Sri Lanka Exports Fall in June on Slowing U.S. Demand

By [bn:PRSN=1] Anusha Ondaatjie []

Aug. 15 (Bloomberg) -- Sri Lanka's exports declined in June for the first time in seven months as a slowdown in the U.S. weakened demand for the island's textiles and garments.

Overseas sales fell 1.9 percent to $654.6 million from $667.3 million a year earlier, after growing 17 percent in May, the Central Bank of Sri Lanka said on its Web site today.

Asian exporters face declining shipments to the U.S., where retail sales dropped in July for the first time in five months. Sri Lanka, the world's fourth-biggest tea producer, is relying on rising demand for commodities from emerging economies to weather faltering U.S. orders.

``Agricultural exports are expected to continue to perform better, in terms of volumes as well as prices,'' the central bank said in a statement.

Sri Lanka's economic growth slowed for the first time in a year in the first quarter as inflation running above 25 percent and escalating violence in the South Asian island's civil war damped spending.

Gross domestic product expanded 6.2 percent in the three months ended March 31 from a year earlier, compared with 7.6 percent in the fourth quarter, the Department of Census & Statistics said in June.

The government on Jan. 16 formally ended its 2002 cease- fire with the Liberation Tigers of Tamil Eelam, saying the rebels had used the accord to rearm and prepare for further attacks. Consumer prices in the capital Colombo rose 26.6 percent from a year earlier in July.

Clothing, Rubber

Slowing shipments of Gap Inc. and Liz Claiborne Inc. clothing to the U.S., Sri Lanka's largest export market, may further weigh on growth.

The value of industrial exports such as clothing, jewelry and rubber-based products declined 9.3 percent to $485.3 million in June, the central bank said. Agricultural shipments gained 34.6 percent to $161.3 million.

Sri Lanka's trade deficit in June widened to $504.5 million, from $164.4 million a year earlier, today's report showed. Imports gained 39.4 percent to $1.16 billion on costlier oil.

The overall balance of payments posted a surplus of $390 million as private remittances climbed. The country's foreign currency reserves were $3.43 billion at the end of June, the bank said.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net.