Textile and garment sector bears the brunt of global uncertainties

Textile and garment businesses are facing pressure due to weaker purchasing power caused by mounting inflation and other global uncertainties.

Textile and garment exports in September dropped by nearly 1.2 billion USD, or 27%, from the previous month, to 3.2 billion USD. Sharp export declines were recorded in the US, Europe, Japan, the Republic of Korea (RoK), and China, according to the General Statistics Office.

The SSI Securities Corporation said the number of orders placed for the fourth quarter of 2022 fell by 25-50% from the second quarter, when orders increased strongly, because the unsold inventory in import markets is high at present.

Many companies have received orders to be delivered in the first quarter of 2023, but the order number is still much below their capacity, SSI noted.

It added the enterprises whose buyers are mainly in the US and Europe will be hit harder compared to those exporting to Japan and the RoK.

Aside from inflation, fluctuations in material prices are also a problem.

Le Tien Truong, Chairman of the Vietnam National Textile and Garment Group (Vinatex), said there are uncertainties running up to the end of the year, especially the Russia-Ukraine conflict and material price fluctuations.

Enterprises are seeking ways to diversify material supply sources as well as export markets because when material sufficiency is ensured, they can boost shipments to many markets, thus helping guarantee production stability, supply chain, and sustainable exports, he said.

Another challenge is foreign exchange rates, according to analysts.

Nguyen Duc Hao, a specialist from the VNDirect Securities Corporation, said the euro has continually depreciated as a result of recession concerns due to Russia’s threat to reduce gas supplies for many European countries, adding that businesses could suffer from lower profits, even losses.

Echoing the view, SSI held that most textile and garment companies earn revenue in the US dollar, but many of their costs such as materials, logistics and lending are also calculated in the greenback.

It said while the export outlook is bleak, the USD/VND exchange rate is predicted to continue falling in the last half of this year, causing an adverse impact on businesses, especially those with high expenses calculated in the US dollar./.