Economy News: Sri Lanka’s trade deficit widened in February 2020 as expenditure on imports increased at a faster pace than the increase in earnings from exports, the Central Bank reported Friday in its External Sector Performance review for the month.
The trade deficit widened to US$ 574 million in February 2020 compared to the deficit of US$ 451 million recorded in February 2019.
Earnings from merchandise exports increased in February 2020 for the first time since June 2019 by 0.7 percent to US$ 988 million compared with US$ 981 million in February 2019 with increase in industrial exports though agricultural and mineral exports declined in comparison to February 2019.
Earnings from industrial exports increased by 2.7 percent in February 2020 in comparison to February 2019 while earnings from agricultural exports declined by 6.1 percent and mineral exports declined by 15.2 percent.
Expenditure on Merchandise imports increased notably, on a year-on-year basis, in February 2020 for the third consecutive month, by 9.1 percent to US$ 1.562 billion from US$ 1.432 billion in February 2019, driven by higher consumer and investment goods imports.
Cumulatively in the first two months of the 2020 YOY export earnings declined by 1.3 percent to US$ 1.993 billion from US$ 2.019 billion while import expenditure increased by 6.8 percent to US$ 3.298 billion from US$ 3.088 billion.
Sri Lanka also experienced the global impact of COVID-19 outbreak and the tourist arrivals in February 2020 declined by 17.7 percent. Earnings from tourism were provisionally estimated to have declined to US$ 391 million in February 2020, in comparison to US$ 475 million in February 2019, with cumulative earnings amounting to US$ 822 million during the first two months of 2020.
Meanwhile, workers’ remittances recorded a growth of 5.4 percent in February 2020, year-on-year, amounting to US$ 527 million. On a cumulative basis, workers’ remittances grew by 6.0 percent to US$ 1.108 billion during the first two months of 2020.
A net outflow of the foreign investment amounting to US$ 118 million was recorded from the rupee denominated government securities market in February 2020, resulting in a cumulative net outflow of US$ 99 million during the first two months of 2020.
Gross official reserves stood at US$ 7.9 billion at end February 2020, equivalent to 4.7 months of imports. Meanwhile, total foreign assets consisting of gross official reserves and foreign assets of the banking sector amounted to US$ 10.9 billion at end February 2020, equivalent to 6.5 months of imports.
The Sri Lankan rupee, which remained broadly stable until mid-March 2020, depreciated sharply with the speculative behavior in the market with the spread of COVID-19 outbreak. However, the exchange rate gradually stabilized and the rupee recorded a depreciation of 3.4 percent against the US dollar by 15 May 2020.