2012, year of dips in external trade

The country’s external trade last year had one direction – south – with declines for the first time since 2009 in both exports and imports, whilst the deficit saw a welcome contraction as well.

As per Central Bank data released yesterday, exports were down by 7.4% to $ 9.77 billion and imports by 5.8% to $ 19 billion whilst the trade deficit contracted by 4.1% to $ 9.3 billion. The latter still remains high despite the dip.

In the month of December, exports were down by 6.7% to $ 871 million, and imports by 19.4% to $ 1.5 billion whilst the trade deficit shrank by 32% to $ 641 million.

The Central Bank said in 2012, expenditure on imports of investment goods increased, but in response to the policy measures it and the Government adopted earlier in the year to rein in import expenditure, expenditure on imports of consumer goods and intermediate goods declined steadily from around April 2012.

“Although earnings from exports declined in 2012 along with the weakening of global demand, the deficit in the trade account of the balance of payments contracted in 2012,” the bank added.

In December 2012, earnings from exports declined on a year-on-year basis, as earnings from industrial exports, which account for about three fourths of total export earnings, declined. Agricultural exports, however, increased on a year-on-year basis in December 2012 as earnings from exports of tea, spices, unmanufactured tobacco and seafood increased.

Sri Lanka’s tea exports have fetched favourable prices since around May 2012 and have therefore helped buoy export earnings during much of the year.



 With respect to other agricultural products exported, spices, unmanufactured tobacco and seafood have recorded increased export earnings for 2012. Nevertheless, with earnings from exports of most items categorised under agricultural exports declining in 2012, earnings from agricultural exports recorded a drop for 2012.

Earnings from industrial exports also declined in 2012, with declines being recorded by most items categorised under industrial exports, including garments, which account for more than a third of total export earnings.

While prices of key inputs to industrial products such as cotton, rubber and several metals including aluminium and copper have declined from the high levels that prevailed in the early months of 2011, this has also contributed significantly to the drop in earnings from industrial exports in 2012.

“Expenditure on imports declined considerably in December 2012,” the Central Bank said, adding that expenditure on consumer goods declined in December 2012 with expenditure on food imports as well as other consumer goods including vehicles declining.

Lower import expenditure in respect of vehicles has continued to make a significant contribution to the deceleration in total expenditure on imports in 2012.

In December 2012, expenditure on intermediate goods imports also declined on year-on-year basis. This decline was driven by lower import expenditure in relation to petroleum products, diamonds, precious and semi-precious stones, and mineral products. Both these categories of imports, i.e. consumer goods and intermediate goods, have contributed to the continued decline in import expenditure since April 2012.

Import expenditure in relation to investment goods, however, increased in December 2012, along with an increase in expenditure on imports of building materials and machinery and equipment, the Central Bank added.