After six years of war, Syria is an economic basket case
Beirut - At no time since the outbreak of the Syrian conflict on March 15th, 2011, has the country’s economic situation been as dire as it is today. This will vastly complicate any post-war reconstruction.
After bankrolling a massive war effort for six years, state coffers are empty and the economic aid provided by Syria’s main ally, Iran, has been slow in coming and delivered with strings attached.
“In purely economic terms, the losses in Syria have been staggering,” Syrian economist Omar Dahi said.
Syria’s “gross domestic product (GDP) stood at $60.2 billion in 2010. As of 2016, it was at $27.2 billion at 2010 prices, representing a contraction of 50%,” said Dahi, an associate professor at Hampshire College in the United States.
“If a realistic growth rate is taken into account, total economic losses shoot up to a staggering 430% or more of GDP at 2010 prices,” Dahi added. “This would put Syria among the outliers in terms of post- World War II civil conflicts in terms of GDP losses.”
In Syria, industry and agriculture have been crippled and more than half the country’s pre-war population of 23 million is homeless and jobless. Millions are eking out an existence as refugees in neighbouring Jordan, Turkey and Lebanon. Given these conditions, Iran is Syria’s economic lifeline.
UN Special Envoy for Syria Staffan de Mistura estimated that Tehran spends at least $6 billion a year keeping Syrian President Bashar Assad, a long-standing Arab ally, in power to further the Islamic Republic’s regional strategy.
The Damascus government suffers from four chronic shortages — heating fuel, petrol, electricity and water — which have disrupted what remains of industrial activity in regime-held territory, estimated to be 40% of the country.
Syria’s water shortage started in December, when fighting in the Damascus countryside severed the capital’s main water supply from the Ayn al-Fijah spring.
The shortage caused the price of water to skyrocket on the black market to $50 for 45 litres of water, which is enough to last the average household no more than ten days.
Two months after the shortages hit in December, the city suffered a petrol crisis that crippled public transport.
As a result, the official price of petrol has shot up 450% compared to five years ago and currently sells for 225 Syrian pounds ($1.05) per litre. Five years ago, state-subsidised gasoline sold for 50 Syrian pounds per litre and was readily available in a country that produced its own oil.
To return to previous capacity, Syria needs no less than 4 billion Syrian pounds a day — an amount likely to remain far beyond the reach of the war-torn country.
The government finds itself in the difficult position of having to provide petrol, electricity, water and heating fuel to entire cities and towns that have been retaken with Russia’s military firepower since September 2015, such as Aleppo in the north. This is costing the regime a lot of money.
Previously, Syria was only required to provide such resources for cities firmly under its rule, which amounted to only a handful in 2011-15.
One way to achieve this end was by cutting government spending; another was to raise the price of petrol — much to the ire of ordinary Syrians and soldiers, who were already complaining that devaluation of the Syrian pound rendered salaries worthless, sinking them deeper into poverty.
In 2012, the exchange rate was 50 Syrian pounds to the dollar. Now it is 550, making the salary of a 5-star army general worth no more than $145.
Since practically everything on the market has risen tenfold, including water, petrol and electricity — this does not come close to providing a decent standard of living.
Diesel, for example, which is used for heating and industry, has risen from 135 Syrian pounds per litre to 160. Gas for home cooking has spiralled from 1,800 pounds a canister to 2,500.
Wages for state employees have been raised 7,500 pounds a month — about $15 — not enough to meet the rising cost of items once widely subsidised by the socialist state.
All sources of state revenue, such as oil revenue or tourism, have dried up.
The oil and gas fields in the north-east are still in the hands of the Islamic State (ISIS), forcing Damascus to buy fuel on the black market.
Public-sector companies used to generate considerable income but they too have been eliminated by the war.
Taxes are uncollectable because so many people are displaced or living away from their registered residences.
Imposing new taxes is impossible for a population that is not earning and is forced to live off its dwindling savings.
Electricity cuts are the most damaging problem these days. In Damascus and other cities, the electricity can be cut for up to 16 hours a day.
Four of Syria’s major power plants have been out of action since 2012. The only ones still functioning are in Deir Ali in southern Syria and al- Nasriya and Jandar in the centre of the country.
The plants need 8,500 tonnes of fuel daily, which the government does not have, and which Iran, a key ally, has failed to deliver.