According to the latest external trade data released by the Central Bank, country’s trade deficit had contracted in October 2019 (year-on-year), with the decline in expenditure on imports and a marginal decline in earnings from exports.

The deficit in the trade account contracted in October 2019 to US dollars 838 million, from US dollars 903 million in October 2018.

On a cumulative basis, the trade deficit contracted by US dollars 2,405 million to US dollars 6,451 million during the first ten months of 2019, in comparison to US dollars 8,857 million in the corresponding period of 2018.

Meanwhile, the terms of trade, which represent the relative price of imports in terms of exports, deteriorated by 5.7 per cent (year-on-year) in October, as export prices declined at a faster pace than the decline in import prices. In cumulative terms, the terms of trade deteriorated by 0.8 per cent during the first ten months of 2019 in comparison to the corresponding period of 2018.

Exports

Earnings from merchandise exports declined marginally by 0.2 per cent (year-onyear) to US dollars 977 million in October 2019, as a result of lower agricultural exports.

Decline in earnings from agricultural exports in October 2019 was driven by lower earnings from all sub-categories except minor agricultural products. Accordingly, earnings from tea exports declined due to lower average export prices in line with the fall in international market prices despite an increase in export volumes.

In addition, earnings from spices declined, mainly due to lower export prices of cinnamon and lower export volumes of cloves and pepper with the decline in supply. Earnings from seafood exports also declined significantly with lower demand from the US market.

Earnings from textiles and garments increased in October 2019 following the slight decline recorded in September 2019, on a year-on-year basis, supported by higher demand for garment exports from all major markets.

However, earnings from petroleum product exports continued the declining trend observed in the recent past, mainly due to lower bunkering prices in line with lower crude oil prices in the international market.

Earnings from mineral exports, which only account for 0.4 per cent of total exports, increased in October 2019, year-on-year, led by ores, slag and ash exports.

The export volume index in October 2019 improved by 13.8 per cent (year-on-year), while the export unit value index declined by 12.3 per cent, indicating that the decline in exports was driven entirely by lower prices when compared to October 2018.

Imports

Contraction of merchandise imports continued for the 12th consecutive month with a 3.5 per cent decline (year-on-year) in October 2019 to US dollars 1,816 million, driven by lower consumer and investment goods imports.

Although food and beverages imports increased in October 2019, expenditure on consumer goods imports declined as a result of the decline in non-food consumer goods imports, driven by lower personal vehicle imports. However, motor vehicle imports remained at a relatively high level, on average, since July 2019 compared to values recorded during the first half of 2019, mainly reflecting the impact of the resumption of personal motor vehicle imports under concessionary permits. Meanwhile, expenditure on food and beverages imports increased, mainly driven by higher imports of onions to supplement lower domestic supply.

Expenditure on imports of intermediate goods increased in October 2019, mainly due to expenditure on fuel, owing to higher volumes of imports of crude oil and coal, despite lower international prices. In addition, expenditure on base metals imports increased in October 2019, driven by iron and steel imports. However, import expenditure on wheat and maize declined mainly due to volume effect while textiles and textile articles declined marginally, led by lower yarn and fabric imports.

Meanwhile, expenditure on investment goods imports declined in October 2019 with lower outlays in all sub categories amidst subpar growth in industry activities, including the spillover effects of the Easter Sunday attacks. Accordingly, expenditure on machinery and equipment declined, mainly related to textile industry and machinery parts, while expenditure on transport equipment declined with lower imports of commercial vehicles such as tractors, ambulances and auto trishaws. Expenditure on building materials declined due to lower imports of iron bars and rods although articles of iron and steel related to bridges and bridge sections continued to increase in October 2019.

The import volume index increased by 3.8 per cent while the unit value index narrowed by 7 per cent in October 2019, indicating that the decline in imports was driven entirely by lower prices when compared to October 2018.