Exports down for second month in Nov. as global economic slowdown bites

• Exports down 18% to under a billion dollars, with apparel exports down 10% 
• Imports down 18% to US $ 1,445mn
• Trade deficit down to US $ 445mn but has been expanding from July 
• China’s reopening, uptick in remittances and recovery in tourism could cushion near-term export woes 
• Sri Lanka economic recovery hinges largely on IMF bailout as imports undermined by persistent forex shortages 

Sri Lanka’s earnings from exports declined for the second consecutive month in November while the trade deficit widened from the previous month, as the global economy slows down amid decades-high inflation and rise in interest rates to tackle the surging prices. 

Sri Lanka’s merchandise exports fell by 17.9 percent year-on-year (YoY) in November to US $ 994 million while the imports declined by 18.1 percent YoY to US $ 1,445 million, resulting in a trade deficit of US $ 450 million, down from US $ 553 million a year ago. However, the November deficit was an expansion from the US $ 285 million in October, as the trade deficit widened month-on-month since recording a surplus in June last year.

The government has relaxed much of the restrictions imposed on imports in several rounds since it banned over a thousand items in August amid a marginal improvement in the foreign exchange conditions, with the gradual improvement seen in exports, remittances and earnings from tourism. Constant lobbying by business chambers also contributed to this relaxation.
However, fresh concerns appear to be stemming from the decline in the earnings from exports, as the country was just coming out from its worst foreign exchange shortage, which caused days-long queues for fuel and certain other commodities. 

 A slowdown in the global economy led by the advanced economies are already taking some toll on Sri Lanka’s exports, predominantly on textile and garments, the country’s largest industrial export. 
For instance, exports of garments declined by 8.3 percent YoY in November while the textiles fell by 21.3 percent YoY, bringing the total decline in textiles, garments and related articles to 9.7 percent to US $ 449.8 million from a year ago. 

In the 11 months, Sri Lanka exported textiles and garments worth US $ 5,470.5 million, up 11.6 YoY.
The export of rubber products declined by 31.5 percent YoY to US $ 67.7 million in November, mainly due to the lower exports of tyres and household gloves.

The above two and many other categories of exports, which fared poorly, weighed down on total industrial exports, causing it to log a 15.4 percent YoY decline to US $ 791.1 million in November. 
Meanwhile, the agricultural exports fell by 25.9 percent to US $ 199.3 million in November, as all agricultural subcategories, including tea, rubber, coconut and spices declined, with tea, the largest agricultural export commodity, falling by 10.2 percent YoY to US $ 105.7 million.  With the November data, earnings from tea exports in the first 11 months slipped 5.1 percent YoY to US $ 1,151.5 million. If the advanced economies go into a widely expected recession by the mid part of this year, the demand for commodities could further subdue. 

However, China’s reopening could add some balance to the global economy while the continuous growth in remittance flows and the acceleration expected in tourism could offset a possible slowdown in the merchandise export earnings in the period ahead. 

However, the bailout money from the International Monetary Fund still remains a wild card for the Sri Lankan economy, as it will decide how soon Sri Lanka can move past its foreign currency troubles, which beset the economy stoking galloping inflation.  

Meanwhile, the cumulative data for the 11 months of 2022 showed Sri Lanka had recorded a trade deficit of US $ 4,839 million, sharply down from US $ 7,054 million in the same period last year. During the period, Sri Lanka received US $ 12,206 million form merchandise exports, up 6.0 percent YoY while the imports fell 8.3 percent YoY to US $ 16,865 million.