The global economic slowdown could reduce export earnings from Philippine-made apparel, travel goods and shoes in 2024, the Confederation of Wearables Exporters of the Philippines (Conwep) said on Tuesday.
Conwep said economic headwinds and higher production costs that may arise from an increase in wages could reduce export receipts from apparel and shoes by as much as 15 percent to $1.2 billion this year.
“We took into consideration the global recession. This does not yet take into account the legislated minimum wage,” Maritess Jocson-Agoncillo, Conwep executive director, told reporters during a virtual press briefing.
Rosette Carillo, Conwep associate director, said consumers tend to be conservative in their personal spending and this trickles down to the supply chain and affects manufacturers of export products.
“When you have a recession people tend to be conservative in their personal spending, consumer spending is down. The inventory of the retail stores [build up] so it trickles down to the supply chain,” Carillo said.
“If this happens, the buyer does not order and this could minimize orders for the next season. This will now affect the export manufacturers directly,” she added.
Agoncillo also said the sector could lose 21,912 workers in 2024. “Should the legislated wage hike push through, maybe about 20 to 30 percent of the 160,000 [workers in the sector] would stay.”
In a letter dated February 26, 2024 addressed to President Ferdinand R. Marcos Jr., Conwep said the global economic turmoil over the past two years “pushed down our generated employment to 182,600 by December 2023.”
“Falling consumer purchasing power and rising price cuts leave retail stores with higher inventory, and buyers migrate their orders to more affordable options such as Vietnam, Cambodia, and Indonesia due to preferential trade agreements or competitive sourcing costs and faster deliveries,” the letter read.
“Last February 22, we received advice from a major buyer in New York that orders would be diverted to Indonesia and Cambodia should there be another wage spike aside from the 2023 regional wage board- mandated increase in the daily minimum wage. The factories that stand to lose are in Regions 3, 4-A/4-B and 7,” it added.
With this, the group said the wearables in the Philippines are recalibrating their factories’ productivity levels so the country could remain “a viable sourcing hub” for quality apparel.
The group also asked the President to provide inflation subsidy to minimum wage earners instead of raising salaries via legislation.
It said the government should consider providing a 2-year monthly P1,000 government inflation subsidy to minimum wage earners similar to the Department of Labor and Employment’s Covid-19 Adjustment Measures Program or Small Business Wage Subsidy Program.
“We request a two-year inflation subsidy to allow the industry to recover as the global demand for apparel exports remains soft until March 2026. Other countries such as Vietnam, China, and Cambodia have implemented support programs similar to those of their apparel export sectors in previous years,” it said.
In a Bloomberg report, the head of the World Trade Organization (WTO) was quoted as saying that global commerce, after proving resilient through the pandemic, is performing weaker than forecast amid multiple economic headwinds and a political tilt toward protectionism.
“We need to repair the multilateral trading system, reform it, make it fit for purpose, but don’t take it for granted,” Director-General Ngozi Okonjo-Iweala said during a press conference in Abu Dhabi, where trade ministers are gathered for the WTO’s 13th biennial conference. The global trading system “is continuing to be quite strained.”
She said that demand is sluggish across most major economies—except for the United States and India, “which are doing quite well.” Meanwhile, wars and climate-related problems like a drought that’s slowing shipping through the Panama Canal are “impinging on the supply side.”