RIGA - Latvia's textile industry is likely to suffer the most from the reversal in the country's economic fortunes, as players in the labor-intensive industry either shut down or pack up and shift production to cheaper quarters.
Guntis Strazds, head of the Latvian Association of Textile and Clothing Industry, said that the association has significantly revised its estimate of 2008 output downward.
Strazds, speaking to the Baltic News Service, said there has been a drop in textile exports to the European Union given that Latvian manufacturers are increasingly unable to compete with cheaper, foreign producers.
What's more, rising energy costs are expected to exacerbate the industry's competitiveness over upcoming years. The high labor and energy costs, after all, are here to stay.
"We had projected a growth of 4-5 percent, but it looks now that there will be no growth," Strazds admitted.
The statement is a significant downward adjustment compared to the association's outlook last year.
Last July the association predicted that the textile industry would increase output and exports by 6 's 7 percent per year thanks to modernization of production facilities, while clothing manufacturers would reduce output by 2 's 3 percent after 2008. Domestic consumption of textiles is also sluggish, as retail sales in March declined 8.3 percent, pushed down mainly by a decrease in sales of textiles.
That contrasts to last year, when stores selling clothes, shoes and textiles saw a 40 percent growth in sales 's compared to an overall retail sales increase of 19 percent throughout the year.
Olegs Baranovs, director of the economics structural policy department of the Economy Ministry, was quoted earlier as saying that the textile industry has been suffering the most from Latvia's economic woes as soaring costs have undermined the industry's exports.
For example, Lauma Lingerie, which began producing women's underwear in Latvia in the 1960s, announced in April that it was laying off 100 employees at its Liepaja facilities and moving production to China and Belarus.
Chairwoman Linda Matisone said that the company had no choice but to optimize production due to the rapid rise of production expenses for electricity, gas, heating, water supply, rent and wages.
However, the lingerie's sister company, Lauma Fabrics, which produces yarns and other textile products, is thriving and expanding into new markets.
Last year Latvia's textile companies made 324 million lats (461 million euros) worth of products, a 4.5 percent rise from 2006. Exports amounted to 264 million lats, up 2.6 percent year-on-year, according to the textile association.
Strazds said lingerie and knitwear products comprised about 20 percent of last year's clothing exports.
He also said that the sector produced 5.4 percent more textile products than in 2006, while the amount of clothing manufactured remained unchanged year on year.
According to the association, there are about 130 textile and clothing companies operating in Latvia. Together they provide some 9.5 percent of Latvia's GDP.