Contraction in SL construction sector to gradually diminish this year
By: Staff Writer
January 02, Colombo (LNW): The construction industry in Sri Lanka has been expected to contract by 14.9% in real terms last year, down from the previous estimate of a 7.9% decline, owing to the ongoing economic and political crisis, a steep currency depreciation and rising inflation.
The Sri Lankan construction industry is set to register an average annual growth of 5.6% from 2024 to 2027, picking up from the low base in 2022 and 2023.
The construction sector saw its contraction continue in November too as per the Purchasing Managers’ Index (PMI) compiled by the Central Bank.
It said the Construction PMI recorded a Total Activity Index value of 44.3 in November 2023, indicating a contraction in construction activities compared to last month.
“The respondents mentioned that the low level of new projects and the decline in work related to ongoing projects, as they are in the final stages, hampered the activity levels,” CBSL said.
It said new orders declined at a higher pace in November compared to the previous month. However, many respondents expect an acceleration in awarding of projects, especially Government-funded projects in the first half of the next year.
Employment continued to contract as the companies tend to operate with minimum staff under the current industry situation. Further, the quantity of purchases declined in line with the decrease in construction work. Suppliers’ delivery time remained lengthened during the month.
CBSL said the industry outlook for the next three months is positive, mainly in anticipation of the increased demand from the next year, together with favourable weather conditions.
However, the firms are concerned about the upward tendency in material prices due to the announced tax revisions.
Sri Lanka’s construction industry is down but falling material prices are helping start small-scale work and there was hope of government backed project re-starting later in the year according to a Purchasing Manager’s Index.
“The lack of new projects continued to hinder the industry, which is reflected by the continuous decrease in New Orders,” the central bank which compiles the index said.
“The respondents mentioned that sizable projects are hardly available, except some foreign-funded projects, and the bidding for available tenders is also highly competitive.
However, they expect the suspended large-scale projects to gradually recommence later in the year.
“Further, Employment remained contracted in June, mainly due to the layoffs after project completions.
Moreover, Quantity of Purchases declined in line with the decrease in pipeline projects. Meanwhile, Suppliers’ Delivery Time remained shortened during the month due to low order quantities.”
Sri Lanka government projects are suspended pending re-structure of defaulted debt.