Sri Lanka’s textile and garment exports, the only commodity which has been cushioning the country’s overall exports and trade balance reversed its growth trend in May as it recorded a 4.6 percent fall from a year ago, reversing the growth trend seen thus far.
Sri Lanka’s top export commodity’s contraction in earnings comes as a huge blow at a time when the tea and rubber exports are also in doldrums amid turmoil in some of the key markets and the commodity market slump.
According to industrialists, Sri Lanka has also lost about half a billion dollars in export earnings per annum since losing the preferential access under the GSP Plus facility in 2010.
However, the Brexit could also result in a fairer playing field between countries who have hitherto been enjoying duty free access and those who do not.
The earnings from tea exports, the foremost agricultural export commodity fell by as much as 27.1 percent yoy to US $ 90.2 million, “reflecting declines in both average export price and volume of export”.
“Average export price of tea decreased by 5.3 per cent to US dollars 4.24 per kilogram owing to lower demand from the Middle East and Russia while export volume also declined by 23.0 per cent to 21.26 million kilograms,” the Central Bank said.
During the first five months, the fall in tea exports earnings is 11.5 percent yoy to US $ 496.5 million.
Meanwhile, rubber product exports also fell sharply by 25.1 percent yoy in May to US $ 57.1 million while the first five months earnings fell by a slower 7 percent yoy to US $ 308.7 million.
The local rubber industry has its own related problems. While the adverse weather conditions have resulted in multi-year low production, availability of cheap synthetic rubber due to low global oil prices have pulled the prices for natural rubber lower.
The government recently proposed to set up a rubber hub which will enable importation of rubber for value addition and re-exportation, for which the industry responded in the positive, as long as the local producer is safeguarded and price maintained.
Sri Lanka’s exports has been in a downward spiral for the last 15 months and in May, exports fell by 12 percent yoy to US $ 776.3 million while the exports in the first five months contracted by 6 percent yoy to US $ 4.2 billion.
According to latest data released by the Central Bank, textile and garments exports shrank to US $ 374.7 million against US $ 392.9 million in the corresponding month a year ago. But the cumulative earnings from textile and garments exports during the first five months increased by a paltry 5.2 percent year-on-year (yoy) to US $ 2.08 billion.
“Earnings from textile and garment exports, the main export product of Sri Lanka which performed well during the past few months, also declined in May 2016 reflecting lower garment exports to both traditional and non-traditional markets,” the Central Bank said.
Further the plunge in sterling pound following the Brexit fallout in June could also have adverse implications on Sri Lanka’s apparel exports as over 40 percent of Lankan apparel goes to the United Kingdom (UK).