External Sector Performance – December 2021
The trade account deficit widened in December 2021 compared to the previous year, mainly due to an excessive increase in imports registering the highest monthly import expenditure on record, despite export earnings constantly spikes that topped $1.0 billion for the seventh consecutive month. Over the course of 2021, the trade deficit widened significantly, driven by a huge increase in imports that outpaced export growth. Tourist arrivals continued their growth momentum in December with a notable increase compared to the previous month. Meanwhile, workers’ remittances recorded monthly growth in December 2021, mainly reflecting the response to the incentive scheme put in place for remittances and the seasonal increase. The weighted average spot exchange rate in the interbank market continued to hover around Rs. 201 per US dollar during the month.
The trade account deficit widened to the highest monthly value on record of US$1,085 million in December 2021, from the deficit of US$562 million recorded in December 2020. trading in 2021 also widened to US$8,136. million compared to US$6,008 million recorded in 2020.
Terms of trade:
The terms of trade, i.e. the ratio of the price of exports to the price of imports, improved by 4.6% in December 2021 compared to December 2020, as the increase in export prices exceeded that of import prices. At the same time, the terms of trade for 2021 deteriorated by 7.8% compared to the previous year.
Merchandise export earnings in December 2021 increased 19.9% from December 2020 to $1,156 million. Revenue increases were seen in all major categories, while industrial exports mainly contributed to the expansion. Meanwhile, cumulative export earnings in 2021 increased by 24.4% to reach US$12,502 million from US$10,047 million recorded in 2020. This is the highest export earnings ever recorded for a year recorded in history compared to the previous highest export earnings of US$11,940. million recorded in 2019.
Income from the export of industrial goods increased by 21.3% in December 2021, compared to December 2020. This increase is due to a general increase in income from most industrial products, namely clothing, petroleum, food, beverage, and tobacco and rubber products. However, a decline in revenue was reported in the printing industry product category (mainly banknotes). Clothing exports to all major markets have improved.