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Overview of the textile and garment industry in the first months of 2023 – The core cause for the decline
According to VIRAC, Vietnam’s textile and garment industry in 2022 has achieved positive results when it reached an export turnover of 44 billion USD, an increase of about 10% compared to 2021. However, from the end of the fourth quarter of 2022, the situation The world economic – political situation suddenly encountered a series of problems such as: the war between Russia and Ukraine was still tense, economic growth slowed down, inflation increased, etc. forecasted that the demand for garments will also decline in 2023. Especially, it will continue in the main import markets of Vietnam, the US and the EU.
As expected, Vietnam’s textile and garment industry in the first months of 2023 was quite gloomy, even with a sharp decline compared to the same period last year.
The textile and garment industry faces great difficulties in the first months of 2023
According to the VIRAC report, in the first quarter of this year, the country’s textile and garment output reached US$8.701 billion, down 18.63% compared to the same period in 2022.
Specifically, in the first quarter, the output of casual clothes that Vietnamese enterprises produced decreased by about 10% over the same period last year.
Source: VIRAC’s report
In addition, the total retail sales of garments in Vietnam is estimated to decrease by about 1.3% compared to the same period in 2022.
Source: VIRAC’s report
The value of garment exports in the first quarter of 2023 also decreased by 18.0% over the same period last year. Facing this difficult situation, many domestic textile and garment enterprises have had to reduce their profits, report losses, and even close their doors.
Source: VIRAC’s report
The main reasons for the significant decline of the textile and garment industry
The reason for the alarming decrease above, based on the economic – political situation, can point to the following main reasons:
- In the current period of world economic decline, not only the textile and garment industry is facing difficulties, but also other export industries. One year since Russia launched the war in Ukraine, up to now, the conflict situation has not shown signs of cooling down, even increasing tension. This is the reason for the decline in economic growth worldwide and the tightening monetary policy has also been strengthened, causing a negative impact on the operations of manufacturing enterprises. In addition, the damage caused by the Covid-19 pandemic has greatly affected the economy in general and the workforce of the domestic textile industry in particular.
- Besides, according to the explanation of many businesses, after 2 years of social distancing, consumers in many countries began to appear “overbought” – buying more than usual. Distributors are afraid of slow delivery due to supply chain congestion, so at the time of the epidemic, they increased the order of higher quantities to meet the great demand of the economic recovery after the pandemic. But the “overbought” mentality did not last long because of geopolitical instability, the Russia-Ukraine conflict, energy shortages, etc., which caused the world economy to fall back into inflation. People from the main import markets such as the US, Europe… began to tighten their wallets with non-essential products such as textiles and garments while these are the largest export markets for Vietnam’s textile and garment products.
- An equally important reason, many competitors of Vietnam’s textile and garment such as Myanmar, Bangladesh, India… are on track to accelerate to make up for the shortfalls in turnover during the years of the Covid-19 pandemic. . In addition, Vietnam is lagging behind competitors in the world such as Bangladesh or China in terms of garment production in the direction of sustainability and environmental protection.
For example, Bangladesh, this is a country that used to be “behind” Vietnam in the textile and garment market, so far, it is known to be making goods continuously, “without time to rest” while Vietnam suffers from a shortage of orders. . One of the big reasons is said that Bangladesh is leading in the trend of green transformation in the global garment industry. Currently, Bangladesh owns 9 of the 10 greenest textile factories in the world, applying innovations to utilize renewable energy, planting trees and vegetables on the factory premises. In addition, workers at factories in Bangladesh are also provided with free meals and a salary commensurate with their efforts during difficult economic times. This is arguably a significant positive endeavor in the worldwide textile industry.
Next to rival China – the tycoon leading the world’s textile exports is also developing a project called Reborn, which is being carried out to implement improvements to achieve national green standard certification. This. China is now also a pioneer in the application of new technologies to reduce waste in the textile and garment industry, such as dry dyeing technology that reduces 95% of water and 40% of energy used in the manufacturing process of dyeing.
What is the scenario for the textile and garment industry in Vietnam in the last months of 2023?
In the next quarters of 2023, it can be predicted that the situation is still not very positive for the world economy in general and for the textile industry in particular. Issues such as the global economic recession or the current tightening monetary policy are continuing to push down apparel consumption demand in major importing countries such as the EU, US, Japan, Korea, etc.
