Positive impact from GSP+
Sri Lanka’s external sector has shown a mixed performance in August 2017 as despite increased export earnings higher growth in import expenditure has resulted in an expanded trade deficit. The Central Bank in a media release said that despite the increase in tourist earnings in August 2017, the decline in workers’ remittances together with the expanded trade deficit dampened the performance of the external current account. However, the financial account of the Balance of Payments (BOP) was supported by the receipt of the second tranche of the foreign currency term financing facility to the government along with continued foreign inflows to the Colombo Stock Exchange (CSE) and the government securities market in August 2017.
Export Performance Surpassing the US dollars 1 billion mark for the second consecutive month, earnings from exports increased in August 2017, indicating the positive impact of the restoration of the GSP+ facility. Accordingly, earnings from exports increased by 15.5 2 per cent (year-on-year) to US dollars 1,001 million in August 2017 mainly due to an increase in industrial exports followed by agricultural exports. Earnings from industrial exports grew by 13.1 per cent (year-on-year) to US dollars 740 million in August 2017 owing to the increase in exports of textiles and garments. Export earnings from textiles and garments increased by 10.1 per cent (year-onyear) to US dollars 433 million with improved garment exports to the EU market.
Accordingly, earnings from garments exports to the EU market increased by 12.2 per cent (year-onyear) to US dollars 186 million in August 2017 contributing more than 68 per cent to the growth of garment exports. Meanwhile, garment exports to the USA and non-traditional markets also grew by 4.4 per cent and 4.6 per cent (year-on-year), respectively, during the month. Further, earnings from the export of petroleum products increased significantly by 74.2 per cent (year-on-year) in August 2017, owing to higher export volumes and prices of bunker and aviation fuel. In addition, the export earnings from food, beverages and tobacco increased significantly by 35.8 per cent (year-onyear) to US dollars 35 million, due to increased exports of vegetable, fruit and nuts preparations. Meanwhile, export earnings from gems, diamonds and jewellery (23.6 per cent), machinery and mechanical appliances (14.0 per cent), and rubber products (4.1 per cent) increased during the month compared to the corresponding month of the previous year.
However, export earnings from base metals and articles, printing industry products and transport equipment declined in August 2017. Earnings from agricultural exports increased substantially by 22.8 per cent (year-on-year) to US dollars 255 million in August 2017 reflecting improved performance in almost all sub categories.
Export earnings from tea increased significantly by 20.6 per cent (year-on-year) to US dollars 131 million, mainly due to higher prices in the international market despite the reduction in exported volumes. In line with higher tea prices in the international market, the average export price of tea increased by 22.3 per cent to US dollars 5.29 per kg in August 2017 from US dollars 4.33 per kg in August 2016. The volume of tea exports declined by 1.3 per cent to 24.8 million kgs in August 2017 from 25.1 million kgs in August 2016. Meanwhile, earnings from spices increased considerably by 40.5 per cent (year-on-year) during the month, mainly due to the increased export volumes of pepper, cinnamon and cloves.
Reflecting the positive impact of the removal of the ban on exports of fisheries products to the EU market and the restoration of the GSP+ facility, earnings from seafood exports increased considerably by 38.6 per cent (year-on-year) to US dollars 18 million in August 2017, with a 81.9 per cent year-on-year growth in exports to the EU market. On a cumulative basis, earnings from exports grew by 7.6 per cent (year-on-year) to US dollars 7,413 million during the first eight months of 2017 mainly due to increased earnings received from exports of tea, petroleum products, transport equipment, spices and seafood. In contrast, on a cumulative basis, export earnings from textiles and garments, gems, diamonds and jewellery and leather, travel goods and footwear declined during the period under consideration. The USA, the UK, India, Germany and Italy were the leading markets for merchandise exports of Sri Lanka during the first eight months of 2017, accounting for about 50 per cent of total exports.