Earnings from exports declined in 2012, largely reflecting the downward movement of commodity prices and subdued global demand in view of faltering economic activity in major economies. Earnings from exports, which grew at a robust rate in 2011, declined by 7.4 per cent, year-on-year, in 2012 to US dollars 9,774 million, reflecting declines in industrial as well as agricultural exports.
Given the decline in commodity prices in the world market and the softening of global demand, earnings from industrial exports in 2012 declined by 7.8 per cent to US dollars 7,371 million. The decline of around 5 per cent in the earnings from exports of garments contributed significantly to the drop in total export earnings in 2012 as garments account for about 40 per cent of total export earnings. While the sharp decline in international cotton prices from the peak levels recorded by March 2011 resulted in a drop in the average unit price of garments, the slowing down of global economic activity and the consequent dampening of global demand has resulted in lower volumes of exports. Earnings from exports of garments to the European Union, which accounted for about 50 per cent of total garment exports over the past five years declined by 9.2 per cent in 2012, with exports to the United Kingdom, Italy, Germany and Belgium Luxembourg, the largest markets for garment exports within the European Union, declining. However, earnings from exports of garments to France and several other countries within the European Union have recorded a growth in 2012. Garment exports to the USA, the second largest market for exports of garments, accounting for about 40 per cent of garment exports over the past five years, declined by 4 per cent in 2012.
Earnings from exports of other industrial products recorded varied performance in 2012. Earnings from exports of gems, diamonds and jewellery, and animal fodder increased in 2012, supporting external sector performance. Export earnings from gems, diamonds and jewellery increased by 5.2 per cent to US dollars 559 million in 2012, along with increases in volumes of both gems and jewellery. While export earnings from petroleum products decreased by 16.2 per cent to US dollars 463 million, this decline could be attributed to a decline in bunkering services provided as a result of a decline in demand given the prevailing subdued global economic conditions and the rising competition from regional ports. Reflecting the marked decline in rubber prices and lower global consumer demand, export earnings from rubber products such as tyres, surgical gloves and other gloves, declined by 2.9 per cent to US dollars 859 million in 2012. Earnings from the transport equipment sub-category also declined by 26.7 per cent to US dollars 165 million in 2012 as a result of earnings from the export of ships, boats and floating structures as well as other transport equipment decreasing. Meanwhile, export earnings from the food, beverages and tobacco sub-category within industrial exports declined by 18.3 per cent to US dollars 284 million in 2012.
Earnings from agricultural exports declined in 2012 as earnings from the export of major agricultural commodities declined. Export earnings from tea, which account for about 15 per cent of total export earnings, declined by 5.3 per cent to US dollars 1,412 million in 2012, due to the export volume of tea declining by 0.9 per cent to 320 million kilograms alongside a drop in the average price of tea exported. Although tea prices remained elevated in the world market since around May 2012 due to adverse weather conditions resulting in lower production in key producer countries, namely, Sri Lanka, Kenya and India, the average price of tea exported during the year was marginally lower at US dollars 4.41 a kilogram compared to US dollars 4.62 a kilogram recorded for 2011, which could be attributed to political instability in major tea markets in the Middle East affecting demand. While the average price of rubber exported declined markedly from US dollars 4.84 a kilogram in 2011 to US dollars 3.35 a kilogram in 2012, earnings from exports of rubber declined from US dollars 206 million in 2011 to US dollars 125 million in 2012, along with a decline of 12.3 per cent in the volume of exports.
Earnings from exports of coconut products declined by 21.5 per cent in 2012 to US dollars 209 million, mainly due to exports of coconut kernel products such as desiccated coconut declining. This decline however was contained by an increase in the export earnings from non-kernal products such as yarn, coconut shells and ekels.