Headline inflation, as measured by the year-on-year (Y-o-Y) change in the National Consumer Price Index (NCPI, 2013=100)1 decreased further to 59.2% in December 2022 from 65.0% in November 2022. Similarly, the Food inflation (Y-o-Y) decreased further to 59.3% in December 2022 from 69.8% in November 2022, while Non-Food inflation (Y-o-Y) decreased to 59.0% in December 2022 from 60.4% in November 2022.

Monthly change of NCPI recorded at 0.01% in December 2022. This was due to setting off the price effects of items in the Food category, which decreased by 0.20 per cent, with the price increase in the Non-food category by 0.21 per cent. Accordingly, within the Food category, significant decreases were observed in prices of Big Onions, Dry Fish, Sugar, Vegetables and Rice. However, prices of Coconut, Milk Powder and Fresh Fruits increased during the month. Within the Non-food category price increases were observed in Clothing and Footwear, and Miscellaneous Goods and Services sub-categories during December 2022.

The merchandise trade deficit continued to remain low compared to a year ago, though it widened in November 2022 over the previous month. Earnings from merchandise exports declined in November 2022, mainly due to lower global demand, particularly for garment exports. Meanwhile, merchandise import expenditure also declined for the ninth consecutive month in November 2022 on year-on-year basis, despite recording an increase, compared to October 2022. Workers’ remittances continued to recover and recorded a notable increase in November 2022 over a year earlier and the previous month. Earnings from tourism increased in November 2022 over the previous month supported by a growth of tourist arrivals over 40 per cent. Foreign investment in the government securities market recorded a marginal net inflow during November 2022, while the Colombo Stock Exchange (CSE) recorded a marginal net outflow during November 2022. The Central Bank continued to provide foreign exchange to the domestic foreign exchange market to part finance essential imports. Consequently, the build-up of gross official reserves remained constrained. Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 363 per US dollar during the month.