THE IMPACT OF COVID– 19 PANDEMIC ON APPAREL EXPORTS: EVIDENCE FROM SRI LANKA

The apparel sector plays a vital role in the Sri Lankan economy as the largest net foreign exchange earner, and employment generator. During the COVID-19 pandemic, the industry’s production and exporting activities came under severe stress due to supply and demand shocks. This research aims at assessing the impact of COVID-19 on apparel exports by employing a standard Gravity equation framework on data related to 20 major destinations of Sri Lanka’s apparel exports. Data was extracted from a number of national and international data sources such as the Department of Census and Statistics of Sri Lanka and World Integrated Trade Solution. The findings indicated the triple effects of COVID-19 pandemic on apparel exports. First, the overall impact of the pandemic on the apparel industry was substantial. Second, the severity of the pandemic in the destination country had a significantly negative impact on apparel exports. However, the severity of the pandemic in Sri Lanka had no impact indicating the industry was resilient to the pandemic. In other words, the demand-side impact was greater than the supply side impact. Finally, in terms of apparel product categories women apparel exports declined drastically compared to other apparel and textile exports. With respect to other standard variables in the gravity model, partner country market size and level of development, movement in real exchange rate, economic performance of the exporting country and trade openness influence significant to apparel exports in Sri Lanka, was taken into account.