The sight of the humanitarian crisis and civilian protests through towns was supposed to be history. Years after the civil unrest concluded, many had hoped Syria would inch back towards stability. Looks like it’s a long way to rescue the Syrian economy.

Assessing the value of lives lost, destroyed, and displaced in Syria is impossible. However, the economic impact is easier to quantify, declining GDP, falling currency, inflation, and a bitter surmise about the time it will take to recover from a 12-year unrest that has already claimed over 350,000 lives. 

The economy is struggling after years of conflict, corruption, mismanagement, and Western-led sanctions on the government over accusations of war crimes and involvement in the illicit narcotics trade.

The UN estimates that 90% of Syrians in government-held areas live in poverty and that over half of the country’s population of 12 million struggles to put food on the table.

Even as calm has been mostly restored to government strongholds along the Mediterranean coast, the capital Damascus and the largest cities, including Aleppo and Homs, protests were held in southern Syria earlier this month amid widespread anger over the crash of the Syrian pound and the dwindling purchasing power.

The demonstrations came after Syrian President Bashar Assad issued two decrees doubling public sector wages and pensions, sparking inflation and compounding economic woes for others.

The US dollar has strengthened from 7,000 Syrian pounds at the beginning of 2023 to 15,000. At the onset of Syria’s uprising-turned-civil war in 2011, the dollar was trading at 47 pounds.

With much of Syria’s economy pegged to the dollar, any drop in the currency has a broad impact.

Humanitarian assistance has been at an all-time high since the war began. Earlier this year, the UN said 15.3 million people inside Syria needed some form of assistance, and 12 million did not know where their next meal was coming from.

The already dire humanitarian situation got significantly worse by the massive earthquake that struck near the Turkish city of Gaziantep, on the Syrian border, this February, affecting another 8.8 million people.

The disaster happened when the food and fuel prices in Syria were already skyrocketing because of runaway inflation and the collapse of its currency.

Assad’s decision to hike wages and pensions comes as the cash-strapped government continues to restructure an expensive subsidy program for fuel, gasoline, and wheat for bread. Soon after the decision, public transport and fuel fares increased. 

“The combined impact of the conflict and the earthquake has led to widespread destruction of critical infrastructure, displacements, and disruptions to essential services, putting immense pressure on access to necessities like food, water, shelter, and healthcare,” says Duaa Al-Daraweesh, Economic and Recovery Development Coordination manager of Syria at the International Rescue Committee (IRC). 

“Education has also been severely affected, with many schools damaged or destroyed in the affected areas.”

WORST ECONOMIC CRISIS

“It’s difficult to see a positive pathway forward for Syria’s economy in the short and medium terms,” says Dr. Robert C. Mogielnicki, Senior Resident Scholar at The Arab Gulf States Institute in Washington and author of A Political Economy of Free Zones in Gulf Arab States.

Echoing the same sentiment, Joseph A. Kéchichian, a political scientist, an author, and a senior fellow at the King Faisal Center for Research and Islamic Studies in Riyadh, says Syrians are enduring the worst economic crisis since the war began. 

“Any economic recovery will first require a political settlement, which is nowhere in sight. It seems that far more competent decision-makers must embark on sorely needed recovery.”

Earlier, a United Nations Relief and Works Agency estimated that it would take decades for Syria to recoup the cost of war. It estimated that it would take the Syrian economy 30 years to return to the economic level of 2010.

Understandably, stabilization and reconstruction efforts are not easy tasks, especially as Syria remains isolated from the global economic community.

“I don’t see an overwhelming torrent of commercial interest in Syria, which is extremely unfortunate for ordinary Syrians and businesspeople but entirely understandable given the tumultuous recent history in the country,” adds Mogielnicki.

RE-ENGAGEMENT WITH SYRIA

Although a positive development, after shunning the country for a decade, Arab states welcomed Syria back into the Arab League in May, experts are not chuffed about its impact on Syria’s economic recovery. 

“Many Middle Eastern countries are treading carefully concerning re-engagement with Syria because of the sanctions-related risks. The political risks of wading deeply into Syria are still ridiculously high right now,” says Mogielnicki.

