Economic News About Syria (6 Sept 2008)

Inflation makes life ‘unbearable’
Phil Sands, Foreign Correspondent
The National – September 06. 2008

DAMASCUS // For years Abu Mohammed struggled to make ends meet, working as a painter, fruit seller or water carrier to put food on the family table. But soaring prices have made his daily battle for survival ever harder.

“A year ago I could pay for all the basics with 7,000 Syrian pounds [Dh440] a month,” he said. “Today I need double that. Today I need 14,000 pounds just to get by.”

Although the cost of food, fuel and housing has risen dramatically in Damascus, household incomes for the majority of Syrians has not. Official government figures for 2007 recorded an inflation rate of less than six per cent, a number rejected by independent economists here who estimate that real living costs rose by up to 30 per cent.

Whatever the actual numbers, inflation is beginning to bite hard and the poorest members of society, such as Mr Mohammed, 47, are bearing the brunt.

He said that in 2006 he could feed, house and clothe his wife and seven children without outside help. Now he relies on handouts from a community mosque in Blackstone, where he lives, 8km south of Damascus.

“Life is getting unbearable,” he said. “The cost of living is all I talk about with my neighbours; it’s a constant worry, it’s the only thing on my mind. It’s the only thing Syrians think about.”

A poor harvest has pushed down supplies of food, while an influx of Iraqi refugees has added to demand.

The resulting rise in prices has forced Mr Mohammed into an increasingly desperate position. Each afternoon he goes to the local market to buy damaged fruit and vegetables that are sold cheaply.

Sometimes, he said, he sifts though rubbish dumps for pieces of scrap metal that can be sold to salvage yards.

“We have one meal a day because that’s all I can afford at the moment,” he said. “We eat meat perhaps twice a month. I’m ashamed to tell you my daughter fainted in school, because I hadn’t fed her properly. She was too embarrassed to tell her teachers it was because she was hungry……

In a recent survey of 1,000 Damascus residents by the Syrian Economic Centre, 70 per cent said their financial situation had “deteriorated seriously” during the past two years…..

The International Monetary Fund has praised the Syrian authorities for their handling of the situation and for resisting the temptation to simply print more money. A 2007 International Monetary Foundation report said that “barring policy missteps or a deterioration in the regional environment, the near-term outlook for growth and inflation looks favourable”.

But with oil reserves running dry, the government can no longer afford to bankroll huge national subsidies, something economists warn is a potential time bomb for the Syrian economy.

“There is no easy way to deal with this problem; it’s going to be painful,” said Nabil Sukkar, managing director of the Syrian Consulting Bureau for Development and Investment. “If we don’t remove subsidies, there will be a growing deficit, and that will cause inflation. If we remove subsidies, salaries will have to be raised and there will be inflation.”….

“Inflation is dangerous for the Syrian economy, as it’s dangerous for all economies; the problem is we are heading towards a threatening level. We should take steps to cope with it before it gets out of control. Difficult decisions are going to have to be made.” ….

In his illegally built house in Blackstone, just south of Damascus, Mr Mamard said he feared his situation was only going to get worse. “I walk out of a shop, and the next time I go in the prices have gone up.

“If they remove the subsidies I don’t know how I will pay for things. My wife has diabetes, and I can’t really afford the medicine as it is. I don’t know how we will get by.”

[Read the whole article]

Syria stands at economic crossroads
By Lina Sinjab
BBC News, September 3, 2008

This socialist state has introduced a range of new laws which have opened Syria to international and private business.

In the past year, cappuccino culture has arrived, with the opening of international coffee chains.

Many of the customers in such cafes have studied and worked abroad – and are bringing now their experiences back home.

"This country is seriously booming," says one of a group of young women in western clothes. "Everyone dresses up, the places are new, the roads are clean. We are not going to be third world for the rest of our life."

Part of the new strategy is to use business to improve relations with other countries in the region and in the West.

