By: Isuru Parakrama
Colombo (LNW): Sri Lanka’s construction industry has been greatly affected for the last two years, even before the economic crisis took place in April 2022, due to a lack of new projects and the higher cost of construction.
However, the recent import relaxation on some 30 construction-related materials could give some hope to the sector, which has been one of the main drivers of economic growth in the past years.
Sri Lanka’s construction industry is expected to grow by 9.2% to reach Rs. 1,535 billion in 2023.
Despite near-term challenges in certain construction sectors, it predicts that the medium to long-term growth story in Sri Lanka remains intact as the construction industry in Sri Lanka is expected to grow steadily from Q2 2023 to Q1 2024.
The growth momentum is expected to continue over the forecast period, recording a CAGR of 7.6% during 2023-2027 while the construction output in the country is expected to reach Rs. 2,058.3 billion by 2027.
According to a newly released report on the construction PMI survey, Sri Lanka’s construction industry remained contracted in June 2023 amid the lack of new projects, recording a total activity index value of 44.4.
The Central Bank yesterday said from June onwards the construction PMI survey results will be released to the public every month, similar to the PMI surveys on manufacturing and services.
The Statistics Department of the Central Bank has been conducting the PMI survey for construction activities since June 2017, delivering key industry insights to the Central Bank, assisting the policy formulation process.
According to the June survey, most of the construction sector companies operate at a sub-optimal level amid the limited availability of construction projects. An index value less than 50 indicates a contraction.
However, several respondents had mentioned that the steady decline in material prices has induced to commence small-scale construction work.
The continued decrease in new orders also reflected the lack of new projects.
The respondents had mentioned that sizable projects were hardly available, except for some foreign-funded projects, and the bidding for available tenders was also highly competitive.
However, they expect the suspended large-scale projects to gradually recommence later in the year.
Further, employment in the country’s construction sector remained contracted in June, mainly due to the layoffs after project completions.
Quantity of purchases also declined in line with the decrease in pipeline projects while suppliers’ delivery time remained shortened during the month due to low order quantities.
