Trade deficit narrows in October

The deficit in the trade account of the country narrowed as a result of the decline in import expenditure outpacing the decline in export earnings in October 2020, the Central Bank said.  

A deficit of USD 514 million was recorded in the trade account in October 2020, which was significantly lower than the deficit of USD 838 million recorded in October 2019.

The improvement in the trade balance was due to the decline in imports (USD 453 million), which was greater than the decline in exports (USD 129 million) during the period under review.

The cumulative deficit in the trade account from January to October 2020 narrowed to USD 4,852 million from the deficit of USD 6,451 million recorded in the same period in 2019. The major contributory factors for this outcome are depicted.

Earnings from merchandise exports suffered in October 2020 due to the impact of the resurgence of COVID-19 cases, although exports of agricultural products continued to grow.

Earnings from merchandise exports in October 2020 were lower compared to October 2019 as well as September 2020, due to the sudden outbreak of the second wave of the Covid-19 pandemic that resulted in disruptions to planned production and support services in the country, especially in the apparel industry.

Further, adverse global market conditions for Sri Lanka’s key exports were aggravated by the second wave of the COVID-19 pandemic experienced by many countries, leading to low demand for exports of Sri Lanka.

As a result, earnings from exports in October 2020 amounted to USD 848 million, which was 13.2% lower than October 2019 and 15.2% lower than September 2020.

Merchandise imports declined considerably in October 2020 supported by lower crude oil prices and restrictions imposed by the Government on the importation of non-essential goods.

Expenditure on merchandise imports declined by 24.9% to USD 1,363 million in October 2020 compared to October 2019, thus continuing the year-on-year declining trend observed since March 2020.