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.

Ibrahim Saif
Saif is an economist specializing in the political economy of the Middle East. His research focuses on international trade and structural adjustment programs in developing countries, with emphasis on Jordan and the Middle East.
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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.