Sri Lankan Economy
Exports: Registered a 3.8% decline year-on-year in January 2017, with subdued performance in industrial exports despite an increase in agricultural exports. Industrial exports performed poorly mainly due to the drop in textile and garments exports. In agricultural exports, all sub sectors showed improvements except minor agricultural products and unmanufactured tobacco.
Imports: Increased substantially by 13.2% year-on-year in January 2017, continuing the double-digit growth in imports for the fourth consecutive month. The increase was driven mainly by imports of intermediate goods followed by consumer goods imports. Rising oil prices are a major contributor to this increase. In January 2017 and December 2016, the fuel import bill accounted for 51% and 65% respectively, of the increase in imports compared to the same month a year earlier.
Trade Balance: The deficit in the trade balance increased substantially by 35.2% in January 2017 compared to a year earlier due to high expenditure on imports and the decline in export earnings.
Credit Growth: Decelerated gradually to 21.0% by end February 2017 and 20.4% by end March 2017 from 21.9% recorded at the end 2016. CBSL rate tightening is beginning to show in the slowdown in credit.
Inflation: In April, inflation (both NCPI and CCPI) edged up on a month-on-month basis, mainly on account of higher demand during the New Year festive season. On YoY basis NCPI decreased to 8.4% (from 8.6%) and CCPI decreased to 6.9% (from the earlier record high of 7.3%).
Global Growth: In the mid-year update of the World Economic Situation and Prospects 2017, the United Nations forecasted a modest global recovery over the next two years with global GDP forecast to grow by 2.7% in 2017 and 2.9% in 2018.
Global Oil Prices: Oil prices are in flux with some short-term rises on news that OPEC and Russia will be pursuing an extension to production cuts, but news from US shale and other non-conventional oil indicating high supply.
EU: The European economy has entered its fifth year of economic recovery and the European Commission expects 1.9% GDP growth in EU for both 2017 and 2018.
China: Economy continued to accelerate in Q1 2017 with GDP growth of 6.9% compared to Q1 2016 boosted by pick-up in retail sales and robust factory output.
USA: Growth in Q1 2017 was feeble at 0.7%, the slowest pace in three years mainly due to sluggish consumer spending and business stockpiling, offsetting rising business investment.