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Syria beyond conflict: the economic test

The bitter divisions in Syria both reflect and intensify the grave, long-term economic challenges that must be met if the country is to have a viable future, says Jihad Yazigi

Jihad Yazigi
29 May 2012

The geography of the Syrian uprising is a reflection of the significant economic and social crisis faced by large segments of the Syrian population since the early 1980s. The core of the revolution is political, in the sense that its backers are overwhelmingly demanding "freedom and dignity"; but strong underlying economic factors are determining its dynamic - and will weigh on the post-revolution period.

It is, indeed, in the areas that historically formed the core constituency of the Ba’ath party that the protests have been strongest, in particular the southern city of Dera’a that sits at the heart of an agricultural plateau, the cities and rural areas of Homs and Hama, and the suburbs of Damascus.

In the late 1970s and early 1980s, after two decades of strong government investment in the economy and society, most Syrians remained solidly behind the regime against protesters led by the Muslim Brotherhood. Now, after three decades of state divestment, trade liberalisation, neglect of agriculture and of the rural areas, and government priority to the services sector, many Syrians are in the streets calling for the demise of this same regime.

An end to illusion

Hence, the few years of strong GDP growth enjoyed by the Syrian economy in the early 1990s (spurred by a growth in oil output) and in the late 2000s (spurred by the oil boom of the Gulf region and the cash surpluses it generated) hid the fact that since the early 1980s, Syria has not been generating enough economic growth to employ its rising population.

The economy, according to most economists, needs to grow by an average of 8% per annum to generate enough jobs for new labour-market entrants - but it has not reached this level even once since 1980. In other words, unemployment has been increasing every single year in Syria for the last three decades.

These difficulties were compounded by poor government policy-making. The free-trade agreements signed with Turkey and the Arab world in the mid-2000s, for instance, as well as a general reduction in custom tariffs, led to an "invasion" of foreign products in the local market that put countless industrial plants and workshops out of business and, consequently, thousands of people out of their jobs. Similarly, a reduction in agricultural input subsidies accompanied by a severe drought forced tens of thousands of farmers from their lands and reduced the contribution of agriculture from around 25% of GDP to 19% in less than a decade.

In addition, in order to respond to its dwindling revenues, the government drastically reduced its investment and spending, and applied what in practice was a copy of the structural-adjustment programs imposed by the International Monetary Fund (IMF) on emerging countries. This contraction of the government's role in the economy was most obvious in rural areas, where the core constituency of the Ba’ath party resided.

In the midst of all these difficulties and state divestment, there was one positive consequence: the government managed to accumulate billions of dollars in foreign-currency reserves and save them for future generations, thanks to an oil boom that, albeit short, lasted most of the 1990s.

This is exactly what Syria is set to lose through the international sanctions imposed on its crude exports. The loss of billions of dollars incurred by the government in the last few months because of the sanctions will render the reconstruction of the country and future investment requirements more difficult to fund.

The issues highlighted above point to the tremendous economic problems faced by Syria's society. There must, indeed, be no illusions. A happy end to the current protest movement, including the establishment of a democratic political system, will not mean an end to Syria's economic woes. Syrians must recognise the challenges ahead and adopt a new economic strategy that puts economic development and employment at the centre.

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