Trade deficit dips to 16-month low in June

Friday, 24 August 2012 01:17 - - {{hitsCtrl.values.hits}}

CB says recent policies have curbed imports

The country’s trade deficit in June dipped to a 16-month low, aided by policies adopted by the Central Bank and the Government earlier in the year.

The trade deficit in June amounted to $ 663 million, as against $ 848 million a year ago and $ 942 million in December 2011. “This is the lowest level recorded by the trade balance since February 2011,” the Central Bank, said adding that recent policies have helped contain trade deficit across the second quarter of 2012 as well.

The Central Bank said expenditure on imports, which had decreased on a year-on-year basis since April 2012, recorded a further decline of 15%, year-on-year, in June 2012, as expenditure on several categories of imports, which had contributed significantly to the expansion of the trade deficit last year, declined.

As in the previous month, expenditure on imports of motor vehicles and gold contracted in June too. Expenditure on imports of motor vehicles and gold declined by 58.9% and 71.1%, respectively. A reduction was also noted in respect of import expenditure on wheat and rubber-based products, within intermediate goods.

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Amongst other intermediate goods imports which helped bring down expenditure on imports in June was crude oil, reflecting the impact of lower world market prices for crude oil. Meanwhile, investment goods imports, which had continued to record strong growth in preceding months, also recorded a decline in June 2012.

With respect to exports, the Central Bank said as in the case of many other Asian countries including India and Thailand, Sri Lanka’s export earnings have also slowed down in recent months.

“The marked decline in the prices of commodities such as cotton and rubber in international markets has been a significant factor contributing to the decrease in Sri Lanka’s export earnings in recent months,” it said.

In the face of dampening global demand along with faltering economic activity, particularly in the European region, lower demand for certain products such as rubber based products, has adversely impacted on some exports, by June, the bank said.

“Nevertheless, exports of apparel, which have the largest share in exports, have sustained demand in major markets and are therefore expected to remain firm in volume terms,” it added.

The Central Bank also said the Sri Lanka Customs has revised data on external trade during the preceding two months. Following this revision, exports in April and May totalled $ 1,553.7 million, which is $ 163.5 million higher than the amounts published earlier this year. Accordingly, the deficit in the trade balance has also declined by a similar amount, as at May 2012.