Sri Lanka’s apparel and textile exports fell more than 8% in the first quarter of 2026, hit by weakening demand from key Western markets and rising operating costs, adding pressure on one of the island nation’s largest foreign exchange earning industries.
According to Business Times, export earnings from apparel and textiles declined 8.06% year-on-year to $1.27 billion during January-March 2026, according to provisional data released by the Sri Lanka Export Development Board.
The downturn reflects slowing orders from the United States, the European Union and the United Kingdom, which together account for the bulk of Sri Lanka’s apparel shipments. Exports to the United States fell 6.37% during the quarter, while shipments to the European Union dropped 7.28% and exports to the UK declined 7.93%, the data showed.
Industry body Joint Apparel Association Forum (JAAF) said the sector remained under pressure from subdued global consumer demand, cautious retail inventory management and rising production expenses.
Sri Lanka’s apparel industry, which supplies major global fashion brands and contributes nearly half of the country’s merchandise export earnings, has been struggling to regain momentum after a volatile 2025 marked by inflationary pressures and uneven recovery in Western retail markets.
March data showed the pressure intensifying. Apparel and textile exports fell 11.22% year-on-year to $440.3 million during the month, dragged by a 12.78% decline in shipments to the United States and a 15.7% drop in exports to the United Kingdom.
JAAF officials said higher fuel and electricity costs were also eroding competitiveness for Sri Lankan manufacturers at a time when buyers are aggressively negotiating prices and shifting orders to lower-cost sourcing destinations.
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Despite the broader slowdown, the industry identified pockets of resilience in regional markets. Exports to India rose about 10%-12% during the first quarter, supported by stronger demand for value-added textile products and closer regional trade ties.
The sector is also banking on trade policy advantages to stabilize exports. Industry executives pointed to recent reforms under the UK’s Developing Countries Trading Scheme (DCTS), which now allow Sri Lankan garment exporters greater flexibility in sourcing raw materials while retaining duty-free access to Britain.
Analysts say Sri Lanka’s apparel sector faces growing competition from regional rivals including Bangladesh, Vietnam and India, all of which continue expanding production capacity and attracting global sourcing contracts. The island’s manufacturers are increasingly focusing on premium apparel, sustainability standards and ethical sourcing to differentiate themselves in the global market.
Sri Lanka’s apparel industry has long marketed itself as an ethical manufacturing hub under the “Garments Without Guilt” initiative, with suppliers serving international brands across sportswear, lingerie and fashion categories.
The broader export sector, however, showed some resilience. Total exports, including services, rose 1.59% in the January-March period to $4.31 billion, helped by growth in information technology services, electrical components, seafood and processed food exports.
Still, apparel remains critical to Sri Lanka’s economy, employment and foreign currency inflows. The industry employs hundreds of thousands of workers directly and indirectly, making any prolonged downturn a significant risk for the country’s fragile economic recovery following its recent financial crisis.
Industry leaders are now urging policymakers to accelerate energy reforms, improve trade facilitation and secure longer-term market access arrangements with key export destinations to protect competitiveness in an increasingly difficult global sourcing environment.
