Area: 185,180 sq. km
Population: 17,952,000 (2014, est.)
GDP: USD 60.0bn (2014, est.)
Exports: USD 2.031bn (2014, est.)
Imports: USD 7.657bn (2014, est.)
Currency: Syrian Pound (SYP)
Exchange rate: 1 USD = 219.96 SYP (01/2016)
Economic Structure and Development:
Syria was a middle-income, developing Country with an economic based on agriculture, oil, industry, and tourism before the outbreak of the civil war. The government passed a law in 2006 which permits the operation of private money exchange companies. Prior to that, it states centralised policy based on socialist principles dominated the economy and hampered diversification, liberalisation and privatisation. Damascus has implemented modest economic reforms in recent years, including: cutting lending interest rates; opening private banks; consolidating all of the multiple exchange rates; raising prices on some subsidised items, most notably diesel, other oil derivate is, and fertilisers; and establishing in the Damascus Stock Exchange, Which began operations in 2009. The government aim to attract new investment in the tourism, natural gas, and service sectors to diversify its economy and reduce the dependence on oil and agriculture. Furthermore, it has begun to implement the economic reforms aimed at liberalising most markets, but reform thus far has been slow and ad hoc. For ideological reasons, the privatisation of government enterprises has not been widespread and, initially, has only been implemented for port operations, power generation, and air transport. Most sectors have been open to private investment except for a cotton mills, land telecommunications, and bottled water. To attract investment entries XS two credits, from 2007 the government allowed investors to receive lawns and other credit instruments from foreign banks and to repay the loans and any acute interest through local banks using project proceeds. As of February 2008, the government permitted investors to receive lawns in foreign currencies from local private banks to finance capital investment.
Thus, on the one hand the reform policy of the government has shown sound success: The GDP growth was relatively high over the last decade, at 4.45%; low public deficit and low public depth have raised hopes that the Syrian economy could overcome its institutional imbalances and re-integrate into the global economy. In addition, the government investments in the provision of Health and education infrastructure in order to tackle the health and labour challenges the population was facing. However, the quality and performance of the provided services is still lagging, although the quantity increased.
On the other hand, although the government aim to implement reforms to confront the over-institutionalisation, the institutional bottleneck, the widespread lack of education, the high population growth rate, and an insufficient standard of living, the economy has shrunk since 2010. The level of poverty has increased because the majority of the population have not benefited from the implemented reform policy, whereas a small elite and the patronage circles around the President and his family have built up a “shadow economy” through corruption and nepotism. At large, the macro economic structure of the economy still remains the same in comparison to the prior-reform era and has been dominated by a large and poorly performing public sector, declining rates of oil production, a widening non-oil deficit, wide scale corruption, weak financial and capital markets, and high rates of unemployment (2010: 10.6%) tied to a high population growth rate (2010: 2.5%).as a result of an inefficient and corrupt centralised economy, Syria has had low rates of investment at all levels of industrial and agricultural productivity. The IMF project it real GDP growth at 5.9% in 2009, up from close to 4.5% in 2008. The two main pillars of the Syrian economy used to be agriculture and oil, which together accounted for about half of GDP. Agriculture, for instance, accounted for about 25% of GDP and applied 25% of the total labour force. However, poor climatic conditions and severe drought badly affected the sector, thus reducing its share in the economy to about 17% of GDP in 2008, down from 20.4% in 2007. In a more positive development, higher crude oil prices counter declining on production and lead to higher budgetary and export receipts. Thus, the economic development in the last decade has led to a “low equilibrium” development, correct arise by poor productivity, large amounts of subsidies, and increasing wealth gap, high levels of corruption, and the large informal sector. At the dawn of the Syrian uprising the gap between the wealthy small state elite and the poor, neglected, and rather marginalised majority of the population – especially in rural Sunni and Kurdish dominated areas – has nets to the outbreak of civil demonstrations for a more economic freedom, prosperity, and future opportunities. During the last two and a half years, the Syrian economy has been devastated by the harsh consequences of the civil war and international sanctions. Between April 2011 and February 2013, the economic losses increased to USD 48.4bn, to the equivalent of 81.7% of the GDP in 2010, jumping rapidly to nearly USD 80bn by the end of 2013. Compared to the beginning of protests in mid March 2011, experts predict that the GDP will have registered a decline of 37% by the end of 2014 (having reached 19% in 2012 and 13.9point nine% in 2013). The inflation rate increased from 4.4% in 2010 to 6.6% in 2011 and surged to 68% in 2013. From 2010 to 2012, the decrease in net investment amounted to USD 12.4bn, the losses in mining in tourism sector to USD 8.9bn, and the destruction of buildings, infrastructure and facilities are estimated to amount of USD 20.8bn. The most important sectors, such as mining, internal trades, transportation and manufacturing, declined from 53% in 2010 to 39% in 2012, and tourism sector had come to a complete standstill by 2013.
