Dardari: Syria crisis taking toll on Lebanon’s economy

Article Summary
As the Syrian crisis drags on, its effects on Lebanon’s economy continue to increase.

The economic growth rate in Lebanon would not have exceeded 1% in 2013, “even if a single Syrian refugee had not been displaced to Lebanon, because of the strong economic correlation between the two countries.”

Abdullah Dardari, a senior economist and the director of the Economic Development and Globalization Division (EDGD) at the UN Economic and Social Commission for West Asia (ESCWA), explained to As-Safir, “The impact of the Syrian crisis on Lebanon does not reside in the increasing number of displaced Syrians but rather in the successive losses inflicted on tourism, economic transactions, investments and exports.” Dardari called to mind that the “drop of the economic growth rate at the beginning of 2011 — when the Syrian crisis erupted — came in tandem with a slump in tourism and commercial traffic. In addition, there were decisions prohibiting Gulf citizens from coming to Lebanon. This all took place prior to the flow of large numbers of displaced Syrians into Lebanon.”

The Syrian crisis is taking a toll on Lebanon. The majority of economic indexes are dropping, coupled with negative expectations for 2014-15, according to a UN report issued last week titled “World Economic Situations and Prospects 2014.” On Jan. 24, during a seminar held at the UN House in Beirut, Dardari and Sandra al-Saghir Senno, a consultant for economic affairs at ESCWA, discussed the report with foreign economists.

Given the crisis of displaced Syrians, the decline in the operating ratio, unemployment growing to 29% and the fall in economic growth to 1% in 2013, Dardari does not expect economic growth to exceed 2.1% in 2014-15. ... 

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“This increase in economic growth is considered good under normal circumstances. But is this level sufficient, with the increase of the population in Lebanon by 25% due to the Syrian displacement?” Dardari asked.

Required steps

Despite the fact that the report touches on the economic situation of countries without proposing solutions, Dardari spoke to As-Safir about the steps the new Lebanese government needs to take to try to limit the repercussions of the Syrian crisis as much as possible. These steps include:

  • Adopting policies that reinforce Lebanon’s economic resilience, through enhancing investment in infrastructure.
  • Creating employment opportunities.
  • Launching fiscal and monetary economic stimulus packages, to encourage Lebanese companies to hire Lebanese people.
  • Encouraging Syrian investors to invest in Lebanon, to take advantage of capital as Jordan did. In one economic complex [in Jordan] there are 370 factories funded by Syrian capital.

When it comes to the Syrian workforce flowing into Lebanon, Dardari said, “A comprehensive policy should be set up to take into consideration the needs of the Lebanese labor market and the impact of the Syrian workforce on salaries and prices. Lebanon is in desperate need of a clear vision that works in favor of its economy.”

It did not slip Dardar’s mind to mention that “at some point, the process of rebuilding Syria will be launched. At that time, there will not be any Syrian worker left in Lebanon or Jordan.” He reiterated the “necessity of taking this into consideration, given its impact on the labor market, production costs, exports and the competitiveness of both the Lebanese and Jordanian markets.”

“According to ESCWA studies, Syria will face a workforce shortage when the reconstruction process begins,” Dardari added.

Eight years back

During the seminar, Senno said that as each day of the Syrian crisis passes, the Syrian state’s losses increase by $103 million. The growth rate is pushed eight years back in time with each year the crisis continues, and as every minute of the crisis passes, Syria loses 10 million Syrian pounds ($70,000). Moreover, every minute, 300 people leave their homes, 9,000 people find themselves below the poverty line and 2,500 people are unable to buy their daily bread; 10,000 people lose their jobs every week. A 1% decrease in Syria’s growth rate is reflected in a 0.22% decrease in Lebanon’s growth rate and a 0.32% decrease in Jordan’s [growth rate]. So, if we consider that there is a 31% decrease in the growth rate in Syria, subsequently there will be a decrease of at least 7.5% in Lebanon’s growth rate.

Regarding the Syrian foreign workers and their impact on the Lebanese economy and Lebanese workers, Senno draws attention to the illegal work of these foreign workers, “whose number is hard to count, yet they significantly influence the Lebanese economy in general.”

“The effects of the Syrian crisis on Lebanon cannot be limited to one sector. In fact, all sectors are in the grip of an inevitable crisis, whether it is the tourist or trade sectors, declining investment, the banks and the financial sector, which has been able to protect itself more than any other sector,” Senno added.

In addition to unemployment, which is one of the major results of the Syrian crisis, Dardari draws attention to how dangerous the rising inflation rate is, accompanied by low growth rates. Based on the report, he expected “growth rates in Arab countries to reach more than 4.3% in 2014-15, while growth rates in West Asian countries remain less than 4%, due to the Syrian crisis. These rates are low, because a 3% growth rate is required to keep unemployment rates unchanged, before even considering other economic problems.”

In parallel, he expected “global inflation rates to reach 2.7%, with 6.1% in the Arab world and 5.7% in West Asian countries in 2014-15.”

Halted positive effect

As oil prices are expected to stay at $100 a barrel over the next two years, Gulf countries are predicted to achieve additional economic growth rates, stability and fiscal expansion, especially since the real estate market is improving in the Gulf region. “The middle-income countries used to be positively and negatively affected by the increase of oil prices. The negative effect was the high energy bill and the positive one is the increase of Gulf aid, the rise of investment and increased tourism. Yet, with the Syrian crisis today, high oil prices only generate negative results, particularly in Lebanon and Jordan, where investments are declining,” Dardari explained

In contrast, Dardari noted that the global economic situation has witnessed a significant improvement following years of declining growth rates, especially in the United States, Japan and the eurozone — which overcame a recession — as well as in India and China, which have maintained good economic indicators. Thus, the global economy is expected to grow by 3%-3.3% in 2014-15.

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Found in: unemployment, syrian refugees, syria crisis, lebanon, economy, economic downturn
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