ECONOMYNEXT – Sri Lanka’s trade gap widened sharply in June 2018 to US$795 million from $554 million a year ago despite export earning exceeding a billion dollars for the second time this year, as spending on imports rose much faster.
The central bank said in a statement export earnings grew 3.8 percent to $1,024 million in June 2018 from the previous year while imports rose 18.1 percent to $1,819 million.
Exports were mainly driven by strong industrial exports, particularly garmets and textiles, and seafood, as well as earnings from tourism while agricultural exports were lower mainly because of lower tea export earnings.
Imports rose much faster mainly because of high expenditure incurred on fuel, vehicles and transport equipment.
“Even though the lowest trade deficit so far during the year in absolute terms was recorded in the month of June, the trade deficit widened significantly in comparison to June 2017 as the growth in import expenditure outpaced the increase in export earnings,” the central bank said.
“Earnings from tourism increased notably in June 2018 continuing the growth momentum observed since the beginning of the year, although workers’ remittances declined during the month in comparison to June 2017.”
On a cumulative basis, the trade deficit expanded significantly during the first half of 2018 to US$5.7 billion from $4.75 billion in the first half of 2017.
“Earnings from merchandise exports surpassed one billion US dollars for the second time during the year mainly driven by industrial exports,” the statement said.
“Earnings from textiles and garment exports increased significantly due to the higher demand from the EU and the USA while exports to non-traditional markets also increased.”
Earnings from agricultural exports declined in June 2018 due to the poor performance in almost all categories except seafood, unmanufactured tobacco and rubber exports.
Export earnings from tea declined as both prices and volumes exported reduced in June 2018.
“However, benefiting from the positive impact of the removal of the ban on fisheries exports to the EU and the restoration of GSP+ facility, earnings from seafood exports increased significantly during the month due to higher prices and volumes of seafood exported.”
Spending on fuel imports, categorised under intermediate goods, increased considerably during the month owing to higher import prices and volumes of crude oil and refined petroleum products.
In addition, expenditure on textiles and textile articles imports increased in June2018 reflecting higher expenses on all sub categories, particularly fabric and yarn imports.
Also, import expenditure on base metals, wheat and maize, fertiliser and food preparations contributed towards the increase in intermediate goods imports during the month.
However, expenditure on the importation of gold, which increased considerably since early 2016, declined notably for the second consecutive month in June 2018.
Import expenditure on personal vehicles, categorised under consumer goods, increased significantly in June2018 owing to the substantial increase in imports of vehicles with less than 1,000 cylinder capacity (cc), hybrid and electric vehicles.
“As taxes applicable on small vehicle imports were revised upward with effect from 01.08.2018, vehicle imports are expected to decelerate to some extent in the coming months,” the central bank said.
(COLOMBO, 27 August, 2018)