Exports kick off 2014 with double-digit growth in January

Wednesday, 26 March 2014 00:46 - - {{hitsCtrl.values.hits}}

The country’s exports have kicked off 2014 with double-digit growth and, aided by a slower improvement in imports, the trade deficit saw a contraction in January. The Central Bank said yesterday the external sector strengthened further with the trade deficit contracting in January 2014. Earnings from exports increased, reflecting the ongoing recovery in the global economy while expenditure on imports also increased, albeit at a lower rate, driven mainly by the increase in intermediate goods imports. Earnings from exports increased substantially compared to the increase in expenditure on imports, resulting in the trade deficit continuing to contract in January 2014. On a year-on-year basis, earnings from exports in January 2014 increased significantly by 23.2% to $ 898 million, while expenditure on imports increased by 7.9% to $ 1,654 million. Accordingly, the trade deficit contracted by 5.9% to $756 million.

The significant growth in exports was led by improved performance in industrial exports followed by agricultural exports. Earnings from industrial exports, which account for more than three-fourths of total export earnings increased by 23.6%, year–on-year, to $692 million in January 2014, reflecting an increase in earnings from all major industrial export categories except petroleum products. Textiles and garments, which is the main contributor to the growth in industrial exports, grew by 23.4% to $ 412 million. The EU and USA continued to be the major markets for textiles and garments of Sri Lanka representing around 85% of total garment exports. In the meantime, a notable increase was also observed in exports of textiles and garments to non-traditional markets of 38.3% reflecting greater diversification of markets in the industry. Earnings from export of food, beverages and tobacco increased more than two fold to $38 million reflecting improved performance in almost all categories. Exports of rubber products grew by 16.6% to $73 million mainly due to the increase in exports of rubber tyres and compounded rubber, despite the decline in export earnings from surgical and other gloves. Earnings from gems grew substantially by 93.0%, year-on-year, to $21 million. However, export earnings from petroleum products which mainly comprise bunkering and aviation fuel declined by 18.4% to $33 million, due to a decline in prices despite the 10.6% increase in export volumes. The intense competition in the region, particularly from India and Singapore caused the price of bunker fuel to steadily decline in the international market. Agricultural exports grew by 21.6% in January 2014, to $203 million, due to the healthy performance in tea and coconut products exports. Export earnings from tea increased by 14.9% to $116 million mainly due to the significant improvement in tea prices in the international market. The average export price of tea increased to $5.31 per kg in January 2014 from $4.58 per kg in January 2013. Earnings from coconut product exports increased by more than two fold to $22.5 million, due to improved performance in both kernel and non-kernel coconut products in terms of both price and volume. In addition, export earnings from seafood and minor agricultural products also increased significantly in January 2014. However, earnings from exports of spices, which has become a significant contributor to agricultural export earnings in recent times, declined by 16.1% in January 2014, mainly due to the decline in export earnings from cloves, despite the improved performance of nutmeg. Expenditure on imports grew by 7.9%, year-on-year, to $1,654 million in January 2014, led by an increase in intermediate goods followed by consumer goods. Expenditure on intermediate goods imports increased by 22.3%, year-on-year, to $1,033 million mainly on account of the increase in fuel imports. Expenditure on fuel increased by 68.1%, year-on-year, to $490 million in January 2014 due to higher import of crude oil (by 41.2%), refined petroleum products (by 85.4%) and coal (by 79.4%). The increase in imports of refined petroleum products was due to greater dependence on thermal power generation as hydro power generation declined due to the prevailing adverse weather conditions. Expenditure on importation of cement clinkers, iron and steel, palm oil, paper and paper boards also increased in January 2014. Despite the strong growth in textiles and garment exports, imported inputs into the industry declined by 4.7%. The continuing decline in imports of textiles and textile articles has been due to the usage of built up raw material stocks, backward integration and production of items at the higher end of the value chain. Import expenditure on diamonds and precious metals declined significantly due to lower imports of gold and diamonds on account of a reduction in both the price and the volume of gold and diamond imports. Expenditure on importation of fertiliser also declined in January 2014 reflecting the reduction in import quantity due to lower usage of fertiliser. Expenditure on consumer goods imports increased marginally by 2.7%, year-on-year, to $254 million in January 2014 due to the increase in non-food consumer goods. Vehicle imports, which mainly contributed to the increase in import expenditure on consumer goods, increased by 54% to $46 million. Import expenditure on dairy products increased by 67.5% in January 2014 mainly due to the significant increase in expenditure on milk powder owing to the increase in both prices and volumes. However, import expenditure on sugar and some home appliances such as televisions and fans significantly declined during the month. Despite the growth in import expenditure on consumer and intermediate goods, expenditure on imports of investment goods declined by 16.8%, to $ 366 million in January 2014, reflecting decreases in all major categories. Expenditure on machinery and equipment imports declined by 21.3% mainly due to the reduction in imports of machinery and equipment parts, hand and machinery tools and telecommunication devices although imports of medical and laboratory equipment and textile industry machinery increased. Expenditure on importation of building materials declined by 11.0%, mainly due to the reduction in imports of aluminium articles and asbestos. Import of transport equipment declined by 10.5% due to the decline in imports of road vehicles, such as commercial cabs, ambulances and auto trishaws.