External trade heads south in October

Sri Lanka’s imports and exports dipped in October, leading to the trade deficit declining, the Central Bank said yesterday.

It said the deficit in the trade account of the balance of payments for the year as a whole declined for the second consecutive month in October 2012. It stands at $ 7,590 million, having declined 1%, year-on-year, from the corresponding period of 2011.

Responding to policy measures adopted earlier in the year, expenditure on imports during the period January to October 2012 recorded a 4% year-on-year decline and amounted to $15,754 million.

“Slowing down of economic activity globally, and particularly in advanced economies which constitute key markets for Sri Lanka’s exports, has resulted in contracting demand for exports,” the Central Bank said.

As a result, earnings from exports declined by 6.6%, year-on-year, in the first 10 months of 2012 to $8,164 million.

In October 2012, all major categories of imports recorded declines, on a year-on-year basis. With regard to intermediate goods, significant contributions to the decline were noted in imports of gold (48%) and fertiliser (11%).

Crude oil also made a relatively high contribution to the decline in import expenditure as crude oil was not imported during the month of October, but this decline was offset to a large extent by increased imports of refined petroleum products.

With respect to other intermediate goods, expenditure on imports of textiles, which have accounted for about 12% of imports so far this year, increased by 12.6%, year-on-year, in October 2012.

Expenditure on wheat imports also increased as world wheat prices have increased due to drought conditions impacting on major wheat producing countries. Import expenditure on investment goods meanwhile, declined marginally by 1.3%, year-on-year, in October 2012 with expenditure on transport equipment declining.

With respect to consumer goods imports, expenditure on imports of food and beverages as well as non-food consumer goods declined. Vehicle imports, which declined by 65.5%, year-on-year, made the largest contribution towards the decline in expenditure on consumer goods imports.

Earnings from exports declined in October 2012 with earnings from agricultural exports as well as industrial exports declining. Within the category of agricultural exports, earnings from tea, which account for about 14% of total earnings from merchandise exports, declined in October, with geo-political tensions which continue to hamper demand from some Middle Eastern countries partly accounting for this drop. Earnings from rubber, coconuts and coconut products also declined in October. Earnings from exports of spices including pepper and cloves, however, increased on a year-on-year basis, in October 2012.

Given the slowing down of global demand, exports of industrial exports continued to decline by October 2012. Earnings from exports of garments, which have a share of around 38% in total export earnings, have made the largest contribution to the decline in earnings from industrial exports. The decline in earnings from exports of rubber products as well as gems including diamonds and jewellery also made a significant contribution to the decline in export earnings in October 2012.