By Moaaz Manzoor

Pakistan's construction sector grew by 5.73% in FY2025-26, making it one of the strongest-performing segments of the economy, according to the Pakistan Economic Survey 2025-26 released by the Ministry of Finance. The sector played a key role in supporting industrial activity, infrastructure development, and employment generation,

The survey highlights the sector's recovery as an important contributor to overall economic growth during the fiscal year, reflecting increased activity in infrastructure projects, housing development and private-sector investment.

According to the survey, construction growth accelerated significantly from 1.14% recorded in the previous fiscal year. The improvement was supported by better macroeconomic conditions, rising investment activity and increased demand for construction-related materials and services.

The Ministry of Finance notes that construction remains a strategically important sector because of its strong linkages with more than 40 allied industries, including cement, steel, glass, ceramics, electrical equipment, paints, transport and engineering products.

The survey indicates that stronger construction activity boosted broader industrial recovery during FY2025-26. The industrial sector expanded by 3.51%, while large-scale manufacturing registered growth of 6.11%.

According to the report, increased construction activity generated demand for a wide range of industrial inputs, supporting production across multiple manufacturing sectors.

The cement industry benefited from higher construction demand during the fiscal year. The survey notes that domestic cement dispatches increased as infrastructure development and private construction activities gained momentum.

Demand for steel products, electrical equipment and construction materials also strengthened, contributing to growth in related manufacturing industries.

The survey highlights that construction activity was supported by improving macroeconomic stability. Inflation moderated significantly compared with previous years, while exchange rate stability reduced uncertainty for investors and developers.

According to the Ministry of Finance, these improvements helped create a more predictable environment for investment decisions and long-term projects.

Private investment, which increased by 12.8% during FY2025-26, also supported construction sector growth. Rising investment activity typically drives higher  spending on industrial facilities, commercial projects, housing schemes and infrastructure development.

The survey notes that construction plays an important role in capital formation and economic development by creating productive assets that support future growth.

Housing continued to remain a significant component of construction activity during the fiscal year. Population growth, urbanization and rising demand for residential units continued  to drive investment in housing projects across various regions of the country.

According to the report, Pakistan's population reached approximately 252 million during FY2025-26, increasing pressure on housing, transport networks and urban infrastructure.

The survey also points to the role of public-sector development projects in supporting construction activity. Government investment in roads, transport infrastructure, water projects, energy facilities and public buildings contributed to sectoral growth.

Construction activity remained particularly important for employment generation. The sector provides jobs for skilled, semi-skilled and unskilled workers while creating economic opportunities for contractors, suppliers, transporters and service providers.

The Ministry of Finance notes that construction has one of the highest employment multipliers in the economy because of its extensive supply chain linkages.

The survey further highlights the sector's contribution to economic recovery by stimulating demand for materials, equipment and professional services.

According to the report, continued improvements in economic conditions are expected to support construction activity in the coming years, particularly as investment and infrastructure development expand.

The survey notes that strengthening infrastructure remains critical for enhancing productivity, facilitating trade and supporting long-term economic growth.

With growth accelerating to 5.73% in FY2025-26, the construction sector emerged as a major contributor to industrial expansion and investment activity, reinforcing its role as a key driver of economic development and employment generation in Pakistan.

Credit: INP-WealthPk