Sri Lanka’s trade deficit shows the lowest increase in 18 months at 2.1%

Responding to the policy measures taken in the first quarter of 2012, trade deficit decelerated further in May 2012, having narrowed in the previous three months. It recorded the lowest increase in 18 months, in May 2012, increasing moderately by 2.1 %, year on year, data released from the Central Bank showed.

According to the results, expenditure on imports continued to decline in May 2012 which amounted to US dollars 1,575 million, thus recording a year on year decline of 6.4 % while the earnings from exports, driven largely by lower international market prices for several major export items, recorded a year on year decline of 15.1 % and amounted to US dollars 710 million in May 2012.

Expenditure on imports declined in May 2012 due to reduced expenditure on both intermediate and consumer goods imports which declined 10% and 11% respectively. The decline in expenditure on intermediate goods imports was mainly due to the decline in crude oil imports by 51 % reflecting lower volumes of imports and the marginal decline in crude oil prices.

With respect to earnings from exports, declining global prices of some major commodities mainly contributed to the lower earnings from industrial exports which recorded a decline of 16.2 % in May 2012.

In cumulative terms, expenditure on imports in the first five months of 2012 grew moderately by 7.8 %to US dollars 8,208 million. This reflected a 20.3 % increase in expenditure on petroleum imports and a 34.6 % increase in expenditure on investment goods imports. Earnings from exports during this period declined by 5.4 % reflecting a 4.9 % decline in earnings from textiles and garments exports and a decline of 10.8 % in earnings from tea exports.

As a result the trade gap was expanded by 24.7% to 4,184.2 million in the first five months ending May

http://www.nation.lk/edition/biz-news/item/8643-sri-lanka%E2%80%99s-trade-deficit-shows-the-lowest-increase-in-18-months-at-21.html

Monetary and fiscal policy measures appear to be delivering results as the country’s once ballooning trade deficit is shrinking, largely owing to a slowdown in imports though the dip in exports remains a concern.

The Central Bank said yesterday that the trade deficit “decelerated further in May 2012, having narrowed in the previous three months”. It recorded the lowest increase (2.1% year on year) in 18 months to $ 865 million in May 2012.


In the first five months of 2012, the deficit was $ 4.18 billion, up by 24.7% over the corresponding period of last year. This is high, however, in comparison to the deficit of $ 2.6 billion as at end March, though the widening in the first quarter was sharper at 45% over the corresponding period of last year. The Central Bank said, responding to the policy measures taken in the first quarter of 2012, expenditure on imports continued to decline in May 2012 and amounted to $ 1,575 million, thus recording a year-on-year decline of 6.4%.

Earnings from exports, driven largely by lower international market prices for several major export items, recorded a year-on-year decline of 15.1% and amounted to $ 710 million in May 2012. Expenditure on imports declined in May 2012 due to reduced expenditure on both intermediate and consumer goods imports.

Expenditure on consumer goods imports declined by 11% in May 2012, with expenditure on non-food consumer goods imports driving the decline. Expenditure on imports of non-food consumer goods declined by 15% as expenditure on personal motor vehicle imports declined by 31.1% in May 2012 to $57 million.

Import expenditure on medical and pharmaceutical items and household and furniture items grew by 11.1% and 15.7%, respectively. In the food category, import expenditure on vegetables, sea food and spices declined significantly.

The decline in expenditure on intermediate goods imports was mainly due to the decline in crude oil imports by 51% reflecting lower volumes of imports and the marginal decline in crude oil prices. The average crude oil import price declined to $110.73 per barrel from $111.50 per barrel in May 2011.

Meanwhile, imports of textiles declined by 3% while imports of diamonds and precious stones, base metals and fertiliser increased. Expenditure on imports of investment goods increased by 11.4%, year-on-year, in May 2012, underpinned by the on-going development activity.

Within investment goods imports, imports of building material as well as machinery and equipment recorded an increase. However, the growth in expenditure on transport equipment decelerated to 2% in May 2012.

With respect to earnings from exports, declining global prices of some major commodities mainly contributed to the lower earnings from industrial exports which recorded a decline of 16.2% in May 2012.

Export earnings from textiles and garments declined by 13.5% mainly due to lower export prices, reflecting lower cotton prices in the international market. Export earnings from gems, diamonds and jewellery however, grew by 45.4% while export earnings from chemical products grew by 15.8% in May 2012.

Agricultural exports declined by 11.5% to $174 million, reflecting lower prices in the international market for tea, rubber and coconut. Earnings from the export of cinnamon, pepper, cereals and fruit however, increased in May 2012.

In cumulative terms, expenditure on imports in the first five months of 2012 grew moderately by 7.8% to $8,208 million. This reflected a 20.3% increase in expenditure on petroleum imports and a 34.6% increase in expenditure on investment goods imports. Earnings from exports during this period declined by 5.4% reflecting a 4.9% decline in earnings from textiles and garments exports and a decline of 10.8% in earnings from tea exports.
http://www.ft.lk/2012/07/26/trade-deficit-narrows/