- Impact from the world economic – political situation
According to businesses in the industry, the Fed’s interest rate policy, the Russia-Ukraine conflict will never end, at the same time, supply chain bottlenecks, global inflation, rising logistics rates, etc. All of these factors show that until the second half of 2023, the market still cannot have an early recovery.
For the garment industry, situations such as lack of orders, small orders, limited quantities, and low prices will continue until the end of the third quarter. It is expected that garment orders will decrease by about 25 – 30% compared to the same period in 2022.
Impact from world competitors
According to the forecast signal, orders for the textile industry in the last quarters of the year will have to face fierce price competition with rivals such as Bangladesh, India and China.
In particular, in the second quarter of this year, China will completely open up its economy, which is considered both a challenge and an opportunity for all export industries, especially textiles and garments in the near future. The economic opening event will promote the export of items to China such as fibers and yarns to recover in the second half of 2023. China is currently Vietnam’s main fiber import market, accounting for 48% of the total price. export value. Yarn manufacturing enterprises with a high proportion of exports to China will benefit from this open door policy.
However, besides opportunities, China’s reopening of the economy also poses many challenges for textile enterprises in the second half of 2023. Currently, China is Vietnam’s main competitor in the market. America. According to OTEXA, in 2022, China is the largest textile and garment supplier to the US with 25.65% market share, followed by Vietnam with 14.87% market share.
Impact from the market
In the following quarters, Vietnamese enterprises will still face many difficulties due to the decline in purchasing power from major markets such as the US and EU, many businesses are reported to have not received orders in April. Expectedly, until July – August 2023, the market will begin to show signs of warming again.
Consumer spending on non-essential goods in general is also forecast to decrease, which makes garment outsourcing businesses more challenging in 2023 due to a sharp drop in orders and purchasing power. weaken. As a result, the profitability of the entire value chain in the textile and garment industry will be under pressure, and Vietnamese yarn and garment manufacturers will be vulnerable due to lower average selling prices.
- The impact of current sustainable trends
The textile industry in Vietnam is currently facing many difficulties in meeting environmental protection standards and is also known as one of the industries causing the leading environmental pollution in Vietnam. Vietnam.
According to the report, in the production process, to make 1 kg of yarn requires 200 liters of water, the stages that need to use a lot of water in the production process include: yarn washing, bleaching, dyeing, cleaning. final product; Cotton alone has to use up to 19,000 liters of water to provide enough raw materials for the production of a T-shirt. Besides, total emissions and solid waste are also considered as big problems in the textile industry.
For textile dyeing, due to the lack of development space planning, industrial parks with centralized wastewater treatment systems have not yet been established. In addition, many localities, due to concerns about environmental pollution, tend not to be interested in licensing textile and dyeing projects.
Especially in the current context, the EU is introducing a new strategy on the textile and garment industry, enhancing sustainable development, traceability, especially requiring textile products to be able to be recycled and reused. , has a long life span, can be understood as replacing fast fashion with solid fashion.
Because of the above painful situation, the textile and garment industry is now forced to transform production in the direction of greening, focusing on the production of green materials to move towards sustainable garment production, meeting increasing requirements. from purchasers. At the same time, the industry needs to focus on breakthrough innovation to maintain the position of Top 3 exporters of textiles and garments in the world.
In Vietnam, green transformation options in textiles and garments are also being carried out quickly, such as the project to reduce wastewater in the dyeing stage of the Vietnam National Textile and Garment Group, the project to operate a garment factory with a part of the energy. Danish company Specter in An Giang, a project to produce recycled fabrics by Hanoisimex and Hansae for export to the EU, etc.
As we also know, investing in green transformation – sustainability is a long-term race. In particular, for the textile industry, this problem becomes even more urgent when competitors in the industry in the world are gradually “leaving Vietnam behind”. Therefore, the textile and garment industry needs to be concerned and receive more support and companionship from the State.
Information on Vietnam’s textile and garment industry is compiled from the “Vietnam Textile Industry Report in Q1/2023” conducted by VIRAC. The report provides full information on the macroeconomics, trade supply and demand of the textile and garment, relevant information and forecasts from the latest updated data.
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