The external sector strengthened further with the trade deficit contracting sharply in October 2013,the Central Bank said yesterday. Earnings from exports increased to record levels, reflecting the ongoing recovery in the global economy, while expenditure on imports declined. The contraction of the trade deficit, higher inflows to the services account and an increase in private transfers contributed to reducing the current account deficit.
The favourable developments in the external sector together with higher inflows to the financial account, resulted in the Balance of Payments (BOP) recording an estimated surplus during the first ten months of 2013, compared to the deficit recorded during the corresponding period of 2012, the Central Bank said yesterday.
Earnings from exports in October 2013 reached US dollars 1,041 million, the highest ever monthly value recorded in the history of Sri Lanka's exports.
This growth was led by industrial exports followed by agricultural exports. Earnings from industrial exports in October 2013, which account for more than 74 per cent of total exports, increased by 34 per cent on a year-on year basis to US dollars 771 million mainly due to higher export of textiles and garments.
Earnings from textiles and garments exports grew by 46.8 per cent, year-on-year, to US dollars 436 million in October 2013, which was the highest monthly value of export of garment and textiles ever recorded. Exports of garments to both the EU and USA, which are Sri Lanka's major export destinations, recorded remarkable growth rates of 53.2 per cent and 43.4 per cent, respectively in October 2013, reflecting the recovery in those economies as well as seasonal demand.
Meanwhile, earnings from rubber product exports increased by 50.1 per cent, year-on-year, to US dollars 94 million in October 2013, the highest monthly value since August 2012, led by higher exports of rubber tyres.
All categories of industrial exports, except gems diamonds and jewellery, animal fodder and petroleum products grew in October 2013. Earnings from agricultural exports rose by 37.4 per cent, year-on-year, to US dollars 258 million in October 2013 mainly due to an increase in export earnings from tea followed by spices. Earnings from tea exports recorded a healthy growth of 26.6 per cent to US dollars 147 million in October 2013. This was the combined outcome of a 13.6 per cent increase in export volumes and an increase in the average export price of tea by 11.4 per cent. Earnings from the export of spices increased significantly by 79.9 per cent to US dollars 41 million led by pepper and cinnamon exports. Continuing the strong performance recorded since June 2013, the volume of both pepper and cinnamon exports increased substantially although prices of those commodities declined, year-on-year. However, in October 2013 rubber export earnings contracted by 29.0 per cent compared to October 2012, due to the continuing decline in both export volumes and prices, owing to low demand from major rubber consumers, such as China and Japan.
Expenditure on imports declined by 2.8 per cent to US dollars 1,535 million in October 2013, due to the significant decline in both intermediate and investment goods imports. Expenditure on intermediate goods imports declined by 7.8 per cent, year-on-year, to US dollars 897 million in October 2013 mainly due to the decline in the importation of fuel and textiles. Expenditure on the importation of petroleum products declined in October 2013 due to the availability of sufficient stocks from previous months. Despite the strong growth in export of textiles and garments, there has been a steady decline in imports of textile and textile articles, reflecting improved backward linkages and higher value addition in the garment industry. Lower import of diamonds and precious stones and metals, rubber and articles also contributed to the decline in intermediate goods imports. However, fertilizer imports increased sharply by 110.7 per cent year-on-year, to US dollars 27 million in October 2013, mainly due to the low base in the corresponding period in 2012 and to ensure availability of adequate stocks for the upcoming Maha season. In October 2013, import expenditure on investment goods declined by 6.8 per cent, year-on-year, to US dollars 351 million mainly due to the decline in machinery and equipment imports by 16.5 per cent and a decline in transport equipment imports by 11.0 per cent although building materials imports increased by 13.4 per cent. Meanwhile, expenditure on consumer goods imports recorded a 25.6 per cent growth, year-on-year, to US dollars 286 million in October 2013 with increases recorded in both food and non-food consumer goods categories. Vehicle imports, mainly contributed to the increase in consumer goods imports, recording a year-on-year increase of 150.7 per cent in October 2013. Dairy products, clothing and accessories, Oils and fats, medical and pharmaceuticals and household and furniture items also contributed to the increase in consumer goods imports.