"It is a way for Syria to break the isolation, because by attracting investment you are having foreign companies that have interests in Syria and they will have to defend their interest in Syria," says economics commentator and Syria Report editor Jihad Yazigi.

"It's a circle. More investments improve political relations and political relations attract more investment and more investments"

Rising prices

Syria has been a socialist country led by a single party for decades. 

Deputy Prime Minister Abdullah Dardari, who is spearheading the economic reform programme, says the changes present opportunities and challenges.

"They are a challenge for social equity, for stability and they are challenge to the status quo," he says.

"What we need to have is the culture of an open and integrated economy, people to believe in the opportunities that this new economy offers them and move away from depending totally on the state for finding jobs."

But most people in Syria are yet to feel the effects of foreign investment.

In a food market in Damascus, people are haggling over the price of vegetables.

"My husband is a civil servant and yet we cannot afford to live any more. We have to prioritise our purchases," one shopper tells me.

In May, the government cut fuel subsidies, leading to a 300% increase in the cost of diesel, with a huge knock-on effect for prices.

International effect

In downtown Damascus, you can now dance the night away in an open-air rooftop bar that would not be out of place in any European capital. It costs about $20 (£10) to enter, which is half the average weekly wage in Syria.

But liberalisation of the economy has brought international jobs and increased some salaries in the private sector.

Business student Omar drinks his tequila, and wonders how people can afford places like this.

"For me I do some work, I can afford it, but I don't save money, that's the thing," he says.

The waiters make about £25 a week. For Amaar Mohammed, it is one of his two jobs.

At the end of his shift in the early hours of the morning, Amaar transforms from nightclub waiter to school teacher.

"Life is becoming harder. You have to work hard to survive. I'm working just to buy a simple home. I don't dream of anything else," he says.

"Syria has never deviated from this strategy, and if the peace process was obstructed and frozen, it is the responsibility of Israel's subsequent governments and the administration of President Bush, which cancelled the word ‘dialogue’ from its dictionary.”

“Sarkozy’s gamble”

“No one can claim that French president Nicholas Sarkozy’s visit to Damascus today has a Lebanese goal,” Sateh Noureddine, a regular columnist for Lebanon’s independent leftist newspaper As-Safir, wrote on September 3. “But no one can claim that Lebanon is not part of that visit that aroused so much controversy in Beirut.”

Resolving the Lebanese crisis was a mandatory condition for normalizing relations between Paris and Damascus, he wrote.

“It is difficult not to jump to the conclusion that Sarkozy has decided to return to the old western and international tradition, which considered Damascus to be the gate to Beirut.”

That tradition used to mean that any western official had to seek permission from Damascus before visiting Beirut and then pass by Damascus on his way back, Noureddine wrote.

“Yet there is nothing to corroborate this impression, especially as there are many Lebanese developments that justify Paris’s desire to open up to Damascus.”

France wants to find an alternative to imposing isolation and siege on Syria, which have proven to be fruitless, he wrote.

Syria: Economic Overviews
Economist Intelligence Unit, September 3, 2008

The president, Bashar al-Assad, is expected to remain in power in 2008-09. He will continue to rely on the strength and loyalty of the security services, which will keep opposition forces weak and ineffective.

  • Ongoing talks with Israel and an easing of tensions in Lebanon will give Mr Assad the opportunity to reduce Syria's political isolation, but he is unlikely to end its strategic alliance with Iran.
  • Economic policy will be dominated by conflicting views on how to respond to high global oil and commodity prices in the context of fiscal deficits.
  • Syrian oil production will decline slightly over the outlook period, which will reduce export volumes and government spending and thereby curb economic growth. * After having appreciated significantly against the dollar this year (because of the US currency's weakness), the Syrian pound is expected to stabilise in 2009.
  • The current-account surplus is forecast to widen to US$1.4bn, or 2.6% of GDP, in 2008, before narrowing to 0.9% of GDP in 2009, as a result of rising imports.

