The trade
deficit in Sri Lanka contracted by $2.3 billion to $4.8 billion in the first
eight months 2019, the Central Bank said yesterday, with imports decreasing by
16.6% in August, while exports are declining by 0.4%. The trade account deficit
contracted in the first eight months of 2019 by $2,386 million to $4,854
million, compared to $7,240 million in the corresponding period of 2018, the
Central Bank reported in its latest External Performance Report.
The trade
deficit expanded in August 2019 as the import downturn accelerated, while the
previous month's export drop has mostly recovered. Import expenditure decreased
by 16.6% (year-on-year), and export earnings declined by 0.4% (year-on-year) in
August 2019, primarily due to lower prices of significant export categories.
In August 2019,
the trade deficit fell to $540 million compared to the $717 million deficit
reported in July 2019. Moreover, trade terms, reflecting the relative export
price of imports, increased by 5.2 per cent (year-on-year) as import prices
dropped at a faster pace than export price reductions. Nevertheless, on a
cumulative basis, trade terms in the first eight months of 2019 declined
slightly by 0.1 per cent relative to the corresponding period in 2018.
In August 2019,
merchandise export earnings declined slightly by 0.4 per cent (year-on-year) to
$1.033 million, guided by a decrease in agricultural exports followed by
mineral exports as industrial exports increased, backed by higher textile and
clothing earnings. Textile and clothing earnings increased by 7%, reflecting
the higher demand from all major markets, especially the European Union, which
saw a 12.9% rise.
There has also
been a rise in export earnings from chemical products, products from the
printing industry, animal fodder and plastics, and their papers. Export
earnings from rubber goods, however, declined as a result of lower revenues
from tires, surgical, and other exports of gloves, while exports of meat,
beverages, and tobacco declined with lower exports of vegetable, fruit, and nut
preparations as well as the tobacco produced. During this time also decreased
export earnings from machinery and electrical equipment, petroleum products,
transportation equipment, base metals, and items and clothing, travel goods,
and shoes.
In August 2019,
earnings from agricultural exports dropped due to lower revenues from all
sub-categories except tea, seafood, and vegetables. In August 2019, tea export
earnings increased due to higher volumes of exports, given the drop in average
export prices. Revenues from spices, however, declined in cinnamon, clove, and
pepper due to poor performance. Besides, coconut export earnings decreased in
both kernel and non-kernel items due to lower export rates.
OSL Take: The
latest report by the Central Bank of Sri Lanka highlighting the decrease in the
trade deficit, increase in the tea export revenues, and the easing of pressure
on the rupee is all indicative of an economy on a buoyant growth path. International
lending agencies have recognised Sri Lanka's economic policies like the IMF,
World Bank, and ADB, which have expressed confidence in Sri Lanka and expressed
willingness to assist the country. The country’s economic policies have also
helped the growth of several key industrial sectors in the country. Hence, this
has resulted in the opening of many business/investment opportunities along
with the aggressive development program undertaken by the GoSL. The country is,
therefore, a hotbed for foreign investments, and interestedbusinesses/investors could explore opportunities in Sri Lanka.
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