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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Trade deficit declines for first time since 2009

Trade deficit declines for first time since 2009

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Trade deficit declines for first time since 2009
November 5, 2012, 8:25 pm
The Island

Tough policy reversals undertaken by the state earlier this year has seen the balance of trade decline for the first time since December 2009, contracting 0.3 percent year-on-year during the first nine months of this year, the Central Bank announced yesterday (05).

The trade deficit reached US$ 6,779.9 million during the period January to September 2012, down a marginal 0.3 percent from US$ 6,799.1 million a year earlier. Imports fell 3.3 percent year-on-year to US$ 14,173.4 million while export earnings fell at a much faster pace, down 5.8 percent to US$ 7,393.4 million during the nine month period.

Tea export earnings fell 6.6 percent to US$ 1,031.6 million while apparel exports fell 4.3 percent to US$ 2,972.3 million. Rubber exports fell 0.2 percent to US$ 644.3 million. Mineral exports grew 59.8 percent to US$ 42.2 million.

Consumer goods imports fell 14.7 percent to US$ 2,291.7 million during the first nine months of this year while intermediary goods imports fell 3.6 percent to US$ 8,552.4 million with petroleum imports growing 8.6 percent to US$ 3,715.5 million.

During the month of September 2012, the trade deficit contracted a sharp 43.3 percent year-on-year to US$ 513.1 million with export earnings falling 6.6 percent to US$ 801.5 million while imports fell 25.4 percent to US$ 1,314.7 million.

Tea export earnings during the month grew 16.2 percent year-on-year to US$ 141.1 million while apparel exports fell 9.2 percent to US$ 303 million.

The petroleum bill for September 2012 fell 3.9 percent from a year earlier to US$ 320.2 million.

The Central Bank yesterday (05) releasing the ‘External Sector Performance – September 2012’ report said:

"The trade deficit for the first nine months of 2012 declined by 0.3 per cent, year-on-year. This was the first time since December 2009 that the cumulative trade deficit for the year declined. The multi-pronged policy strategy implemented during the first half of 2012 to curb the widening trade deficit has therefore helped reduce the deficit in the current account. The declining trend in earnings from exports decelerated sharply in September 2012 as tea exports fared well after declining for three consecutive months. Expenditure on imports meanwhile, continued to respond to the tighter policy environment and recorded a sharp decline of 25.4 per cent, year-on-year, in September 2012.

"The lower import expenditure during September 2012 reflected developments in respect of both external and domestic economic conditions. While expenditure on imports of most consumer goods declined, import expenditure on non-food consumer items declined responding to the depreciation of the rupee since February this year as well as the tightening of credit conditions over the past several months.

"Motor vehicle imports being subject to the imposition of higher taxes since March 2012, contributed the most to the decline in expenditure on consumer goods imports. Expenditure on intermediate goods imports declined in September 2012, driven by non-oil imports. The decline reflected both a weakening of demand for certain industrial exports as well as lower prices. Expenditure on textile imports declined as both global cotton prices and import volumes were lower than in 2011. Lower global demand for jewellery meanwhile, resulted in lower import expenditure on diamonds and gold during September 2012.

"Expenditure on wheat imports however, increased as world wheat prices have increased due to drought conditions impacting on major wheat producing countries. With respect to imports of petroleum products, despite expenditure on refined petroleum increasing in September, total expenditure on petroleum products declined in September, on a year-on-year basis, as crude oil was not imported during the month of September.

"Import expenditure on investment goods meanwhile, declined in September 2012 with expenditure on machinery and equipment, building material as well as transport equipment declining.

"Despite earnings from agricultural and mineral exports increasing, total earnings from exports declined in September 2012 as earnings from industrial exports, which have the largest share in exports, declined. Within the category of agricultural exports, tea, which account for about 14 per cent of total earnings from merchandise exports, spices including cinnamon and pepper, and several minor agricultural products such as cereals, fetched higher export earnings in September 2012.

"With respect to earnings from industrial exports, exports of garments, with a share of more than 35 per cent in total export earnings, continued to record lower earnings by September, given the slowing down of global demand and the decline in cotton prices since around March last year. The decline in earnings from exports of gems, diamonds and jewellery also made a significant contribution to the decline in export earnings in September," the Central Bank said.

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