Construction sector activities accelerate to double digits

• Construction sector expands 14.2% YoY in 1Q24
• Sector participants say witnessing rising opportunities 
• Share in overall economy grows to 6.4% in 1Q24, from 5.9% in 4Q23 

The all-important construction sector in Sri Lanka added much more heft in the first three months of the year, from the growth recorded in the final three months of last year, as the borrowing costs declined while the construction sector material prices softened.

According to the latest data, the construction sector registered a robust growth of 14.2 percent in the first three months of the year from the same period in 2023, accelerating from 4.0 percent growth in the final quarter of last year.

After nearly two years of decline, the construction sector activities returned to some growth in the final quarter of last year, in a sign of return of building activities in housing, commercial and infrastructure.
The construction sector participants said they witness rising opportunities but the competition is high when participating in the tender process.

The strengthening rupee is a boon for the sector, as most of the imported material prices, which rose multifold in the last two years, are somewhat softening, making things less unaffordable.

The declining borrowing rates are also adding a tailwind but some banks were found not willing to transfer the benefit of the lower policy rates to the borrowers, as they keep their lending rates still high.
Access to bank finance is still at very restrictive levels, as the staff in the banks has an appalling attitude towards requests for new loans, as if the loan officers give their own money.

Unless the Central Bank takes a tougher stance on these banks, which are either slow or refuse to pass on the full benefit of the eased financial conditions, they will be unable to meet their goals.
Meanwhile, the construction sector also expanded its share in the overall economy to 6.4 percent in the first quarter, from 5.9 percent in the last quarter of last year.

The recovery and growth in the construction sector is vital in Sri Lanka for job creation and growth in the economy, as it has trickle down effects into many other sectors.
The repeated crises, from the pandemic to the economic crisis, threw a wrench into the sector, which was a leading sector in the country’s gross domestic product in post-war Sri Lanka.