IMS report brings good news for suffering textile industry

According to a report released by Inter-Market Securities (IMS), Pakistan’s textile exports may only fall by 5-10% in the 2021 financial year rather than the 20% or more that was predicted earlier.
Global textile demands have decreased sharply due to the coronavirus pandemic, hurting Pakistan’s exports. However, according to the IMS report, Pakistan’s textile industry may stand to ultimately gain from the crisis since it will recover quicker than its competitors. This can be attributed to Pakistan’s largest export market Europe coming out of lockdown, home textile exports going strong, and the added benefits from global orders being rerouted out of China.
The government has also already taken measures to both protect exporters during the present crisis and remove longstanding barriers to competitiveness. Several input costs have been subsidised and Pakistan’s currency is no longer overvalued.
Based on IMS’s discussions with major textile exporters, home textiles and healthcare segments will recover earlier than garments. There is an emerging demand for pandemic-related textiles such as masks and PPEs. The sector has corrected 9% since the onset of the pandemic while the expected upcoming demand of back-to-school and winter clothing can be key catalysts in further reviving the industry.
Pakistan’s export-to-GDP ratio has shrunk from 17% in 2003 to 9% in 2020 due to weak policy incentives, tough local business conditions and the rise in competitiveness of regional countries.
According to the report, the coronavirus pandemic and its socio-economic impacts have led to the worst global crisis since the financial crisis of 2008-09. Negative GDP growth of 10% or more is forecasted for many developed countries. Global textiles have suffered from not only disrupted sales and supply chains but also decreased demand led by rising unemployment and postponed consumption. This has caused severe financial stress for major textile retail chains.
However, massive government stimulus packages — as much as up to 20% of the GDP — along with the lifting of lockdowns globally have helped contain the fallout and led to a recovery in retail sales during May-June.