Construction businesses reported weaker activity during the first quarter of 2026, with declining orders, tighter access to credit and rising costs weighing on the sector’s near-term outlook.
The Maldives Monetary Authority’s Quarterly Business Survey showed that the index measuring construction activity fell by 50 points from the previous quarter to minus one. The index for new orders declined by 43 points to zero, indicating that the share of businesses reporting an increase in contracts was equal to those reporting a decline.
Construction was the only sector covered by the survey to record an overall weakening in activity during the quarter. Businesses also became less optimistic about the second quarter, with expected construction activity falling to minus nine and anticipated orders dropping to minus 12.
The slowdown has begun to affect labour expectations. Although the number of employees index remained positive at 14 during the first quarter, it declined by 19 points. Expectations for employment in the following quarter turned negative at minus five.
Financial pressure also increased across the sector. The index measuring companies’ financial position fell from 15 to minus 13, while the overall business situation index dropped from 20 to minus 18.
Access to finance remained a major constraint. The credit access index declined further to minus 48 during the quarter, with 48 per cent of construction businesses reporting tighter conditions. For the second quarter, 51 per cent expect credit access to tighten, pushing the expected index to minus 51.
Cost pressures remained elevated despite the slowdown in activity. The input price index was unchanged at 54, while the index for prices charged by construction businesses rose by 33 points to 50. This indicates that more firms increased their prices as they sought to recover higher operating costs.
Businesses expect input prices, excluding wages, to rise by 29 per cent in 2026, compared with a 13 per cent increase in 2025. Selling prices are expected to rise by 14 per cent this year, up from five per cent last year, while wages are forecast to increase by 13 per cent.
Half of the surveyed firms said they were passing some of their additional costs to customers. A further 22 per cent said they were transferring most of the increase, while six per cent said all additional costs were being passed on.
Energy and material prices were identified as the main drivers of higher costs, accounting for 31 per cent and 30 per cent of responses, respectively. Freight and shipping costs accounted for another 14 per cent.
Supply chain disruption has also become a significant concern. Sixty-one per cent of construction businesses said they had been severely affected by disruption linked to the closure of the Strait of Hormuz, while a further 33 per cent reported a moderate or mild impact.
Despite the weaker activity, capital expenditure remained positive during the first quarter. However, expectations for future investment moderated sharply, with the capital expenditure outlook dropping by 30 points to 15.
The results point to a difficult operating environment in which slowing orders and restricted financing are being accompanied by higher material, energy and transport costs. This combination could place further pressure on project timelines, contractor margins and construction prices during the remainder of the year.
