Workers sort clothes at a garment factory in Savar, Bangladesh. Picture: REUTERS / ANDREW BIRAJ
Workers sort clothes at a garment factory in Savar, Bangladesh. Picture: REUTERS / ANDREW BIRAJ

Sri Ganganagar — European and US buyers, including the budget fashion chain Primark, have cancelled about $1bn of Bangladesh garment orders as the coronavirus outbreak roils demand.

As many as 347 Bangladesh garment factories have seen orders getting scrapped, Asif Ibrahim, director at the Bangladesh Garment Manufacturers and Exporters Association, said.

While Bangladesh, the world’s biggest garment exporter after China, has been relatively unscathed with 27 virus infections so far, order cancellations may hit the economy hard. Ready-made clothing factories employ 4-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,” Rubana Huq, president of the exporters’ group, 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, according to a pre-virus forecast from the IMF.

The administration headed by Prime Minister Sheikh Hasina has spearheaded policies that had boosted per capita income, which the IMF estimated to be $1,906 last year, almost on par with India’s $2,172.

Primark, which has no online sales, is using a force majeure clause in its contracts to cancel orders, Britain’s Sunday Times reported citing CEO Paul Marchant. Primark operates 376 stores in 12 countries.

“For Bangladesh, the main exposure is reliance on exports to Europe and the US, which are likely to slow sharply,” Moody’s Investors Service said in a statement last week that kept 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,” the agency said.

The global number of coronavirus cases doubled in a week to more than 300,000, with about 13,000 dead.

The slowdown in the US — JPMorgan Chase 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.