Freight Forwarding : October Sales Tips : Sri lanka Import & Export market

In October 2024, Sri Lanka's import-export market showed mixed trends. The country's merchandise exports performed well, particularly in industrial sectors such as textiles and garments, which contributed significantly to export revenue. August 2024 saw a 9.5% year-on-year increase in export earnings, reaching USD 1,224 million, driven by textiles, rubber, and petroleum products. However, imports also surged, increasing by 16% year-on-year, primarily due to higher intermediate goods and consumer goods imports, such as refined petroleum and wheat​.

In October 2024, Sri Lanka’s import-export market faced a range of challenges and opportunities. The country's external sector is showing positive trends, particularly in exports, despite global economic uncertainties and domestic challenges.

Export Growth:

Sri Lanka's exports have experienced steady growth, with a 9.5% year-on-year increase in August 2024. This growth was driven by key sectors such as textiles, which alone generated USD 512 million, the highest since 2022, along with increases in exports of petroleum products, rubber, and agricultural goods like tea and coconut products​.This trend reflects the resilience of the country's industrial exports, which continue to perform well despite global economic headwinds.

Import Surge:

At the same time, imports have risen sharply, increasing by 16% year-on-year in August 2024. The surge is primarily attributed to higher imports of intermediate and consumer goods, such as refined petroleum, textiles, and chemical products. This has contributed to an expanding trade deficit, which widened to USD 430 million in August​.

Trade Deficit Concerns:

Despite strong export performance, Sri Lanka’s trade deficit has widened due to the substantial increase in import expenditures. This widening gap has put pressure on the economy, although the deficit narrowed slightly compared to July 2024​.

Participation in Global Trade Events:

To further bolster export opportunities, Sri Lanka has been actively participating in international trade events. For instance, the country’s participation in the Canton Fair 2024 is aimed at strengthening trade ties with China, a major trading partner. This provides a valuable platform for Sri Lankan exporters to showcase their products and explore business opportunities in emerging markets​.

Sectoral Highlights:

The apparel and agriculture sectors continue to be vital contributors to export earnings. Additionally, Sri Lanka is leveraging its strategic location for port activities, particularly for transshipment services, which are crucial for its logistics and supply chain sectors​.

• Performance of Merchandise Import & Exports in 2023 October.

Overall Exports Earnings from merchandise exports declined by 11.8 per cent to US d While the decline in earnings was observed across all main categories, industrial exports mainly contributed to the overall contraction. Cumulative export earnings also declined by 10.3 percent during January to October 2023 to US dollars 9,910 million, over the same period of the last year dollars 928 million in October 2023.

  Figure 1: Composition of Exports

Industrial Exports: Earnings from the exports of industrial goods declined in October 2023, with a significant share of the decline being contributed by garments. Accordingly, exports of garments to most of the major markets (the USA, the EU, and the UK) recorded a decline. Further, a sizeable decline was recorded in the exports of transport equipment (due to the base effect of exporting a cruise ship in October 2022), machinery and mechanical appliances (mainly, electronic equipment), and rubber. products (mainly, household rubber gloves), among others. Meanwhile, earnings from petroleum products increased due to the increase in volumes of bunkering and aviation exports, despite lower prices.

Agricultural Exports: Earnings from the exports of agricultural goods also declined in October 2023, compared to a year ago, driven by lower export earnings from tea (due to both lower export volumes and export prices), coconut related products (primarily, fibers) and spices (primarily, cinnamon, and nutmeg and mace). Meanwhile, the export earnings from minor agricultural products (mainly, areca nuts), seafood and vegetables recorded marginal increases. 

Overall Imports: Expenditure on merchandise imports increased to US dollars 1,610 million in October 2023, compared to US dollars 1,336 million in October 2022.

Figure 2: Composition of Imports

Consumer Goods:

Expenditure on the importation of consumer goods increased in October 2023, compared to a year ago, due to broad-base increases in both food and non-food consumer goods. The increase in import expenditure on food and beverages was led by sugar and dairy products (mainly, milk powder). In contrast, expenditure on the cereals and milling industry products (primarily, rice) declined, compared to that of October 2022. Expenditure on non-food consumer goods imports increased, mainly owing to the importation of medical and pharmaceuticals (primarily, medicaments), while expenditure on home appliances (primarily, televisions and fans), household and furniture items and telecommunication devices also increased supported by the relaxation of import restrictions since June 2023.

Intermediate Goods:

Expenditure on the importation of intermediate goods increased in October 2023, compared to a year ago, mainly driven by higher imports of fuel. Expenditure on fuel imports increased in October 2023 led by higher import volumes amidst the decline in the import prices of refined petroleum products and coal, compared to October 2022. Further, expenditure on base metals, diamonds and precious stones and metals, wheat and mineral products increased to some extent. However, the importation of textiles and textile articles (primarily, yarn) declined in October 2023, compared to October 2022, although recorded a significant increase, compared to September 2023. Meanwhile, expenditure on fertilizer (primarily, urea) and unmanufactured tobacco also declined during the period concerned.

 Investment Goods:

Import expenditure on investment goods increased in October 2023, compared to October 2022, led by the increase in imports of machinery and equipment (primarily, turbines and office machines). Import expenditure on building material also increased, mainly owing to high imports of iron and steel (primarily, iron bars and rods), and articles of iron and steel (primarily, bridges and bridge sections). This increase was partly supported by the relaxation of import restrictions since June 2023. Meanwhile, the expenditure on importation of transport equipment increased due to high imports of agricultural tractors, and railway track construction material.

Overall, Sri Lanka's import-export market in October 2024 reflects both growth potential and significant challenges. The rise in exports and participation in international trade fairs offer promising avenues for economic growth, but the expanding trade deficit and reliance on imports, especially in the face of global economic uncertainties, remain key concerns.