's continuing challenges. Globally, uncertainty surrounding US tariff policies has disrupted sourcing decisions and manufacturers' production planning.

At the same time, China's increased export push into the European Union has intensified price competition, while competitors such as India and Vietnam continue to benefit from their free trade agreements with the EU, further weakening Bangladesh's competitive position in key markets.

Domestically, the prolonged energy crisis, particularly the acute gas shortage, has significantly undermined production. Many factories are operating well below capacity, eroding productivity and worsening financial pressures.

The slowdown is also reflected in investment trends: imports of capital machinery fell 14.38% in the garment sector and 29.19% in the textile sector during the July-March period of FY2025-26, pointing to weakening confidence in future expansion.

Meanwhile, the cost of doing business has risen sharply. Manufacturers are grappling with bank lending rates exceeding 14-15%, repeated increases in electricity tariffs, and the cumulative impact of annual wage hikes.

These mounting pressures have pushed many factories into financial distress, forcing a growing number to shut down. The sector's performance underscores the urgent need for structural reforms in energy, financing, logistics, and trade policy to preserve Bangladesh's competitiveness in an increasingly demanding global apparel market.