Sri Lanka's trade deficit narrowed substantially this year mainly due to increased clothing exports to the United States and Europe. Exports jumped 16.8 per cent in the first six months of 2014 compared to the same period last year. Imports declined 1.2 per cent compared to the same period last year.
Sri Lanka’s exports of garments to the EU jumped 34.6 per cent while those to the US increased 12.1 per cent. Retailers are increasingly turning to Sri Lanka, instead of traditional garment hubs such as Bangladesh, which is under international pressure over safety standards and conditions following a string of accidents. Sri Lanka’s economy recorded a growth of over eight per cent in the first two years since 2009 but since then growth has slowed down. Sri Lanka is one of the fastest growing economies in South Asia but the island is also vulnerable to sudden external shocks because of high levels of foreign commercial borrowings.
The country’s clothing sector is worth $4.5 billion. The aim is to reach an export target of $5 billion by 2016. Sri Lanka’s apparel export industry is almost entirely privately owned. It has grown over the last three decades and has become the number one foreign exchange earner and the largest single employer in the manufacturing industry.