Wednesday May 08, 2024
Wednesday May 08, 2024
Tuesday, 21 December 2021 02:55 - - {{hitsCtrl.values.hits}}
External trade in October turned favourable to Sri Lanka but challenges persisted from a 10-month analysis posing fresh problems to the country amidst the worsening foreign exchange crisis.
The Central Bank yesterday revealed that overall exports in October surpassed the previous maximum recorded in March 2019 ($ 1,137 million) to increase by 40.4% to $ 1,200 million.
On the other hand, imports grew by only 24% to $ 1.7 billion, though very high.
In August, export growth was 16% year-on-year (YOY), whilst imports improved by 31% to $ 1.68 billion. In September, exports growth (3%) overtook that of imports (0.1%) with the latter remaining at $ 1.5 billion. However, October imports, though growing lower YOY, peaked to $ 1.7 billion.
Better export performance in October saw trade deficit shrink to $ 495 million from $ 509 million a year ago. However, first 10 months figure amounted to $ 6.5 billion as against $ 4.8 billion in the first 10 months of last year.
Exports in the first 10 months of 2021 amounted to $ 10.1 billion, up by 22%, whilst imports were higher by 26.5% to $ 16.6 billion.
CBSL said in October increases in earnings were observed in agricultural and industrial exports, while a marginal decline was recorded in mineral exports. Cumulative export earnings, which increased by 22.1% during January-October 2021, amounted to $ 10,134 million, compared to $ 8,299 million recorded in the corresponding period in 2020.
Earnings from the export of industrial goods increased by 49.3% in October 2021, compared to October 2020. The major export segments, such as garments, food, beverages and tobacco, transport equipment, machinery and mechanical appliances, petroleum products and rubber products recorded substantial increases in earnings, while a decline in earnings was reported in the category of plastics and articles (mainly plastic clothing articles).
Exports of garments to all major markets improved. All subcategories of exports under food, beverages and tobacco and machinery and mechanical appliances increased, while earnings from transport equipment increased mainly due to the export of two ships. Earnings from the export of petroleum products increased mainly due to the increase in bunker fuel exports, reflecting higher prices. Tyres and gloves led the increased export earnings from rubber products.
Total earnings from the export of agricultural goods in October 2021 increased by 14.3%, compared to October 2020, mainly due to the increase in export earnings from spices, seafood, coconut and minor agricultural products. However, earnings from tea exports decreased by 2.4% YOY, due to lower export prices (by 7.3%) in October 2021.
Mineral exports: Earnings from mineral exports decreased marginally in October 2021, compared to October 2020, due to lower earnings from earths and stone.
The export volume index and unit value index increased by 9.5% and 28.3%, respectively, on a YOY basis, in October 2021. This indicates that the increase in export earnings can be attributed to the combined impact of higher export volumes and prices.
Expenditure on merchandise imports increased by 24.3% to $ 1,694 million in October 2021, compared to $ 1,363 million recorded in October 2020. An increase in import expenditure was observed in intermediate goods and investment goods, while a decline was observed in consumer goods. On a cumulative basis, total import expenditure from January to October 2021 amounted to $ 16,632 million, compared to $ 13,145 million recorded in the corresponding period in 2020.
Consumer goods: Expenditure on the importation of consumer goods in October 2021 decreased by 7.1% over October 2020, led by lower expenditure on food and beverages. Expenditure on the importation of non-food consumer goods increased by 5.6% YOY, mainly due to the importation of clothing and accessories. Imports of some other categories of non-food consumer goods, including home appliances (mainly radio receivers and TV sets) and telecommunication devices, also increased. Meanwhile, expenditure on food and beverages imports declined by 20.5% in October 2021 YOY, mainly with a decline in sugar imports. In addition, declines were observed in oils and fats (mainly coconut oil), spices (mainly chillies), seafood (mainly fresh fish), and fruits. An increase in import expenditure was observed in dairy products (mainly milk powder), vegetables (mainly lentils), and beverages (mainly alcoholic beverages).
Expenditure on the importation of intermediate goods in October 2021 increased by 38.6% over October 2020, driven by fuel, textiles and textile articles (mainly fabrics and yarn), wheat, base metals, and rubber and articles thereof. Despite lower import volumes, expenditure on fuel increased by 72.3% in October 2021 due to the increase of import prices of crude oil by 76% (to $ 73.51 per barrel in October 2021 from $ 41.77 per barrel in October 2020), refined petroleum by 88.1% and coal by 148.2% YOY.
Meanwhile, import expenditure on fertiliser, unmanufactured tobacco, gold, and mineral products
decreased.
Investment goods: Expenditure on the importation of investment goods increased by 11.5% in October 2021, compared to the same month in 2020. An increase in import expenditure under machinery and equipment (mainly medical and laboratory equipment, engineering equipment, and electronic equipment) and building material (mainly iron and steel) was recorded in October 2021.
Expenditure on transport equipment decreased, owing to lower expenditure on commercial vehicle imports.
The import volume indices decreased by 1.6%, while the unit value indices increased by 26.4% YOY in October 2021, implying that the increase in import expenditure was mainly due to the price effect.
The merchandise trade deficit, which has been falling on a month-on-month basis since May 2021, declined further to $ 495 million in October 2021. Earnings from exports recorded the highest monthly export value in history in October 2021, while marking the fifth consecutive month of above $ 1 billion of export earnings.
“Such improvement in export earnings, along with improving conversions, is expected to strengthen foreign exchange inflows to the domestic foreign exchange market in the period ahead. The import expenditure also recorded a YOY growth in October 2021,” CBSL added.
