Sri Lanka’s exports declined the least this year in October as U.S. and European orders increased for the South Asian island’s tea and rubber.
Overseas sales fell 4.9 percent to $628.7 million from a year earlier, after dropping 12.8 percent in September, the Central Bank of Sri Lanka said on its Web site today.
The recovery in exports from Sri Lanka, which makes garments for Marks & Spencer Group Plc and Gap Inc., may falter as the European Union plans to withdraw trade concessions on alleged human rights violations by President Mahinda Rajapaksa’s government. Central bank Governor Nivard Cabraal said he plans to keep interest rates low to spur local consumer demand and support growth.
“Demand for Sri Lankan products is growing in Western markets,” said Saminda Weerasinghe, research manager at Acuity Stockbrokers Pvt. in Colombo. “The loss of EU trade concessions would be a worry in the medium-to long-term.”
The value of industrial exports such as clothing and jewelry declined 8.2 percent to $456.4 million, the central bank said. Agricultural shipments gained 5.1 percent to $165.8 million in October.
Cabraal said low inflation in the $41 billion economy gives the central bank room to maintain interest rates at a five-year low. That would help drive consumer demand and investments, overcoming any export loss from the removal of EU benefits.
The central bank has cut lending rates five times this year as inflation plunged from a record high in June 2008 to a five- year low in September.
Gross domestic product expanded 4.2 percent in the third quarter from a year earlier, the fastest pace this year, after gaining 2.1 percent in the three months to June 30, the statistics department said Dec. 18.
Sri Lanka’s trade deficit in October narrowed 33.6 percent from a year earlier to $369.6 million, today’s report showed. Imports fell 18 percent to $998.2 million.
source - www.bloomberg.com
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