**7 |** P a g e

The dynamic of imports growth has been much more explosive than that of exports. The range in annual growth rates of imports of goods and services was between (-) 25 percent in 2009 and (+) 32 percent in 2010: the value of imports in 2010 was slightly below its 2008 level. In 2003-08 imports expanded much faster than exports; the contraction in imports in 2009 of 25 percent was much deeper and the rebound of 32 percent in the value of imports in 2010 much stronger.

**Figure 2: Four phases of Sri Lanka’s exports growth and its share in world exports in 1992-2010 (exports in millions of US dollars and share in world exports in percent)**

<!-- Start of picture text --> 9,000 0.10%<br>8,000 0.09%<br>7,000 0.08%<br>0.07%<br>6,000<br>0.06%<br>5,000<br>0.05%<br>4,000<br>0.04%<br>3,000 0.03%<br>2,000 0.02%<br>1,000 0.01%<br>0 0.00%<br>1992 (1) 1993 1994 1995 1996 1997(1) 1998(2) 1999 2000 2001 2002(2) 2003 (3) 2004 2005 2006 2007 2008 (4) 2009 2010<br><!-- End of picture text --> Note: **_Left axis_** : Exports in millions of US dollars; **_Right axis_** : Sri Lanka’s share in world exports in percent. In parentheses, the phase of exports performance: 1992-97; 1998-2002; 2003-2007; and 2008-10. Source: for world exports WTO data from <u>http://stat.wto.org/StatisticalProgram/WSDBViewData.aspx?Language=E</u> accessed on September 5, 2011 and Sri Lanka’s exports as reported IMF’s balance of payments statistics.

The growing trade deficit of transportation services is driving overall commercial services trade deficit, but both are being driven by the goods deficit. In 2001-10, the average share of services in total exports was 20 percent with the highest value of 22 percent reached in 2001, 2003 and 2010, and the lowest of 19 percent in 2006-07. This shows that the dynamics of services exports lagged behind that of exports of goods except in 2010. The same is true for imports of services: their share in total imports was also 20 percent on average in 2001-10 with the highest values of shares in total imports of goods and services having been reached in the early 2000s and then slightly falling and strongly rebounding in 2010. Trade in services has been driven by transportation services accounting on average in 2001-08 for 60 percent of total imports of commercial services and 43 percent of their exports: even in 2010, the year of rebound after the global financial crisis. Their share in exports of commercial services increased from 46 percent in 2009 to 48 percent in 2010 and in imports from 62 percent to 66 percent, correspondingly.<sup>4</sup> Changes in imports and exports of goods directly impact changes in trade in commercial services whose composition remained relatively stable in 1995-2010. The only significant change was the increase of the share of transportation services in both exports and imports of commercial services. On the export side, this share increased from an average of 42 percent in 1995-2003 to 46 percent in 2004-10 at the expense of two percentage point fall in the share of travel and 3 percentage point fall in the share of financial services: the share of computer and telecom services barely moved one percentage point to 25 percent. On the import side, except for computer services, whose average share declined from 19 percent to 15 percent, and financial services whose share remained unchanged at 15 percent, the

> 4 Own calculations based on data from the World Bank WDI database.