External Sector Performance - November 2021

Economic Research Department

25 January 2022

External Sector Performance - November 2021

Overview

Earnings from exports in November 2021 recorded the highest monthly export value in the history, while marking the sixth consecutive month of above US dollars 1.0 billion of exports. Meanwhile, import expenditure also increased at a higher rate in November 2021. Reflecting the favourable impact of increased exports, the merchandise trade deficit narrowed to US dollars 553 million in November 2021 compared to US dollars 600 million in November 2020. Tourist arrivals continued to gather momentum with a notable increase over the previous month, showing strong signs of revival. A further moderation of workers' remittances was observed in November 2021. The weighted average spot exchange rate in the interbank market continued to hover around Rs. 202 per US dollar during the month.

Table 1: Summary of External Sector Performance (a)

				November			November			Change			Jan-Nov			Jan-Nov			Change
	Category			2020			2021					2020			2021
							(%)							(%)
				US$ mn			US$ mn					US$ mn			US$ mn
Merchandise exports	784	1,211		54.6		9,083		11,345		24.9
	Merchandise imports			1,384			1,765			27.5			14,529			18,396			26.6
Trade balance	-600	-553					-5,446		-7,051
	Earnings from tourism			-			60 (c)			-			682 (b)			141 (c)			-79.3
Workers' remittances	612	271		-55.6		6,291		5,166		-17.9
	Inflows to the CSE (net) (d)			-15			-20						-209			- 242
Inflows to the Government (gross)	90	84				1,904		2,065
	Treasury bills and bonds			1			-						103			16
	Long term loans		89	84					1,801			2,049
	Foreign direct investment (gross) (e)												543			567
Overall balance										-2,203		-3,674

Sources: Sri Lanka Customs (SLC), Sri Lanka Tourism Development Authority (SLTDA), Colombo Stock Exchange (CSE), Board of Investment of Sri Lanka (BOI), Central Bank of Sri Lanka (CBSL)

1. Provisional
2. Revised, based on the survey results of SLTDA on average stay period and average spending per day estimates for 2020
3. This provisional estimate may be revised once SLTDA releases its survey results for 2021
4. Includes primary and secondary transactions
5. Data for the first nine months of each year including foreign loans to Direct Investment Enterprises as recorded by the BOI and net direct investment to the CSE

The CBSL publishes a 'Monthly Trade Bulletin' with further information on merchandise trade performance, which can be viewed on the Central Bank of Sri Lanka website under Statistics > Economic Indicators > Monthly Trade Bulletin. https://www.cbsl.gov.lk/en/monthly-trade-bulletin

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Merchandise Trade Balance and Terms of Trade

Trade Balance: The deficit in the trade account narrowed to US dollars 553 million in November 2021, compared to the deficit of US dollars 600 million recorded in November 2020. In the meantime, the cumulative deficit in the trade account during January to November 2021 widened to US dollars 7,051 million from US dollars 5,446 million in the corresponding period of 2020. The major contributory factors to widen the trade deficit are shown in Figure 1.

Terms of Trade: Terms of trade, i.e., the ratio of the price of exports to the price of imports deteriorated by 8.1 per cent in November 2021, compared to November 2020, as the increase in import prices surpassed the increase in export prices.

Figure 1: Major Contributory Factors for the Y-o-Y Increase in the Trade Deficit

during January-November 2021 (Values in US$ mn)

Decline in exports	Increase in imports
Plastics and articles thereof -97.9
Fuel	992.9
Textiles and textile articles	668.8
Machinery and equipment	536.9
Base metals	252.3
Chemical products	225.1
Medical and pharmaceuticals	213.5
Plastics and articles thereof	200.6

Sources: SLC, CBSL

Figure 2: Monthly Trade Deficit (2020 - 2021)

1,000									2020		2021
	900
	800
	700
mn	600
US$	500
	400
	300
	200
	100
	0
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec

Sources: SLC, CBSL

Figure 3: Terms of Trade (2020 - 2021)

	130
(2010=100)	120
110
	100
Points	90
80
Index	70
	60

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Export Unit Value Index

Import Unit Value Index

Terms of Trade

Source: CBSL

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Performance of Merchandise Exports1

Overall exports: Earnings from exports in November 2021 grew by 54.6 per cent over November 2020 to reach US dollars 1,211 million, and surpassed the previous highest value recorded in October 2021 (US dollars 1,200 million). Increases in earnings were observed across all main categories, while industrial exports mainly contributed to the expansion. Cumulative export earnings, which increased by 24.9 per cent during January-November2021 over the same period of the last year, amounted to US dollars 11,345 million.

Industrial exports: Earnings from the export of industrial goods increased by 56.6 per cent in November 2021, compared to November 2020. This increase was due to a broad-based increase in earnings from most of the industrial products led by garments, petroleum products, rubber products and animal fodder. However, a decline in earnings was reported in the category of plastics and articles (mainly plastic clothing articles). Export of garments to all major markets improved. Earnings from the export of petroleum products increased with the increase in prices of bunker and aviation fuel and the increase in volumes of bunker fuel exports. Tyres and gloves led the increase in export earnings generated by rubber products. Earnings from the export of animal fodder increased mainly due to wheat residues.

