October trade gap contracts by 6.8%

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By Shabiya Ali Ahlam
 Sri Lanka’s external sector showed improved performance in October 2015 with the trade gap contracting by 6.8 percent to US $ 791 million. But despite the modest progress, the deficit for the first ten months of 2015 expanded by 2.5 percent to US $ 6,936 million.
 The Central Bank attributed the increase in cumulative trade deficit, as at end October, to the subdued export performance which was largely due to depressed global demand Improvement.

 October saw earnings from exports dip by 6 percent yoy to US $ 847.3 million, reflecting lower earnings in all major export categories. The main contributors to the overall decline were tea, rubber products and garment exports.

 While lower export earnings from gems, diamonds and jewellery, petroleum products and sea food also contributed considerably to the overall decline, earnings from spice exports recorded a continuous growth so far this year.  “The continued decline in demand for tea from Russia and the Middle East mainly caused export earnings to decline significantly by 11.2 percent YoY October 2015,” the CB said.  Export earnings from garments, which contribute nearly 43 percent of total exports, contracted by 3.6 percent in October 2015 due to significantly lower exports to EU markets. Continuing on a negative growth trajectory were also earnings from rubber products which declined by 18.7 percent yoy. 

Keeping up with the declining trend witnessed in the last three months, import expenditure dampened by 6.4 percent yoy to US$ 1,638.3 million in October. The CB stated that the reduction largely came from fuel imports, followed by rice and textile and textile articles.  “Despite the increase in import volumes of both crude oil and refined petroleum, the fuel import bill declined by 30.5 per cent in October 2015 reflecting the substantial decrease in oil prices. 

The average import price of crude oil declined to US $ 49.3 per barrel in October 2015 compared to US $ 99.4 per barrel recorded in October 2014,” shared CB.
 In line with the reduction recorded in garment exports, import expenditure on textile and textile articles declined by 21.0 per cent during the month.  Rice imports declined by 98 percent in year-on-year which reflects the base effect of significantly high rice imports recorded in the previous year owing to lower domestic supply. Meanwhile, wheat and diamond imports also declined significantly.

 However, it is observed that imports of consumer durables continued to increase in October 2015 due to the influx of personal motor vehicles.  Cumulative analysis of the first ten months show that expenditure on imports decreased by 1.2 percent to US $ 15,780 million due to a 15.8 percent drop in expenditure on intermediate goods imports.
The main import origin countries for the first 10 months, accounting for 60 percent of total imports were India, China, Japan, UAE, and Singapore.

Earnings from tourism up 20.4% 

The Central Bank on Thursday said earnings from tourism in November 2015 showed significant progress having expanded by 20.4 percent Year-on-Year (YoY).  While November recorded earnings of US$ 229.5 million, it stated that the cumulative earnings from the sector in the first eleven months has increased by 18.1 percent to US$ 2, 534.8 million from US$ 2, 146.7 million posted in the corresponding period in 2014.  Tourist arrivals continued its growth momentum in November 2015 having expanded by 20.4 percent yoy with 144,147 arrivals, while arrivals during the first eleven months of the year totalled 1,592,266 showing a growth of 18.1 percent over the same period in 2014.

ndia and China continued to lead the top ten source countries for tourist arrivals with Indian and Chinese tourist arrivals recording the highest growth of 29.7 percent and 68.9 percent during the period.

US$ 1, 092 mn outflow from govt. securities, US$ 7.5 mn inflow to bourse

Foreign investment in government securities market during the first eleven months of 2015 increased by 945 percent with net outflow amounting to $ 1, 092.2 million from $ 104.5 million recorded in the corresponding period the previous year. Meanwhile the Colombo Stock Exchange (CSE) recorded a net inflow of US$ 7.5 million up to end November 2015, which comprised net outflows of US$ 27.7 million of foreign investment from the secondary market, and net inflows to the primary market amounting to $ 35.2 million. “Foreign investments remained subdued over the past few months as a result of rebalancing of portfolios with the expectation of interest rate hike in the US,” the Central Bank said. Over the first ten months of 2015, long term loans to the government registered a net inflow $ 182.2 million compared to the net inflow of US$ 737.9 million recorded during the corresponding period of 2014.
 Earnings from
India and China continued to lead the top ten source countries for tourist arrivals with Indian and Chinese tourist arrivals recording the highest growth of 29.7 percent and 68.9 percent during the period.

With the increase in net outflows, the overall Balance of Payment (BOP) is estimated to have recorded a deficit of $ 2,337.2 million during the first ten months of 2015 in comparison to a surplus of $ 1,761.1 million recorded during the corresponding period of 2014.
Be end October, the nation’s gross official reserves stood at $ 6.5 billion, with total foreign assets amounting to $ 8.0 billion.
Subsequent to the decision of the Central Bank on September 04, 2015 to accommodate greater flexibility in the determination of the exchange rate, the Sri Lankan rupee has depreciated by 6.64 percent, resulting in an overall depreciation of 9.03 percent during the year up to December 31, 2015.
It was highlighted that over the year, based on cross currency exchange rate movements, the Sri Lankan rupee has appreciated against the Australian dollar by 2.42 per cent and the euro by 1.30 per cent, while depreciating against the Japanese yen by 8.20 per cent, the pound sterling by 4.46 per cent and the Indian rupee by 4.62 per cent during this period.

October draws US$ 605 mn in workers’ remittances

Inflows of workers’ remittances grew by 0.8% in October to $ 605.1 million, from US $ 600.1 million received the corresponding month the previous year.
The Central bank said workers’ remittances during the first ten months of the year grew by 1.7 percent to US $ 5,787.3 million from $ 5,689.7 million in the corresponding period of 2014.