May 22, Colombo: Sri Lanka's economy grew by 4.4% during the year 2016, although slightly low compared to 2015, amidst internal and external shocks that impacted on the economic growth of the country.
As a whole, the external sector contribution to GDP was little less, mainly due to the poor export performance of products such as Tea and Garments & the Apparel sectors.
However, economists have commented that the year ended positively due to the reduced fiscal deficit, high earnings from tourism, an increase in remittances and the growth recorded in construction and other services sectors. Against this background, it would be pertinent to examine and compare the performance of exports in the first quarter of 2017, the Exports Development Board (EDB) said in a release.
Merchandise exports from Sri Lanka during the period January to March 2017 valued at US$ 2.7 billion reported a growth of 2% compared to the same period in 2016. These observations were made after analyzing the recently released customs provisional export statistics for the first quarter of 2017.
Export values of essential oils showed the highest growth of 41%, followed by Electronic/Electrical and Machinery products and parts. Spice exports showed a growth of 39% and exports of fruits, ornamental fish and seafood grew by 27%, 22% and 17% respectively. The Combined value of these sectors was US$ 258 Million. However, Tea, Coconut and Rubber & Rubber based sectors with a combined value of 701 US$ Million grew only by 7 % while the Apparel sector, the highest export revenue contributor to the economy, performed negatively, with a total value of US$1274 Million during the period under review, a decrease of US$ 90 Million.
The US continued to be the leading export destination with a share of over 25%. Shares of India, Italy, Singapore, UAE, China, Russian Federation, Canada, Australia and Turkey increased during January to March, 2017 when compared to 2016.
Tea exports increased during the first three months of the year. The main markets served were Russia and Turkey. Further increases in exports of tea can be expected in 2017 as the main markets such as the Middle East and Northern Africa (MENA) have projected a 2.4 % economic growth in the region. The World Bank expects a 1.4 % growth in the Russian market in 2017, which together with the oil price stabilization in the region, is expected to show a positive impact on tea exports. On the supply side of tea, sector experts have indicated that tea production has improved since November 2016. High prices in the international market and the expected growth in the Euro Zone too, will contribute towards the industry's further growth in 2017.
The value of Seafood exports increased by 18% in the first quarter of 2017, compared to same period during the previous year. During January -March 2016, the industry's exports were affected due to the ban of fish imports from Sri Lanka into the EU. However, with the removal of the ban from June 2016, the industry has performed well in the European markets as well as in the USA. Exports to markets such as Italy, United Kingdom and Germany resumed during the period under review. The main exports to these markets are mainly frozen and fresh fish, Crabs, Lobsters and prawns, all of which are exported under the category of seafood. The exports of seafood together with ornamental fish contributed around 70 US$ Million to the total merchandise exports of the country.
The removal of the ban on exports of Fishery products to the EU was a success due to strong lobbying of the relevant authorities such as the Ministry of Fisheries and Aquatic Resources Development, the Export Development Board, Department of Commerce along with the relevant Trade Associations. Seafood exporters are expected to see increased volumes in the coming months, with the reinstatement of the EU GSP + concessions.
The exports of cloves increased significantly in 2017.The main markets are India and Saudi Arabia, while cinnamon moved to its traditional markets such as Mexico, Columbia and Peru. The spice manufacturers are closely related to the essential oil industry as well. The main essential oil products are Cinnamon leaf and bark oil, clove, nutmeg and pepper oil, which are exported to markets such as the United States of America, Germany, France, India etc.
Ceylon cinnamon, the spice item which is obtained from the inner bark of the Cinnamomum zeylanicum blume tree, or famous "Kurundu", is a well-known and reputed spice all over the world. The Sri Lanka Export Development Board, obtained the Pure Ceylon Cinnamon (PCC) Certification Mark, which has been registered in main markets such as Europe, USA, Peru and Colombia, in addition to being registered at the World Intellectual Property Organization (WIPO). The EDB is in the process of obtaining the Geographic Indication (GI) for Cinnamon in collaboration with relevant public, private stakeholders such as National Intellectual Property Office, Department of Export Agriculture and Spice council in order to gain a competitive advantage in commercialization of Ceylon cinnamon while protecting it internationally.
Products such as electronic, electrical and machinery products/parts were exported to variety of markets such as Ghana, UAE, Cyprus, Thailand, Germany and United Kingdom, in smaller values. Electronics and electrical products have been identified as future potential products to expand Sri Lanka's export basket, after extensive analysis carried out by a team of EDB officials under the guidance of Harvard Business School experts.
Under the category Coconut & Coconut products, items such as coconut oil, Activated Carbon, liquid coconut milk and coconut cream exports have been made to markets such as the United States, Germany, China and Pakistan.
The export of Textiles and Garments, Food & Beverages, Gems, Diamonds & Jewellery and mineral and Non - metallic products recorded a decline during the period. Apparel Exporters attribute the decline in exports to the sluggish economic growth and in particular, the economic slowdown of the United States - the main market for Sri Lanka's apparel industry. Exports of apparel to the European Union and Germany also recorded reduced volumes.
As a whole, the first quarter exports fared well, despite unfavorable global conditions which continued from 2016. However, there are signs of recovery during 2017, with the global positive economic forecasts available to-date. The export performance of Sri Lanka remains stable compared to other the regional competitors such as Malaysia, Thailand and Singapore, where five year export growth was negative, while Sri Lanka's performance has been positive with a five year average growth of 10%. The export related industries are expected to have better times ahead, as Sri Lanka has regained the EU GSP+ status and with the United Kingdom affirming that it would continue to extend this facility to Sri Lanka despite its decision to leave the EU.