In the face of the rising exchange rate between the United States and Liberian dollars (L$88.00 for US$1.00), the Liberian economy is reported to have experienced a huge trade deficit in the first quarter of 2014. According to a 1st quarter 2014 data released by the Central Bank of Liberia (CBL), trade deficit widened by 86.9 percent to US$77.0 million from US$41.2 million at in December, 2013.
Total trade volume amounted to US$382.1 million with import receipts alone accounting for US$226.9 million. The CBL says the widened trade deficit is explained by a 4.2 percent decline in merchandise export earnings couple with a 14.6 percent decline in merchandise import payments. When compared with the corresponding quarter in 2013, however, the trade balance narrowed by 51.1 percent on account of a 20.2 percent rise in export earnings against a 19.3 percent decline in import payments.
The Bank, however, noted that the slight deterioration in the trade deficit was outweighed by improved net current transfer inflows during the quarter, yielding a narrower current account deficit.
Overall, total merchandise trade increased by 6.3 percent to US$382.1 million, from US$359.4 million in December, 2013, largely on account of a 4.2 percent and a 14.6 percent rise in merchandise export receipts and import payments, respectively.
On annualized basis, total trade declined by 7.1 percent, largely indicative of a 19.3 percent decline in import payments that outweighed the 20.2 percent rise in export receipts. Merchandise export receipts accounted for 39.9 percent and 30.8 percent of total trade at the end of March, 2014 and in the same quarter in 2013.
Commodities export receipts declined by 25.1 percent to US$152.5 million in the review quarter, from US$159.1 million at the end of December, 2013, which the CBL attributes largely on account of a 25.1 percent fall in rubber export earnings to US$30.2 million in March, 2014, from US$40.3 million in December, 2013.
Compared with the corresponding quarter in 2013, commodities export receipts rose by 20.2 percent during the quarter. The decline in rubber export receipts in particular, was mainly occasioned by both volume and price factors.
Export volume declined to 14,584 metric tons at end-March, 2014 from 17,950 metric tons at the end of the preceding quarter. Rubber price recorded a three month average of US$2250.9 per metric ton in the review quarter, from US$2527.5 per metric ton and US$3155.6 per metric ton at in December, 2013 and March 2013, respectively.
The CBL warned that weaker than expected growth prospects in the United States and struggling recovery in the Euro area may perpetuate the decline in rubber prices in the near term.
Meanwhile, combined rubber and iron ore exports recorded 85.7 percent of total export receipts from 84.3 percent in December, 2013. The CBL called for a paradigm shift from an enclave sector led-growth model to one that engenders broader export base, particularly towards SME-led non-traditional exports to reverse Liberia’s sole dependence on iron ore and rubber exports.
On the logging industry, the Bank noted that ongoing reforms in the sector coupled with global logs price decline continue to affect the production and export of round logs. Data released by the Bank declared that round logs export earnings plummeted by 10.0 percent to US$7.0 million, from US$7.8 million in December, 2013. “Round logs recorded a quarterly average price of US$289.8 per cubic meter in March, 2014, from US$296.3 per cubic meter and US$322.5 per cubic meter in December, 2013 and March 2013 respectively,” the CBL said.
Direction of Trade
Amid Liberia’s widening trade deficit, the Economic Community of West African States (ECOWAS) sub-region accounts for the giant share of the country’s total trade. In the review quarter, the ECOWAS sub-region topped chart as Liberia’s largest trade partners in the area of import followed by Europe, Asia and North America, where the country mostly exported.
Merchandise export receipts from Europe amounted to US$57.9 million in the quarter, from US$51.3 million in December, 2013, accounting for 38.0 percent of total export receipts for the quarter, from 32.1 percent of total export receipts during the preceding quarter.
The growth in exports towards Europe, the CBL noted, reflects the ongoing recovery in the Eurozone. Europe’s share of Liberia’s import payments for the quarter also rose to US$67.7 million at end-March, 2014, accounting for 29.5 percent of total import payments, from 19.6 percent at end- December, 2013.
North America’s share of Liberia’s exports also grew to US$40.0 million in the March, 2014, from US$30.3 million in December, 2013, accounting for 26.2 percent of total export earnings during the quarter from 18.5 percent for the preceding quarter. The Bank said improved growth outturns in the US economy triggered the upward trend.
It wasn’t too good for Liberia’s exports in Asia for the quarter as export dwindled to US$32.1 million, from US$54.3 million in December, 2013, accounting for 21.1 percent of total export receipts, from 34.1 percent for the preceding quarter.
Weak external demand from China is largely blamed for the decline. Asian-sourced imports also fell to US$47.7 million during the period, from US$68.2 million as at December, 2013, and accounted for 20.8 percent of total import payments at the end of the quarter, from 34.1 percent recorded for the preceding quarter.
Liberia’s intra-regional export trade with its sub-regional counterparts meanwhile inched up to US$2.1 million during the quarter under review, from US$1.9 million in December, 2013, reflecting gradual improvement in regional trade as a result of improving trade relations. Analysts have stressed the need for greater improvement intra-regional trade. Liberia’s import payments to the ECOWAS sub-region surged to US$51.9 million in the quarter, representing 22.6 percent of total import payments, from US$48.6 million recorded at the end of the previous quarter.