Sri Lanka’s external sector demonstrated a modest performance in January with trade deficit widening as a result of increased import expenditure and a decline in export earnings, the Central Bank said.
Foreign currency receipts in terms of earnings from tourism recorded a relatively high growth in January 2017 while workers’ remittances grew at a moderate rate, year-on-year. The government securities market and the Colombo Stock Exchange (CSE) witnessed net outflows during January 2017, the CBSL said yesterday.
Earnings from exports at US$ 865 million in January 2017 registered a 3.8 per cent decline, year-on-year, compared to US$ 899 million in January 2016, reflecting subdued performance mainly in earnings from industrial exports despite an increase recorded in agricultural exports.
Export earnings from industrial exports, which account for about 77 per cent of total exports, declined by 6.7 per cent, year-on-year, to US$ 668 million in January Economic Research Department 2017.
This was mainly due to the decline in earnings from textiles and garments, rubber products and gems, diamonds and jewellery. Earnings from textiles and garments exports, which account for around 49 per cent of total export earnings, contracted by 8.2 per cent, year-on-year, to US dollars 426 million in January 2017, reflecting lower demand for garments from both traditional and non-traditional markets. Export earnings from rubber products and gems, diamonds and jewellery declined by 18.7 per cent and 28.8 per cent, respectively, due to decreases in all sub categories related to both items. In addition, earnings from leather, travel goods and footwear also contributed substantially to the decline in industrial products during January 2017.
However, export earnings from machinery and mechanical appliances, base metals and articles, printing industry products and wood and paper products showed a growth in January 2017, when compared to the previous year. Earnings from agricultural exports grew by 7.9 per cent, year-on-year, to US dollars 194 million in January 2017 reflecting improved performances in all subsectors except minor agricultural products and unmanufactured tobacco.
The leading markets for merchandise exports of Sri Lanka in January 2017 were the USA, the UK, India, Germany and Italy accounting for about 53 per cent of the total exports.
Expenditure on imports increased substantially by 13.2 per cent, year-on-year, to US dollars 1,798 million in January 2017 continuing the double digit growth in imports for the fourth consecutive month. Expenditure on intermediate goods was the main driver for this growth followed by consumer goods imports. However, expenditure on investment goods imports declined in January 2017 reversing the year-on-year growth trend started from January 2016.
Expenditure on import of intermediate goods increased in January 2017 by 18.6 per cent, year-on-year, to US dollars 950 million. This increase was mainly driven by higher expenditure on fuel led by refined petroleum imports. Import expenditure on refined petroleum increased by 101.6 per cent, year-on-year, due to higher volumes imported as a result of increased thermal power generation with prevailing drought conditions in the country as well as higher international oil prices. In addition, gold imports, valued at US dollars 64 million in January 2017, continued to record a high growth while import of iron and steel, categorised under base metals, increased substantially. Import of textiles and textile articles, the second major import item of Sri Lanka, increased marginally by 0.8 per cent in January 2017.
Expenditure on consumer goods imports increased by 4.4 per cent, year-on-year, in January 2017 to US dollars 359 million from US dollars 344 million in January 2016.
Import expenditure on investment goods declined in January 2017 by 2.6 per cent, year-on-year, to US dollars 432 million from US dollars 444 million a year ago.
The decline in expenditure on import of transport equipment led by auto trishaws and machinery and equipment led by textile industry machinery mainly contributed to this decline. However, import expenditure on building materials increased marginally in January 2017 with higher imports of goods such as iron and steel, wood and ceramic products.
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