External trade witnesses improvement in Jan ’17

External trade trend witnessed an improvement in Jan ’17 where exports clocked in at $1.78 billion (up 3.0 per cent month on month and 0.7 per cent year on year), marking a reversal from the consistent monthly downward trend seen this year.

The textile sector, which constitutes more than 60 per cent of country’s exports, picked some pace on sequential basis, rising 2.7 per cent MoM to $1.06 billion in Jan ’17, driven by a broad-based recovery in both low-value (7.8 per cent MoM) and value-added segments (1 per cent MoM).

However, on a cumulative basis, textile exports for the seventh month of the fiscal year still stand 1.5pc lower YoY at $7.23 billion, largely contributed to 8.66pc YoY decline in low-value segment, diluting the impact of 1.6pc YoY growth in the value-added segment.

Going forward, analysts at AKD Securities expect textile exports to largely remain under pressure on the basis of demand side bottlenecks with weak Chinese demand outlook and concerns of an economic slowdown in the EU following Brexit.

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Moreover, lower currency competitiveness amid sharp depreciation in regional currencies can also play a significant part in the pressure building.

That said, the recently announced export incentive package worth Rs180 billion with the textile sector having the lion’s share of 87-89pc is expected to enhance export competitiveness over regional countries remaining a key near-term trigger for the sector.

Moreover, encouraging cotton arrivals to date for is expected to reduce cotton shortfall this year.­­

On a cumulative basis, however, textile exports performance still remains unimpressive with January exports recording a decline of 1.5pc YoY. Drilling down, low valued added exports declined by 8.6pc YoY to stand at $1.99 billion, wit the highest impact coming from cotton yarn and cotton cloth, clocking in at $740 million and $1.21 billion respectively, sliding by 6.3pc YoY and 7.3pc YoY respectively.

On the other hand, value-added sector’s performance remained promising at 1.6pc during the seventh month of the fiscal year, with 0.5pc YoY, 4.4pc YoY and 4.3pc YoY increase in knitwear, bedwear and readymade garments exports.

Going forward, a substantial uptick in exports seems unlikely amid fresh concerns on low currency competitiveness following sharp decline in regional currencies Moreover, risks of potential economic slowdown in the EU region following Brexit (contributing 20pc-25pc to country’s total exports), undermining benefits from GSP plus status accompanied with slower Chinese demand can keep recovery limited.

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