DOMESTIC POLITICS: There is little prospect of any serious challenge to the president in 2008-09, and substantive political reforms are unlikely.
Mr Assad's control of the country is supported by key elements in the security services and by the ruling Baath party. The core of the elite is
drawn from Mr Assad's minority Alawi sect, and is acutely conscious that to move against him would risk endangering the Alawi hold on power. For
this reason, the rumours that emerged in a German newspaper, Die Welt, of an attempted coup in February are unlikely to be correct. However, the mysterious assassination in August of a close ally of Mr Assad's in the military, Mohammed Suleiman, was a reminder that there are tensions below the surface of the regime. Since assuming power following the death of his father, Hafez al-Assad, in 2000, Mr Assad has stepped up repression of local opposition groups and activists, and has appointed his own close allies to key posts. This has increased his control, albeit at the cost of narrowing his power base.

INTERNATIONAL RELATIONS: Since May 2008 Syria's international isolation has begun to ease, largely because of its support for the May 2008 Doha agreement between the opposing factions in Lebanon and its agreement to normalise diplomatic relations with Lebanon, as well as its engagement in the current indirect talks with Israel being brokered by Turkey. The early fruits of these developments have included loans and grants from Gulf Arab states, an invitation to Mr Assad to attend the launch of the Union for the Mediterranean in Paris in July and an imminent visit to Damascus, the Syrian capital, by the French president, Nicolas Sarkozy. However, Syria's diplomatic links with the region's heavyweights, Egypt and Saudi Arabia (whose leaders boycotted the March 2008 Arab League summit in Damascus), have remained strained. A rapprochement with the US would also be difficult, although it could become more likely towards the end of the outlook period if Barack Obama becomes US president and implements his stated policy of dialogue with enemy states, including Syria. However, Syria still considers Lebanon to be within its sphere of influence and Mr Assad is therefore likely to get entangled in controversy again in the run-up to the 2009 Lebanese parliamentary election. A further threat is the UN investigation into the assassination of a former Lebanese prime minister, Rafiq al-Hariri, which is expected to implicate senior Syrian officials.

POLICY TRENDS: Syria has been gradually reforming its centrally planned economy, a process that has been led by the deputy prime minister for economic affairs, Abdullah al-Dardari. The rise in global commodity prices, at a time of declining oil production, has highlighted the weakness of the Syrian economic system and enabled fiscally prudent reformers finally to make some progress on issues such as subsidies and taxation. Fuel subsidies were reduced in May, but higher oil prices and a 25% rise in public-sector salaries have largely offset the fiscal benefits, leaving open the debate on reform of the public finances. Although the introduction of a value-added tax (VAT) has been approved in principle, its implementation, which has already been delayed, appears unlikely until well into 2009. The policy debate in 2009 will increasingly focus on the need to diversify the economy away from oil and to encourage investment–including through the opening of the Damascus Stock Exchange.

INTERNATIONAL ASSUMPTIONS: World GDP growth (at purchasing power parity exchange rates) is expected to average 3.6% in 2008-09, down from an estimated 4.8% in 2007, largely because of a sharp slowdown in the US economy in 2008. Oil prices will remain high as buoyant demand in emerging markets offsets the slowdown in the OECD, although they will remain well off their peak. The Economist Intelligence Unit now forecasts that the price of the benchmark dated Brent Blend will fall from an average of US$110/barrel this year to US$91/b in 2009.

ECONOMIC GROWTH: Although the government estimates that growth in 2007 was 6.5%, we put it at 4.3% and the IMF is even more downbeat, estimating it at 3.9%. The most recent Quarterly Bulletin from the Central Bank of Syria does not include an estimate for 2007 GDP, whereas the previous bulletin did. This implies that the figures are being re-examined, and we would expect a downgrade. We expect the Syrian economy to slow further this year, bringing growth down to 2.4%, owing to falling oil output and a particularly poor harvest. These negative factors will be only partly offset by continued expansion in the services sector, boosted by solid growth in tourism and in demand for goods and services, in part from the large Iraqi refugee population. We forecast that growth will recover to 3.7% in 2009, assuming that the current drought does not continue.

