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Syria`s Economy Crisis
Syria`s Economy Crisis

Ailing Syrian Economy affects neighbors

(Dp-news)

Agencies- Amid sanctions and currency depreciation, the economic devastation of Syria's conflict could drive the economies of neighboring Lebanon and Jordan into reverse, Syria's former deputy Prime Minister Abdallah al-Dardari, and now chief economist for United Nations body ESCWA, told Reuters on Thursday.



The Syrian conflict "has a very destabilizing effect," said al-Dardari. "It is in the interest of the whole region for Syria to regain peace and quiet, and start rebuilding."

Al-Dardari said Syria's economy had already shrunk between 35 to 40 percent and would fall 60 percent from its level at the start of the uprising if the fighting continued.





Every one percentage point of economic slowdown in Syria produced a 0.2 percentage point slowdown in Lebanon, he said.

With Syria's economy still collapsing "we can speak about negative growth in Lebanon and Jordan if the situation in Syria continues as it is today for the next two years," he told Reuters in an interview at the U.N.'s central Beirut offices.



Pointing to the sharp slowdown in Lebanon's economic growth since the start of Syria's conflict in 2011, from 7 percent to barely 2 percent, Abdallah al-Dardari said there was a direct link to the ever-deepening economic collapse in Syria.



Jordan's economic growth had remained steadier, between 2 and 3 percent, but was still affected by the Syrian turmoil and was below the level needed to provide enough jobs for its fast-growing population, he said.



The former deputy prime minister for economic affairs was dismissed by President Bashar al-Assad in a cabinet reshuffle shortly after the uprising erupted. He has since been working at the U.N. on plans for Syria's post-conflict reconstruction.



Economists in Lebanon say domestic factors also played a part in the country's economic slowdown, including the political uncertainty when former Prime Minister Saad al-Hariri's government was toppled in early 2011.



But al-Dardari said the Syrian crisis was hitting tourism, trade, development assistance from Gulf Arab oil states and even remittance levels from Lebanon's huge expatriate population, who worry about security in their homeland.



Reports indicated that flood of cheap Syrian labor into Lebanon could also drag down average salaries by 14 percent because of the increase in labor supply of hundreds of thousands of refugees and laborers arriving in a country of just 4 million.



Lebanon's Central Bank governor Riad Salameh, speaking at a conference in Beirut on Thursday, agreed that the Syrian conflict was weighing on Lebanon's performance but reiterated his forecast of 2 percent growth this year.



On Jordan, the impact would be slightly less because its economy was less tied to Syria's, al-Dardari said. "However you can see in the last five to 10 years Syria and Jordan dramatically improved their trade relations and bilateral investments, and have tremendous plans for further integration."

"That has all stopped now" he added.



Al-Dardari's prediction was gloomier than the IMF, which said in March it expected Jordan's economic growth to accelerate above 3 percent, reflecting an increase in government capital spending, higher domestic consumption and a recovery in exports.



However Syria faced almost unimaginable challenges even if the fighting were to stop tomorrow, Dardari said. He put the economic cost at $70-$80 billion, including $28 billion to rebuild 1.2 million houses and provide them with infrastructure.



The country would need 30 million metric tons of cement a year - more than three times pre-crisis quantities - to repair damaged homes and keep up with the need for new housing, al-Dardari said. "Thirty million metric tons of cement requires more than 1 billion cubic meters of water. We don't have that much water."



Sustained fighting on the other hand could only bring greater calamity, including staggering levels of unemployment and absolute poverty, al-Dardari added.

"Over the next few years, if the fighting continues, we will have to look at it as a disaster zone rather than a normal economy functioning according to economics as we know it."



Inside Syria, where clashes entered its third year, Al-Iqtisadi news magazine, reported on April 4 that the Public Company for Bakeries incurred losses of $3.5 million (250 million Syrian pounds). The magazine also reported in April the “insane” price of chicken and beef. Vegetable prices were also high.



For his part, the World Bank reported that Syria’s International Energy Agency shows oil output was slashed in half from 2009 to 2012—from 400,000 barrels per day (bpd) in 2009, down to 200,000 bpd or less in 2012.



The World Bank noted the challenges Syria will face when and if the turmoil ceases: “Once the political situation stabilizes, Syria will grapple with immediate economic challenges including: output and employment collapse in the tradable sector; accelerated exchange rate depreciation in the parallel market; hoarding of hard foreign currency; likely foreign exchange reserve losses; rising inflation; and legal and financial issues associated with frozen assets.”

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