Sri Lanka’s external sector remained subdued with a widening of the trade deficit, a moderation in tourist earnings and a modest growth in workers’ remittances in February 2017.
A considerable widening in the trade deficit was observed in February with a decline in exports amidst increased imports mainly due to higher imports of fuel and rice. Earnings from tourism dipped with a marginal decline in tourist arrivals during the month, which could partly be attributed to the day time closure of the Bandaranayke International Airport (BIA) for resurfacing of the runway.
The growth in workers’ remittances in February remained below the expected level. Further, the financial account was adversely affected by significant outflows from the government securities market during the month. However, some foreign investments were observed in the Colombo Stock Exchange (CSE) with inflows to both primary and secondary markets during the month. The pressure on the external account has been eased somewhat in subsequent months by improved export performance; a reversal of capital outflows with investments in the stock exchange and inflows to the government securities market as well as proceeds from the International Sovereign Bond of US dollars 1.5 billion and a syndicated loan of US dollars 450 million.
Earnings from exports at US dollars 868 million in February 2017 registered a decline of 2.7 per cent from US dollars 892 million in February 2016, mainly due to lower industrial exports. Earnings from industrial exports, which represent about 76 per cent of total exports, declined by 6.5 per cent, year-on-year, to US dollars 659 million in February 2017 mainly due to reduced earnings from textiles and garments. Export earnings from textiles and garments contracted by 14.5 per cent to US dollars 396 million in February 2017 reflecting a significant decline in garment exports to the EU and the USA. Food, beverages and tobacco and gems, diamonds and jewellery also contributed substantially to the lower earnings from industrial exports. However, earnings from machinery and mechanical appliances, petroleum products and rubber products showed an improved performance.
Meanwhile, earnings from agricultural exports grew for the third consecutive month registering an increase of 12.5 per cent to US dollars 205 million in February 2017. Earnings from tea exports increased by 12.8 per cent in value terms due to higher prices, in spite of a decline in the volume exported. Earnings from spices showed a significant growth of 25.7 per cent in February 2017 mainly due to the improved performance in cloves, nutmeg and mace, owing to significant increases in volume despite lower prices. In addition, earnings from seafood exports increased by 27.3 per cent, year-on-year, in February 2017 mainly due to a 111.0 per cent growth observed in seafood exports to the EU. However, earnings from coconuts, minor agricultural products and vegetables exports declined in February 2017.
On a cumulative basis, export earnings during the first two months of 2017 at US dollars 1,733 million, contracted by 3.2 per cent, year-on-year, mainly due to lower exports of textiles and garments, food, beverages and tobacco, gems, diamonds and jewellery and rubber products. However, earnings from machinery and mechanical
appliances, tea and spice exports increased considerably during the period concerned. The leading markets for merchandise exports of Sri Lanka during the first two months of 2017 were the USA, the UK, India, Germany and Italy accounting for about 52 per cent of total exports.
The deficit in the trade balance widened substantially to US dollars 743 million in February 2017 compared to US dollars 548 million in February 2016. The cumulative trade deficit during the first two months of 2017 increased substantially to US dollars 1,677 million from US dollars 1,238 million recorded during the same period of 2016.
The overall Balance of Payment (BOP) is also estimated to have recorded a deficit of US dollars 258.3 million during the year up to end February 2017, compared to a deficit of US dollars 534.0 million recorded up to end February 2016.
The cumulative trade deficit during the first two months of 2017 increased substantially to US$ 1,677 million from US$ 1,238 million recorded during the same period of 2016.
0 comments: