The deficit in Sri Lanka’s trade account widened in February 2020 to 574 million dollars, from 451 million dollars in February 2019, as the increase in imports surpassed the increase in exports.

However, on a month on month basis, the trade deficit in February 2020 recorded a contraction.

On a cumulative basis, the trade deficit widened to 1,304 million dollars during the first two months of 2020 compared to 1,069 million dollars in the corresponding period of 2019.

Meanwhile, terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 3.5 per cent (year on year) in February 2020, as export prices declined at a faster pace than the decline in import prices.

The tourism industry, which recovered faster than expected in the aftermath of the Easter Sunday attacks, was affected again with the outbreak of COVID-19 evolving as a pandemic from late February 2020.

Workers’ remittances recorded a year on year growth, while foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded net outflows in February 2020.

The Sri Lankan rupee, which remained relatively stable up to the second week of March 2020, depreciated significantly in the latter part of March up to mid-April 2020, but started to stabilise thereafter, and recorded a significant appreciation in the first week of May 2020.

Significant implications on the external sector performance are expected from the COVID-19 pandemic from March 2020 onwards, particularly in the areas of merchandise trade, tourism, workers’ remittances and foreign investment.

Source:- LBO

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