Trade deficit narrows in first nine months
The external sector sustained its growth momentum with expanding
external trade activities in September 2014.
Since July 2014, the expenditure on imports continued to rise
reflecting the rebound of investment goods imports in particular.
As the cumulative earnings on exports outweighed the cumulative
expenditure on imports, the trade deficit during the first nine months
of 2014 narrowed, while tourist earnings and workers' remittances
continued to be stable sources of inflows improving the current account
of the Balance of Payments(BOP).
Inflows to the financial account in the form of project loans to the
Government and inflows to the banking sector continued to strengthen the
BOP resulting in a healthy surplus in the overall BOP during the first
nine months of 2014, despite some volatility in the government
securities and equity markets.
Earnings from exports increased by 0.5 percent, year-on-year, in
September 2014 to US $ 903 million while the cumulative earnings
increased by 13.0 percent to US $ 8,288 million during the first nine
months of 2014.
The largest contribution to export growth in September 2014 was from
textiles and garments followed by coconut and printing industry
Export earnings of textiles and garments grew by 4.4 percent in
September 2014 supported by a substantial improvement in exports of
The increase of earnings of coconut exports was mainly led by the
significant increase in kernel product exports.
However, some major exports such as tea, spices, precious metals and
gem and diamonds, on a year-on-year basis, mainly due to the higher
exports in September 2013.
Export earnings of petroleum products, particularly on bunkering and
aviation fuel were significantly affected by the heightened competition
from major regional players.
Major export destinations from January to September 2014 were USA,
UK, Italy, India and Germany accounting for around 50 percent of
Expenditure on imports increased by 12.2 percent, year-on-year, to US
$ 1,667 million in September 2014, while on a cumulative basis, imports
grew 5.4 percent to US $ 14,222 million during the first nine months of
The increase in import expenditure in September 2014 was mainly due
to the significant increase in imports of transport equipment
particularly a dredger vessel followed by imports of vehicles such as
motorcycles and motor cars for personal use.
Further, rice imports also increased significantly during the month
as a result of a shortfall in domestic rice production during the year.
However, the expenditure on fuel imports declined significantly
during the month due to a sharp reduction in crude oil imports as the
available crude oil stocks were used by the refineries.
As a result of substantial decline in volume of fertiliser imports,
the import expenditure on fertiliser declined. The import expenditure on
investment goods showed a broad based increase except the decline in
imports of machinery and equipment due to lower imports of engineering
During the first nine months of 2014, the main import origins were
India, China, UAE, Singapore and Japan accounting for about 60 percent
of total imports.
The number of tourist arrivals continued to record an impressive
growth of 16.8 percent, year-on-year in September 2014, with 105,535
tourists arriving during the month.
The cumulative tourist arrivals in the first nine months grew by 22.4
percent to 1,107,178 compared to the corresponding period of 2013.
Earnings from tourism are estimated to be US $ 152 million in September
2014 compared to US $ 122 million recorded in September 2013.
The substantial increase in the number of tourist arrivals and the
increase in estimated average spending per night resulted in the
cumulative earnings from tourism recording a growth of 31.4 percent to
US $ 1.6 billion during the first nine months of 2014 compared to US $
1.2 billion during the corresponding period in 2013.
Workers' remittances recorded an increase of 3.1 percent,
year-on-year, amounting to US $575 million in September 2014 compared to
US $ 558 million in September 2013.
Cumulative inflow from workers' remittances stood at US $ 5,090
million for the first nine months of 2014, a growth of 9.1 percent
compared to the corresponding period of 2013.
For the first nine months of 2014, long-term loans obtained by the
Government amounted to US $ 1,232 million, which is a decrease of 5.7
percent from the corresponding period in 2013.
Net inflow to the Government securities market from January to end
September 2014 amounted to US $ 100 million, despite some outflow in
foreign investment in Government securities during August and September.
Meanwhile, foreign investments in the Colombo Stock Exchange (CSE)
recorded a net outflow of US $ 9.5 million in September 2014, although,
on a cumulative basis, foreign investment in the CSE stood at US $ 107
million by end of October 2014.