Worker remittances lose steam in May; tourism earnings remain robust

The worker remittances to Sri Lanka have declined during May, though the earnings from tourism have continued to grow, providing a cushion to the current account of the external account of Sri Lanka.

The worker remittances, the single largest foreign income earner for Sri Lanka, have declined by 3.4 percent to US $ 580 million in May, after two months of positive growth.

On average, Sri Lanka receives US $ 7.0 billion from worker remittances for a year.

The worker remittances to Sri Lanka have been erratic since the Gulf countries curtailed their quota for foreign employees after the region suffered for nearly three years from the declining oil prices.

However, as the global oil prices have now steadied around mid-us $ 70 a barrel, the gulf economies are slowly rebounding and diversifying their economies.

The majority of Sri Lankan migrant worker population work in the Gulf as domestic aides and the diversification of the Gulf economies could open up new job opportunities for the skilled and semi-skilled Sri Lankan workers.

For the first five months of the year, the worker remittances increased by 3.3 percent to US $ 3.1 billion over the same period in 2017.

Meanwhile, the earnings from the tourism trade continued the upward trend as the May earnings grew on a year-on-year (YOY) basis to US $ 240 million and the earnings for the first five months to US $ 1.9 billion.

The earnings were generated out of 1,017,819 tourist arrivals during the first five months, growing by 14.7 percent YOY.

When analysing the financial flows for May, the government securities market saw US $ 89 million net outflow, while the net outflow in the first five months was US $ 102 million.

The capital flight from the government securities market was sparked by the continuously rising interest rates in the United States as a result of strengthening of the US economy amid strong corporate earnings, near full employment and reinvigorated manufacturing and consumption activities.

The Colombo Stock Exchange had a net inflow of foreign funds amounting to US $ 5.0 million in May. The cumulative net inflow for the first five months stood at US $ 53 million.

The Sri Lankan rupee depreciated 4.5 percent during January and July 20 against the US dollar, after falling in value by 2.0 percent in 2017.