Bangladesh’s apparel industry closed FY2025–26 with a number that still commands respect: US$38.70 billion in ready-made garment exports. But behind that headline is a more complicated story.
RMG exports declined 1.64% year on year, from US$39.35 billion in FY2024–25. Knitwear exports fell 2.53% to US$20.62 billion, while woven garments declined a comparatively modest 0.61% to US$18.08 billion. Total merchandise exports stood at approximately US$48 billion, down 0.58% from the previous fiscal year.
RMG therefore continued to generate more than four-fifths of Bangladesh’s merchandise export earnings. That is both the industry’s extraordinary achievement and the country’s strategic vulnerability.
The FY2025–26 story is not one of collapse. It is a story of resilience under pressure — and of a competitive model reaching the point where doing more of the same will no longer be enough.
FY2025–26: The Export Scorecard
| Indicator | FY2025–26 |
| Total merchandise exports | ~US$48.00bn |
| RMG exports | US$38.70bn |
| RMG annual change | -1.64% |
| Knitwear | US$20.62bn |
| Woven garments | US$18.08bn |
| RMG share of exports | More than 80% |
| June total exports | US$4.20bn |
| June RMG growth | +21.52% |
Source: Export Promotion Bureau (EPB), BGMEA and industry reporting.
A Strong Finish Could Not Rescue a Difficult Year
June delivered a dramatic ending to the fiscal year.
Bangladesh exported goods worth approximately US$4.20 billion during the month, a 26% increase from June 2025. The surge helped limit the full-year decline in merchandise exports to just 0.58%. RMG shipments also rebounded strongly in June.
But the June number needs context. The previous June had been unusually weak, creating a low comparison base. More importantly, the annual result shows that the recovery came too late to reverse months of weaker shipments.
RMG exports had already fallen 3.41% during July–May, reaching US$35.31 billion. May alone saw garment exports decline 8.29% to US$3.59 billion after a brief April rebound.
The monthly pattern therefore tells a more revealing story than the June headline. Bangladesh did not experience a straight-line collapse in demand. It experienced volatility. Global inventory levels, buyer caution, tariff uncertainty, geopolitical tensions, energy costs and subdued consumer demand repeatedly changed the timing and size of orders.
That volatility is increasingly important for a sector built around long production cycles and large-scale capacity.
The Five-Year Picture: Growth Has Become Harder
Fiscal year RMG exports
FY2021–22 US$42.61bn
FY2022–23 US$38.14bn
FY2023–24 US$36.15bn
FY2024–25 US$39.35bn
FY2025–26 US$38.70bn
Also Read: Bangladesh RMG Exports to US Surge 11.42% in July-August
The pandemic and its aftermath distorted parts of this period, particularly the exceptional FY2021–22 performance. Nevertheless, the broad direction is significant. Bangladesh has not yet established a sustained upward trajectory beyond the US$40 billion range.
The industry came close to that threshold again in FY2024–25, only to move backwards in FY26. This suggests that the next stage of growth will require more than a global demand recovery. It will require a structural improvement in competitiveness.
Europe Weakened While North America Provided Support
The market picture was mixed. The European Union remained Bangladesh’s largest RMG destination, but exports weakened during FY26. Through July–May, RMG exports to the EU were down 4.88% to US$17.36 billion.
Germany was particularly important to the weakness, exposing Bangladesh to the risks of concentration even inside its largest regional market. The United States provided greater resilience.
During FY26, US demand helped cushion weakness in Europe and non-traditional destinations, although the US market itself remained subject to tariff uncertainty and cautious ordering. Industry reporting described the late-year improvement in North American markets as one of the factors limiting the overall decline.
This creates an important strategic lesson that market diversification is no longer optional. But diversification must mean more than adding a few small destinations to an export list. Bangladesh needs deeper, commercially meaningful sourcing relationships across a wider range of markets.
The Five-Product Problem
One of the industry’s biggest structural challenges is its concentration in a relatively narrow product portfolio. Bangladesh remains exceptionally strong in products such as T-shirts, trousers, woven shirts, underwear and sweaters. Industry reporting has highlighted the dominance of these categories and the large number of factories competing within them.
This concentration has created Bangladesh’s manufacturing strength. It has also intensified price competition. When many factories can offer broadly similar products, buyers gain greater negotiating power. The result can become a familiar cycle:
Similar products → Intense competition → Price pressure → Thinner margins → Limited investment capacity
The answer is not to abandon Bangladesh’s strengths. It is to build on them. The next product frontier includes:
- sportswear and performance apparel;
- outerwear;
- technical garments;
- premium knitwear;
- lingerie;
- workwear;
- functional apparel;
- higher-value man-made-fibre products.
