Mixed bag for Lankan exports

The country’s export sector has recorded mixed fortunes, suffering its worst decline year-on-year whilst month-on-month manages to recover, as per latest external trade data released by the Central Bank yesterday.

Marking the fifth consecutive dip YOY, the contraction in exports in July at 17.4% to $ 794.4 million was the worst in recent times though MoM wise, it has been on the rise since April when the value was only $ 680 million. Exports in the first seven months were down by 4.6% to $ 5.76 billion, whereas by end April the cumulative dip was 3%. Imports too continued their downward trend, declining by 25% to $ 1.33 billion in July whilst first seven months figure at $ 11.1 billion was up by only 0.6% over the corresponding period of last year.The trade deficit saw a 34% contraction in July to $ 534.6 million though end July figure at $ 5.35 billion, was still higher by 6.7% over the first seven months of 2011. The Central Bank said policies adopted earlier in the year have led to a significant deceleration in expenditure on imports by July 2012, thereby helping contain the deficit in the trade balance of the balance of payments. It said the deficit in July was the lowest recorded in 17 months.

It said expenditure on imports, which had decreased on a year-on-year basis since April 2012, recorded a decline of 24.9%, year-on-year, in July 2012, as expenditure on several categories of imports, which had contributed significantly to the expansion of the trade deficit last year, continued to decline.

Measures taken by the Government and the Central Bank earlier in the year to rein in the high growth of both credit and imports are likely to have led to the decline in expenditure on imports of these items. In value terms, expenditure on imports in July 2012 is the lowest recorded since March 2011.

Amongst the import categories classified under consumer goods that made a relatively high contribution to this decline were motor vehicles. Expenditure on imports of motor vehicles has declined by 62.4%, year-on-year, in July.

With regard to intermediate goods, significant declines were noted in respect of import expenditure in relation to fertiliser, gold, wheat and rubber based products. As in June, expenditure on investment goods imports recorded a decline in July 2012 too, although for the first seven months of 2012, investment goods have recorded an increase on a year-on-year basis. Expenditure on investment goods imports in July declined by 20.6%, year-on-year.

As in the case of Asia as well as other countries around the world facing weaker global demand, Sri Lanka’s export earnings have also slowed down in recent months, although on a month-on-month basis, export earnings have recorded an increase from June to July 2012.

In addition to weaker global demand, the marked decline in the prices of commodities such as cotton and rubber in international markets has contributed significantly to the decrease in Sri Lanka’s export earnings in recent months.

Further, the base effect, that is, the fact that export earnings were at a historically high level of $ 962 million in July 2011, has also led to the relatively large drop in export earnings in July 2012. Earnings from exports in July 2012 have declined by 17.4%, year-on-year, to $ 794 million.

With respect to industrial exports, textiles and garments, transport equipment, and rubber-based products were amongst items that contributed significantly to the drop in export earnings in July. A drop in earnings from tea exports also contributed to the decline in export earnings on a year-on-year basis in July 2012.