February 29, 2020
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    Trade deficit contracts in first 11 months of 2019 Featured

    January 20, 2020
     

    During the first eleven months of 2019, the trade deficit contracted compared to the corresponding period in 2018, as a result of the significant decline in expenditure on imports along with a marginal increase in earnings from exports.Although tourist arrivals decreased on a year-on-year basis in November 2019, a continued recovery is seen in the tourism industry. Workers’ remittances declined (year-on-year) in November 2019and have recorded a cumulative decline during the first eleven months of 2019.

    The financial account of the balance of payments was augmented with the proceeds of the seventh tranche of the International Monetary Fund’s Extended Fund Facility (IMF EFF) program and net foreign inflows to the Government securities market. However, the CSE recorded a net outflow during the month. The Sri Lankan rupee appreciated against the US dollar during 2019 and thus far during 2020 as well.

    The deficit in the trade account contracted marginally in November 2019 to US dollars 762 million, from US dollars 785 million in November 2018. On a cumulative basis, the trade deficit contracted by US dollars 2,428million to US dollars 7,214million during the first eleven months of 2019fromUS dollars 9,642million in the corresponding period of 2018. Meanwhile, the terms of trade, the ratio of the price of exports to the price of imports, deteriorated substantially by 9.0 percent (year-on-year) in November 2019, as export prices declined at a faster pace than the decline in import prices. Cumulatively, the terms of trade deteriorated by1.6per cent during the first eleven months of 2019 in comparison to the corresponding period of 2018.

    Merchandise exports declined marginally by 0.1percent to US dollars 979 million in November 2019, with all major sub-sectors broadly recording a similar trend. Bunker and aviation fuel continued to decline mainly due to lower bunkering prices in line with lower crude oil prices in the international market, leading to lower earnings from petroleum product exports.

    The export volume index in November 2019 improved by 11.6per cent (year-on-year), while the export unit value index declined by10.5per cent, indicating that the decline in exports was driven entirely by lower prices when compared to November 2018.

    Expenditure on consumer goods imports increased in November 2019, led by food and beverages imports such as vegetables (mainly onions), sugar and dairy products due to both higher import volumes and prices, although non-food consumer goods category driven by lower personal vehicle imports continued its declining trend on a year-on-year basis.

    Monthly tourist arrivals after the Easter Sunday attacks have gradually recovered. Tourist arrivals amounted to 176,984 in November 2019, with a decline of arrivals of 9.5 percent in November 2019, compared to the drop of 22.5 percent in October and 27.2 percent in September 2019. Earnings from tourism were provisionally estimated at US dollars 332 million in November 2019, in comparison to US dollars 367 million in November 2018. Workers’ remittances declined by 7.2 percent, year-on-year, to US dollars 515 million.

     

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