The construction sector registered a robust growth of 15.5% in the second quarter, accelerating from the first three months, reflecting the positive trends seen in monthly indices.
Contributing 7.6% to the broader Sri Lankan economy, the sector expanded by 15.5% in the April-June quarter compared to the same period last year, according to the latest gross domestic product (GDP) data. This also marked an increase from the 14.2% growth recorded in the first quarter, with overall growth for the first half of the year reaching 14.8%.
The sector had struggled since the latter half of 2021, initially due to a foreign currency shortage and later from sharp interest rate hikes, which nearly crippled the industry. The situation was further exacerbated by the suspension of projects, particularly government-funded infrastructure, due to a lack of rupee funds.
Multilateral lenders permitted the government to divert funds from infrastructure projects to provide relief for the crisis-stricken economy. However, recent monthly indices show a resurgence in the sector, driven by increased activity in multilateral-funded projects.
Additionally, bilateral funding pledges to resume support after the government’s foreign debt restructuring in June are expected to further accelerate sector growth. The construction sector, a major employer in the country, has resumed hiring, though not yet at levels sufficient to offset the job losses suffered during the crisis years.
Meanwhile, real estate activities, including residential development, grew by 4.2% in the second quarter, bringing total growth for the first six months to 3.6% compared to the same period in 2023.
The easing of construction material prices, especially for imported goods, and the softening of interest rates are aiding both sectors in regaining strength. However, full recovery may be constrained by the government’s less expansionary fiscal policy under the current International Monetary Fund program, which emphasizes reducing the budget deficit.
