Syria's Economic Collapse

Article Summary
A study reveals $40 billion in economic losses as a result of Syria's war.

A Syrian academic study has shown that the total losses of the war up until the first quarter of this year amounted to $85 billion, which means that the losses of this first quarter are nearly equal to those of last year. Simultaneously, the prices of hard currencies, including the dollar, have tripled in comparison to the initial prices recorded three years ago. Thus, the government was driven to lay out a rationed import-export policy, limiting the role of the private sector.

According to a study conducted by the Syrian Center for Policy Research (SCPR) in Damascus and published by Aliqtisadi website yesterday [June 13], the losses inflicted on the Syrian economy as a result of the war until the first quarter of this year amount to $84.4 billion, whereas the total losses by the end of 2012 were $48.4 billion according to the current prices, which put the losses of the first quarter of this year at around $40 billion.

The study showed that some of the losses included: $8 billion in lost GDP, $13 billion in lost capital and around $7 billion in military expenditures. The same center pointed out in a previous study that the rate of military expenditures increased by 9% from 2011 to 2012.

The study also highlighted that the general internal and external debt to GDP ratio increased from 48% in 2012 to 65% during the first quarter of this year. The external debt constituted around 49% of the GDP during the first four months of this year.

The SCPR report, entitled “Socioeconomic Roots and Impact of the Syrian Crisis,” estimated that 12% of Syrians live under the poverty line, while around 33.6% or one third of the Syrian population live under the upper poverty line. The report also revealed that poverty was more concentrated in rural areas. Additionally, the number of poor people has increased by 3.1 million persons, of which 1.5 million are expected to have fallen below the lower poverty line.

For its part, the daily Al-Watan affirmed that the state has limited import activities to the public sector in an attempt to preserve Syria’s foreign currency reserves. The newspaper reported a Syrian official as saying that the government has set three lists — red, yellow and green — for importing goods.

The red list encompasses 11 essential items, of which the government will be the sole supplier. The new laws entitle traders to import these goods through frozen accounts outside the country and not through the government, as was the case before.

The decision came following controversy, particularly after the government announced more than once its concerns about traders manipulating exchange rates as they buy the state’s dollar for half the price of the black market, if not less.

According to the same source, the yellow list includes the goods that the private sector is entitled to import. The government will fund traders who wish to import the goods if need be. Yet, they will be subject to fierce competition since the government will import these goods as well.

The green list, which includes clothes, electronics and a wide array of luxury goods, will be restricted to the private sector, where traders will fund the imports without government intervention.

Following the directives of Prime Minister Wael al-Halqi, the government strives to find new ways to benefit from frozen Syrian accounts outside the country. Therefore, it is using these accounts to fund the commercial needs of the private sector. This attempt is favored by the fact that the sanctions on Syria do not include foodstuffs and medicines, leaving the door open for the government to fulfill the needs of the Syrian citizens through these frozen accounts and allowing it to preserve as much as possible of the state’s cash reserve.

It is worth mentioning that the government attempted a similar strategy in the spring of 2011, only to quickly renege on the decision following the complaints of traders and businessmen.

Found in: syrian civil war, syrian crisis, syrian, economic, business

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