May, 18, 2020
According to the latest external trade data released by the Central Bank, country’s trade deficit widened in February 2020 compared to February 2019, as expenditure on imports increased at a faster pace than the increase in earnings from exports.
The deficit in the trade account widened in February 2020 to US dollars 574 million, from US dollars 451 million in February 2019, as the increase in imports surpassed the increase in exports.
However, on a month on month basis, the trade deficit in February 2020 recorded a contraction. On a cumulative basis, the trade deficit widened to US dollars 1,304 million during the first two months of 2020 compared to
US dollars 1,069 million in the corresponding period of 2019.
Meanwhile, terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 3.5 per cent (year on year) in February 2020, as export prices declined at a faster pace than the decline in import prices.
Earnings from merchandise exports increased in February 2020 for the first time since June 2019 by 0.7 per cent to US dollars 988 million, year-on-year, led by the increase in industrial exports though agricultural and mineral exports declined in comparison to February 2019.
Earnings from industrial exports increased in February 2020 in comparison to February 2019. Higher prices and increased quantities of bunker and aviation fuel helped earnings from petroleum product exports to grow considerably in February 2020. Despite the decline in earnings from garment exports from the USA, export
earnings from textiles and garments increased, albeit marginally, due to increased exports of textiles and other made up textile articles. Export earnings from other major sub categories such as machinery and mechanical appliances, rubber products, food, beverages and tobacco also recorded increases during the month. However, export earnings from gems, diamonds and jewellery, wood and paper products, leather, travel goods and footwear, base metals and articles, chemical products and transport equipment declined compared to February 2019.
Earnings from agricultural exports declined in February 2020, on a year on year basis. Lower volumes exported led earnings from spices and coconut to decline in February 2020, while lower average export prices resulted in earnings from tea exports to decline. Amidst lower demand from the USA and the EU, earnings from seafood exports also declined in February 2020. In contrast, earnings from export of minor agricultural products and natural rubber increased notably during the month.
Earnings from mineral exports recorded a decline in February 2020, year on year, led by lower earnings from earths and stone exports.
The export volume index in February 2020 improved by 5.2 per cent, while the export unit value index declined by 4.2 per cent, indicating that the increase in exports was driven entirely by higher volumes when compared to February 2019.
Expenditure on merchandise imports increased notably, on a year on year basis, in February 2020 for the third consecutive month, though recorded a decline on month on month basis. Accordingly, expenditure on imports increased by 9.1 per cent to US dollars 1,562 million in February 2020 driven by higher consumer and intermediate
goods imports partly due to the lower base recorded in February 2019. However, expenditure on non fuel imports declined, indicating that the increase in import expenditure was driven by fuel imports.
Expenditure on consumer goods imports increased in February 2020, on a year on year basis. Under food and beverages, dairy products (mainly milk powder), vegetables (mainly big onions and potatoes), sugar, spices (mainly chillies) and beverages (mainly alcoholic beverages) imports increased. Under non food consumer goods category, expenditure on the importation of personal motor vehicles and most of the items in other subcategories increased on a year on year basis, in February 2020 due to the base effect.
Expenditure on imports of intermediate goods also increased in February 2020, from a year earlier. Higher volumes of crude oil, refined petroleum and coal imports led expenditure on fuel to increase during the month, although average import prices remained low compared to February 2019. Expenditure on food preparations (mainly palm oil), rubber and articles thereof, fertiliser (mainly urea), chemical products imports also increased in February 2020. However, textiles and textile articles imports declined significantly, led by lower imports from China due to supply chain disruptions amidst the COVID-19 pandemic.
Meanwhile, expenditure on investment goods imports declined in February 2020 compared to February 2019. Expenditure on machinery and equipment imports declined, although machinery and equipment parts imports increased notably. Expenditure on transport equipment and building materials also declined.
The import volume index increased by 10.0 per cent, while the unit value index declined by 0.8 per cent in February 2020, indicating that the increase in imports was driven entirely by higher volumes when compared to February 2019.