Syria in a state of disarray

14 July 2015

Approaching its fifth year, the Syrian conflict shows no signs of slowing down and, with the international community increasingly divided over the legitimacy of all parties, trade relations have reached a halt with a country that had historically secluded its economy from the developing world.

Desperate times

In what is becoming a desperate bid to consolidate its power, Bashar al-Assad’s regime will continue to focus its spending on military and public sector wages.

Looking at the budget for 2015, the government projects high oil revenues, although nothing near the 25 per cent the sector contributed to GDP prior to 2011.

Many of Syria’s oil refineries have either been destroyed or are under the control of Islamic State in Iraq and Syria (Isis) militants. This has left the country heavily dependent on revenues from its two mobile phone companies.

In January 2015, the cabinet approved the restructure of both firms, but this seems to have now been abandoned. Instead, the government has increased charges for mobile phone and internet usage in line with estimates that such a move will raise an additional $47m for the state coffers.

Damascus aims to improve efforts to collect overdue and unpaid taxes, but as war continues to rip through most parts of the country and with many administrative bodies on their knees, this is proving to be impossible.

GDP is estimated to have contracted by more than 50 per cent since the start of the conflict, and more than half of the labour force has become unemployed. The war has also brought imports from Iraq almost to a halt. Iraqi goods flowing into and through Syria made up 15-20 per cent of total imports in 2010, but are now negligible. This has affected food supply, contributing to an uptick in food inflation.

According to estimates by the Syrian Centre for Policy Research, the country’s GDP decreased by 3.4 per cent in 2011, 21.8 per cent in 2012, 22.5 per cent in 2013, and more than 23 per cent in 2014, when it reached barely $35bn.

Credible information

These are only estimates though; it has become difficult to obtain credible and accurate information regarding GDP growth, fiscal and trade deficits or any other economic indicators.

Although the regime continues to rely on financial support from Iran and Russia, Assad will be keeping a close eye on the impact of falling oil prices and ongoing nuclear talks between Tehran and Washington.

The UN forecasts that at an annual growth rate of 5 per cent, it will take nearly 30 years to restore Syria’s GDP to pre-war, 2010 values. Numerous UN reports have compared the economic meltdown in Syria to the despair faced by many European countries following World War Two.

Syria now has to deal with a dwindling labour force, with millions of refugees scattered across the region. According to the UN’s agency for refugees, UNHRA, there are currently 3.9 million registered displaced Syrians worldwide. And despite a $3.6m gap in required funding, the numbers keep growing as the regime and opposition groups continue to turn major cities and towns into unlivable warzones.

Lebanon is now home to more than 1.5 million Syrian refugees, with many more travelling across the volatile border every day for work. Turkey also has more than 1.7 million displaced Syrians, with many making their way to Istanbul in a bid to enter the European Union.

Overall Syria is in a state of disarray, with the war stopping any sort of economic activity that can be monitored. It is difficult to assess the extent of the damage or even project how long the recovery period will be once the war finishes. When the fighting does end, it will be a long time before Syria finds its feet again.

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