courtesy FibreFashion

INSIGHTS

• CBSL envisages exports to increase by 8.4 per cent this year in aftermath of decline in 2023.
• This projection is indicated in the CBSL’s Annual Economic Review of 2023 released recently.
• Last year exports were down by 9 per cent to $11.9 billion from $13.1 billion in 2022.
• Imports expected to recover to $20 billion from $16.8 billion last year.

The Central Bank of Sri Lanka (CBSL) predicts an 8.4 per cent increase in exports to $12.9 billion in 2024, following a decline in the previous year.

This projection was outlined in the CBSL’s 2023 Annual Economic Review, released recently.

Exports dropped by 9 per cent to $11.9 billion in 2023 from $13.1 billion in 2022, while imports are anticipated to rebound to $20 billion from $16.8 billion in 2023, a decrease from $18.3 billion in 2022.

In the initial two months of 2024, exports totalled $2 billion, up by 3.6 per cent compared to the same period in 2023, while imports surged by 18 per cent to $2.89 billion.

The CBSL commentary suggests sustained external demand for domestic services, particularly in tourism, and a potential resurgence in export demand given ongoing initiatives to strengthen exports amidst improved growth prospects for Sri Lanka’s key trading partners.

Despite a projected moderate growth in export earnings, the merchandise trade deficit is expected to widen in 2024 due to increased import demand, driven by eased import restrictions and enhanced economic activity.

The services account surplus is predicted to expand, propelled by higher tourism earnings and increased competitiveness in service exports.

The CBSL anticipates a strengthening services account surplus, supported by increased activity in transport services and robust growth in the Information Technology and Business Process Outsourcing (IT/BPO) services subsector.

The medium-term current account deficit is forecast to remain sustainable, aided by restored debt sustainability and favourable policies for the tradable sector.

Reflecting on 2023, the CBSL notes a significant decline in the merchandise trade deficit, primarily due to reduced import expenditure relative to export earnings. Industrial exports, particularly garment exports, experienced a notable contraction, while certain sectors, such as tea, spices, and unmanufactured tobacco, saw marginal declines in agricultural exports.

Imports saw a substantial contraction, driven by restrictions on non-essential imports and subdued economic activity even as declines were observed in intermediate and investment goods imports, while consumer goods imports increased, notably medical and pharmaceutical products.