European and US retailers — including Primark — have cancelled about $1.5bn (€1.4bn) of Bangladesh garment orders as the coronavirus outbreak roils demand.
As many as 1,089 Bangladesh garment factories have seen orders getting scrapped, Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association said. That’s impacting lives of 1.2 million workers, she said.
While Bangladesh, the world’s biggest garment exporter after China, has been relatively unscathed with 27 virus infections, order cancellations may hit the economy hard.
Readymade clothing factories employ more than four million people and the industry accounts for 13% of the South Asian nation’s GDP.
“I urge you all to kindly steer through this crisis together,” Ms Huq wrote in a letter to retailers urging them not to cancel orders.
“Let the production go on. In case of urgency, we can accept deferred payment.”
The order cancellations are a setback for Bangladesh, which has been making steady economic gains with growth set to expand more than 7% for the fifth straight year, as per a pre-virus forecast from the IMF.
The administration headed by Prime Minister Sheikh Hasina has spearheaded policies that had boosted per-capita income — estimated by the IMF to $1,906 last year — to almost on par with India’s $2,172.
“Brands who were partners last month have all turned into strangers,” Ms Huq said.
“We call upon the international community to surface with a renewed pledge to support the workers of Bangladesh, if not just the businesses.”
Primark, which has no online sales, is reportedly using a force majeure clause in its contracts to cancel orders.
“For Bangladesh, the main exposure is reliance on exports to Europe and the US, which are likely to slow sharply,” Moody’s Investors Service last week, keeping the nation’s credit rating at Ba3, a junk rating.
“However, Moody’s expects the shock to be temporary, with supply chains and demand starting to recover later this year,” it said.
JPMorgan Chase & Co expects GDP to shrink at an annualised rate of 14% in the April-June period — and Europe may delay Bangladesh’s goal of doubling total exports to $72bn by 2024.