Construction sector suffers worst contraction in 3Q 

• Construction sector contracts for fifth quarter in a row to 33.2% in 3Q22
• Both public and private construction sector activities came to a grinding halt when economy collapsed in March firing runaway prices 
• Construction materials, which are largely imported, have surged manyfold
• Govt. owes over Rs.200bn to contractors for projects completed
• Decline in real estate activities reflects possible housing crisis 

The slump in construction sector activities deepened in the third quarter of 2022, declining for the fifth quarter in a row, according to the Gross Domestic Product (GDP) data for the third quarter released last week.
The sector measured based on 2015 constant prices slumped 33.2 percent in the July-September period from the same period in 2021 as both private and public developments came to a near standstill earlier this year when the economy collapsed sending prices of construction sector materials through the roof. 

The dollar crunch, which became more pronounced from March this year, caused widespread shortages of construction materials as they are largely imported, forced developers and individuals to either postpone or abandon their projects altogether, putting a chill on the once brisk industry and thereby the overall growth of the economy. 

The decline in the third quarter construction sector activities was the deepest since the sector began its current streak of de-growth in the third quarter of 2021 when a major part of the economy was forced to shut down for the fourth time due to the virus resurgence. 
It was around the same time the country began facing the acute shortages in foreign currency as inflows dried up while the outflows remained strong amid some large foreign debt payments.

The sector woes grew more intense from around the second quarter of this year when the government decided to redirect its capital budgets to both preserve money for its day-to-day expenses and also to provide relief to those millions who fell victim to the cost of living crisis. 

The government-sponsored infrastructure projects are one of the leading segments which kept the overall construction sector activity on an even keel for years, specially after the end of decades-old conflict in 2009. 
Construction sector accounted for a sizeable 6.8 percent of the total economic output of the country in the foregoing quarter.

The sector is going through some profound difficulties after the government failed to settle over Rs.200 billion owed to contractors for the projects carried out in recent past due to the fiscal challenges faced by the authorities. 
The prolonged delay has brought in fresh challenges as contractors have fallen behind their loan repayments to banks. The two sectors met recently to discus how banks could accept treasury bonds from the government for amounts due to contractors from the government. 

Besides the constant decline in the sector for nearly two years, the economic and the cost of living crises have together forced many construction sector professionals to migrate seeking better opportunities elsewhere, worsening the skill dearth the sector has been plagued with for years. 

Meanwhile, reflecting the extent to which the housing sector has suffered through the crisis, the real estate activities subcategory of the GDP, which captures the ownership of dwelling, has also declined in tandem by 4.8 percent in the third quarter of 2022 from a year ago. 
The sector accounts for 5.4 percent of the GDP, making the combined contribution of the two sectors to 12.2 percent.