Sri Lanka’s construction sector confident of resilience in post Covid 19 environment
ICRA Lanka in their Construction Sector Outlook has reportedly stated that Sri Lanka’s construction sector is expected to demonstrate resilience compared to other economic sectors in the country.
The report has made this observation in the post-confinement period based on data collected as of end May 2020.
“We base our assessment on four key reasons; The construction projects are expected to gradually pickup pace and broadly stay within the original timelines, Current domestic raw material production level and inventories are expected to sustain ongoing projects, Construction companies are largely insulated from the adverse effect of raw material price volatility due to currency depreciation and availability of funding support,” the report has stated.
“However, ICRA Lanka would also like to highlight the fact that the effect of the four reasons mentioned above can be undermined by the following deterrents; new order inflows would be muted in the medium term, Moderation in profitability is expected due to the lockdown.
“Sri Lanka’s economic activities had slowed down during Q1 CY2020 and the economy is expected to contract by 4.5% in Q2 as per ICRA Lanka’s assessment, amidst the outbreak of the COVID-19 virus.
Sri Lankan government has taken containment measures affecting the entire country for several weeks and construction activities have been stalled to an extent during this period. At the business entity levels, the ability of some construction companies to withstand the effects of COVID-19 pandemic, will depend on several factors such as duration and severity of the pandemic, parent company support, GOSL’s policies, availability of additional capital buffers etc.
“Notwithstanding the relief package introduced by the GoSL, ICRA Lanka expects the disruption to have some impact on the operating income, profitability, and liquidity position of the construction companies in the short term.
“However, this sector is expected to demonstrate resilience compared with other economic sectors of Sri Lanka. After the spread of COVID-19, the Government has imposed a set of import restrictions on selected items effective for 3 months from April 16, 2020.
“Given the deteriorating external position of Sri Lanka, it is expected that GOSL may be compelled to extend the import restrictions further following the expiration dates. Nevertheless, most imports for the construction industry have alternatives in Sri Lanka,” the report has stated.
OSL take:
Sri Lanka’s construction industry that was in full force prior to the Covid 19 closure has resumed once again. The country’s development programme as well as the economic expansion showed a buoyant growth in Sri Lanka’s construction industry. However, the resumption of the construction work as well as overall economic activities in the country shows Sri Lanka’s construction industry is on the path to a full recovery. This has resulted in the expansion of opportunities in Sri Lanka’s construction industry. Also, Sri Lanka’s geographical positioning in the Indian Ocean, the ease of doing business environment, the many trade agreements as well as trade concessions enjoyed by the country will undoubtedly help the country regain its position as a business hub in the South Asian region.
| Article Code : | VBS/AT/20200617/Z_4 |