May the international news agencies broadcast today (9.12.2024) that tomorrow (10.12.2024), the central bank her Syriaalong with the commercial banks, will be put into operation again, but it is very difficult to imagine how the Syrian economy, marred by the long civil war, will function “normally”, the day after the fall of the al-Assad regime.
The fall of al-Assad leaves Syria’s economy in shambles in the hands of al-Jolani’s successor. Indicative is the fact that the latest data, which are reported on the IMF’s online platform, date back to… 2010. Nevertheless, there is a report by the World Bank, which was issued in the spring of this year, which shows a tragic situation of the Syrian economy..
More than a decade of conflict, exacerbated by external shocks, had further exacerbated Syria’s dire economic situation and led to a dramatic deterioration in the welfare of Syrian households.
Continued funding shortfalls and limited access to humanitarian aid have further strained households’ ability to meet basic needs amid soaring prices, reduced access to basic services and rising unemployment.
Syria’s economic situation continued to deteriorate in 2023. Economic activity declined by 1.2% year-on-year, particularly along Syria’s western border, partly due to weakened trade activity. The figures also show a 5.5% year-on-year drop in oil production, partly due to damage to infrastructure related to earthquakes and conflicts.
Despite a rebound in agricultural production due to improved weather conditions in 2023 (from a near-record low in 2022), the conflict has nevertheless severely affected the agricultural sector, with mass displacement of farmers and widespread damage to infrastructure and irrigation systems lead to a reduction in crop yields. Conflict-related disruptions have also severely affected foreign trade.
The collapse of domestic industrial and agricultural production increased Syria’s dependence on imports.
Dependence on food imports, although already a problem before 2011, also intensified with the conflict.
In 2023, the Syrian pound depreciated by a significant 141% against the US dollar, while consumer price inflation is estimated to have increased by 93%, exacerbated by government subsidy cuts. As the economy slows, fiscal revenues continue to decline. In response, authorities have cut spending further, with particularly steep cuts in capital spending and continuing to tighten subsidy programs.
“Syria has suffered multiple overlapping shocks in 2023 with the February earthquakes and spillover from the ongoing conflict in the Middle East,” Jean-Christophe Carret, the World Bank’s Middle East director, said recently. “More than a decade after the start of the century’s deadliest conflict, Syria’s capacity to absorb external economic shocks has been severely diminished, particularly with the recent decline in aid flows and the challenge of humanitarian access and heightened geopolitical regional tensions ».
The same report forecast a prolonged economic contraction this year Subject to extremely high uncertainty, real GDP was expected to contract by 1.5% in 2024, extending the 1.2% decline in 2023.
Private consumption, the main driver of growth, will remain subdued as rising prices continue to erode purchasing power. Private investment is expected to remain weak amid a volatile security situation and significant economic and political uncertainty.
Inflation is expected to remain high in 2024 due to the spillover effects of currency depreciation, along with persistent shortages and possible further cuts in food and fuel subsidies. The 2024 budget signals a continuation of the downward trend in subsidies for essential goods.
As of 2022, poverty affects 69% of the population – corresponding to approximately 14.5 million Syrians. Extreme poverty, while almost non-existent before the conflict, affects more than 1 in 4 Syrians in 2022 and may have worsened further due to the devastating effects of the February 2023 earthquake. Multiple external factors, such as the 2019 financial crisis in Lebanon , the COVID-19 pandemic and the war in Ukraine, have contributed to the further deterioration of the welfare of Syrians households in recent years.
According to the report, poverty in Syria has a strong spatial dimension. More than 50% of the extreme poor live in just three provinces (Aleppo, Hama and Deir ez-Zor) and the provinces in the north-eastern part of the country have the highest poverty rates. Female-headed households and internally displaced households are at the highest risk of poverty.
The report also highlights that international remittances have been a critical lifeline for Syrian households. Receiving remittances from abroad is associated with a 12 percentage point reduction in extreme poverty rates and an 8 percentage point reduction in poverty rates.