Coronavirus to push up prices in Sri Lanka

– Electronics, plastic items, and toys to shoot up

The retail prices of consumer goods in Sri Lanka, especially non-fast moving consumer goods (FMCGs), are likely to witness a slight uptick in the coming months due to the supply shortage created by the mushrooming coronavirus outbreak in China.
Sri Lanka Retailers’ Association (SLRA) Founder/President and Hameedia Deputy Managing Director Hussain Sadique told The Sunday Morning Business that imports from China have been disrupted as many factories and manufacturing facilities remain closed in China to contain the spread of the coronavirus epidemic.
“As a result, our retailers have to shift their import market to countries like Indonesia, India, and Bangladesh, which is happening at the moment. Until retailers finalise new import markets, there will be scarcity which could lead to a marginal increase in retail prices locally,” Sadique noted.
Further, according to Sadique, additional costs that will be incurred in finding new import markets are also likely to support the increase in retail goods.
However, given the slashing of Value Added Tax (VAT) from 15% to 8% by the Government recently, the SLRA believes the price increase would not be considerably felt by the consumers.
Sri Lanka is largely dependent on China for most of its retail goods and the items that will mainly be subjected to the price hike would be electronic items, plastic products, and toys.
However, Sadique believes that the hike would prevail only until local retailers find new import markets and substitutes for products they used to get down from China.
Nevertheless, the SLRA is considering the supply cut of Chinese products as positive due to the chance it has given to Sri Lanka to enter into new import markets, thereby diversifying imported products.
“Earlier, we used to import most of the retail goods from Thailand and Singapore, and then we eventually shifted to China. Due to coronavirus, we are shifting from China and reaching out to new countries now,” Sadique added.
Commenting on the local retail performance so far this year, Sadique noted that consumption has been higher compared to a year ago but retail performance of malls have decreased slightly due to coronavirus and the reduced number of Chinese tourists.
Meanwhile, we spoke to several retail chains in Sri Lanka to determine the possibility of retail goods’ price hike. Speaking to us, Abans PLC Deputy Director Dinesh Perera noted that there will be a price hike after April, only if the demand for electronic goods remains the same after the Sinhala Tamil New Year.
“But, that is something very unlikely to happen. Demand drops usually after the New Year, so the prices might remain in their current levels,” Perera noted.
According to Perera, Abans has pre-ordered stocks from China that could cater the demand until end-April. He further noted that stocks for the period following might face a slight delay, but they are looking to import them from other countries.
“We started looking for other countries but there is an issue in that. Most of these other countries source production components from China. They are facing delays in getting them due to coronavirus,” Perera added.
An official from Singer Sri Lanka told us that they placed their January and February consignments in September last year and their concern is now about the possible delay in the orders placed for March and April, this year.
The official noted that there will only be a price hike in electronic goods, only if the Chinese manufacturers increase their selling prices.
As intensity of future consequences of coronavirus is not clear at the moment, Singer has already begun increasing their imports from countries like Malaysia, Korea, and India.
According to Central Bank of Sri Lanka’s Purchasing Managers’ Index (PMI) for the month of January 2020, a significant lengthening of suppliers’ delivery time was experienced, especially in the manufacturing of textile and wearing apparel sector due to the COVID-19 virus outbreak in China.
Further, it noted that many respondents in this sector highlighted that their import orders for materials from China have been delayed indefinitely due to the same reason.
Chinese exports to Sri Lanka in 2018 were valued at $ 4.11 billion and it was 18.5% of Sri Lanka’s total imports, that year.
In 2000, Chinese imports represented only 3.5% of Sri Lanka’s total imports which saw a significant jump by 2017 as China contributed to nearly 20% of Sri Lanka’s import basket. There was a particularly significant rise in Chinese imports after 2010, especially during the period from 2011 to 2018 as Chinese imports increased by almost four times.
According to the World Integrated Trade Solution (WITS), developed by the World Bank, Sri Lanka’s top 10 goods from China in the year 2017 were intermediate goods, capital goods, machinery and electronics, textile and clothing, consumer goods, metals, transportation, chemicals, plastic/rubber, and wood.