War cost Syrian economy $20bn in 2012

Investors continue to exit country while local currency loses half its value

The ongoing conflict in Syria has taken a heavy toll on its economic and financial system, with its GDP diving by nearly $20 billion in 2012 and currency losing over half its value, according to a key Western financial centre.

The Arab country’s fiscal deficits have also worsened while investors continued to flee the local market as the war heads into its third year, “The uprising has taken a heavy toll on the economy,” the Washington-based Institute for International Finance (IIF) said in its December Arab report.

It said economic sanctions imposed by the Arab League, Turkey and the West along with the spreading violence are believed to have pushed GDP down by at least 20 per cent in 2012.The fiscal and external deficits are also projected to widen, and official reserves could approach the depletion point by end-2013.

There has been an exodus of businesses from Syria which is depleting its strong pre-war enterprise base…. Foreign direct investment and tourism, which drove Syrian growth from 2003-2010, have virtually dried up,” the report said.

It said the official exchange rate of the countr6y’s pound had plummeted by nearly 51 per cent since the end of 2010 to about 70 to the US dollar, while the black market rate hovers around 90 to the dollar. Consequently, inflation soared to 40 per cent in August.

“The fall in output combined with the sharp depreciation of the exchange rate have almost halved the size of the country’s economy in dollar terms, which fell from $58 billion in 2010 to $30 billion in 2012,” IIF said.

“Public finances are also in deep trouble. Revenues from oil usually bring in between one-fourth and one-third of state revenues, depending on global oil prices. The fiscal deficit is projected to widen from 11 per cent in 2011 to 13 per cent of GDP in 2013.”

According to the report, the Syrian government has thus far managed to provide for its need for petroleum products by arranging deals with Russia, Venezuela and Iran.

Prior to 2011, most of Syria’s petroleum product imports were from the GCC, it said.

“Given the lack of evidence that the armed opposition is diminishing or that the regime is near collapse, the violence in Syria is likely to continue for some time,” it said.

“Irrespective of how the change in the regime or the full-blown regime change takes place, any transition to a more inclusive political system (the focus of ongoing peacemaking efforts), will be difficult and protracted.”

The report showed Syria’s GDP stood at $57.5 billion in current prices in 2010 before shrinking to nearly $46.7 billion in 2011. It expected GDP to have receded further to $29.5 billion in 2012 and projected a further fall to $27.4 billion in 2013.

Real GDP contracted by around six per cent in 2011 and was expected to have plunged by nearly 20 per cent in 2012. The report expected a further fall by five per cent in 2013.

IIF also said the war widened the Syrian government’s debt from around $28.4 billion at the end of 2010 to $33.2 billion at the end of 2011 and $48.5 billion at the end of 2012. It expected the debt to climb to its highest level of $56.7 billion at the end of 2-13.

The country’s official reserves also tumbled from $19.5 billion at the end of 2010 to $10.8 billion at the end of 2011 and are expected to have dipped to only about $3.4 billion at the end of 2012. IIF projected them at just $1.5 billion at the end of 2013.

 

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