Trade deficit widens to US$ 6.2B Exports hit US$ 1B mark for the second month

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By 2017-10-18

Sri Lanka's trade deficit widened to US$ 6,186 million during the first eight months of this year from US$ 5,515 million a year ago, with the deficit in August reaching US$ 856 million.
Surpassing the US$ 1 billion mark for the second consecutive month, earnings from exports increased in August 2017, indicating the positive impact of the restoration of the GSP+ facility.

Accordingly, earnings from exports increased by 15.5% (year-on-year) to US$ 1,001 million in August 2017, mainly due to an increase in industrial exports followed by agricultural exports.
Earnings from industrial exports grew by 13.1% (year-on-year) to US$ 740 million in August 2017, owing to the increase in exports of textiles and garments.

Export earnings from textiles and garments increased by 10.1% (year-on-year) to US$ 433 million, with improved garment exports to the EU market. Accordingly, earnings from garments exports to the EU market increased by 12.2% (year-on-year) to US$ 186 million in August 2017, contributing more than 68% to the growth of garment exports. Meanwhile, garment exports to the USA and non-traditional markets also grew by 4.4% and 4.6% (year-on-year), respectively, during the month.

Further, earnings from the export of petroleum products increased significantly by 74.2% (year-on-year) in August 2017, owing to higher export volumes and prices of bunker and aviation fuel. In addition, the export earnings from food, beverages and tobacco increased significantly by 35.8% (year-on-year) to US$ 35 million, due to increased exports of vegetable, fruit and nuts preparations.
Meanwhile, export earnings from gems, diamonds and jewellery (23.6%), machinery and mechanical appliances (14.0%), and rubber products (4.1%) increased during the month compared to the corresponding month of the previous year. However, export earnings from base metals and articles, printing industry products and transport equipment declined in August 2017.
Earnings from agricultural exports increased substantially by 22.8% (year-on-year) to US$ 255 million in August 2017, reflecting improved performance in almost all sub categories.

Export earnings from tea increased significantly by 20.6% (year-on-year) to US$ 131 million, mainly due to higher prices in the international market despite a reduction in export volumes.

In line with higher tea prices in the international market, the average export price of tea increased by 22.3% to US$ 5.29 per kg in August 2017 from US$ 4.33 per kg in August 2016. The volume of tea exports declined by 1.3% to 24.8 million kg in August 2017, from 25.1 million kg in August 2016.

Meanwhile, earnings from spices increased considerably by 40.5% Year-on-Year (YoY) during the month, mainly due to increased export volumes of pepper, cinnamon and cloves.
Reflecting the positive impact of the removal of the ban on exports of fisheries products to the EU market and the restoration of the GSP+ facility, earnings from seafood exports increased considerably by 38.6% YoY to US$ 18 million in August 2017, with a 81.9% year-on-year growth in exports to the EU market.

On a cumulative basis, earnings from exports grew by 7.6% YoY to US$ 7,413 million during the first eight months of 2017 mainly due to increased earnings received from exports of tea, petroleum products, transport equipment, spices and seafood. In contrast, on a cumulative basis, export earnings from textiles and garments, gems, diamonds and jewellery and leather, travel goods and footwear declined during the period under consideration.
The USA, the UK, India, Germany and Italy were the leading markets for merchandise exports of Sri Lanka during the first eight months of 2017, accounting for about 50% of total exports.
Expenditure on imports during August increased by 12.6% YoY to US$ 1,857 million, recording the second-highest import value so far during the year, owing to the higher expenditure incurred on intermediate goods, particularly fuel.
Expenditure on intermediate goods imports increased significantly by 23.9% YoY to US$ 1,021 million in August 2017, mainly due to the increase in expenditure on imports of fuel by 73.0% YoY to US$ 312 million. This was largely driven by the significant increase in refined petroleum imports by 110.9% to US$ 233 million. In addition, reflecting the impact of high crude oil prices in the international market, import expenditure on crude oil increased by 12.2%, despite a reduction in volume. Accordingly, average import price of crude oil was recorded at US$ 53.07 per barrel in August 2017 compared to US$ 46.71 per barrel recorded in August 2016.
Further, expenditure on gold imports increased considerably by 50.0% YoY to US$ 65 million during the month, owing to higher volumes of gold imports while expenditure on base metals increased by 52.6% YoY.

Expenditure on textiles and textile articles increased by 7.9% YoY in August 2017 with higher expenditure incurred on the import of fabrics. Meanwhile, higher imports of chemical products, wheat and maize, and food preparations contributed largely towards the increase in intermediate goods imports during the month.

However, import expenditure on mineral products and fertilizer declined by 54.8% and 30.4%, respectively, in August 2017, compared to the corresponding month of the previous year.
Meanwhile, expenditure on consumer goods imports remained broadly unchanged at US$ 394 million in August 2017. However, expenditure on food and beverages grew by 3.7% YoY in August 2017, mainly due to higher expenditure incurred on the importation of rice.

Continuing the year-on-year increasing trend, expenditure on rice imports increased in August 2017 following the measures taken to fulfill the shortage of rice in the domestic market. Meanwhile, import expenditure on vegetables, dairy products and fruits increased during the month. In addition, import expenditure on household and furniture items and telecommunication devices categorized under non-food consumer goods also increased in August 2017.
However, import expenditure on rubber products, beverages and spices recorded a decline in August 2017.
Import expenditure on investment goods increased by 2.1% YoY to US$ 439 million in August 2017, reflecting higher imports of machinery and equipment, and building materials.
Expenditure on machinery and equipment grew by 2.5% during the month, with a surge in imports of printing machinery, telecommunication devices and air conditioning machines.
Import expenditure on building materials increased by 6.8% YoY during this period owing to higher imports of iron and steel, articles of iron and steel, and ceramic products.

However, import expenditure on transport equipment decreased by 10.0% (year-on-year) in August 2017, mainly due to lower imports of road vehicles such as auto trishaws and cabs for commercial purposes.
Reflecting these developments, on a cumulative basis, import expenditure increased by 9.6% YoY to US$ 13,599 million during the first eight months of 2017, largely due to higher imports of fuel, gold and rice. However, import expenditure on machinery and equipment, personal vehicles and fertilizer declined during this period.

With regard to the origin of imports, India, China, the UAE, Singapore and Japan were the main import origins during the first eight months of 2017 accounted for about 59% of total imports.

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