In 2011, the order sector has reduced by 47% due to sanctions and book withdrawal of foreign petroleum companies, whereas the prices in oil derivatives surged by 200% between 2010 and 2012. In January 2014, Syria’s oil sector nearly halted (production of 380,000 bpd before the conflict started, only 20,000 bpd in November 2013). Refineries, mostly located in eastern and north-eastern Syria, have fallen under the control of Kurdish opposition, militants and tribes, whereas the oil sector provided approximately 20% of the government’s revenues and around 35% of its expert receipts before the conflict started. The agriculture sector, with 18% share of GDP in 2010, has halved due to the conflict, whereby the industrial sector suffered even more: 75% of the production facilities in Aleppo and Damascus are no longer under operation, and stocks have lost 86% of their value since the beginning of the uprising. The losses of the industrial sector have amounted to about USD 2.2bn: USD 500m for the public sector and the remaining use the 1.7bn for the private sector, which means a collapse of the micro economy due to the closure of more than 100,000 small workshops around the country.
Society has been affected grammatically by the consequences of the uprisings. As mentioned, more than 120,000 people have been killed, and the population growth rate has sunk from 2.5% in 2010 to minus 2.5% in 2012. The number of poor people has increased by 3.1m, of form 1.5m have fallen below the poverty line. According to estimates, by the end of 2013 69% of the Syrian population were unemployed. Half of the population has no regular access to clean water, two thirds are suffering from supply bottlenecks, one third rely on external aid, 1 million people are suffering from malnutrition, and 9.3m are in acute need of help. In the event that the crisis persists until 2015, unemployment rates are expected to surpass the current 70%, and 44% of the population may be living below the poverty line. Since 2011, bread prices have risen by 500% after the wheat harvest dropped by 50% in 2013 to 1.5m tons. By March 2013, more than 3800 schools were either partly or completely destroyed, with costs of more than USD 560m. To date, the government has not found a solution to slow the deterioration of the Syrian economy. This has led to spending on public wages and recruitment instead of public investment, to a lack of correlation between local administrative entities, and no support for IDPs and refugees. The government policy to reduce public investment expenditure in favour of current expenditure, which meant a decrease in public investment from 8.8% of GDP in 2010 to 3.5% of GDP in 2012, increase the government budget deficit from 3.8% in 2010 to 10.1% in 2012 and the total public debt from 23% in 2010 to 40% in 2012. The deficit in the balance of payments amounted to USD 16.6bn in 2013. This deficit has been financed my net foreign assets, which declined from approximately USD 18bn in 2010 to USD 1.8bn by the end of 2013. Therefore, reconstruction funding with the volume of at least USD 45bn will be needed after the end of the conflict. In addition, more than 60% of the Syrian business people have fled the country. In consequence, the government has increased spending on subsidies from 37% in 2012 to 45% of the total USD 9.26bn budget in 2014 in order to tackle the growing undersupply in Syrian society.
The country is rapidly losing its economic, human and cultural assets and potential. Syria, in the past well known for its multi-ethnic, multi-confessional heterogeneous society, is splintering into several groups, divided between confessions and ethnic groups, between the opposition and the regime-loyalists, and between militias supported by rival foreign powers such as Iran and Saudi Arabia. The unity of the country is on the brink: the international community is acting in disharmony and without a coherent strategy to solve the Syrian crisis in the long run. Russia and Iran are still supporting the Assad regime and the state military has gained new momentum on the battlefield in recent months. To put it in a nutshell, Syria is suffering from an existential humanitarian, political and economic crisis; the outcome of this crisis remains to be seen. However, the likelihood of an overthrow of Bashar Al-Assad in the foreseeable future seems to be helpful.
Besides the political and societal problems the country is facing, the deteriorating economy has caused manifold future obstacles for Syria. No regular economic system is in existence yet. Instead, a so called “war economy” has emerged: Initially, a black market economy served as provider of livelihood needs without the control of government. Incrementally, rebel groups gained profits from the black market and became involved in smuggling networks. Today, much like the revolution itself, the war economy has become highly militarised and is now controlled by many of the armed groups on the ground. In the meantime, rural areas have been fragmented into entities ruled by warlords, who are fighting each other and have turned a blind eye to ousting al-Assad in order to capitalise on the critical situation.
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