Merchandise exports fall in Jan. as demand in major markets slows

• Trade deficit narrows to US$ 410mn from US$ 857 a year ago
• Exports down 11.3% to US$ 978mn; imports down 29.2 YoY to US$ 1.38bn
• Workers’ remittances and tourism earnings continue to grow
• Official gross foreign reserves improve to US$ 2.1bn amid CB net purchases

Sri Lanka’s merchandise export earnings fell in January 2023, while trade deficit narrowed from a year ago, as imports fell sharply, the external sector data released by the Central Bank showed.
Exports fell 11.3 percent year-on-year (YoY) to US$ 978 million in January “continuing the moderation observed since September 2022, though at a slower pace than expected” the Central Bank said.
The January trade gap narrowed to US$ 410 million from US$ 857 million a year ago. However, the trade balance widened compared to the deficit of US$ 358 million recorded in December 2022.

Sri Lanka ended 2022 with an overall trade balance of US$ 2.8 billion, down from US$ 3.9 billion in 2021.
Both industrial and agricultural exports fell in January. Industrial exports, led by textile and garment exports fell 12.4 percent YoY to US$ 781.3 million. Textile and garment exports fell 17.8 percent YoY to US$ 424.4 million largely due to slowing demand in major markets such as the US, EU and the UK.

Agricultural exports led by tea fell 6.6 percent to US$ 191 million. Tea exports rose 9.1 percent YoY to US$ 99.6 million, but both rubber and coconut exports fell. Seafood exports also fell by 13.1 percent YoY to US$ 20.9 million.
Meanwhile, imports in the month of January 2023 fell 29.2 percent YoY to US$ 1.38 billion as all three import categories reported lower imports.

Consumer goods imports—both food and non-food—fell 39.3 percent YoY to US$ 218.5 million. As of now, Sri Lanka has relaxed most of the restrictions brought in for imports, except for motor vehicles. 
However, the sharp depreciation of the rupee has made most of the imported items unaffordable to many, particularly when the inflation remains elevated. 
Intermediate goods imports also fell 20 percent YoY to US$ 970.5 million in January, though the country’ oil bill, which is the largest component of this category rose 11.8 percent to US$ 481.1 million amid higher crude oil and coal imports.

Fertiliser imports also rose 285.6 percent YoY to US$ 9.6 million in January.
The investment goods imports also fell 45.6 percent YoY to US$ 198.9 million in January with lower machinery & equipment, building material and transport equipment imports.  Meanwhile, earnings from both tourism and workers’ remittances made positive gains in January with tourism earnings reaching an estimated US$ 162 million in comparison to US$ 127 million in the previous month and US$ 152 million in the corresponding month in the previous year.  The workers’ remittances in January rose to US$ 427 million, in comparison to US$ 259 million in the corresponding month in the previous year.

Total departures for foreign employment were recorded at 24,236 during the month of January 2023. Total departures for foreign employment comprised unskilled (7,556), skilled (7,283) and domestic aid (6,120) categories.

Meanwhile, the Central Bank said the country’s external foreign reserves improved to US$ 2.1 billion by the end of January amid net absorptions. 
However, this includes a swap facility from the People’s Bank of China, equivalent to around US$ 1.4 billion, which is subject to conditionalities on usability.