The deficit in the merchandise trade account continued to narrow to US dollars 450 million in November 2022, compared to the deficit of US dollars 553 million recorded in November 2021. However, the merchandise trade deficit has shown a tendency to widen on a month-on-month basis since recording a surplus in June 2022.
The cumulative deficit in the trade account during January November 2022 recorded at US dollars 4,839 million, a decline from US dollars 7,054 million recorded over the same period in 2021. The major contributory factors for the decline in the cumulative trade deficit are shown in Figure 1.
Earnings from merchandise exports declined in November 2022, mainly due to lower global demand, particularly for garment exports, the Central Bank said. Declines in earnings were observed across all main categories, industrial exports mainly contributed to the contraction in earnings.
However, cumulative export earnings during January-November 2022 increased by 6% over the same period in the last year to USD 12,026 million, which was mainly driven by a 9.4% improvement in industrial exports amidst a decline in agricultural (by 25.9% in November 2022) and mineral exports.
Earnings from the export of industrial goods declined in November 2022 by 15.4 %, compared to November 2021. This decline was due to a broad-based decline in earnings from most of the industrial products led mainly by garments and rubber products.
The drop in export earnings from tea was mainly due to lower export volumes (a decline of 25.5%), despite high average export prices which recorded an increase of 20.5% (y-o-y).
Meanwhile expenditure on merchandise imports declined by 18.1% in November 2022 to USD 1,445 million, compared to US dollars 1,765 million in November 2021. Expenditure on the importation of consumer goods declined by 27.2% in November 2022, compared to November 2021, driven by lower expenditure on non-food consumer goods.
This decline in expenditure on non-food consumer goods was broad-based but the drop in imports of telecommunication devices (primarily, mobile telephones); medical and pharmaceuticals (base effect of higher expenditure on C-19 vaccines in 2021); and home appliances (primarily, televisions) was notable.
Expenditure on food and beverages imports declined by 3.6% in November 2022. Earnings from tourism increased over the previous month supported by a growth of tourist arrivals over 40%. Foreign investment in the government securities market recorded a marginal net inflow during November 2022, while the Colombo Stock Exchange (CSE) recorded a marginal net outflow during November 2022.
Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 363 per US dollar during the month.
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Workers’ remittances increase
Workers’ remittances increased to USD 384 million during November 2022, in comparison to USD 355 million in the previous month, recording the highest monthly remittances thus far during 2022.
Meanwhile, total departures for foreign employment were recorded at 25,376 during the month of November 2022. Total departures of foreign employment comprised unskilled (9,337), skilled (7,334) and domestic aid (6,058) categories.
Total departures for foreign employment during January-November 2022 were recorded at 276,527 which exceeded the annual departures in the pre-pandemic period.
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