May 27, 2024
According to two new World Bank reports issued today, almost ten years of fighting exacerbated by external shocks has further deteriorated Syria’s dismal economic status in 2023 and led to a catastrophic decline in the wellbeing of Syrian households. Households’ capacity to satisfy basic necessities has been further depleted by ongoing financial shortages and restricted access to humanitarian aid, in addition to skyrocketing costs, restricted access to necessary services, and increased unemployment.
In 2023, Syria’s economic circumstances only became worse. A decrease in commercial activity contributed to the 1.2% year-over-year (yoy) reduction in economic activity, as measured by evening light emissions, particularly near the western borders of Syria. Data from gas flares at night also reveals a 5.5% year-over-year decline in oil production, partially attributable to infrastructure damage from earthquakes and conflicts. Even though agricultural output increased in 2023 as a result of better weather compared to 2022, when it was at an almost historic low, the conflict still had a significant negative impact on the industry due to the widespread farmer displacement, extensive damage to irrigation systems, and decreased crop yields. Foreign trade has also been badly harmed by disruptions caused by conflicts. Syria’s reliance on imports increased as a result of a decline in domestic agricultural and industrial output. While reliance on food imports was already problematic before 2011, the conflict has made it more so.
The Syrian pound lost a significant 141% of its value in relation to the US dollar in 2023, and the reduction of government subsidies is thought to have contributed to a 93% increase in consumer price inflation. Fiscal receipts are falling even as the economy slows. Authorities have responded by cutting expenditure even more, notably in capital expenditures, and by tightening subsidies programs.
The prolonged economic contraction is expected to continue in 2024, according to the Spring 2024 Syria Economic Monitor. Real GDP is expected to shrink by 1.5% in 2024, continuing the 1.2% fall in 2023, despite extremely high uncertainty. The main driver of growth, private consumption, will continue to be subdued as rising costs continue to reduce purchasing power. In the face of significant economic and policy uncertainty, as well as an unstable security environment, private investment is predicted to remain sluggish. Due to the pass-through effects of currency depreciation, ongoing shortages, and possible additional reductions in fuel and food subsidies, inflation is predicted to continue to increase in 2024. The budget for 2024 shows that subsidies for necessities would continue to be cut.
A summary of the key conclusions from the Welfare of Syrian Households report may be found in the Special Focus section. As of 2022, 14.5 million Syrians, or 69% of the population, have been reported to be living in poverty. Although nearly nonexistent before to the conflict, extreme poverty plagued over 40% of Syrians in 2022 and may have worsened much more as a result of the severe effects of the earthquake that struck in February 2023. The COVID-19 pandemic, the war in Ukraine, and the financial crisis in Lebanon in 2019 are just a few of the external circumstances that have significantly weakened the welfare of Syrian households in recent years.
The research also emphasizes how vitally important foreign remittances have been for Syrian households. Remittances from overseas are linked to reductions in extreme poverty rates of 12 percentage points and poverty rates of 8 percentage points.
(Source: The World Bank)
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