The opportunity is to move from competing primarily on how cheaply a garment can be produced to competing on how much value the garment delivers.
The Factory Margin Squeeze
Export earnings tell only half the story. Manufacturers also faced pressure from rising operating costs.
Labour costs increased following wage adjustments, while yarn, dyes, chemicals, energy and financing remained significant cost pressures. At the same time, buyers continued to push for competitive prices amid weak consumer demand and inventory concerns.
That creates a difficult equation:
Higher input costs + Limited price increases = Margin pressure
For years, Bangladesh’s low-cost manufacturing proposition has been a central part of its global competitiveness. But wages cannot remain the primary source of competitive advantage forever. The next phase must come from productivity.
From Low Labour Cost to Low Total Cost
The factory of the future will compete on much more than hourly labour rates. It will compete on:
Productivity + Quality + Lead time + Energy efficiency + Material utilisation + Digital planning + Logistics + Reliability.
A global buyer does not ultimately purchase a wage rate. The buyer purchases a garment that arrives at the right price, quality and time — with manageable supply-chain risk. That makes operational excellence increasingly valuable.
Automation, advanced cutting, digital production planning, real-time quality control, energy management and better forecasting can allow factories to produce more value from the same capacity. For Bangladesh, this is crucial.
The country already has enormous manufacturing scale. The next question is how much output and value can be extracted from that scale.
Trade Policy Is Becoming Fiber Policy
FY2025–26 also demonstrated how closely apparel competitiveness is becoming connected to trade policy. Tariffs, rules of origin and sourcing requirements are increasingly influencing where brands place orders and where manufacturers source fibres, yarns and fabrics.
For Bangladesh, this means sourcing decisions can no longer be based solely on FOB price. The origin and composition of a garment can increasingly affect its market-access economics.
Cotton, polyester, yarn and fabric are therefore becoming part of the trade strategy, not merely procurement strategy. This is a major shift. The most competitive manufacturer in the next decade may not simply be the one with the cheapest input. It may be the one that can intelligently balance:
Material cost + Tariff exposure + Origin rules + Sustainability requirements + Lead time.
Diversification: Progress, But Not Enough
Bangladesh has made genuine progress in reaching markets beyond the traditional EU, US, UK and Canada destinations. Yet the numbers show why the diversification agenda remains unfinished.
During July–May FY26, exports to non-traditional markets fell 5.95% to US$5.68 billion. Over the same period, EU RMG exports fell 4.88%, while US exports were broadly flat.
This means Bangladesh remains exposed to the economic health of a relatively small group of major markets. Japan, Australia, South Korea, the Middle East and other emerging destinations represent opportunities. But the strategic goal should not simply be –“Export to more countries.” It should be – “Build large, stable sourcing positions in more countries.”
That requires stronger market intelligence, product adaptation, buyer development and trade relationships.
The 80% Question
The most revealing FY26 statistic may not be US$38.70 billion. It may be the fact that RMG still accounts for more than 80% of Bangladesh’s merchandise export earnings. This demonstrates the extraordinary success of the apparel industry. But it also creates concentration risk. When apparel performs well, Bangladesh’s export numbers rise.
When apparel slows, the national export picture suffers. The answer is not to reduce RMG’s importance. It is to build other export sectors large enough to complement it.
Leather, footwear, home textiles, jute, engineering products and other manufacturing segments can contribute to a broader export base. Bangladesh needs RMG excellence and export diversification at the same time.
The FY2027 Test
Bangladesh entered FY2026–27 with an ambitious merchandise export target of US$55.2 billion, approximately 15% above FY2025–26’s actual export earnings. The target comes against a global environment still marked by uncertain consumer demand, energy costs and trade-policy shifts.
For RMG, the challenge is even more fundamental. A return to growth cannot depend entirely on buyers replenishing inventories. It must come from stronger fundamentals.
That means higher-value products, greater productivity, better energy reliability, market diversification, technology, trade intelligence, sustainable manufacturing.
The industry has already proved that it can manufacture at enormous scale. Now it must prove that it can create significantly more value from that scale.
The Bottom Line
Bangladesh did not lose its apparel competitiveness in FY2025–26. But the economics of competitiveness changed.
US$38.70 billion remains an extraordinary export achievement. Bangladesh’s next competitive advantage will not come from being cheaper than everyone else. It will come from becoming better at creating value, managing risk and delivering reliably across the global fashion supply chain.