Mixed fortunes in August external trade

The country saw mixed developments in external trade in August, with exports and imports down year-on-year but up in comparison to July.

The Central Bank took comfort in the decelerating trend in the trade balance but exports face further challenges, whilst imports still remain high largely on account of petroleum.

“The trade balance recorded a year-on-year increase of 6.3% for the first eight months of 2012. The deceleration in the trade balance reflects the decline in imports since April this year, amidst the slowing down of exports,” the Central Bank said yesterday.

“Policy measures adopted by the Government and the Central Bank earlier this year have resulted in imports declining from the high levels recorded for last year. Waning global demand along with faltering global economic activity, as well as lower prices for several key items exported in view of the sharp decline in the prices of commodities such as cotton and rubber, which constitute key inputs into these exports, have resulted in exports slowing down,” it added.



In August 2012, expenditure on imports of both consumer goods and intermediate goods declined while expenditure on imports of investment goods recorded an increase, on a year-on-year basis. The decline in consumer goods imports led the overall decline in imports. While expenditure on imports of food and beverages as well as non-food consumer goods declined, vehicle imports, which declined by 54 per cent, year-on-year, made the largest contribution towards the decline in expenditure on consumer goods imports.

With respect to imports of intermediate goods, expenditure on imports of textiles, which have accounted for about 10% of total imports, decreased in August, partly reflecting the lower prices in the world market for cotton. Amongst other items classified under imports of intermediate goods, diamonds, gold and other precious and semi-precious metals; chemical products; and plastic articles; were items which made a significant contribution towards the decline in expenditure on imports.

Fertiliser imports, which increased in value terms by nearly 72%, year-on-year, and amounted to around $77 million; and imports of petroleum, which increased marginally by 0.8%, year-on-year, meanwhile, negated to some extent the decline in expenditure on imports as a result of lower expenditure on the aforementioned items. Expenditure on imports of investment goods which declined in the previous two months reversed in August and grew by 9.9%, with expenditure on machinery and equipment growing by 25.3%.

On a month-on-month basis, expenditure on imports has recorded an increase from July to August. In US dollar terms, imports increased from $ 1,325 million in July 2012 to $ 1,750 million in August 2012. Increased expenditure on imports in August was largely due to the increased expenditure on petroleum products, particularly refined petroleum, in view of the closure of the refinery in July for periodic maintenance purposes. A significant increase in import expenditure on machinery also contributed to the increased expenditure on imports in August 2012.

The decline in export earnings in August 2012 was driven by exports of both industrial goods and agricultural goods. The decline in earnings from exports of garments, which account for about 40% of total exports; food, beverages and tobacco; and printing industry products mainly accounted for the decline in earnings from industrial exports. The decline in export earnings from tea, rubber and coconuts and coconut based products largely accounted for the decline in earnings from agricultural goods exports.