Sri Lankan Economy
- Exports: Reached an all-time-high of USD 11.4 billion, recording a Y-o-Y growth of 10.6% in 2017. This was attributed to the restoration of the GSP+ facility by the European Union, favorable prices for commodities in the international market and the flexible exchange rate policy maintained by the Central Bank.
- Imports: In November 2017 recorded the highest value since November 2011. This increase was attributed to the significant increase in fuel import bill on account of higher prices in international markets and increased in import volumes.
- Trade Balance: The deficit in the trade balance expanded by 8% to USD 999.5million in November 2017 on Y-o-Y basis while trade deficit on a cumulative basis also widening during the first eleven months of 2017 in comparison to the same period of 2016.
- Inflation: Headline Inflation (CCPI) recorded a sharp decline from 7.1% in December 2017 to 5.8% in January 2018 with considerable slowdown in food inflation. The Central Bank is expecting the NCPI also to record a substantial decline in January 2018 and both headline and core inflation to stabilize in the desired mid-single digit level during the remainder of 2018.
- Policy Rates: The Monetary Board of the Central Bank of Sri Lanka (CBSL) in their first policy review meeting for 2018 held in January decided to keep policy rates unchanged.
- Political Uncertainty: The results of the recent Local Authority elections which took place during the second week of February has raised concerns over the future stability of the unity government. This uncertainty coupled with an unfavorable global environment saw the rupee depreciate during the month of February.
- ETCA Negotiations: The 8th round of negotiations of the proposed Economic and Technology Cooperation Agreement (ETCA) with India is taking place this week in New Delhi, India.
The Global Economy
- Oil Prices: The OPEC Reference Basket increased for the fifth-straight month in January, gaining a sharp 7.7% to average USD 66.85 per barrel. This is the highest monthly average since November 2014. Oil prices were supported by continuing efforts by OPEC and participating non-OPEC producers to balance the market. There were ten consecutive week of crude inventory declines amid healthy economic growth and improving oil demand.
- Trade: Latest World Trade Outlook Indicator (WTOI) of the World Trade Organisation in mid-February, indicated that the trade recovery of 2017 should continue with solid trade volume growth in the Q1 of 2018.
- China: Imports surged to a 36.9% expansion during January 2018 over January 2017. This was the strongest expansion since March 2017 and largely reflect the distortion related to the Lunar New Year Holidays, which occurs in mid-February 2018.