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From an economic point of view 2021 can be considered as the year in which the world takes its first steps towards normalization following the global pandemic. Sri Lanka kick started January 2021 with the narrowing of the trade deficit from $ 730 million a year earlier to $ 667 million, a total deficit reduction of $ 63 million according to the latest date released by the Central Bank. This deficit was observed largely due to new policies adopted by the government in terms of import and export
Trade deficit recorded in Dec 2020 valued at $ 562 million bringing the overall trade deficit of 2020 to an estimated $ 6 billion.
In comparison of January 2021 to January 2020 we observe an improvement of 7% in the ratio of price of exports: price of imports resulting from lower import prices & higher export prices. The export volume index showed a decline of 10.2% and the Unit value index showed a 2.5% increase in Year on Year basis in Jan 2021. This is the result of the decline in export earnings due to the lowering of the volume of exports.
Merchandise export earnings showed a drop of 8% in comparison to January 2021. The export earnings recorded in Jan 2021 were totaled at $ 924 million. This is a lower figure when compared to $1005 million in Jan 2020 and $ 964 million earned in December 2020.
Due to the restrictions placed on non- essential goods merchandise imports saw a decline of 8.3% January of this year valuing at $ 1592 million. This decrease is a continuation of the year on year decline observed since March 2020. The decline in export expenditure presented an import value index and unit value index decline of 4.2% & 4.3% respectively in Year on Year basis in January 2021.
Data released by the Central Bank show a decrease in the earnings received by the export of industrial goods by 11.4%. This decrease in earnings can be attributed to the decrease in garment exports by 10.8% and the decrease of petroleum products that include bunkering and aviation fuel by 58.5%. Jewelry
products shared a similar decline in export earnings.
Sizable increase in the exports were noted in rubber products primarily surgical gloves and other varieties such as tires, machinery and mechanical appliances related to electronics & food & beverages as well as tobacco.
Agricultural exports primarily fruits, vegetables & spices such as cinnamon saw an increase of earnings by 5.9% In January 2021 in Year on Year basis. Due to the price increase and the decrease in the volume exported a marginal increase in the tea exports was observed. Export of coconut fibers, natural rubber and unmanufactured tobacco shared a similar marginal increase.
Mineral exports earnings showed an increase when compared to Jan 2020.
Spending on consumer goods in comparison Jan 2020 showed a decline of 7% resulting from a decline in non- consumer goods import. However significant increase in expenditure was observed on products such as mobile phones and home appliances in the category of non- food consumer goods.
The import of Food & Beverages increase by 24.6%, despite the increase in the imports the cost for most food items remained lower than the value in Jan 2020.
Intermediate good expenditure witnessed a decline of 2.1% in January 2021. This decrease was attributed to 21.4% decline on the expenditure on textiles and similar materials. The expenses on fuel saw an increase for the first time since February 2020. Although the unit price per barrel in imports were decreased from $ 70.44 to $ 57.65 the increase in the volume of imports has driven the expenses higher. Although some intermediate good showed an increase in import costs most of the import costs relating to intermediate goods showed a decline.