Agricultural exports: Total earnings from the export of agricultural goods in November 2021 increased by 46.9 per cent, compared to November 2020, mainly due to the increase in export earnings from seafood (mainly fresh and frozen tuna), tea (mainly packed black tea), spices (mainly pepper) and coconut (mainly desiccated coconut, fibres and coconut oil). Earnings from tea exports increased by 22.3 per cent (y-o-y) in November 2021, due to higher export volumes (by 27.9 per cent) although at a slightly lower unit price.

Mineral exports: Earnings from mineral exports increased by 49.0 per cent in November 2021, compared to November 2020, due to higher earnings from earths and stone and precious metals.

Export indices: The export volume index and unit value index increased by 36.0 per cent and 13.7 per cent, respectively, on a year-on-year basis, in November 2021, indicating relatively higher contribution by export volumes to the increased export earnings.

1 The classification of exports, based on the Standard International Trade Classification Revision 4, is presented in Annex I.

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Figure 4: Monthly Export Performance

Figure 5: Monthly Export Volume Index

1,300

1,200

1,100

1,000

mn	900
800
US$
700
	600
	500														2019
	400
														2020
	300
														2021
	200
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec

Sources: SLC, CBSL

Figure 6: Monthly Export Unit Value Index

120

	110
(2010=100)	100
90
80
Points
70
Index
60
										2019
	50										2020
											2021
	40	Feb	Mar	Apr	May				Sep		Nov
	Jan	Jun	Jul	Aug	Oct	Dec

Source: CBSL

200

180

(2010=100)	160
Points	140
120
Index	100
80											2019
	60											2020
											2021
	40
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec

Source: CBSL

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Table 2: Earnings from Merchandise Exports (a)

	November	November	Change	Jan-Nov	Jan-Nov	Change
Category	2020	2021	(%)	2020	2021	(%)
	(US$ mn)	(US$ mn)		(US$ mn)	(US$ mn)
1. Industrial exports	597.4	935.4	56.6	6,916.5	8,788.4	27.1

Food, beverages and tobacco	35.0	52.7	50.6	422.7	529.5	25.3
Animal fodder	6.5	38.6	494.2	95.1	137.1	44.2
Textiles and garments	326.2	498.1	52.7	3,971.3	4,901.9	23.4
o/w Garments	281.4	455.4	61.9	3,526.7	4,466.7	26.7
Textiles	26.1	31.1	19.0	234.0	316.6	35.3
Other made up textile articles	18.8	11.6	-38.2	210.5	118.6	-43.6
Rubber products	66.4	98.9	49.0	711.2	960.2	35.0
Gems, diamonds and jewellery	23.6	27.8	17.6	162.8	256.5	57.6
Machinery and mechanical appliances	31.9	45.6	43.0	298.0	457.7	53.6
Transport equipment	5.9	12.1	105.7	64.6	138.6	114.6
Petroleum products	21.3	59.1	177.7	342.4	455.4	33.0
Chemical products	16.3	19.4	19.2	156.0	201.5	29.1
Wood and paper products	7.1	12.3	74.0	89.6	117.9	31.7
Printing industry products	4.5	5.7	26.5	43.4	47.5	9.4
Leather, travel goods and footwear	2.5	7.5	199.1	49.5	52.0	5.0
Plastics and articles thereof	21.1	8.2	-61.1	170.3	72.4	-57.5
Base metals and articles	8.4	16.6	96.8	98.8	141.3	43.1
Ceramic products	2.6	3.4	29.8	20.8	34.4	65.2
Other industrial exports	18.1	29.4	62.8	220.2	284.5	29.2
2. Agricultural exports	183.1	268.9	46.9	2,132.9	2,497.2	17.1
Tea	96.2	117.6	22.3	1,128.0	1,213.7	7.6
Rubber	3.2	3.3	3.1	25.5	38.9	52.7
Coconut	28.6	40.8	42.7	318.4	393.9	23.7
Spices	33.8	46.6	38.1	300.4	411.1	36.8
Vegetables	2.0	3.6	78.3	34.9	26.3	-24.7
Unmanufactured tobacco	1.3	5.1	304.5	23.0	29.5	28.4
Minor agricultural products	7.6	16.9	123.9	127.3	136.4	7.1
Seafood	10.5	34.9	233.6	175.4	247.4	41.0
3. Mineral exports	2.3	3.5	49.0	20.5	39.5	92.8
4. Unclassified exports	0.9	3.6	315.5	13.1	20.3	55.4
Total exports	783.7	1,211.5	54.6	9,083.0	11,345.4	24.9

(a) Provisional

Sources: SLC, National Gem and Jewellery Authority (NGJA), Ceylon Petroleum Corporation (CPC) and

Other Exporters of Petroleum, CBSL

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