aleppo city syria
#Economy #SYRIA
Agence Ecofin
Wednesday 29 January 2025 Last update on Wednesday, January 29, 2025 At 7:35 AM

The Syrian economy is emerging extremely weakened from a decade of conflict. Formal GDP contracted from $60 billion in 2010 to $6.2 billion in 2023. The economy has been affected by external shocks and economic difficulties in neighboring countries (Turkey and Lebanon). Exports collapsed from $8.8 billion in 2010 to $700 million in 2022, while imports fell from $18.8 billion to $4.8 billion.

The Syrian pound (SYP) has continuously depreciated against the dollar: the official exchange rate was divided by 270 between 2011 and 2023, reaching 12,562 SYP for 1 USD (14,122 on the market). This depreciation has fueled high inflation (+115% in 2023 according to the WFP).

The Syrian economy has largely fallen into informality and now relies on illicit flows, particularly from the sale of captagon.

The Syrian state is exhausted and without resources.

Budget revenues have contracted by 85% since 2010. Revenues from oil and mining resources have fallen from 26% to 16% of the total, with most oil fields having been out of the regime’s control for several years.

Public spending has contracted by 87% in parallel and current expenditures represent the majority of the budget. In 2023, subsidies have been significantly reduced, bringing the prices of gasoline and diesel closer to their respective market prices.

Between 2011 and 2023, Syria’s budget deficit has averaged around 11% of GDP. These financing needs have been difficult to meet, despite Treasury bond issues since 2020.

Rebuilding infrastructure is essential to revive the Syrian economy.

The main obstacle to economic recovery is the collapse of the electricity sector. Syria had based its energy model on hydrocarbons, whose domestic production has collapsed (from 385,000 to 80,000 barrels of crude per day).

Part of the electricity infrastructure (power plants, transmission lines) has also been seriously damaged. The transitional authorities have announced a target of providing 8 hours of electricity per day within two months, while current production only provides a few hours of electricity per day.

The destruction of water infrastructure has led to an almost permanent water crisis, penalizing the agricultural sector and weakening human capital. Following the conflicts, half of the water infrastructure is now inoperable. Two-thirds of the wastewater treatment plants have been destroyed and nearly 70% of wastewater is not treated. Transport infrastructure (airports, ports, roads, rails) was targeted during the conflict and will also need to be rebuilt to support the reconstruction effort.

The issue of financing the reconstruction will be central and requires security and legal guarantees, particularly in terms of sanctions regimes.

Syria is emerging financially drained from the conflict and will not be able to commit funds for its reconstruction, even though its economic stabilization will already require a significant financial effort. While reconstruction needs are massive, the financing effort will have to come mainly from outside (donor countries, multilateral development banks).

However, the implementation of such support will first require security and legal guarantees for donors and foreign companies (adjustment of the American and European sanctions regime, financing arrangements with regard to AML-CFT rules).

Source: French Embassy in Lebanon”””

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