May saw a startling decline in Sri Lanka’s industrial strength due to flaws in the apparel industry, which has been suffering from weakening demand due to inflation and higher borrowing costs in important markets like the United States and Europe, including the United Kingdom.
The Index of Industrial Production (IIP) fell 0.3 percent from April to 88.0 index points in May, a decrease of 3.1 percent from a year earlier.Since February of last year, shortly before the economy imploded, when the index last reached a 100-point level, more than a year has passed.
According to Central Bank authorities, this also indicates the economy’s steady deterioration, which persisted through the first half of 2023 before maybe turning around from the current second quarter.
The index’s behaviour in May also demonstrates how easily one industry, in this case, clothing, may influence it. From a year ago, the wearing clothing sub-index fell 19.0 percent in May.
No other industry in Sri Lanka has been able to match the size and domination of the clothing industry during the past nearly 40 years, therefore it has continued to be the country’s largest industrial sector.
Since the majority of Sri Lanka’s clients are located in North America and Europe, especially the United Kingdom, which is experiencing the worst cost of living crisis since the inflationary spiral of the early 1980s, the garment industry is currently undergoing cyclical difficulties.
On a year-over-year (YoY) basis, garment export earnings have been declining since September 2022. For the first five months of 2023, total export revenue fell by 16.48 percent YoY to US$ 1.88 billion.
