Pakistan Textiles Exports Take Nosedive

Dull exports in continuation has been the unflagging trend now, Pakistan exports remained low in September 2016 at US$1.52 billion as compared toUS$1.72 billion in September 2015, down 11%YoY/7%MoM.

Total exports registered a decline in all the segments, with the highest impact coming from heavyweights Textiles and Food sectors, which could fetch only US$961.0 million and US$238.8 million respectively. Consequently, 1QFY17 total and textile exports were recorded at US$4.68 billion and US$3.03 billion respectively, posting a decline of 9%YoY and 6%YoY.

Going forward, analysts expect textile exports to remain under pressure due to: 1) slowing Chinese demand, 2) lack of currency competitiveness limiting GSP plus benefits, 3) concerns of an economic slowdown in the EU following Brexit referendum and 4) shortage of cotton supply after cotton arrivals declined by 34%YoY. However, the soon-to-be announced export incentive package worth Rs175 billion by GoP remains a key near-term trigger for the sector.

The current financial year (FY17) started on a weak note, with textile export for 1QFY17 declining by 6%YoY to US$3.03 billion. The decline was underpinned by: 1) downtrend in low value added goods that were down 15%YoY to US$849.6 million, where cotton yarn and cotton cloth exports declined by 19%YoY and 7%YoY respectively, and 2) a 2%YoY reduction in the value added goods segment that slipped to US$2.18 billion on account of 4%YoY decline in Knitwear. However that was partially compensated by 3%YoY and 2%YoY growth in bedwear and readymade garments respectively.

Going forward, exports are unlikely to see any substantial increase. Apart from currency remaining un-competitive, fresh concerns on potential economic slowdown in the EU region following Brexit, can keep demand subdued, undermining benefits from GSP plus status. However, the export incentive package amounting to Rs175 billion aimed at reducing the cost of doing business and enhance competitiveness of export-oriented industries with regional countries remains a key near trigger for textile sector.



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