Syria: An Economic Crisis

Theo Demolder

Whilst the political turmoil and horrific humanitarian situation in Syria has been well documented, little time has been set aside to consider some of the wider consequences- such as for the national and international economies. Most immediately, the effects have been observed on the markets with oil prices increasing in August and subsequently decreasing in September, in line with the relative likelihood of US involvement in the Syrian civil war. Such action would have put her oil reserves in jeopardy, potentially cutting supply for a number of months. It would be wrong to characterise these shifts as a collective judgement on the morality or wisdom of a strike, however they do give a good idea of experts’ opinions on what may happen; much like bookmakers- they have to put their money where their mouth is, to coin a ghastly phrase.

More fundamentally, Syria faces an economic crisis of far greater proportions than the day to day fluctuation in oil prices. We can see in Libya the precariousness of a country emerging from civil war; despite a growth of 105% last year, she is still beset by problems such as striking oil workers in the East. With 98% of the country’s income coming from oil there is desperate need to diversify before reserves run out- but this is deeply challenging given recent events; war torn Middle Eastern countries making a gradual transition to democracy are a hard sell for holidaymakers and investors. Moreover, domestic businesses are reluctant to expand until they have greater economic certainty, stemming from political security. Unlike in the UK, where fiscal policy will arguably be relatively unchanged whoever wins the next election, in Syria any of a number of policies could emerge when Assad finally stands down, or is stood down.  Will it be a secular democracy encouraging free trade and promoting enterprise, or a hard-line Islamist regime imposing sharia law and restricting businesses’ activities? Most likely somewhere inbetween- perhaps even differing by region. However Syria is by no means identical to Libya; in fact Syria no longer has the need for diversification that Libya does; oil revenues only accounted for 22% of GDP in 2008 to services’ 45%. As well as instilling confidence in small business owners and investors, Syria’s next government will have to make Assad’s infrastructure projects such as eco-tourism hotels and development of real estate pay, not only for businesses but also for the people of Syria, 30% of whom were living below the poverty line in 2005. Certainly one expense they cannot afford without is huge spending on the military. Before the civil war began the military accounted for 7% of GDP- who knows what it is now. So, be it rebalancing the economy, helping businesses to recover and grow, or providing for those (newly or otherwise) impoverished Syrians- the next government will have much to do. In the long term Syria’s crisis is as much economic as political.

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