Feb 22, Colombo: Despite a double-digit growth in exports surpassing US$ 1 billion for the fifth time in the year, Sri Lanka's trade deficit also widened to exceed US$ 2 billion mark in December 2017, according to the Central Bank data released in its External Sector Performance Review on Thursday.
Although earnings from exports increased at a higher rate, the increase in import expenditure resulted in widening the trade deficit in December 2017.
The trade deficit widened 7.5 percent to US$ 1.029 billion in December 2017 from US$ 957 million a year earlier. On a cumulative basis, in the year 2017, the trade deficit increased by 8.4 percent to US$ 9.62 billion from US$ 8.87 billion recorded for 2016.
Earnings from exports increased by 18.7 percent in December 2017 to US$ 1.02 billion from US$ 859 million earned in December last year. Earnings from textiles and garments exports contributed largely for this growth.
Recording the highest value for the year, earnings from textiles and garment exports continued to increase significantly in December 2017 with increased exports to the European Union (EU) following the restoration of the GSP+ facility in May 2017, according to the Central Bank.
On a cumulative basis, exports earnings during 2017 grew by 10.2 percent (year-on-year) to US$ 11.36 billion, with higher earnings from tea, rubber, garments, seafood exports, spices, petroleum products and minor agricultural products.
However, expenditure on imports also increased significantly by 12.8 percent (year-on-year) to US$ 2.05 billion in December 2017 from US$ 1.82 billion a year ago, particularly due to expenditure incurred for fuel imports as a result of significant increase in crude oil and refined petroleum products on account of the combined effect of higher prices in the international market and increased import volumes.
On a cumulative basis, import expenditure recorded the historically highest value of US$ 21 billion in 2017 largely due to higher imports of fuel and rice. Expenditure on imports during the 2017 grew by 9.4 percent (year-on-year) to US$ 20.98 billion from US$ 19.18 billion.
In December 2017, earnings from tourism increased by 8.8 percent to US$ 420 million as tourist arrivals increased in the latter part of the year. On a cumulative basis, earnings from tourism increased by 3.2 percent to US$ 3.63 billion during the year.
Workers' remittances declined by 1.9 percent to US$ 671 million in December 2017 from US$ 685 million a year earlier. The cumulative inflow from workers' remittances declined by 1.1 percent to US$ 7.16 billion during 2017, relative to 2016 reflecting the geo-political uncertainties and the continuation of subdued economic performance in the major remittance generating destinations.
Reflecting the favorable developments in the external sector, the BOP recorded a surplus of US$ 2.068 billion in 2017, while gross official reserves of the country stood at US$ 8.0 billion as at end 2017 compared to US dollars 6.0 billion recorded at end 2016.
Meanwhile, the Sri Lankan rupee which depreciated by 2.0 percent in 2017, further depreciated by 1.6 percent against the US dollar in 2018 up to 21 February.