Textile and garment sector bears the brunt of global uncertainties

Wednesday, Oct 26, 2022 09:27

The factory of the Ho Guom garment company in Hung Yen Province. Aside from inflation, fluctuations in material prices are also a problem for garment and textile firms. — VNA/VNS Photo

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

Sharp export declines were recorded in the US, Europe, Japan, the Republic of Korea (RoK), and China, according to the General Statistics Office.

Textile and garment exports in September dropped by nearly US$1.2 billion, or 27 per cent, from the previous month, to $3.2 billion.

According to the SSI Securities Corporation the number of orders placed for the fourth quarter of 2022 fell by 25-50 per cent 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 said the enterprises whose buyers are mainly in the US and Europe would 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 Viet Nam National Textile and Garment Group (Vinatex), said there were uncertainties running up to the end of the year, especially the Russia-Ukraine conflict and material price fluctuations.

Enterprises were seeking ways to diversify material supply sources as well as export markets because when material sufficiency is ensured, they could 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 had 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 and even losses.

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

While the export outlook was bleak, the VND/USD exchange rate was 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. — VNS

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