Expenditure on merchandise imports in May 2021 has increased notably by 61.7% to $ 1,607 million from import expenditure of $ 994 million in May 2020. However, import expenditure in May 2021 was lower when compared to the imports of $ 1,707 million in April 2021, supported by lower expenditure in all major import sectors.
Meanwhile, the cumulative export earnings during January to May 2021 amounted to $ 8,356 million, recording an increase of 26.2% over the same period in 2020.
The deficit in the trade account widened on a Year-on-Year (YoY) basis for the third consecutive month in May 2021. Both exports and imports were significantly higher in May 2021 than in May 2020, mainly due to the statistical effect of pandemic-related disruptions a year ago. Earnings from exports increased, while imports declined in May 2021 compared to the previous month.
During the month, workers’ remittances continued to increase, while earnings from tourism remained at minimal levels. In the financial account, foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded marginal net outflows in May 2021. Meanwhile, the Sri Lankan rupee remained broadly stable throughout the month, and gross official reserves stood at $ 4 billion by end-May 2021.
The trade deficit widened on a YoY basis for the third consecutive month in May 2021 to $ 716 million, compared to $ 407 million recorded in May 2020. Greater increase in import expenditure as against the increase in export earnings in May 2021 over May 2020 resulted in the widening of the trade deficit. However, the trade deficit showed a month-on-month (MoM) improvement in May 2021 compared to $ 889 million in April 2021. The cumulative trade deficit widened to $ 3,663 million during the period from January to May 2021 from $ 3,101 million recorded in the corresponding period in 2020.
Terms of trade – i.e. the ratio of the price of exports to the price of imports – deteriorated by 11.5% in May 2021, compared to May 2020, with prices of imports having increased while prices of exports declining.
Earnings from merchandise exports increased to $ 892 million in May 2021, recording growth rates of 52% and 9% over May 2020 and April 2021, respectively, with higher earnings from all major sectors. Cumulative export earnings from January to May 2021 amounted to $ 4,692 million, a 33.3% increase compared to the corresponding period of 2020, which is largely attributable to lower statistical base during the islandwide lockdown in the early months of 2020.
Accordingly, workers’ remittances increased by 6.6% in May 2021 YoY to $ 460 million. Workers’ remittances during the first five months of the year recorded a notable growth of 18.2% YoY to $ 2,846 million, partly due to the low base effect.