Export income drops 7.4 percent

Ban on seafood exports to EU the main cause:

by Lalin Fernandopulle

The external sector, which is backed by strong export earnings, was hit by poor export performance in the first quarter of this year. Cumulative export earnings decelerated 0.3 percent to US$ 3,569 million from January to April this year compared to last year, a report on ‘Recent Economic Developments’ released by the Central Bank last week revealed.

It said export income dropped 7.4 percent to US$ 707.5 million in April with a drastic dip in the export of seafood and petroleum products. Seafood exports dropped 41.2 percent to US$ 14.1 million and petroleum products dipped 42.7 percent to US$ 18.5 million.

Tea export earnings declined 12.7 percent to US$ 102 million and rubber products was down 16.2 percent to US$ 48.5 million in April.

Central Bank Governor Arjuna Mahendran said the downward movement in export earnings was due to the ban imposed on Sri Lanka’s seafood exports by the European Union and the slow recovery in certain Western countries and the crises in the Middle East and Russia.

However, the Governor was upbeat about the economic growth momentum and achieving the seven percent economic growth rate envisaged this year.

“The seven percent economic growth rate target is achievable with the political stability that will be gained following the completion of the polls in August. Work on mega development projects will resume and private sector investments will receive a boost,” he said.

He said though economic growth in the first quarter of this year was low compared to the corresponding period last year, the second half of the year will be better than the first, from a growth perspective.

The economic growth rate in the first quarter of this year was 6.4 percent compared to 7.6 percent in the corresponding quarter last year.He said inflation will be around three percent by the end of this year. Core inflation was 2.8 percent y-o-y in June this year. However, he also cautioned about the adverse effects the economy would face due to the rising US dollar against the Euro and the Japanese Yen.

“The appreciating US dollar against the Euro and Yen will pose difficulties to Sri Lanka,” Mahendran said.

The rupee depreciated by around 2 percent against the US dollar this month. The Governor was concerned about the falling tea and rubber prices affecting exports while recognising the contribution of the agriculture sector to the economy.

The number of tourist arrivals in May rose 26.1 percent to 113,529. and in June 14.5 percent to 714,584 visitors. The number of arrivals during the first five months of this year was 142,917 compared to 124,836 in the corresponding period last year.

Credit to the private sector increased 15.2 percent in April from 13.9 percent in March.Central Bank data revealed that all sub sectors contributed positively to sectoral growth. The industrial sector grew 6.5 percent in the first quarter of this year. However, rubber and fish production contracted 12.8 percent and 3.8 percent.

Deputy Governor D.B.W.A. Silva said that the performance of the agricultural sector will be good with favourable weather so far this year. The cumulative trade deficit increased 3.9 percent from January to April this year compared to the corresponding period last year. The deficit in the trade account of the Balance of Payments widened by 15.1 percent to US$ 783 million in April this year.

The Governor dismissed Opposition rumours of fleeing the country in fear of facing an investigation on the alleged Treasury Bond scam as absolute nonsense. Mahendran scoffed at Parliamentarian Bandula Gunawardena’s statement that the Central Bank Governor had fled the country to avoid a probe. He said he accompanied the Finance Minister on an official visit to Japan and added that there is no reason for him to flee the country.

“I faced the committee on a couple of occasions,” the Governor said. Mahendra was accused for having a direct role in deciding to accept bids over and above the Rs. 1 billion stipulated in the 30-year bond tender and accepting up to Rs. 10 billion.