Syrian Regime Cannot Conceal an Economy in Rapid Decline

Source: Getty
Op-Ed Al-Monitor
Summary
Even without considering the effects of sanctions, Syria's economic crisis appears very severe, and tightening the embargo might have more of an impact than military intervention.
Related Topics
Related Media and Tools
 

No one is fully knowledgeable about the state of the Syrian economy, or how exactly it has been affected by the events taking place in the country. This is due the official authorities holding a monopoly on all information related to economic change in Syria. Meanwhile, many do not know how to interpret the economic indicators issued by Syrian officials.

The latter analysis applies to international institutions such as the International Monetary Fund (IMF). The IMF's director general, Nemat Shafiq, recently announced that he expects a sharp drop in growth in Syria in 2012, but the organization was unable to reveal precise figures supporting this analysis. In spite of the intense cover-up engineered by the Syrian authorities, a number of indicators exist that shed light on the difficult circumstances facing the country. These signs clearly demonstrate the crisis’ indisputable graveness. The most important indicators stem from IMF estimates that the Syrian pound has experienced a 45% devaluation since the outset of events there. This has many repercussions for citizens — the depreciation of the Syrian pound means a decrease in the value of citizens' monetary assets and savings.

Citizens of countries that have experienced similar events have usually tried to escape the peril of fluctuating currencies by investing in physical assets and financial markets. However, these two options are out of reach for Syrians. The Syrian authorities have decided to prevent citizens from exchanging their pounds for foreign currencies, and have imposed limits on bank deposits in foreign currencies. In this way, the devaluation of the currency has become a form of a collective punishment exercised by the government on depositors and investors. Businessmen will soon complain if such a situation persists, and there is no indication that it will change anytime soon.

The second option, that of resorting to the stock market, is as bad as the first. According to IMF estimates, the stock market has plunged by 40% since the outbreak of the crisis, while trading has ground to a halt due to the lack of liquidity and an unwillingness to trade amid the prevailing uncertainty.

The IMF and regional institutions highlight the possibility that regional influences are contributing to the continuation of the Syrian crisis. On one hand, exports out of Syria have decreased significantly. This will take its toll on Syria's neighbors, mainly Iraq and Lebanon. According to the IMF, Iraq is Syria’s number-one trade partner, and Syria is home to Iraq’s closest export port on the Mediterranean Sea.

Continued violence in Syria will paralyze this port, and will consequently negatively affect trade with Iraq. Trade with Turkey has ceased, except for few basic products. Currently, border areas between Turkey and Syria are devoid of economic activity and many employment opportunities have been lost due to the events. These areas were once considered economic hubs in terms of job creation and touristic activity.

Previously, both official and unofficial trade activity took place between the Syrian city of Deraa and the Jordanian city of Al-Rathma. These activities have stopped due to security concerns, which has led to the lowest numbers of people moving across the border in decades.

On the other hand, Lebanon can be considered the country most directly affected by the events. The two countries are important trade partners to each other, and the Lebanese banking sector is most active in Syria. The sector announced in January that it would adhere to the international sanctions levelled against Syria, including freezing government accounts and halting transactions with the Syrian Central Bank, as well as with other banks. This greatly impacted the banking activities and the profit that this sector used to generate and transfer to Lebanese banks. This situation was, for the first time, accompanied by a decline in the granting of loans and credit — a liquidity freeze. In this regard, Nemat Shafiq says that "the Lebanese banks have partially withdrawn from the Syrian market to avoid being affected by the crisis." This has made it difficult for Syrians to take out loans.

Without even taking into account the issue of exports and the sanctions imposed on oil transfers and other products into Syria, the economic crisis appears to be very severe, causing Syria’s decrease in monetary reserves by almost half. This raises questions regarding the ability of the Syrian economy to withstand the crisis and achieve a measure of balance.

