The Maldives construction sector continues to face significant challenges, as rising input prices and stagnant output prices hinder growth. According to the Maldives Monetary Authority’s Quarterly Business Survey for Q4-2024, the sector recorded a contraction in activity, with several key indicators pointing towards persistent difficulties.
The volume of construction activity index fell by 26 points to -35 during the fourth quarter of 2024, while the volume of orders received dropped further, with 53 per cent of surveyed businesses reporting a decline. These figures reflect ongoing struggles within the sector to secure new projects and maintain momentum.
One of the most notable pressures comes from input costs. The input prices index surged by 21 points to 69, indicating that construction companies are grappling with rising material and operational expenses. However, despite this cost increase, the prices charged on average by these companies have remained largely unchanged, with 90 per cent of businesses reporting no variation compared to the previous quarter. This mismatch between escalating costs and stagnant revenue streams has created a precarious financial environment for many firms, making it difficult to invest in growth or expand operations.
Employment trends in the construction sector also paint a concerning picture. The number of employees index decreased by 25 points to -24 in Q4-2024, highlighting a reduction in workforce as companies struggle to sustain operations. Although wages and labour costs per employee remain in positive territory, the index’s drop to 6 suggests a slowing pace of wage growth amidst the sector’s broader contraction.
Looking ahead, the outlook for the construction sector remains mixed. While the expected volume of activity index rose by 18 points to 30, indicating some optimism, the expected volume of orders received turned negative, dropping by 31 points to -10. Additionally, the expected employment index plunged to -13, reflecting concerns over future hiring.
The sector’s financial health remains fragile, as evidenced by the financial situation index, which, although improved, stood at -24. Businesses also anticipate continued high costs, with the expected input prices index at 48 for Q1-2025, further underscoring the challenges in achieving profitability.
For the Maldives, where infrastructure development plays a crucial role in economic diversification and long-term growth, these challenges in the construction sector could have far-reaching implications. Addressing issues such as rising input costs and limited pricing power will be critical to ensuring the sector’s recovery. Stakeholders might consider exploring cost-sharing mechanisms, incentivising innovation in construction practices, and supporting credit access to stabilise the industry.
The ongoing struggles of the construction sector serve as a reminder of the delicate balance required to navigate economic growth amidst rising costs and uncertain market conditions.
