Economists Samer Abboud and Omar Dahi, along with Jihad Yazigi of the Syria Report, discussed the current economic situation facing Syria during its uprising and the socio-economic dynamics of rebuilding the Syrian state after the fall of Bashar al-Assad.  Carnegie scholar, Yezid Sayigh, from Carnegie Middle East Center in Beirut moderated the discussion.

Before the Uprising

Yazigi explained that the uprising that began in 2011 can best be understood in the context of thirty years of deteriorating economic conditions that particularly affected the country’s rural areas, smaller towns, and working classes.

  • Economic Decline in the 1980s: After two decades of sustained economic growth and state investment, Syria’s GDP was comparable to that of Turkey or South Korea. But a decline in aid and remittances from the Gulf States and the continuous growth of the state bureaucracy throughout the 1980s put a halt to these positive trends, Yazigi explained.
  • Liberalization and Devaluation: Recognizing the dire need for reform, the government embarked on an extensive program of economic liberalization that devalued the Syrian currency. The 1980s and 1990s were marked by continuous state divestment, high population growth, and economic growth rates too low to generate new employment. The state lost its role as a social integrator and provider of services, and the Syrian middle class gradually disappeared. Although the discovery of crude oil generated new income, the government did not invest its oil revenues in economic renewal, but decided instead to amass foreign currency reserves.
  • Bashar al-Assad: According to Yazigi, Bashar al-Assad, who succeeded his father in 2000, initiated  a renewed program of liberalization, lifting obstacles to free trade and opening the economy to foreign investment.  But Assad neglected both the agriculture and the manufacturing sectors. Major industrial areas were forced to close due to the sudden influx of foreign products and the shrinking agricultural sector pushed approximately one million workers to migrate to the cities. Yazigi concluded that these developments disproportionately affected lower-income Syrians, particularly in rural areas, who in the past had benefited from the Baath Party’s pro-poor and pro-agricultural policies.

The Syrian War Economy and Current Economic Crisis

  • Estimating Costs: Abboud explained that the total cost of the conflict so far remains impossible to measure. Such costs not only include money lost and damage to infrastructure, but also the depletion of household assets. The war economy and rise of informality will further have a profound impact on Syria’s future economic trajectory.
  • Sectors Hit by the Violence: While sanctions have targeted the oil sector in particular, the manufacturing sector has also suffered and tourism has virtually come to a halt, Abboud said. But he explained that the conflict has most profoundly affected agriculture, which had already been constrained by the regime’s policies before the current conflict. Furthermore, insecurity and fuel shortages have slowed down production and caused workers to migrate to the cities.

After the Uprising

  • Opposition’s Silence: Dahi argued that the political opposition has so far missed the opportunity to critique the regime’s economic policies. Instead, they have largely excluded economic issues from current debates, treating the economy as a technical problem rather than an ideologically contested field.
  • Inclusive and Transparent: The development of Syria’s post-Assad economic trajectory should not be monopolized by one group, but should be inclusive and participatory, or least the result of a legitimate process of negotiation and contestation, Dahi said. Transparency and a focus on local needs are also crucial to prevent Syria’s limited resources from being squandered on unnecessary or ineffective projects.
  • Micro and Macro: Abboud added that although reconstruction processes tend to focus on macroeconomic structures, microeconomic policies are also needed.
  • Priority Sectors: In particular, reconstruction should focus on the sectors that most Syrians depend on for their livelihoods, namely agriculture and manufacturing.
  • Balancing the Public and Private Sector: Both Dahi and Abboud emphasized that a balance between the private and public sectors is crucial. The reconstruction experience in Iraq has shown that unregulated liberalization and privatization can decimate the public sector, with long-term negative consequences.
  • Beyond Sectarian Cleavages: Dahi added that the current focus on sectarian divisions should not overshadow structural and economic divisions between urban and rural areas and among the country’s different regions.

Cost of Reconstruction

According to Abboud, the financing of reconstruction will depend on the future political authority. He outlined and evaluated three different scenarios for funding reconstruction, and their potential value:

  • From Within: Reconstruction relying entirely on domestic resources is unlikely, he said. The current tax base is not strong enough to finance reconstruction. Currency reserves have been depleted, and oil revenues will not be sufficient.
  • Further Liberalization: A complete liberalization of the economy focused on attracting foreign investment is likely to undermine the long-term reconstruction effort, he added.
  • Foreign Aid: There are multiple plausible sources of aid that could be drawn on, including expatriate communities, foreign governments, and international organizations.