INFLATION: We expect inflation to continue to rise in 2008–to an average of around 16.8%–owing to significant reductions in fuel subsidies in March and May and to a 25% increase in government salaries and pensions. However, it is possible that these changes could drive inflation even
higher than we currently forecast. In 2009 a decline in oil prices and an easing of non-oil commodity prices will help to bring down inflation, to
around 10.2%, and any significant return of Iraqi nationals to their homeland could lower it even further by reducing demand pressures. We
estimate that annual average inflation was about 12.2% in 2007, even though the official consumer price index shows that prices were flat over
the first three quarters of 2007 (full-year data are not yet available).

EXCHANGE RATES: The Syrian pound has been pegged to a basket of currencies based on the IMF's special drawing rights (SDR) since October 2007, resulting in a marked appreciation against the US dollar. Although the new regime is less rigid than the previous peg to the dollar, the authorities are unlikely to let it float freely, placing a high priority on exchange-rate stability. The dominant position of the state-owned banks
and the Central Bank's control over foreign-currency transactions (even as some laws are relaxed) mean that the regime is well placed do this. The
dollar has recovered slightly from its lowest point against the pound (SP45.8:US$1), but we do not expect any substantive change over the next
year, and the 2009 average is forecast to be SP46.7:US$1.

EXTERNAL SECTOR: We expect Syria's merchandise export earnings to rise by 19% in 2008, owing to an increase in oil prices, which will offset the
negative impact of falling oil production and reduced wheat exports resulting from a poor harvest. In 2009, in spite of a better harvest, a fall in oil prices will lead to a 1% drop in export earnings. However, because Syria is now importing almost the same volume of refined products as it exports in crude oil, the overall effect of oil price shifts on the trade account will be minimal. Non-oil exports are continuing to benefit from strong regional demand and the relaxation of foreign-exchange controls, which has led to more exports being officially recorded. Import spending growth will remain strong over the outlook period, partly because of the ongoing process of tariff liberalisation, but also because of healthy demand for capital goods related to some large infrastructure and construction projects. With all these factors taken together, the trade surplus will narrow over the outlook period from about US$1bn (1.9% of GDP) in 2008 to about US$160m next year.

Where the poor are concerned, Syrian media has nothing to report
Menassat, July 15th, 2008 

More than 2 million Syrians live below the poverty line of two dollars a day. But you would never know it from the Syrian media. Media analyst Ruhada Abdoush explores how Syria's poor are perceived, and ignored, by the media establishment. …….

Media analysts are quick to point out that privately-owned newspapers such as al-Watan or Baladona also act as if there are no social or economic problems in Syria…..

Turning to the electronic media, with websites such as Thara, Marsad Nisa’ Souriya and al-Jamal, the qualitative gap with the rest of the media is clear. This is due perhaps to the publishing freedom electronic media enjoys, or maybe because of the gravity with which they address issues of public interest and social awareness experienced by most Syrians.

Still, even in the electronic media the treatment of the poor mainly touches on domestic violence and its relation to poverty and unemployment.

TV drama to the rescue

Examining the TV stations, both local and satellite Syrian broadcasters  avoid any programs dealing with the livelihood of the disenfranchised in their news or analysis, relying instead on ornamentation and state slogans about government steps to address their plight.

That is unless Syrian TV dramatic series are considered as credible news sources.

Ironically, Syrian TV drama series do manage to portray characters that are indeed deprived both socially and economically. As an example, writer Fouad Humeira's popular series, Deer in a Forest of Wolves, which aired on Syria's second channel two years ago, often cut away to poor people in their homes wrestling with their dreams and their hardship.  

It is a trend that has been found in recent Syrian drama series through writers such as Dalah Al-Rahbi and Reem Hanna, both of whom have made the point that the poor deserve as much attention as the more economically well-off in Syrian society. 

