According to the latest external trade data released by the Central Bank, country’s trade deficit had widened in December 2019, led by a decline in exports and a growth in imports on a year-on-year basis.

The deficit in the trade account widened in December 2019 to US dollars 784 million, from US dollars 701 million in December 2018,

On a cumulative basis, the trade deficit contracted by US dollars 2,346 million to US dollars 7,997 million during 2019 from US dollars 10,343 million in 2018.

Meanwhile, the terms of trade,the ratio of the price of exports to the price of imports, deteriorated by 2.9 per cent (year-on-year) in December 2019, as export prices declined at a faster pace than the decline in import prices. Cumulatively, the terms of trade deteriorated by 1.5 per cent during 2019 in comparison to 2018.

Exports

In comparison to December 2018, earnings from merchandise exports declined by 3.2 per cent to US dollars 1,000 million in December 2019, with the decline in agricultural exports as well as industrial exports.

Earnings from agricultural exports declined in December 2019 due to lower exports of most subcategories. On a year-on-year basis, earnings from tea exports declined due to the combined effect of lower export volumes and average export prices. Earnings from spices declined due to lower export prices of all sub sectors while export volumes, except cloves, also declined. Earnings from seafood exports also declined with lower demand from the US market. In contrast, earnings from exports of minor agricultural products, mainly arecanuts and fruits, increased during the month.

Earnings from industrial exports declined in December 2019 in comparison to December 2018, mainly driven by lower textiles and garment exports due to dampened demand from the EU and the USA, despite an increase recorded in exports to non-traditional markets such as Canada, Australia and China. Earnings from machinery and mechanical appliances declined due to lower exports in most subcategories except insulated wires, cables and conductors. Earnings from rubber products also declined as a result of lower tyre exports, although export of surgical and other gloves increased. Conversely, export earnings from petroleum products increased mainly due to the increase in earnings from petroleum gases despite a decline in earnings from bunker fuel. In addition, earnings from gem, diamonds and jewellery exports increased.

Earnings from mineral exports recorded a considerable growth in December 2019, year-on-year, led by ores, slag and ash exports.

The export volume index in December 2019 improved by 1.8 per cent (year-on-year), while the export unit value index declined by 4.9 per cent, indicating that the decline in exports was driven entirely by lower prices when compared to December 2018.

Imports

In December 2019, merchandise imports increased for the first time since October 2018, by 2.9 per cent (year-on-year) to US dollars 1,784 million, driven by higher investment and consumer goods imports.

Expenditure on consumer goods imports increased in December 2019 with increases in both food and beverages and non-food consumer goods imports. Accordingly, vegetables (mainly big onions), spices (mainly chillies) and beverages (mainly alcoholic beverages) imports, categorised under food and beverages, increased. Meanwhile, most categories in non-food consumer goods imports increased during the month. Expenditure on personal motor vehicle imports recorded a growth on a year-on-year basis for the first time since November 2018, mainly reflecting the impact of the resumption of personal motor vehicle imports under concessionary permits.

Expenditure on investment goods imports increased in December 2019 due to higher imports of machinery and equipment and transport equipment. The increase in expenditure on machinery and equipment was driven by medical and laboratory equipment, while expenditure on transport equipment increased with higher expenditure incurred on railway equipment and commercial vehicles. However, expenditure on building material decreased due to low imports of most subcategories except articles of iron and steel, mineral products, and insulated wires and cables.

Expenditure on imports of intermediate goods declined in December 2019, mainly as a result of lower expenditure on base metals such as iron and steel. Expenditure on fertiliser and wheat and maize also decreased owing to lower import volumes as well as prices. However, import expenditure on fuel increased during the month mainly due to higher expenditure on refined petroleum on account of higher average import price and volume imported despite lower import expenditure on crude oil and coal due to lower import volumes. Expenditure on textiles and textile articles also increased, led by higher fabric and fibre imports.

The import volume index increased by 5.0 per cent while the unit value index narrowed by 2.1 per cent in December 2019, indicating that the decline in imports was driven entirely by lower prices when compared to December 2018.