2013 starts with double-digit dip in external trade

The country has started the New Year with a double-digit dip in external trade with exports, imports and trade deficit heading southwards.

The Central Bank said yesterday the trade deficit continued to narrow and recorded a 24% year-on-year decline in January 2013. The policy measures implemented early in 2012 to discourage non-essential imports have continued to ease pressure on the trade deficit and therefore on the current account balance. The policy measures adopted have therefore helped withstand the adverse impact of the slowing down of global demand on exports.

Inflows on account of exports of services remained favourable in January 2013, further supporting the current account, while total reserves were maintained at healthy levels, strengthening the overall balance of the BOP.

Expenditure on imports declined by 21.3%, year-on-year, to $1,507 million in January 2013, reflecting the effectiveness of the policies introduced early in 2012 to curb import expenditure. Imports of refined petroleum declined by 58.4%, year-on-year, in January 2013, partly due to increased hydropower generation. Lower expenditure on imports of transport equipment, gold and vehicles also made a significant contribution toward the decline in import expenditure in January 2013.

However, expenditure on imports of certain intermediate goods such as chemical products, agricultural inputs, plastic and articles thereof and wheat and maize, which accounted for about 11% of imports, increased on a year-on-year basis in January 2013. Import expenditure on investment goods also declined on a year-on-year basis in January 2013, as imports of transport equipment and machinery and equipment declined.

Nevertheless, import expenditure on building materials, categorised under investment goods, increased in January 2013.

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 51.7%, year-on-year, made the largest contribution towards the decline in expenditure on consumer goods imports.

As demand for exports remained fettered by the slow recovery of major export destinations, namely, the EU and the USA, the decline in export earnings continued into 2013. Earnings from exports declined by 18.2% to $ 727 million in January, as earnings from all major categories of exports declined, on a year-on-year basis. The decline was mainly driven by industrial exports which declined by 20.7%.

Earnings from exports of textiles and garments declined by 8.9%. Exports of transport equipment, gems, diamonds and jewellery and rubber products were the other categories of export that contributed significantly to the decline in export earnings.

Earnings from agricultural exports declined in January 2013, as a result of earnings from both traditional and non-traditional agricultural exports declining. Despite exports of tea continuing to fetch favourable prices, the drop in demand from main markets led to a decline in earnings from tea exports in January. However, export earnings from green tea, although its share remains low, recorded a year-on-year increase.

While the price of natural rubber has decreased globally, the decline in volumes of rubber exports could be attributed partly to the demand from local manufacturers of rubber-based products.

Of non-traditional agricultural exports, earnings from the export of spices increased in January 2013, led mainly by the commendable performance of pepper and cloves exports. Further, earnings from the export of unmanufactured tobacco increased marginally in January 2013.