- Export earnings down for 7th consecutive month
- Import expenditure up 4.8% to US $ 1.74bn
- Trade gap at US $ 730mn, up from US $ 617mn a year ago
Sri Lanka’s earnings from exports dipped and imports surged, widening the hole in the trade deficit for January, as the country braces for deeper troubles in the trade account for months to come when the world battles what appears to be a prolonged health crisis already transcended into an economic crisis.
According to the official data released by the Central Bank yesterday, Sri Lanka’s earnings from exports fell for the seventh consecutive month in January to little over a billion dollars, a 3.2 percent decline from the same month in 2019.
Meanwhile, the import bill rose by 4.8 percent year-on-year (YoY) to US $ 1.74 billion in January, rising for the second consecutive month, as the country’s imports were recovering since last December, after months of contraction caused by import restrictions and weak consumer demand.
As a result of the value of the two baskets going in opposite directions, as typically the case for years and decades, the deficit in the trade account expanded to US $ 730 million in January, from US $ 617 million in January 2019.
While the higher merchandise trade deficit has been a nagging issue for Sri Lanka and the policymakers have been scrambling to narrow the gap as a top economic priority, some trade experts have shown that it would be misleading to target only the merchandise trade deficit, as Sri Lanka has a services exports segment, which has a strong upside, given the right policies.
Services exports comprise of earnings from tourism and the exports of specialised services such as BPO and KPO.
Tourism earnings in January were estimated at US $ 431 million, compared to US $ 460 million in January 2019.
However, the COVID-19 outbreak, which has engulfed the entire global economy by sickening both the supply side and demand side, has prompted nations to think of merchandise trade anew.Meanwhile, in the export basket, all three categories of exports – agriculture, industrial and mineral, declined by 9.1 percent, 1.7 percent and 15.4 percent YoY.
Under agriculture, all sub-sectors declined except for minor agriculture products. Earnings from tea, Sri Lanka’s largest agricultural export, declined by 10 percent YoY to 99.7 million, due to the combined effect of lower volumes and average prices, although the dynamics have dramatically changed at present.
While the demand for tea is seen increasing and the auction prices rising, the industry is hamstrung to cater to the demand and to hold auctions due to the contagion, the tea traders say.
Meanwhile, under industrial exports, textile and garment exports, Sri Lanka’s largest merchandise export, slipped 0.4 percent YoY to US $ 474 million.
Currently, the industry has come to a grinding halt due to the cancellation and absence of orders from its US and European buyers.
Meanwhile, the consumer goods imports rose by 23.7 percent to US $ 371.8 million, under which food and beverage imports rose by 32.7 percent YoY to US $ 147.5 million and non-food consumer goods by 18.4 percent YoY to US $ 224.2 million.
Personal vehicle imports stood out with a bill of US $ 63.3 million, a 27.8 percent YoY increase. But the expenditure on personal vehicle imports has declined from December 2019, the Central Bank said.
Meanwhile, under intermediate goods, the biggest relief came from the 11.3 percent YoY decline in the fuel import bill to
US $ 291.9 million.
As the global crude oil prices have more than halved since January, Sri Lanka is expected to be relieved from that front, although any of such benefit could be well offset and surpassed by the plunge in export earnings in the months to follow.
Meanwhile, the textile and textile articles, which forms the single largest expenditure item in the entire import bill, rose by 14.6 percent YoY to US $ 300.8 million.