Still, as a window into a country’s economy where accurate data is hard to come by, it offers a bleak assessment of Syria’s future.

De-industrialization and destruction of large and small Syrian factories and businesses have seen GDP contract over the last 12 years.

“Most Syrians are barely scraping the bottom, with hyper-inflation – the Syrian pound has effectively lost 99% of its value compared to 2011, and, equally important, very limited productivity in the vital agricultural sector,” says Kéchichian.

Experts say the economic crisis is exacerbated by mismanagement and the predominantly state-controlled economy.

“The economic crisis is a confluence of multiple negative factors: war, corruption, and government mismanagement. Yet sanctions on Syria and reputational concerns associated with working alongside the Syrian regime also pose a major obstacle to attracting the type of economic support Syria ultimately needs,” adds Mogielnicki.

ROLE OF MSMEs

According to UNDP, micro, small and medium enterprises (MSMEs), which constitute about 95% of the total enterprises, can contribute to economic growth and employment, especially women and youth.

“MSMEs have provided and will most likely continue to create new jobs; their roles will gain value,” says Kéchichian.

Al-Daraweesh says supporting MSMEs will foster resilience and diversify the economy, benefiting communities affected by conflict. 

“The IRC is focusing on integrating MSMEs into value chains to enhance overall economic stability and contribute to sustainable recovery,” she adds.

Given a lack of political outlook that envisions day-after scenarios, if Syria aims to reduce poverty and foster social cohesion, MSMEs will need concerted attention, adds Kéchichian.

But how? “By unleashing entrepreneurship, reducing red tape, and limiting corruption that eats its profit margins. It is unclear whether the regime is ready for such bold initiatives.”

It’s not going to be an easy task. Al-Daraweesh says the conflict has had a devastating impact on businesses, both big and small. It has led to massive job losses, exacerbating unemployment and income instability. Investments have declined, supply chains have been disrupted, and businesses struggle to access finance. 

“Inflation and currency devaluation have negatively affected purchasing power, while loss of market share and emigration of skilled labor further compound the challenges. Many have turned to the informal economy for survival.” 

The war has brought about a collapse in Syria’s oil and gas production to just a fraction of what it was. According to a report, Syria’s petroleum sector has incurred losses of more than $100 billion since the start of the civil war.

“With most of its resources falling under Kurdish control, consequently, the need to import oil grew during the civil war as indigenous resources were no longer under State control,” says Kéchichian. “An organized, effective smuggling operation increased oil and gas imports into Lebanon, doubling figures. This mechanism is still in place, which means that accountability is not a priority, something that will slow down any recovery.”

It does not look like the crisis will end anytime soon, but all agree an economic reconstruction is required. 

Although reconstruction work can be done under the auspices of the UN and so on — in July, Italy and the UNDP signed a contribution agreement worth over $21 million to support resilience and recovery efforts in Syria – experts say it will be a near impossible task to rehabilitate Syria without access to the Western financial system, which has been blocked by the US and Europe’s sanctions on the country.

Al-Daraweesh says the complexity of the crisis necessitates sustained support from the global community to address shortages and rebuild infrastructure and social services, ensuring a comprehensive and sustainable recovery.

The IRC focuses on supporting SMEs, integrating protection with economic recovery, seeking international support, and investing in skills development, supporting value chains and education. These are key factors that can contribute to Syria’s economic revival. 

“Coordinated efforts from various stakeholders are essential to pave the way for a sustainable and prosperous recovery,” says Al-Daraweesh. 

At the Arab League summit in May, the Syrian minister of economy and international trade, Mohammad Samer Al-Khalil, called on his Arab counterparts to invest in Syria “in light of the current important opportunities, promising prospects and new laws that are attractive to investors.”

Saudi Arabia and the UAE have been at the forefront of Syria’s regional rehabilitation, and although many Arab countries have expressed readiness to help Syria rebuild, all states are aware of the existing sanctions and do not intend to breach them.

“Several Arab states have stated that they would assist in the reconstruction of the country, but they also placed specific conditions on any aid that they may disburse, including ending the drug trade, curtailing ties with Iran,” says Kéchichian. 

“The ball is now in Damascus’ court.”