Syria: the economic costs behind a civil war
The Syrian civil war officially began with demonstrations as part of the Arab Spring protest movement in March 2011. Forces opposed to the government, such as the Free Syrian Army, have been seeking to oust the Ba’ath Government and defend the violence against opposition protesters. According to the United Nations, more than 100,000 people have died in this conflict. Since March 2011, UNICEF estimates that as many as 1.9 million Syrians have sought refuge in neighbouring countries including Turkey, Jordan, Lebanon and Iraq, with a further 4.25 million Syrians internally displaced.
Beyond the devastating human costs, the Syrian economy is crashing, aggravating the crisis further. The long-standing weaker structural economic problems identified by the World Bank, including the lack of significant job creation and poverty reduction, have translated into particularly severe social and political discontent in the eastern areas of Syria. So, what’s going on with the Syrian economy?
Today, the World Bank predicts that the Syrian economy has contracted by 31.4% over the past twelve months, with a current inflation rate of 42% (July 2013 estimates). To put that into perspective, Australia’s inflation rate is currently 2.4%. In April 2013, the Syrian Centre for Policy Research estimates the Syrian unemployment rate to be an astonishing 48.8%. Households in poorer areas are more likely to be effected by the extraordinary increase in cost of everyday expenses (including electricity, basic food items and clothing). Not being able to afford the basic essentials can only lead to more conflict, as the Syrian citizens become increasingly desperate.
Mining, manufacturing, retail trade and transportation and tourism have all been severely impacted by the crisis. In 2010, the oil sector accounted for approximately 35% of Syria’s total exports. Since 2011, oil export revenue has reduced significantly, and this is partially due to the heavy sanctions imposed on oil imports by the EU. Across the board, Syria has seen a sharp decline in its total export revenue, which compounded by the suspension of its production cycle, was reflected in the 67% depreciation of the Syrian pound in the first twelve months of the crisis (from March 2011 to April 2012).
Nineteen Arab League countries have imposed similar sanctions to the EU, prohibiting “business with any government party through the Central Bank of Syria and Syrian commercial banks, and preventing their nationals from traveling to Syria or investing in it”. Naturally this has hit the Syrian economy hard, particularly considering 52.5% of its total exports in 2010 were to the Gulf markets, and its long-standing dependence on tourism from within the region.
So the statistics show that Syria’s economy is in some serious trouble. The Syrian Centre for Strategic Studies estimates that the economic cost of the civil war to date, including the cost from damages to assets, investments and infrastructure, is approximately $84.4 billion. This is additional to the military costs amount predicted to be approximately $7 billion.
According to the World Health Organization, 35% of Syrian hospitals are not in service, and up to 70% of medical practitioners have left. USAID has delivered approximately $385 million of aid in the form of food, basic health aid and clean water to name a few.
Last month, the United Nations launched a $5.2 billion emergency appeal, the largest in its history (followed by the $2.5 billion emergency appeal for the 2011 Horn of Africa food crisis). However, humanitarian efforts have been complicated with the dangerous conditions, with over 30 humanitarian workers killed in the crisis so far. Importantly, neighbouring countries such as Iran also need aid to support their food and shelter offerings to the Syrians. The government has also received significant financial and economic support from Iran, Russia and China.
Unfortunately, it is difficult for aid to reach where it is ultimately needed. On an interesting side note, at the beginning of this month, it was reported that regime employees in the public sector have received pay rises averaging 40%. Considering the dire financial and economic state of Syria at present, is this the best use of resources? Officially, the reasons for these salary rises relate to higher levels of inflation. Or perhaps, could it be more a signal to the international community that the regime is strong and will survive this turmoil?
Once there is greater political stability, it will be easier to effectively address the economic challenges facing Syria. Such challenges include “output and employment collapse in the tradable sector, accelerated exchange rate depreciation in the parallel market, hoarding of hard foreign currency, likely foreign exchange reserve losses, rising inflation, and legal and financial issues associated with frozen assets”. Will Syria come out of this anytime soon? Only time will tell once this tumultuous conflict has ceased and the dust has begun to settle.
References
The World Bank, “Syria Overview”. Last updated April 2013. Available online at:
http://www.worldbank.org/en/country/syria/overview
UNICEF. “Syria Crisis Appeal”. Last updated June 2013. Available online at:
http://www.unicef.org.au/Donate/One-off-Donation/Syria-Crisis-Appeal.aspx#sthash.CNiGoxvy.dpuf
Abu-Nasr, Donna. “Syria’s Inflation Rise to 40%, Central Bank Governor”. Last updated June 2013. Available online at: