A

1.      Recovery and resurgence of the construction sector

·      The most recent report by the CBSL indicates that as of November 2023, the construction sector PMI remains below 50 points at 44.3, due low level of new projects and decline in work related to ongoing projects

·      But as per the report, there is expectation that there will be an acceleration in awarding new projects, especially government funded projects in the 1H 2024.

·      Further analysis also shows that policy rates have come down around 700bps from peak, which should result in a surge of demand and reduction in cost of financing.

B

2.      Political Stability

The Sri Lankan economy’s political stability is a crucial pillar for the country’s future, in 2024 political stability will be defined by the 2024 presidential elections due before September

·      Sri Lanka which is currently on the IMF’s extended fund facility program needs to fulfil many conditions which includes raising government revenues, the recent tax hikes that followed have added to the cost-of-living crisis in the country, which can result in a potential change of government which could put existing policies at risk.

N:B ; The risk of the country going into political instability will be a huge blow to the construction sector which is recovering as it may discourage investor and funding.

C

3.      Stabilization of inflation

The CBSL recently announced that inflation would stabilize at around 5%

This would be a good indicator for the construction sector which was suffering from high input costs

·      Reducing finance costs on the other hand is expected to boost consumer and investor demand within the construction sector space.

·      VAT hike to 18% from 15% will add to costs, and is expected to have negative pressure on construction projects.

D

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E

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