The collapse of the Syrian economy

The collapse of the Syrian economy
Analysis: The war in Syria has destroyed the country's economic foundations, plunged 80 percent of its people into poverty, and led to economic losses estimated at more than $200 billion.
4 min read
18 March, 2015
Kadi estimates the damage to the Syrian economy at more than $300 billion [Anadolu]
Economic sanctions have not toppled Bashar al-Assad.

He has fought tooth and nail for the seat of power he inherited, even though the price has been more than 200,000 people killed, 11 million displaced and economic losses that have exceeded $200 billion.

The economic cost has been high: the Syrian economy has effectively been destroyed in Assad's fight to remain in power. He has squandered Syria's foreign currency reserves, more than $18 billion before the war, and borrowed another $11 billion dollars.

The head of the Syrian Economic Task Force, Osama Kadi, believes that economic sanctions alone cannot overthrow a regime as brutal as Syria's. While the economy is an important to any regime, he argues, it can only weaken authoritarian military regimes, not topple them - and their people will be hardest hit.
No economic sanctions have been able to remove [Assad's regime] on their own, but they might cause it to lose popular support
- Osama Kadi

The Syrian Economic Task Force is an independent consultative body that has been selected by the Friends of Syria Group to represent Syria in planning its post-war economy and reconstruction efforts.

"No economic sanctions have been able to remove [Assad's regime] on their own, but they might cause it to lose popular support bases and affect the wealth of its backers, because the regime quite simply does not care about the suffering of people, otherwise we would not have reached this point," said Kadi.

Political propaganda

Kadi also told al-Araby al-Jadeed that Assad's promotion of economic recovery is both illogical and impossible, as such recovery would require central economic planning.

"The regime only has the minimum amount of administrative effectiveness after losing control of over half the country including border crossings," he said.

Furthermore, economic recovery would require a level of security under which products could be moved from one governorate to another, as well as consumers who can afford the products on offer.

Recovery would also require a lifting of the economic sanctions imposed on Syria and the revival of specific sectors of Syria's economy. While these conditions are not present, talk of an economic recovery is nothing more than a dream, used to strengthen Assad's rule and extend the life of the regime, he said.

"I think that many countries will loosen their grip on Syria for security and political reasons as a tactic to encourage the regime to soften its position on political solutions - a carrot and stick policy. The regime might advance in a certain area due to the lack of support for the other [opposition] groups, or receive enough funding to keep it alive in the economic and political intensive care unit," said Kadi.

Burning the Lira

"The Syrian regime knows full well that floating the Syrian currency and leaving it to market demand for less than a week is enough for the lira to fall by over 1000 lira per dollar," said Kadi.

A currency's value is subject to the products and services provided by a state, and in Syria the gross national product has dropped to a quarter of what it used to be, while foreign currency reserves have been nearly depleted, four years into the crisis.

Kadi also confirmed the US dollar has become an essential part of the daily lives of Syrians, despite the harsh punishments for anyone found to be trading in greenbacks. But merchants need to price their products with a stable currency to avoid suffering heavy losses.

The real reconstruction conferences will not take place until the after the end of the crisis.
- Osama Kadi

The head of the Syrian Economic Task Force said he believed that economic researchers "should assume many governorates in Syria will become empty of residents after the crisis, as approximately two million people used to live in the 'liberated areas' and now only half a million of them remain at best".

"Unfortunately, with the economic and structural losses and the destruction of oil resources, agriculture, industry, trade, infrastructure and the displacement of millions of people, the total losses suffered by Syria easily exceeds 200 billion dollars."

And Kadi doesn't hold much faith in Assad's promises of reconstruction, either.

"The real reconstruction conferences will not take place until after the end of the crisis, and any other talk of reconstruction is merely part of the psychological war against the rebels and to soothe what is left of the regime's popular support bases, especially businessmen.

"It is unthinkable that any private company would come to invest in a country if it does not know who governs it, especially with the jets of fifty countries flying through its skies without any oversight."

Kadi described Assad's reconstruction promises to Hitler's promises to rebuild Germany during World War II, and the destruction in Syria in similar to that of Germany after the Second World War.

This is an edited translation from our Arabic edition.