Trade deficit widened in December 2019 | Sunday Observer

Trade deficit widened in December 2019

The deficit in the trade account widened in December 2019 to US $ 784 million, from US $ 701 million in December 2018, led by a decline in exports and a growth in imports on a year-on-year basis.

However, on a cumulative basis, the trade deficit contracted by US $ 2,346 million to US $ 7,997 million during 2019 from US $ 10,343 million in 2018.

The terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 2.9 per cent (year-on-year) in December 2019, as export prices declined at a faster pace than the decline in import prices.

Cumulatively, the terms of trade deteriorated by 1.5 per cent during 2019 in comparison to 2018. In comparison to December 2018, earnings from merchandise exports declined by 3.2 per cent to US $ 1,000 million in December 2019, with the decline in agricultural exports and industrial exports.

Earnings from agricultural exports declined in December 2019 due to lower exports of most subcategories. Earnings from spices declined due to lower export prices of all sub sectors, while export volumes, except cloves, also declined. Earnings from seafood exports also declined with lower demand from the US market.

Earnings from industrial exports declined in December 2019 in comparison to December 2018, mainly driven by lower textiles and garment exports due to dampened demand from the EU and the USA.

Earnings from machinery and mechanical appliances declined due to lower exports in most subcategories except insulated wires, cables and conductors.

Earnings from rubber products also declined as a result of lower tyre exports, although export of surgical and other gloves increased. Conversely, export earnings from petroleum products increased mainly due to the increase in earnings from petroleum gases despite a decline in earnings from bunker fuel. Earnings from gem, diamonds and jewellery exports increased.

Earnings from mineral exports recorded a considerable growth in December 2019.The export volume index in December 2019 improved by 1.8 per cent (year-on-year), while the export unit value index declined by 4.9 per cent, indicating that the decline in exports was driven entirely by lower prices when compared to December 2018.

In December 2019, merchandise imports increased for the first time since October 2018, by 2.9 per cent (year-on-year) to US $ 1,784 million, driven by higher investment and consumer goods imports.

Expenditure on consumer goods imports increased in December 2019 with increases in food and beverages and non-food consumer goods imports. Accordingly, vegetables (mainly big onions), spices (mainly chillies) and beverages (mainly alcoholic beverages) imports, categorised under food and beverages, increased. Most categories in non-food consumer goods imports increased during the month. Expenditure on personal motor vehicle imports recorded a growth on a year-on-year basis for the first time since November 2018, mainly reflecting the impact of the resumption of personal motor vehicle imports under concessionary permits.

Expenditure on investment goods imports increased in December 2019. However, expenditure on building materials decreased.

Expenditure on imports of intermediate goods declined in December 2019. Expenditure on fertiliser and wheat and maize also decreased.

However, import expenditure on fuel increased mainly due to higher expenditure on refined petroleum on account of higher average import price and volume imported.

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