The recent dip in Sri Lanka’s apparel export revenue is the result of external macroeconomic pressures and weaker consumer spending in key Western markets rather than domestic operational failures, according to Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe.
He added that the Government was working to diversify market reach while ensuring that trade concessions such as the European Union’s (EU) Generalised Scheme of Preferences Plus (GSP+) remained protected.
“The reason for the drop in apparel is the economic slowdown in the United States and Europe,” he told The Sunday Morning, noting that rising inflation in the US and the economic fallout from the Middle East conflict had contributed significantly to the deceleration of Western economies.
Apparel exports totalled $ 3.59 billion from January to September this year, a decline of 5.52%, or roughly $ 210 m, compared to the same period last year, according to the Joint Apparel Association Forum (JAAF), which represents the industry.
Cumulative figures show declines across all major markets. Exports to the UK recorded the sharpest fall at 10.85%, followed by the EU and other markets at 5.44% and 5.43%, respectively. The US market contracted by 3.69%.
The Deputy Minister pointed out that the local industry was structured around high-value manufacturing. “We produce high-premium products for top-tier brands,” he said. “When their markets experience a slowdown, consumer spending decreases, and that is what impacts our order volumes.”
Drawing comparisons with market fluctuations during the Covid-19 pandemic, Abeysinghe described the downturn as part of an economic cycle. Some facilities are operating at capacities roughly 20% below peak periods, but he stressed that the sector’s survival was not at stake.
“This is not a threat severe enough to cause factory closures, though order volumes are not at the levels seen previously,” he said.
To reduce vulnerability to single-market shocks, he said the Government would assist manufacturers to expand. “What we intend to do is promote apparel beyond our current markets,” he said. “We are looking at assisting our enterprises to expand into different states within the US as well as exploring new international destinations outside the US.”
According to the JAAF figures, September itself saw some improvement. Exports totalled $ 416.99 million, up 3.47% year-on-year. Shipments to the US climbed 7.17% to $ 172.03 million, while exports to the EU, excluding the UK, grew 6.5% to $ 132.46 million. Exports to the UK, however, dropped 5.92% to $ 47.33 million, and shipments to other regions decreased 3.89% to $ 65.17 million.
JAAF described the growth in the US and EU as an “encouraging sign” but cautioned that it did not yet constitute a turnaround.
The forum stated that global shifts in trade dynamics were influencing the outlook. US import data indicate that Chinese apparel shipments to the US dropped by approximately 34% in the first seven months of 2026.
Industry stakeholders in other apparel-exporting countries observe that China and India have redirected more exports to Europe after facing higher US tariffs, increasing competition in the EU market. China’s share of EU apparel imports grew from 26.9% to 28.6% between January and April this year. JAAF said this highlighted the need for Sri Lankan producers to focus on competitiveness, reliability, and market diversification.
JAAF Secretary General Yohan Lawrence said: “September’s growth in the US and EU is encouraging, and it shows our manufacturers can compete when demand is there. We’re still more than 5% behind where we were this time last year. What the industry needs now is steady, competitively priced energy and a supportive policy environment, so that this momentum lasts beyond a single month.”
Responding to questions on the EU’s GSP+ concession which directly impacts Sri Lanka’s apparel sector and the conditions tied to democratic reforms in the light of controversies surrounding the Protection of the State from Terrorism Bill (PSTB), Abeysinghe said the President had given assurances that the required commitments would be addressed. He dismissed speculation that the Government would risk tariff preferences through proposed legislation.
“We are formulating these laws in consultation with the United Nations, the EU, and relevant governing bodies,” he said. “If there are shortcomings or adjustments that need to be made, the Government will address them appropriately. We will carry out legal reforms in a manner that will not harm concessions like GSP+.”
Meanwhile, the Ceylon Chamber of Commerce has submitted its observations on the PSTB and is finalising its views on the Prevention of Organised Crimes Bill. It called for a careful review to ensure clear definitions, appropriate judicial oversight, and adequate due process safeguards.
“Such measures are essential to maintaining investor confidence, legal certainty, and Sri Lanka’s reputation as a predictable and rules-based destination for trade and investment,” the chamber said, urging that new legislation be aligned with international commitments and standards to support the continuation of GSP+ benefits.
The Bar Association of Sri Lanka, the Human Rights Commission of Sri Lanka, and Human Rights Watch have flagged concerns over the drafts.