Construction sector’s recovery and challenges going forward

THE construction sector - which was the key driver of the nation's economic growth during 2010 to 2015, particularly during the presidency of Mahinda Rajapaksa - has made a commendable recovery after having endured a series of crises - the Easter Sunday attack, COVID-19 pandemic as well as the economic catastrophe.

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The sector witnessed a strong revival in 2025, represented by a 12.2% growth during the 3rd quarter of 2025. The Sri Lanka Purchasing Managers' Index for Construction (PMI - Construction), as measured by the Total Activity Index, increased to 66.2 in November 2025. According to the PMI survey, most firms had reported improved construction activity during the month, despite Ditwah-related disruptions at the end of the month.

The construction sector experienced rapid, state-led expansion between 2010 and 2015, mainly driven by postwar infrastructure development. The sector grew significantly, often outpacing the overall national economic growth rate, with its contribution to the GDP rising from 6.7% in 2010 to 9.6% in 2014. In fact, among the South Asian region, Sri Lanka's construction industry grew faster than any other corresponding sectors, recording expansion rates between 10% and 22%. A low-interest rate environment, combined with urban development legislation, stimulated both public and private sector projects during the sunny days for the construction sector a decade ago.