As a result of Syria’s five-year-long conflict, the country has suffered great humanitarian and economic losses. Assad’s war on the Syrian people has set the country back decades in terms of economic, social, and human development. The Atlantic Council provides a summary of some of the losses taken by a working IMF report: “Syria’s Conflict Economy.”
Before the Conflict
In the early 2000s, Syria was attempting gradual economic liberalization by taking several concrete steps: strengthening banking supervision and regulation, modernizing the monetary framework, developing a government debt market, strengthening and streamlining revenue administration, and improving public financial management, all with IMF technical assistance. The economy was stable.
However, there were indicators of underlying problems. Poverty and unemployment were beginning to rise during the latter half of the 2000s, and the disparity between rural and urban poverty was large: the economic liberalization efforts did not benefit rural populations, and Syria’s “Doing Business Indicators” were poor: Syria performed poorly on access to finance, contract enforcement and registering property, in addition to problems with corruption, an inadequately educated workforce, and electricity. Political reforms were also slow, and frictions began to arise after Bashar Assad’s presidency began in 2000.
A Humanitarian Disaster
The Syrian conflict is considered the “worst humanitarian crisis of our time.” The Syrian population has shrunk by an estimated 20% with 250,000 people dead and another 800,000 injured, according to official UN figures. 4.7 million Refugees have fled Syria, and there are another 7.6 million internally displaced Syrians.
Unemployment and poverty is widespread: 60% of the labor force is unemployed, three million people having lost their jobs from the conflict. Poverty is estimated to be at 83% of the population, and 2.1 million homes have been destroyed.
Children are one of the most heavily affected groups in the conflict. About two million Syrian children out of school, and one-quarter of schools in Syria are no longer operational as a result of the conflict. There have been 3.7 million Syrian children who were born as refugees since the start of the conflict.
Life expectancy has declined by 20 years due to the conflict. Vaccination rates for children have fallen to 50-70% from 99-100% before the conflict. There is little food security, and there is a struggle for consistent access to water and electricity.
Relief organizations lack the funds to support the 13.5 million people in need of aid and face challenges in providing aid to all those besieged in Syria by the Assad regime and its allies. 4.6 million people are in hard to access areas, and the Assad regime has refused to authorize NGOs to distribute aid in some areas.
A Destroyed Economy
The economy has contracted in real terms by 57 percent since 2010. Output losses and physical infrastructure destruction are concentrated in the oil, manufacturing, transportation, and construction sectors:
Crude oil production in areas under regime control has fallen to 9,000 barrels per day (b/p) in 2014 from 386,000 b/p in 2010—a 98% decline in oil GDP.
Agricultural production accounted for one-fifth of Syria’s economy before the conflict and has since experienced significant losses. Some of the more fertile areas—such as the Aleppo and Raqqa governorates, which accounted for half of Syria’s agricultural production—have been burnt down by Assad barrel bombs and Russian airstrikes. Wheat production is 20% lower than in 2010; livestock production has declined by 30% in cattle, 40% in sheep and goats, and 50% in poultry. Livestock accounted for 20% of the rural labor force, and sheep, goats, and chicken were important export commodities.
Manufacturing has been heavily affected by lack of input materials, limited access to trade finance, and infrastructure destruction. Many of the manufacturing centers of Syria were located in Aleppo, Homs, and the suburbs of Damascus—some of the most heavily affected areas of the conflict which saw heavy bombardment by Assad and his allies since 2011. A lot of Syrian business has relocated to Turkey, accounting for 26% of new businesses registered in Turkey.
In the external sector, the conflict and international trade embargos led to a 2015 current account deficit of 13% of GDP, up from 0.6% of GDP in 2010. Most of this deterioration is coming from the collapse in oil exports and tourism. Exports decreased by 70% between 2010-15 due to the international embargo, and imports declined by almost 40%.
The IMF speculates that there has been major capital flight while capital inflows have been limited, implying that (1) Syria has received little to no private financial and capital flows, including no investment; (2) Syria is no longer servicing its debt; and (3) it is no longer allowed any repatriation of any profits. The only assumed financial assistance the Assad regime is gaining is credit lines from the Iranian government.
Lastly, international reserves have been estimated to have dropped to $1 billion at the end of 2015, and the exchange rate has sharply depreciated as well, having lost an estimated 85% of its value against the dollar.
A Scattered Fiscal System
The fiscal deficit is estimated to have risen to over 20% of GDP in 2015, up from 8% of GDP in 2010. While Iranian credit finances some of Assad’s debt, the rest is covered domestically by the Central Bank and commercial banks. Public debt was above 100% of GDP by the end 2015, up from 31% of GDP at the end of 2009.
Foreign currency and raw material shortages have heavily damaged the Syrian people seeing a cut back on wheat, bread, sugar, fuel, water, and electricity subsidies. The Assad regime has reached agreements with ISIS and the Kurds to buy Syrian crude oil and gas in an effort to make itself some more money in addition to the Iranian support it receives.
The financial sector is in disarray. Syrian banks are largely isolated from the international market—three-quarters of the banking market largely shut off from international payment and settlement systems—and a majority of international assets have been frozen. Non-performing loans are a large problem, as well, having increased to 35% by September 2013, up from only 4% in 2010.
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