Tuesday, June 18, 2024

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Sri Lanka construction sector further contracted in April as seasonal pattern

By: Staff Writer

June 03, Colombo (LNW): Sri Lanka construction sector has been further contracted following the seasonal pattern where activities across many sectors slowdown during the traditional New Year celebrations, Central Bank report revealed.

Sri Lanka Purchasing Managers’ Index for Construction (PMI- Construction) compiled by the Central Bank decreased to an index value of 31.9 in April 2024.

“This indicates a contraction in construction activities compared to the previous month,” PMI- Construction compiler CBSL said.

As per the respondents, most construction sites were temporarily closed during the month due to the extended New Year holidays, leading to this month-on-month decline.

New orders decreased in April with the fewer working days. However, most respondents were confident that the increasing trend in tender opportunities will continue in the upcoming months.

Moreover, the participatory firms widely highlighted the intense competition in the market. The employment and quantity of purchases declined during the month, in line with the decline in total activities and new orders.

Further, the decreasing trend of the overall price levels continued in April as well. Meanwhile, suppliers’ delivery time lengthened at a comparatively slower rate during the month.

The industry outlook for the next three months is positive, mainly due to the expected increase in new construction projects, CBSL added.

Sri Lanka stands on the verge of losing a major industry – its construction sector, which notably contributes approximately 9.6% to the GDP and involves nearly 2.6 million stakeholders.

The industry has already seen a significant contraction by 60%, resulting in over 500,000 job losses and the emigration of more than 10,000 professionals.

In response, the government has established a task force, producing a 51-point report, from which 11 critical points were selected for action. Despite these measures, progress has stalled, necessitating urgent intervention to rejuvenate the industry.

The plight of contractors, particularly in the SME sector, is alarming. They face immense hardships from halted projects, non-payment, and financial pressures, often risking personal assets.

The competitive nature of acquiring projects, with minimal profit margins, exacerbates their vulnerability, leading to a detrimental cycle affecting their entire business operation.

As the industry contends with these challenges, the proposal is for a high-powered committee to address contractor grievances, improve contract terms, and establish fair compensation mechanisms.

Additionally, strategies include restarting halted projects, resuming donor-funded initiatives, maintaining and upgrading deteriorating infrastructure, managing construction costs and VAT effectively, and ensuring equitable work distribution among companies.

These steps are essential to prevent further decline and promote recovery in the construction sector, vital for Sri Lanka’s economic stability and growth in 2024.

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