External Sector Performance – January 2023
The deficit in the merchandise trade account narrowed to US dollars 410 million in January 2023, from US dollars 857 million recorded in January 2022 due to a larger decline in imports, compared to the decline in exports. However, the merchandise trade deficit in January 2023 widened, compared to the deficit of US dollars 358 million recorded in December 2022.
Overall exports: Earnings from merchandise exports declined by 11.3 per cent in January 2023, over January 2022, to US dollars 978 million, continuing the moderation observed since September 2022, though at a slower pace than expected. This decline was observed across all main categories, and the compression of industrial exports was noticeable.
Industrial exports: Earnings from the exports of industrial goods declined in January 2023, compared to January 2022, with the greatest share for the overall decrease being contributed by garments resulted from lower demand in most of the major markets (the USA, the EU and the UK). Meanwhile, earnings from the exports of petroleum products declined due to the decline in volumes of bunker and aviation fuel exports despite higher bunker prices. Further, the declining trend of exports of rubber products (mainly, household rubber gloves) continued, although earnings from gems, diamonds, and jewellery; and machinery and mechanical appliances (mainly, electronic equipment) increased.
Agricultural exports: Earnings from the export of agricultural goods declined in January 2023, compared to a year ago, driven by lower export volumes of fibres and desiccated coconut, categorised under coconut related products. However, earnings from tea exports improved with the higher average export prices of tea amidst low volumes. Volumes of almost all agricultural exports remained at subdued levels in general with the lagged impact of unavailability of adequate fertiliser during 2021/2022.
Mineral exports: Earnings from mineral exports declined in January 2023, compared to January 2022, mainly due to the decline in exports of quartz and natural graphite powder.
Overall imports: Expenditure on merchandise imports remained at subdued levels in January 2023. Accordingly, expenditure on imports declined by 29.2 per cent (y-o-y) to US dollars 1,388 million in January 2023, compared to US dollars 1,959 million recorded in January 2022 and US dollars 1,426 million in December 2022. The decline in expenditure in all sectors contributed to this decline although the decline in intermediate goods contributed the most.
Consumer goods: Expenditure on the importation of consumer goods declined in January 2023, compared to January 2022, due to the decline in both food and non-food consumer goods. Decline in import expenditure on non-food consumer goods was mainly driven by the reduction in the import of medical and pharmaceuticals (due to the base effect of higher expenditure on COVID vaccines in January 2022). Expenditure on food and beverages also declined due to lower cereals and milling industry products (mainly, rice), compared to that of January 2022. (CBSL)