Expects Conditions to Persist Longer
Participants in the construction sector remain optimistic about the rising opportunities for tenders for new development projects in the country. This optimism stems from the economy being equipped with both foreign currency and rupee liquidity.
However, they also noted the intense competition in the market and the easing prices for construction materials, which could reactivate more activities in a sector that experienced a prolonged decline over the past two years.
“Most respondents were confident that the increasing trend in tender opportunities will continue in the upcoming months,” stated the construction sector Purchasing Managers’ Index (PMI) for April.
“Moreover, the participatory firms widely highlighted the intense competition in the market,” the Central Bank’s statement added.
The PMI for construction sector activities contracted due to seasonality, as the long holidays for the New Year temporarily closed construction sites for extended periods.
The manufacturing and services sector PMI released in the middle of last month for April hinted at what could be expected for the construction sector, as these PMIs also weakened compared to March for the same reasons.
The construction sector has been in continual expansion for many months due to the availability of affordable credit, softening prices of many construction materials, and the ready availability of materials due to excess liquidity levels in the domestic foreign exchange market.
The Sri Lankan economy shifted gears for a fresh growth cycle starting from the second half of last year, thanks to normalizing monetary policy and increased foreign inflows from tourism and remittances.
However, fiscal policy, a key driver of the country’s construction sector, has been extremely constrained.
The construction sector and the broader economy could have turned a corner during 2022 if not for the Central Bank and government missteps in handling monetary and fiscal policies, influenced by the International Monetary Fund.
The construction sector participants remain optimistic about the next three months’ performance, “mainly due to the increase in new construction projects,” the statement said.
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