Sri Lanka Trade Deficit lowers - Central Bank

The Central Bank in a review of economic performance for the 2nd Quarter this year said that policies adopted by the Central Bank and the government earlier in the year helped contain the deficit substantially in June and across the second quarter of 2012.  The deficit in the trade balance, which was US dollars 848 million in June 2011 and US dollars 942 million in December 2011, was substantially lower in June 2012, amounting to US dollars 663 million.  The Bank said that this is the lowest trade deficit level recorded since February 2011.  

The Bank said that expenditure on imports, which had decreased on a year-on-year basis since April 2012, recorded a further decline of 15 per cent, 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.

It said that as in the previous month, expenditure on imports of motor vehicles and gold continued to contract in June.  The Bank said that expenditure on imports of motor vehicles and gold declined, by 58.9 per cent and 71.1 per cent, respectively.

It said that a reduction was also noted in respect of import expenditure on wheat and rubber based products, within intermediate goods.  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, the Bank said that  investment goods imports, which had continued to record strong growth in preceding months, also recorded a decline in June 2012.

With respect to exports, 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.  The Bank said that 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.  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.  

The Bank pointed out that with regard to inflows to the services account of the balance of payments, earnings from tourism in June 2012 grew by 20.6 per cent, year-on-year, to US dollars 63 million, while during the first six months of 2012, earnings from tourism have grown at a robust rate of 24.3 per cent, year-on-year, to US dollars 460 million.  The number of tourists visiting Sri Lanka totalled 65,245 in June 2012, an increase of 21.6 per cent, raising tourist arrivals during the first six months of 2012 to 452,867.

Reference to remittances being received from the overseas employed Sri Lankans, the Bank said that remittances grew by 12.1 per cent, year-on-year, to US dollars 452 million in June 2012, while cumulative inflows on account of  remittances during the first six months of 2012 increased by 17.4 per cent to US dollars 2,942 million.  Accordingly, the Bank said that the net current transfers have continued to help buttress the current account of the balance of payments.(niz)