Exports up for second consecutive month in Sept; imports down

Sri Lanka’s external sector performance has improved in September 2016 with a contraction in the trade deficit and continued growth in tourist earnings. 

The Central Bank said the trade deficit in the month of September narrowed as a result of the increase in export earnings together with a reduction in import expenditure. Although worker’s remittances recorded a marginal decline, earnings from tourism increased during the month in comparison to those of September 2015. Furthermore, foreign investments at the CSE and government securities market as well as the long-term loan inflows to the Government supported to strengthen the financial account during September 2016.

Earnings from exports recorded a year-on-year growth for the second consecutive month in September 2016. Accordingly, earnings from exports grew by 5.7%, year-on-year, to $ 898 million in September 2016, compared to $ 850 million recorded in September 2015. 

All major categories of exports contributed positively to this growth. 

Earnings from rubber product exports showed a growth of 15.3%, year-on-year, mainly due to the growth in export of rubber tyres, while all other subcategories under rubber products performed well. Earnings from tea exports increased by 8.0%, year-on-year, in September 2016, reflecting both higher export volume and average export price. The highest amount of tea export earnings was from Iran which increased substantially by 41.0% while Middle-East as a region which accounts for about 43% of total tea exports earnings, showed a growth of 15.9%, year-on-year, in September 2016. 

Further, export earnings of seafood increased, both in value and volume terms, in September 2016 while earnings from seafood export to the EU, which accounts for about 28.7% of total seafood exports, grew over 200.0%, year-on-year, for the second consecutive month showing improved demand from the EU after the removal of the fish export ban imposed on Sri Lanka by the EU. In contrast, earnings from textiles and garments exports, which account for around 43% of total export earnings, contracted for the second consecutive month by 7.1%, year-on-year, to $ 382 million, due to a temporary slowdown in global demand for garment exports from the traditional markets, such as the US and EU, in September 2016. 

On a cumulative basis, export earnings during the first nine months of 2016 contracted by 3.0%, year-on-year, to $ 7,763 million, mainly due to the decline in export earnings from transport equipment and petroleum products. 

In addition, agricultural exports, such as tea and spices, contributed considerably for the contraction in exports during this period. However, earnings from textile and garments exports increased by 2.4% during the first nine months of 2016, reflecting higher exports to both traditional and non-traditional markets. The leading markets for merchandise exports of Sri Lanka during the first nine months of 2016 were the US, UK, India, Germany and Italy, accounting for about 52% of total exports.

Expenditure on imports declined by 2.5% to $ 1,543 million in September 2016 compared to the same month in 2015. Lower expenditure incurred on importation of personal motor vehicles and fuel contributed largely to this percentage, year-on-year, in September 2016, as a result of the lower importation of personal motor cars and hybrid electric motor vehicles. 

Meanwhile, expenditure on fuel imports declined substantially by 22.1% to $ 176 million in September 2016, compared to $ 226 million in September 2015 reflecting declines in export volumes and average import prices of crude oil, and refined petroleum products. The average import price of crude oil in September 2016 declined to $ 46.99 per barrel compared to $ 48.65 per barrel recorded in September 2015. In addition, import expenditure on wheat and maize decreased significantly by 48.7% in September 2016, due to lower import volumes and average import prices.

On a cumulative basis expenditure on imports in the first nine months declined by 1.7% to $ 13.94 billion mainly due to the declines in the import of vehicles for personal use and business purposes, fuel and rice. China, India, Singapore, Japan and the UAE were the main import origins during the first nine months of 2016, accounting for about 57% of total imports. The deficit in the trade balance decreased to $ 645 million by 12.0%, year-on-year, in September 2016 compared to $ 733 million in September 2015 due to the combined effect of an increase in exports and a decline in imports. 

However, the cumulative trade deficit during the first nine months of 2016 remained almost unchanged at $ 6,183 million in comparison to $ 6,182 million recorded during the same period of 2015.