Saturday, 14 December 2019 18:41

Sri Lanka’s trade deficit contracted amidst decline in imports

Sri Lanka’s trade deficit contracted in October 2019 (year-on-year), with the decline in expenditure on imports and a marginal decline in earnings from exports, Central Bank announced.

The trade deficit constricted during the first ten months of 2019 compared to the corresponding period in 2018, as a result of the notable decline in cumulative expenditure on imports along with increased cumulative earnings from exports.

Meanwhile, the drop in tourist arrivals was contained further in October 2019. Workers’ remittances improved (year-on-year) in October 2019, although a cumulative decline was recorded.

In the financial account, foreign investment in the Colombo Stock Exchange (CSE) recorded a net outflow while the government securities market recorded a marginal net inflow in October 2019.

The exchange rate recorded mixed movements during the month of October and remained appreciated against the US dollar so far during the year.

The deficit in the trade account contracted in October 2019 to US dollars 838 million, from US dollars 903 million in October 2018.

On a cumulative basis, the trade deficit contracted by US dollars 2,405 million to US dollars 6,451 million during the first ten months of 2019, in comparison to US dollars 8,857 million in the corresponding period of 2018.

The major contributory factors for this decline are depicted in Figure 1. Meanwhile, the terms of trade, which represent the relative price of imports in terms of exports, deteriorated by 5.7 per cent (year-on-year) in October, as export prices declined at a faster pace than the decline in import prices.

In cumulative terms, the terms of trade deteriorated by 0.8 per cent during the first ten months of 2019 in comparison to the corresponding period of 2018.


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