The importance of the aforementioned economic indicators extends far beyond the economic dimension, and reflects the role of political officials and their stance on the recent developments. Those most affected by the devaluation of the currency and other economic trouble are high-income earners and the ones who save in local currency. These are the individuals on which the regime depends the most. They are witnessing a great decline in the value of their savings and wealth, and being forced to pay a price for not taking a stand on the ongoing events. However, when these individuals — along with the middle class — will change their stance remains a question with an uncertain answer. Preliminary indicators suggest that the situation will not witness any improvements in the near future. The stakes are so high that worsening the economic crisis and tightening the embargo might have more of an impact than military intervention, over which there is no international consensus.

Most indicators related to the production, service and political sectors, in addition to the money transfers made by Syrians abroad, show a rapid deterioration in the country’s economic performance and confusion over the best approach to manage the economic issue.

Currency depreciation, inflation and the rise in prices will affect a wide ange of sectors. So far, the authorities have been controlling the prices of basic-needs items being consumed by the lower-income classes. This has been done at the expense of foreign-currency reserves, which are steadily declining. The question remains: how long can the Syrian economy survive? Even with the regime’s deliberate concealment, present indicators show that there are not many ways left to deal with the economic crisis.

This article was originally published in Al-Monitor.

End of document
Source http://carnegie-mec.org/2012/05/22/syrian-regime-cannot-conceal-economy-in-rapid-decline/he7v

Syria in Crisis

Syria in Crisis

Syria in Crisis

Syria in Crisis

More from The Global Think Tank

Publication Resources

In Fact

 

45%

of the Chinese general public

believe their country should share a global leadership role.

30%

of Indian parliamentarians

have criminal cases pending against them.

140

charter schools in the United States

are linked to Turkey’s Gülen movement.

2.5–5

thousand tons of chemical weapons

are in North Korea’s possession.

92%

of import tariffs

among Chile, Colombia, Mexico, and Peru have been eliminated.

$2.34

trillion a year

is unaccounted for in official Chinese income statistics.

37%

of GDP in oil-exporting Arab countries

comes from the mining sector.

72%

of Europeans and Turks

are opposed to intervention in Syria.

90%

of Russian exports to China

are hydrocarbons; machinery accounts for less than 1%.

13%

of undiscovered oil

is in the Arctic.

17

U.S. government shutdowns

occurred between 1976 and 1996.

40%

of Ukrainians

want an “international economic union” with the EU.

120

million electric bicycles

are used in Chinese cities.

60–70%

of the world’s energy supply

is consumed by cities.

58%

of today’s oils

require unconventional extraction techniques.

67%

of the world's population

will reside in cities by 2050.

50%

of Syria’s population

is expected to be displaced by the end of 2013.

18%

of the U.S. economy

is consumed by healthcare.

81%

of Brazilian protesters

learned about a massive rally via Facebook or Twitter.

32

million cases pending

in India’s judicial system.

1 in 3

Syrians

now needs urgent assistance.

370

political parties

contested India’s last national elections.

70%

of Egypt's labor force

works in the private sector.

70%

of oil consumed in the United States

is for the transportation sector.

20%

of Chechnya’s pre-1994 population

has fled to different parts of the world.

58%

of oil consumed in China

was from foreign sources in 2012.

$536

billion in goods and services

traded between the United States and China in 2012.

$100

billion in foreign investment and oil revenue

have been lost by Iran because of its nuclear program.

4700%

increase in China’s GDP per capita

between 1972 and today.

$11

billion have been spent

to complete the Bushehr nuclear reactor in Iran.

2%

of Iran’s electricity needs

is all the Bushehr nuclear reactor provides.

78

journalists

were imprisoned in Turkey as of August 2012 according to the OSCE.

Stay in the Know

Enter your email address in the field below to receive the latest Carnegie analysis in your inbox!

Personal Information
 
 
Carnegie Endowment for International Peace
 
1779 Massachusetts Avenue NW Washington, DC 20036-2103 Phone: 202 483 7600 Fax: 202 483 1840
Please note...

You are leaving the website for the Carnegie-Tsinghua Center for Global Policy and entering a website for another of Carnegie's global centers.

请注意...

你将离开清华—卡内基中心网站,进入卡内基其他全球中心的网站。