Population n/a
GDP n/a
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
3.2 |
-5 |
-15 |
-5 |
|
Inflation (yearly average) (%)
|
4.5 |
5 |
33 |
20 |
|
Budget balance (% GDP)
|
-4.5 |
-11 |
-14 |
-13 |
|
Current account balance (% GDP)
|
-2.7 |
-10 |
-12 |
-11 |
|
Public debt (% GDP)
|
29.5 |
35.5 |
46.5 |
52.5 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Relatively diversified productive apparatus
- Good tourism potential
- Moderate external debt
WEAKNESSES
- Insurrection against the existing regime in a multi-confessional country
- Declining oil production, source of nearly a third of tax revenues
- Obsolete public-sector industry
- Uncompetitive agricultural sector
- Very unfavourable business environment
Risk assessment
Civil war likely to continue
After facing violent protests since March 2011, the regime of President Bashar Al-Assad – who started a second seven-year term in 2007 - has been facing an armed rebellion since 2012, which it is trying to contain by military repression.
In this context, Syria’s international isolation has grown. In August 2012 the United States and the EU proclaimed an embargo on Syrian oil exports, to which they have added financial sanctions. The Arab League, under pressure from Saudi Arabia and Qatar, suspended the country’s membership at the end of 2011 and Turkey has broken off its free trade agreement. Besides these sanctions, Saudi Arabia and Qatar led the Arab League in demanding President Assad’s resignation.
However, the Syrian regime is likely to continue to rely on China and Russia to veto any UN Security Council resolution authorising force or international sanctions against it. Appointed in August 2012, the new UN and Arab League mediator, Lakhdar Brahimi, was given the task of finding a peaceful end to the civil war despite obstruction by the Syrian parties and the disagreements of the international community.
The hard core of the regime is limited to the Alawite minority (about 12% of the population), especially after the defections of high-ranking Sunnites. However, despite increased control of several areas by the Free Syrian Army and by Jihadist combatant groups, these forces seem too disparate and have insufficient military capacity to quickly overthrow the regime. Politically, a “Syrian National Coalition for Opposition and Revolutionary Forces” was created at the end of 2012 and recognized by several Arab countries, the EU, the United States and Turkey. This will, however, not suffice to lessen the disagreements within the opposition and offer a credible alternative to the regime.
Consequently, the most likely prospect is a prolongation of the civil war into 2013 with an effective partition of the country. In the end the regime could succumb to the rebellion’s growing power and/or to external pressures.
Prolonged recession due to the conflict
Economic activity will continue to suffer heavily from the ongoing fighting and from the damage caused to infrastructure, as well as from western sanctions and those of the Arab League and Turkey. On the demand side, public and household consumption will again be hard hit, while on the supply side, besides agricultural and industrial production, services, which represent 45% of GDP, in particular commercial activity and tourism, will continue to suffer greatly. Even if the current conflict ends, the economy will recover only gradually.
Meanwhile, inflation will remain high, mainly because of the fall of the Syrian currency.
Continued large fiscal and current account deficits
2013 will be marked by the continuation of a very large fiscal deficit. The decline in economic activity and western sanctions against the oil sector are depriving the state of its main source of revenue. Consequently public debt will again grow sharply in proportion to GDP, while the cancellation in 2005 of bilateral debt with Russia had brought it down significantly.
Meanwhile, oil exports will continue to be affected by the western embargo, with other exports already affected by trading sanctions. Imports will also be affected, particularly by financial sanctions, despite the importance of refined oil purchases. In total, with the collapse of tourism and the fall in expatriates’ remittances, the level of the current account deficit will remain very high.
Moreover, the level of external debt will rise due to the contraction in economic activity. Capital flight is expected to accelerate and the Syrian currency to depreciate further, with the increased pressure on the banking system. This situation will lead to a depletion of foreign exchange reserves, which could fall to a level estimated at three months of exports at the end of 2103. However, financial aid from Iran (and possibly from Russia) could help the current regime to avoid a financing crisis in the immediate future and thus delay its collapse.
Greatly worsened business environment
There were already considerable obstacles to the gradual liberalisation of the economy, though the authorities had begun to reform the business and banking sectors. The business environment suffered from major weaknesses: poor company transparency, red tape, nepotism, corruption, shortage of skilled labour and absence of a consistent framework for foreign direct investment. All these ills have been made worse by the country’s catastrophic political, economic and security situation.
