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UPDATE 1-S. Lanka Jan-Sept trade gap narrows 60 pct

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COLOMBO, Nov 25 (Reuters) - Sri Lanka’s trade deficit for the first nine months of 2009 narrowed 60 percent to $1.85 billion, the central bank said on Wednesday, as the island nation recovers from the global financial crisis and the end of a 25-year war.

Exports in the Jan-Sept period fell 16.8 percent to $5.12 billion amid the global trade downturn, while imports dipped 35.3 percent $6.97 billion, compared to a year earlier.

“Imports are down mainly due to low spending by consumers and corporations, while exports has been shrinking following the financial crisis,” Danushka Samarasinghe, head of research at Asia Securities, told Reuters.

Analysts said lower imports of intermediate and investment goods along with weak exports suggest a slowing economy ahead. “We think the trend will change with an improvement in both imports and exports after September,” Nandalal Weerasinghe, an assistant governor at the central bank, told Reuters.

Imports of intermediate goods have fallen by 40 percent, while investment and consumer goods have dipped 28.5 percent and 28.8 percent, respectively.

Despite the end of Sri Lanka’s 25-year war in May, external trade is yet to pick up, Samarasinghe said.

The trade deficit narrowed for a ninth straight month in September by 62.2 percent to $220.3 million from $582.5 million a year earlier. September exports fell 12.8 percent to $568.2 million, while imports fell 36.1 percent to $788.5 million.

Sri Lanka’s exports have been falling as its top foreign exchange earner, garments, have faced the loss of a trade concession from the European Union since mid 2005. For a Q+A on the EU trade concession, see [ID:nCOL268213]

Private remittances, mainly from Sri Lankan expatriates, have risen 10.3 percent in the first nine months to $2.48 billion, central bank data showed.

The central bank also said it had absorbed $2.84 billion from the foreign exchange market from the end of March until Nov. 23.

The mopping up of the dollars has helped the gross foreign reserves to boost to a record high of $5.2 billion as of Friday, from and eight-year low of 1.27 billion, the central bank said. ((; +94-11-237-5903; Reuters Messaging; ((If you have a query or comment on this story, send an email to