Sri Lanka’s external sector strong, says Central Bank
View(s):Sri Lanka’s external sector strengthened further with the trade deficit contracting sharply in October, the Central Bank (CB) said this week.
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 transfrs 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 CB statement said.
Earnings from exports in October exceeded US$1 billion for the first time in the history, up 35.1 per cent, year-on-year, the highest growth rate recorded since May 2011.
Expenditure on imports declined by 2.8 per cent compared to the corresponding month in 2012. Consequently, the trade deficit contracted significantly by 38.9 per cent to $494 million during this period.
On a cumulative basis, earnings from exports during the first 10 months of 2013 grew by 3.6 per cent, while expenditure on imports contracted by 1.1 per cent from the corresponding period in 2012. Accordingly, the cumulative trade deficit contracted by 6 per cent to $7,216 million, during the period compared to the corresponding period of 2012.
Earnings from exports in October reached $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, which account for more than 74 per cent of total exports, increased by 34 per cent on a year-on year basis to $771 million mainly due to higher export of textiles and garments,” the CB said.
Earnings from textiles and garments exports grew by 46.8 per cent, year-on-year, to $436 million in October 2013, which was the highest monthly value of export of garment and textiles ever recorded.
The CB said 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, reflecting the recovery in those economies as well as seasonal demand.
Expenditure on imports declined by 2.8 per cent to $1,535 million in October, due to the significant decline in both intermediate and investment goods imports. Expenditure on oil imports fell in October 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,” the Bank said. Earnings from tourism recorded a year-on-year growth of 26 per cent during the first 10 months of 2013 to $996.2 million, compared to the cumulative earning of $790.5 million during the corresponding period of 2012. The top five sources of tourist arrivals in October 2013 were India, UK, Middle East, Germany and Maldives, accounting for about 50 per cent of tourist arrivals during the month.
Cumulative inflow from workers’ remittances increased by 11.8 per cent to $5,521.9 million during the first 10 months of 2013 from the corresponding period of 2012. The growth in remittances continues to be driven by increased labour migration in the professional and skilled categories.
FDI inflows during the first nine months of 2013 increased by 42 per cent to $870 million from $614.7 million in the corresponding period in 2012. During the first 11 months of 2013, the Colombo Stock Exchange received net foreign inflows of $176.5 million, while net inflows to the Government securities market amounted to $506 million. Long-term loans obtained by the government during the first nine months of 2013 amounted to $1,302 million, compared to $2,450 million obtained by way of long-term loans during the corresponding period in 2012.
| SL’s inflation falls significantly in November, CB says
Inflation, as measured by the change in the Colombo Consumers’ Price Index (CCPI), fell significantly to 5.6 per cent last month from 6.7 per cent in October 2013 on a year-on-year (YoY) basis, its lowest level recorded since April 2012. “The sharp deceleration of inflation was a result of the moderation in prices of both food and non-food categories. Annual average inflation moderated to 7.3 per cent in November 2013 from 7.6 per cent in the previous month, declining for the sixth consecutive month,” a Central Bank (CB) statement said this week. Reflecting well contained demand pressures on prices, core inflation continued to decelerate to 2.4 per cent, year-on-year in November, recording a new low since its introduction in 2007. “The continued low level of core inflation is a result of prudent monetary management by the Central Bank, which supports favourable inflation expectations, thus enabling the economy to avoid the emergence of wage-price spirals. Annual average core inflation also continued to decline, and recorded 4.9 per cent in November,” the statement said. Compared to a month-to-month increase of 1.3 per cent in the CCPI in November 2012, the CB said the increase in CCPI was contained at 0.2 per cent in November 2013. Within the marginal monthly increase in the index, prices in the Food and Non Alcoholic Beverages sub-category increased by 0.3 per cent reflecting higher prices of some varieties of vegetables, potatoes, red onions, big onions, green chillies and milk powder during the month. “Nevertheless, a decrease in the prices of all varieties of fresh fish, dried fish and fruits was reported. In the Non-Food category, price increases were reported in the sub-categories of Transport (0.5 per cent); Recreation and Culture (0.2 per cent); Furnishing, Household Equipment and Routine Household Maintenance (by 0.1 per cent) and Miscellaneous Goods and Services (by 0.1 per cent). The increase in the price of Transport sub-category was entirely due to the upward revision in bus fares, with effect from November 2013. Meanwhile, the prices in the sub categories of Clothing and Footwear; Housing, Water, Electricity, Gas and Other Fuels; Health; Communication and Education remained unchanged during the month,” the statement added. |