Syrian media expert Hala Al-Atasy told MENASSAT that the media landscape in Syria is like "an island isolated from its surroundings."….

WSN Editor Broader Middle East, Manuela Paraipan,

Walid Jumblatt: The West tried to grab Georgia, fix it and introduce it to NATO. The Russians have a good relationship with Syria, and I think it will further improve. This is why I am keen to see Lebanon in the non-alignment agreement instead of somewhere in the middle following a similar line to the foolish policy of Georgia.

Walid Jumblatt: We never had a state because we have no sense of citizenship. We always claimed we are Lebanese, but Lebanon is divided along confessional lines. When my father was leading the leftist parties – the national movement – he tried to change the system of Lebanon. However, the so-called progressive environment, the Baathists and the reactionist environment of the Arab world were all against having a secular state in Lebanon. When he was powerful, at one point people from certain circles – like Kissinger – said that Kamal Jumblatt was an extremist-leftist and he was eliminated. In 1975, the Americans allowed the Syrians to come to Lebanon, and they killed my father.

The West tried to grab Georgia, fix it and introduce it to NATO. The Russians have a good relationship with Syria, and I think it will further improve. This is why I am keen to see Lebanon in the non-alignment agreement instead of somewhere in the middle following a similar line to the foolish policy of Georgia.

Walid Jumblatt: We never had a state because we have no sense of citizenship. We always claimed we are Lebanese, but Lebanon is divided along confessional lines. When my father was leading the leftist parties – the national movement – he tried to change the system of Lebanon. However, the so-called progressive environment, the Baathists and the reactionist environment of the Arab world were all against having a secular state in Lebanon. When he was powerful, at one point people from certain circles – like Kissinger – said that Kamal Jumblatt was an extremist-leftist and he was eliminated. In 1975, the Americans allowed the Syrians to come to Lebanon, and they killed my father.

….. Its impossible for the United States to move peacefully. It is just impossible, with all the corporations ruling the country. Furthermore it is a competition between the United States, China and others as to who will control more of the wealth of this planet, and the planet is being systematically destroyed by the United States……."

 Republic of Blowback By: Ken Menkhaus and Karin von Hippel | International Herald Tribune

American diplomatic, intelligence and military activity designed to reduce Islamic radicalism and the threat of terrorism in Somalia have instead helped to catalyze a much more powerful, popular, shockingly violent and stridently anti-American jihadist movement.

Comments (9)

AnotherIsraeliGuy said:

This is the crux of the matter. In our day and age the strength of a country comes from its eocnomy. It will take some time to see the full influence of high inflation and no export of oil on Syria, but the initial indications seem to show that Syria is in a bind. This should certainly be a factor that Israel should consider in the negotiations and take advantage of. Syria cannot afford to be isolated much longer if it is serious about economic growth. As a side note, obviously Ehsani knows what he is talking about as he has been warning about this for a while.

September 7th, 2008, 9:46 pm


trustquest said:

“This should certainly be a factor that Israel should consider in the negotiations and take advantage of.”

What do you mean by this?

September 7th, 2008, 11:06 pm


AnotherIsraeliGuy said:

The Arabs are proud of their leaders when they exploit Israeli weakness in negotiation. For example, Nasrallah is considered a hero as he exploited the Israeli weakness of wanting to return its soldiers almost whatever the price, and even if they are dead.

Israeli politicians should exploit the fact that Syria grows more weak economically the longer it is isolated and does not reform. This is leverage Israel has over Syria in the negotiation. Israel should be in no hurry whatsoever to reach any agreement in the next few years, because if the Syrians are serious on economic growth, they MUST have peace with Israel or give up “resistance”. So, Israel can get a better peace deal from Syria if it waits and it can also help the opposition forces by demanding Asad make democratic reforms.

