By: Staff Writer
Colombo (LNW): Sri Lanka’s deficit in the merchandise trade account witnessed a significant contraction in February, due to a significant moderation in the import expenditure, arising out of the aggregate demand conditions.
The deficit in the merchandise trade account narrowed significantly to US dollars 39 million in February 2023, from US dollars 780 million in February 2022, mainly reflecting the impact of significant moderation of import expenditure due to subdued aggregate demand conditions.
This was announced by the Central Bank in its latest report on the external sector performance in February 2023.
The cumulative deficit in the trade account during January-February 2023 was US dollars 449 million,a sizeable decline from US dollars 1,636 million recorded over the same period in 2022.
Despite recording a marginal growth compared to January 2023, earnings from merchandise exports declined by 10.2 per cent in February 2023, year-on-year, to US dollars 982 million. Exports earnings recorded below US dollar 1 billion level for the second consecutive month.
While the decline in earnings was observed across all main categories, industrial exports mainly contributed to the overall contraction. Cumulative export earnings during January-February 2023 declined by 10.7 per cent over the same period in the last year
Earnings from the exports of industrial goods declined in February 2023, compared to February 2022, with a substantial share of the decline being contributed by garments.
Reduced demand from major markets for garments due to unfavourable economic conditions globally mainly contributed for this outcome. Earnings from rubber products continued to decline due to the lower exports of household rubber gloves.
Similarly, earnings from the exports of petroleum products also declined due to the drop in volumes of bunker and aviation fuel exports despite the higher aviation fuel prices. In contrast, earnings from machinery and mechanical appliances (mainly, electronic equipment); and gems, diamonds, and jewellery increased in February 2023.
Earnings from the export of agricultural goods marginally declined in February 2023, compared to a year ago, since the increase in earnings from spices and tea was offset by the decline in earnings from coconut related products (primarily, fibres and desiccated coconut).
Export earnings from spices improved due to higher export volumes of cloves; cinnamon; and nutmeg and mace. Increased earnings from tea exports were mainly due to price increases as the volumes registered a decline.
Earnings from mineral exports declined in February 2023, compared to February 2022, mainly due to the decline in exports of titanium ores.
Expenditure on merchandise imports was almost halved in February 2023 at US dollars 1,021 million, compared to February 2022, recording the lowest imports since May 2020.
All major import sectors declined while the decline in expenditure on intermediate goods was significant.Meanwhile, cumulative import expenditure during January-February 2023 also declined by 37.1 percent over the corresponding period in 2022.