Construction sector expands 8.5% in 2Q bringing 1H growth to 9.6% 

• Sector shares 7.2% of the economy and 11.7% including real estate activities
• Sector cites continuous availability of large scale infrastructure projects since recently
• Govt. allocated Rs.1.3tn to public expenditure for 2025
• Despite concerns of under-spending, gradual roll out of public sector projects seen   

The local construction sector grew by a robust 8.5 percent in the three months ended in June 2025 from the same period in 2024, extending its nearly two-year long growth which began in the final quarter of 2023. 

This is in a sign that the sector appears to have entered a sustained growth path helping once again generate jobs while building a renaissance in the entire economy which Sri Lanka had a decade ago.

The sector suffered six quarters of prolonged decline since the second quarter of 2022. This was due to the unprecedented economic crisis which brought the work in both public and private sector projects to a standstill. This was caused by the lack of materials, cost overruns caused by runaway inflation, lack of funds due to tight monetary conditions and the challenge in finding people to work in the sites as many left the country seeking employment and better living standards.

Despite a slowing from the 10.7 percent growth seen in the first three months of the year, the second quarter growth took the total growth in the sector in the first half of the year to a solid 9.6 percent from the same period last year.

This was as twice as fast as the 4.8 percent growth in the overall economy for the same period and thus reflects how significant the role played by the construction sector in Sri Lanka overall economy is.

This was amply seen in the rapid growth in the overall economy in the five years since the end of the war, made possible by the State led infrastructure drive which helped to rebuild the country.  This slowed significantly down from 2015 due to the suspension of projects and also the tight fiscal conditions causing the economic growth to weaken substantially before ending with a negative growth in 2019.

However, in a recent speech made by the Central Bank Governor, Dr. Nandalal Weerasinghe, he said the construction sector could not solely rely on the State funded projects for its sustenance.

Nevertheless the government allocated Rs.1.3 trillion for public expenditure from the 2025 budget - the highest for any year – but project execution and spending are still at a nascent stage.  

While under-spending on public investments has been a perennial issue in Sri Lanka, industry has called for some urgency in getting the much needed infrastructure projects off the ground.

As of late, the construction sector participants have cited the increased availability of large projects, especially in the area of road infrastructure in a sign that the government has ramped up spending their allocated money.

After the long delays caused for several reasons, President Anura Kumara Dissanayake launched the construction of the Central Expressway section from Kadawatha to Mirigama on Wednesday, scheduled to be over by mid-2028.

The construction sector accounts for a substantial 7.2 percent share in the overall economy by the end of June 2025.

Together with real estate activities which include ownership of dwelling, the sector accounted for an outsize 11.7 percent of the economy.