CSR

Impact of the economic crisis on the Sri Lankan export market

When the global pandemic brought restrictions on international travel, the Sri Lankan economy suffered heavy losses in many income-earning sectors like international trade and tourism. Short-term relief systems like import restrictions and price controls backfired as they created supply distortions in the economy. Along with the drop in global demand for goods and services and the rise in international inflation rates, the export market in Sri Lanka suffered amidst the worst economic crisis. This created disruption in production, supply chains as well as international trade. The government, central bank, shipping companies in Sri Lanka, etc took strategic decisions to support the economic activity amidst these disruptions, and the year 2022 witnessed gradual improvement in the export market in relation to its previous year.

The shipping industry continues to contribute significantly to Sri Lanka’s export income by facilitating the transportation of essential goods to and from the country. It plays an important role in ensuring that all of the country’s exports are shipped overseas and delivered in a timely manner. It also functions as an indirect exporter of services by providing its services to shipping lines and bringing foreign exchange into the country. This has supported the Sri Lankan economy immensely in its gradual recovery.

Export market performance before September 2022

Between the period of January and September 2022, merchandise exports went through a major increase of 11.83% compared to the corresponding year, 2021. Apparel and textiles, coconut-based commodities, electrical and electronic components, gems and jewellery, food and beverages, and other export crops witnessed an improvement in relation to the previous year. Export earnings from Seafood and ornamental fish recorded an increase as well. In comparison to the previous year, earnings from all the major categories of coconut-based products increased during this time due to the improved performance in the export of Liquid Coconut Milk, Cocopeat, Brooms & Brushes, Mattress Fiber, Activated Carbon, Coconut Oil, and Desiccated Coconut.

However, export earnings from commodities such as Rubber & Rubber finished products decreased by 2.18%, Tea decreased by 5.27%, and Spices and Essential Oils declined by 14.21% during the period of January to September 2022 compared with the corresponding period of 2021.

The performance during September 2022

According to the Central Bank report, Sri Lanka’s trade deficit contracted in September 2022 as import expenditure declined year on year for the seventh consecutive month due to export earnings remaining strong. The merchandise trade deficit declined in September 2022 as merchandise exports grew by 4.3% compared to the previous year.

Earnings from the merchandise exports increased by 5.75 % y-o-y to US$ 1,093.98 Mn in September 2022. This was due to increased exports in the major export industries such as Apparel & Textiles, Tea, Electrical & Electronic Components, Spices & Concentrates Diamonds, Gems & Jewellery, Food & Beverages, Ornamental fish, and Other export crops. However, in comparison to the previous month, August 2022, merchandise exports in September 2022 recorded a decline.

Export earnings from tea increased by 11.63% y-o-y to US$ 117.82 Mn primarily due to increased export of bulk tea and tea packets. Exports of Apparel & Textiles and Electrical and Electronics Components recorded an increase as well. In addition, export earnings from Spices and Essential Oils increased by 9.29% this September compared to the month of September 2021, due to the better performance in the export of Cinnamon and Pepper.

However, Export earnings from Rubber and Rubber Finished products have decreased by 16.91% due to poor performance in exports of Pneumatic & Retreated Rubber Tyres & Tubes and export of Industrial & surgical gloves. Furthermore, export earnings from Seafood witnessed a decrease of 25% in comparison to the previous year, September 2021.

Overall, as exports in Sri Lanka continue to improve month after month, the future of exports appears to be slowly but steadily improving, and the country’s export prospects look very optimistic.