September 8th, 2008, 12:25 am


trustquest said:

Thanks AGI for the explanation, and thank you for your adamant hold up calling for Democratic environment.
But, I disagree,
The Syrian oppositions are no way stronger when they receive help from Israel on the contrary they will look weaker and there is always a chance from the regime to exploit this fact to break the opposition. This is for the simple fact that Israel is an enemy state. The idea that the state of Israel will exploit the current bad economic situation will not resonate well in the opposition or in public. The regime is not an enemy and will never rise to the level of external enemy.
That is why I disagree, in addition, Israel should not show its wickedness in this matter it should show that she desire to have satisfied, civilized, developed nice neighbors and should show that she is working on this with them. Because having peace of mind is the best guarantee. I think the best deal is the fair deal for both, but especially for the people who are vulnerable to extremist.

September 8th, 2008, 12:57 am


AnotherIsraeliGuy said:

You can call it “wickedness”, I call it negotiating skills.
The only way the Lebanese got the Syrians out of Lebanon is by the threat of UN sanctions. If you think you can on your own get rid of Assad or force him to compromise you are severly mistaken. In 60 years not one liberal and democratic movement in the Arab world has forced a dictator to budge. But do not worry, if you do not want, we won’t help you. But we certainly will not help Asad, the person behind Hizballah and Hamas and the death of hundreds of Israeli civillians.

Asad supports Hizballah and Hamas? No problem, Israel will do all it can to keep Syria isolated and thwart its economic growth. Two can play this game. If you don’t like it, you know how to stop it.

September 8th, 2008, 1:08 am


trustquest said:

I have read to you much smarter phrases than: “ we want to help you”, I could understand that it is to the benefit of Israeli public to have normal neighboring state with functioning democratic society. I do not agree with your insinuation that Israel and the US want to get rid of Assad, this is evident in the negotiation itself.

Not all opposition having the goal of removing the regime in any price even if it is going to take decades, I think the old policies of the last 60 years are starting to change on all levels, the west who start realizing their mistakes and the opposition movements who have the new tools of the global economy where there is one unilateral economic system.

The revenge mentality of your tone is also not helpful for the Israeli public or for the neighboring public, we have suffered from this tone for ages and we believed those dictators with these slogans, we need to grow smarter.

September 8th, 2008, 1:50 am


AnotherIsraeliGuy said:

Asking Israeli politicians to get a good deal from Syria in peace negotiations is not a revenge mentality. I am merely stating that Asad is not mother Teresa and we don’t owe him anything or have to be nice to him.

I do not know what mistakes of the West you are alluding to or what strategies you have in mind. As I see it, the mistakes of the past 60 years are still being repeated. Both Asad and Mubarak crack down the strongest on the liberal democrats as they view them as most dangerous. What tools of the global economy can the opposition parties use?

September 8th, 2008, 2:14 am


Shai said:

“Israel should be in no hurry whatsoever to reach any agreement in the next few years…”

This mentality is what held Israel back from making peace with the Arab world for the past 60 years, certainly since 1967. The inability to see how such mentality is read by our “enemies” (i.e. Israel is not interested in peace.) is part and parcel of typical Israeli arrogance amongst those who still see the Arab as less-than the “Westernized” high-tech Israeli.

When hearing such views, I certainly cannot blame those Arabs who are, at best, skeptical about the Israeli leadership’s true intentions whenever “peace talks” are held.

September 8th, 2008, 4:45 am


AnotherIsraeliGuy said:

Right Shai, it was never the Arabs that said no to peace after 67. I have a simple question for you. Why didn’t Syria join the Camp David accords? Did Israel say no then or Syria? That was the chance to make a comprehensive peace and the Syrians missed the boat.

Israeli arrogance? Is that the problem or is it Arab intrasigence? And now asking our politicians to negotiate smartly with Syria is racist? Is getting a good deal for Israel racist? You know Shai, the more you write the less I understand you.

By the way, do you blame Israelis for being skeptical about the fact that Syria wants peace?

September 8th, 2008, 4:59 am


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