Sri Lanka Construction Sector: Strong Recovery Amidst Labor Shortages 📈

• Overall Growth: The sector recorded a strong 12.2% growth in Q3 2025. The Total Activity Index (PMI) reached 66.2 in November 2025, signaling a robust revival after years of decline (2019-2023). • Key Drivers: Recovery is fueled by the resumption of stalled infrastructure projects, government capital expenditure at ~4% of GDP, and rising demand in residential and tourism-related construction. • Cost Dynamics: A notable reduction in raw material prices from 2022 peaks has provided relief, though savings on items like electrical components are not yet fully passed to consumers. • Labor Crisis: The workforce has shrunk from 600,000 pre-2019 to approximately 350,000 today. Brain drain and youth preference for gig-economy roles (e.g., Uber, PickMe) have created a severe dearth of both skilled and unskilled workers. • Future Outlook: To meet post-Ditwah reconstruction demand, the industry is seeking government approval to hire foreign labor from India and Bangladesh to offset the local labor exodus and aging population.