Sharp contraction in trade deficit in November

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Exports up 24.7% to $ 1.03 b; Apparel shipments up 35% to $491 m; agricultural exports by 28.3% to $244 m
First 11 months figure up 5.6%
Imports dip by 14.1% to $1.64 b led by intermediate and investment goods
First 11 months figure dips by 2.5%
November trade deficit down 43.5% to $616 m and by 10.7% to $7.8 b in first 11 months

The Central Bank said yesterday that favourable developments in the external sector continued in November 2013, with a sharp contraction of the trade deficit, leading to an improvement of the overall balance. It said earnings from exports increased substantially, reflecting gradual recovery in export destination countries, while expenditure on imports declined. Accordingly, the current account deficit narrowed, and was strengthened further as a result of

the increase in inflows from workers’ remittances and tourism. Meanwhile, inflows to the financial account also increased during the period ending November 2013, leading to a surplus in the Balance of Payments (BOP), compared to the deficit recorded in the corresponding period of 2012. Continuing the increasing trend observed from June 2013, earnings from exports surpassed the $1 billion mark for the second consecutive month in November 2013. Accordingly, earnings from exports increased by 24.7% in November 2013, while expenditure on imports declined by 14.1% compared to the corresponding month in 2012. Consequently, the trade deficit contracted significantly by 43.5% to $616 million during this period. On a cumulative basis, earnings from exports during the first 11 months of 2013 grew by 5.6%, while expenditure on imports contracted by 2.5% from the corresponding period in 2012. Accordingly, the cumulative trade deficit contracted by 10.7% to $7,831 million, during the first eleven months of 2013 compared to the corresponding period of 2012. Earnings from exports in November 2013 reached $1,032 million. Industrial exports, which account for more than three fourths of total export earnings, increased by 22.6% on a year-on year basis to $776 million in November 2013. The leading driver of growth in the industrial sector was textiles and garments. Earnings from export of textiles and garments grew by 35% year-on-year to $491 million in November 2013, the highest monthly value of export of textiles and garments ever recorded. Export of garments to both the EU and USA, the major export destinations of garments, grew by 16.7% and 58.7%, respectively in November 2013, reflecting the recovery in those economies as well as seasonal demand. Meanwhile, export of machinery and mechanical appliances grew by 54%, year-on-year. Earnings from rubber product exports increased by 10.6%, year-on-year, to $83 million in November 2013, mainly due to an increase of exports of rubber tyres. Apart from these, leather, travel goods and footwear, wood and paper products, base metals and plastics and articles also recorded positive growth.

Earnings from agricultural exports rose by 28.3%, year-on-year, to $244 million in November 2013 due to an increase in export of tea followed by spices. Earnings from tea exports increased by 14.4% to $144 million in November 2013, due to a 16.2% increase in the average price of tea, despite a marginal decline in export volumes. Earnings from the export of spices recorded a remarkable growth of 73% to $35 million led by pepper and cinnamon exports. Continuing the strong performance recorded since June 2013, the volume of both pepper and cinnamon exports increased substantially by 186.6% and 24.4%, respectively in November 2013 compared to the corresponding month of the previous year. Export of coconut, seafood and minor agricultural products also recorded healthy growth. However, in November 2013 rubber export earnings contracted by 24.1% compared to November 2012, due to the continuing decline in both export volumes and prices. Expenditure on imports declined by 14.1% to $1,647 million in November 2013, due to the significant decline in both intermediate and investment goods imports. Expenditure on intermediate goods imports declined by 17.3%, year-on-year, to $972 million in November 2013 mainly due to the decline in the importation of fuel. Expenditure on the importation of fuel declined by 24.1% to $441 million in November 2013, reflecting declines in both crude oil and refined petroleum imports due to the availability of sufficient stocks. Despite the strong growth in export of textiles and garments, there has been a steady decline in the importation of textile and textile related articles, reflecting improved backward linkages and higher value addition in the garment industry. Decline in imports of base metals, chemical products, rubber and articles thereof, diamonds and precious stones also contributed to the decline in intermediate goods imports. However, the importation of fertiliser, wheat and maize and food preparation increased in November 2013. Import expenditure on investment goods declined by 18.3%, year-on-year, to $414 million, mainly due to the decline in machinery and equipment imports by 42.5%. However, import of transport equipment increased significantly by 98.1%, led by a one off increase in the importation of ships and boats. Meanwhile, expenditure on consumer goods imports recorded a 25.7% growth, year-on-year, to $261 million in November 2013 with increases recorded in both food and non-food consumer goods categories. Vehicle imports contributed significantly to the increase in consumer goods imports, recording a year-on-year increase of 148% in November 2013. Dairy products, oils and fats and spices also contributed to the increase in consumer goods imports.