Sri Lanka’s external sector showed a mixed performance in December 2015 with a widened trade deficit, continued high growth in tourist earnings and moderate workers’ remittances.

On a cumulative basis, the trade deficit widened marginally during 2015, while earnings from tourism increased significantly. Meanwhile, workers’ remittances recorded a marginal decline in 2015, the Central Bank said.

The major source of inflows to the financial account of the BOP during 2015 were the issuance of two international sovereign bonds and swap arrangement of the Reserve Bank of India.

Earnings from exports continued its downward trend for the tenth consecutive month in December 2015 recording an 18.7 per cent decline, year-on-year, to US dollars 817 million, led by textile and garments and tea exports.

Export earnings from textile and garments, which contribute nearly 48 per cent to the total exports, declined for the third consecutive month by 12.8 per cent in December 2015, reflecting low exports to both EU and USA markets.

However, garment exports to non-traditional markets such as Canada, China and UAE increased slightly by 1.7 per cent, year-on-year, during the month. Lower demand for tea exports continued throughout the year 2015 due to economic and geo-political developments in the main tea export destinations.

Earnings from tea exports in December dropped by 24.7 per cent reflecting declines in both export volume and average price levels compared to the corresponding month in the previous year. Further, transport equipment, rubber products and gems, diamonds and jewellery exports also contributed significantly to the drop in December exports. The substantial drop shown in transport equipment was largely as a result of base effect due to the export of a cruise ship in December 2014. Earnings from rubber product exports continued to weaken and recorded a 19.8 per cent decline, year-on-year, in December 2015. However, petroleum product exports recorded a 24.5 per cent increase as a result of a substantial increase in bunkering quantity by 186.4 per cent, year-on-year, in December 2015. Adding to that, earnings from chemical products also showed a growth of 10.5 per cent while sub categories of cinnamon, woven fabrics and fruits showed a growth in the month of December 2015, over the corresponding month in 2014.

Deviating from the normal seasonal trend of increased expenditure on imports towards the end of the year, expenditure on imports weakened for the sixth consecutive month in December 2015 by 8.5 per cent to US dollars 1,645 million, year-on-year. A large part of this decline in growth was attributable to the drop in imports of intermediate goods led by fuel imports, while the drop in imports of consumer goods and investment goods also contributed. In December 2015,expenditure on fuel imports decreased by 15.5 per cent, year-on-year, to US dollars 216 million mainly due to the considerable decline in import prices. In line with the downward movement in international oil prices, average import price of crude oil dropped to US dollars 41.21 per barrel in December 2015, compared to US dollars 75.98 per barrel recorded in December 2014. Consumer goods imports decreased by 9.1 per cent to US dollars 384 million, in December 2015.

Source : http://www.dailynews.lk/?q=2016/03/07/business/trade-deficit-widens-tourism-earnings-increase-december