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The construction industry in Pakistan is expected to experience a significant contraction of 5.2% in the current year, following a decline of 2.8% in 2022. The economic strains, political uncertainties, and financial instability within the country have contributed to this projected decline in the construction sector.

Pakistan’s substantial current account deficit, high levels of public debt, and diminished foreign exchange reserves are anticipated to put considerable pressure on the construction industry. Additionally, the economy is grappling with elevated inflation rates and soaring energy and construction material costs, further dampening construction activity.

To secure a .1 billion tranche of IMF funding, the Pakistani government has tightened its FY2023 budget. This has led to spending cuts, increased tax base, and lifted restrictions on imports. Pakistan’s economic woes have been compounded by soaring rates of inflation, with annual consumer price inflation rising to 37.97% in May 2023.

The industry’s growth in the forecast period will be supported by investments in transport, electricity, housing, telecommunication, and industrial infrastructure projects. The power demand in Pakistan is estimated to rise from 26.9GW in FY2021/2022 to 44.7GW in FY2030/2021, attracting public and private sector investments in the electricity sector.

The government estimates that an investment of approximately PKR10.5 trillion ( billion) will be required to increase the total installed power capacity from 41GW currently to 65GW by 2031. The World Bank has recently approved financing of over PKR573.5 billion ( billion) to support infrastructure development in the energy sector.

In summary, the Pakistan construction industry is facing challenges due to economic strains, inflation rates, and financial instability. However, investments in infrastructure projects, especially in the electricity sector, are expected to drive growth in the coming years.

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