Forrest Cookson, PhD
This short paper attempts to forecast the garment sector for the coming year. This is difficult due to the uncertainties in the rules for world trade. The actions of the United States in changing tariffs and the continuing changes being made in agreements makes the future unusually opaque. The final agreement between the United States and Bangladesh is not yet signed, but at this point we can assume the rules for the Readymade Garment (RMG) sector are known.
The recent history of export of RMG exports are as follows in Table 1:
Table 1
(Billion dollars; calendar years)
Year 2023 2024 2025
Total exports 40.86 47.26 47.75
Woven goods 15.45 17.95 18.01
Knitted goods 17.25 20.53 20.81
Total RMG 32.70 38.48 38.82
We can see that in calendar year 2025 total exports increased only 1%. RMG exports similarly increased at about 1%.
Prospects for 2026 are not encouraging. The uncertainties that characterized 2025 continue. Buyers continue to be uncertain and will be inclined to wait until the new government has settled down and shown what it could accomplish. This will take some time and as a result we expect buyers will to be reluctant to increase orders until the government in Bangladesh has shown its hand. Also, the final negotiation of the agreement with the United States will possibly not be completed before the new Government takes power resulting in a new negotiating team from the Bangladesh side.
Capacity of the industry has increased substantially and Chinese interest in investment will increase this capacity. There are two considerations: Demand and the supporting facilities.
There are real factors influencing the demand. Forecasts for the US economy have generally been lowered as have those for the EU. How this transmits into changes for apparel demand are uncertain. There may be changes in tastes although for most of retail buyers of Bangladesh goods this is limited. It is unlikely that there will be a strong increase of the international demand for Bangladesh garments.
For the supporting facilities there are real problems. In Bangladesh itself there is continuing shortage of gas and electricity. This was a major factor in 2025 and will probably continue into 2026. It is unlikely that the incoming Government will be able to do better than the Interim Government. The energy problems are unlikely to be solved for some time. The electricity shortages and shortages of gas will not change and these limit the production of garments. Hence there is a clear limit on the supply side. Transport problems are still difficult. The time delays on the Chittagong- Dhaka highway are growing, the customs delays continue to be long, and port handling reported to be improving. Air cargo remains chaotic and even use of the new airport will take some years to function well. In effect the actual capacity of exports is constrained by these ancillary factors.
In addition, the dispute over protection of the spinning industry is unresolved. This problem is likely to be passed on to the new Government.
This unhappy picture suggests that there is no major improvement to be expected in the exports of garments in 2026.
The conclusion is that exports of the RMG sector for 2026 will range from +2% to minus -7%. Weighting our analysis with a limited survey of experts in the sector leads us to project -4% for RMG sector in calendar 2026. The new Government faces challenges to correct the ancillary factors that are currently limiting the industry.
Over the next few years capacity of the industry will increase both due to the investment by the owners and the increase of Chinese investment. Demand will certainly grow as the main buyers will find rising GDP and improved income distribution. There will be demands for improved environmental practices and better labor practices. But the real problem for the next three years is to improve the electricity system and increase the gas supply.
