European retailers scrap $1.5 billion of Bangladesh orders

European and U.S. buyers including Primark, the budget fashion chain owned by Associated British Foods Plc, have canceled about $1.5 billion of Bangladesh garment orders as the coronavirus outbreak roils demand.

As many as 1,089 Bangladesh garment factories have seen orders getting scrapped, Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association said on LinkedIn. That’s impacting lives of 1.2 million workers, she said.

While Bangladesh, the world’s biggest garment exporter after China, has been relatively unscathed with 27 virus infections, order cancellations may hit the economy hard. Readymade clothing factories employ more than 4 million people and the industry accounts for 13% of the South Asian nation’s gross domestic product.

“I urge you all to kindly steer through this crisis together,” Huq wrote in a letter to retailers urging them not to cancel orders. “Let the production go on. In case of urgency, we can accept deferred payment.”

The order cancellations are a setback for Bangladesh, which has been making steady economic gains with growth set to expand more than 7% for the fifth straight year, as per pre-virus forecast from the International Monetary Fund. The administration headed by Prime Minister Sheikh Hasina has spearheaded policies that had boosted per-capita income—estimated by the IMF to $1,906 last year—was almost on par with India’s $2,172.

“Brands who were partners last month have all turned into strangers,” Huq said on LinkedIn. “We call upon the international community to surface with a renewed pledge to support the workers of Bangladesh, if not just the businesses.”

Primark which has no online sales, is using a force majeure clause in its contracts to cancel orders, Britain’s Sunday Times reported citing Chief Executive Officer Paul Marchant. Primark operates 376 stores in 12 countries.

“For Bangladesh, the main exposure is reliance on exports to Europe and the U.S., which are likely to slow sharply,” Moody’s Investors Service said in a statement on Thursday keeping the nation’s credit rating at Ba3, a junk rating. “However, Moody’s expects the shock to be temporary, with supply chains and demand starting to recover later this year.”

The global number of coronavirus cases doubled in a week to more than 300,000, with about 13,000 dead.

The slowdown in the U.S.—JPMorgan Chase & Co. expects gross domestic product to shrink at an annualized rate of 14% in the April-June period—and Europe may delay Bangladesh’s goal of doubling total exports to $72 billion by 2024.