Syrian Conflict Impact on Macro-economy and Millennium Development Goals

ESCWA launched today from its headquarters in Riad el Solh, Beirut, a report entitled “The conflict in the Syrian Arab Republic: The impact at the Macroeconomic Level and the Obstacles on the Way to the Millennium Development Goals.” A host of Arab and foreign diplomats and experts took part in the event. Also participating was the Editor-in-Chief of As Safir newspaper Talal Salman who delivered a keynote address (attached in Arabic). Speakers in the event included ESCWA Senior Economist and Head of the Economic Development and Globalization Division Abdallah Al Dardari, Chief of the ESCWA Economic Policies Section Khaled Abu Ismail, and Chief of the ESCWA Economic Modeling and Forecasting Section Hedi Bchir. Discussants of the report included economic and development experts Raslan Khaddour and Jomaa Hijazi. The event opened with an introductory welcome by Al Dardari, who clarified that this report is different than the national report produced in Syria annually on the achievement of the Millennium Development Goals (MDGs), by the Syrian government in cooperation with the United Nations. Instead, the report tackles this issue from an analytical viewpoint focusing on the repercussions of the conflict on the macroeconomic level. The report includes data and real live facts about the development and economic situation of the Syrian Arab Republic, until the end of the year 2013, in addition to an analysis on future prospects conducted by the ESCWA team, Al Dardari added. He said that the report was written based on data taken from Syrian governmental institutions, the United Nations and its agencies (according to their specializations) and analysis and information provided by experts. Following this introduction, Abu Ismail and Bchir delivered a detailed presentation on the report, as follows: the report consists of three chapters on the macroeconomic situation, the achievement of the Millennium Development Goals, and the projections on development in light of the ongoing crisis. As concluded from the report, since the beginning of the crisis, 2013 has been the worst year faced by the Syrian Arab Republic at all levels, due to the steady deterioration of development indicators, the expansion of the armed conflict to large regions and the increase in the number of displaced people within Syria and to neighboring countries. Moreover, the economic activity contracted in all the sectors and regions of Syria, a large number of companies closed and laid off their employees. Leading to a decline in the supply of a wide range of goods and services in the market, a sharp increase in the levels of unemployment as well as a deterioration of the nominal exchange rate of the Syrian Pound against foreign currencies. This deterioration, resulted in the smuggle of those currencies and their trade in the black market, which in turn led to a sharp increase in the prices of imported goods. While the Syrian economy should have benefitted from the devaluation of its local currency, it oppositely faced a significant drop of its exports given the growing deficit of its balance of trade due to the sanctions imposed on foreign trade and financial transactions. Consequently, the budget deficit widened with the increase of the allocations of current expenditures, leading to a sharp increase of public debt. Public service declined as well due to the destruction of: power plants, water pumps, sewage treatment plants, transportation stations, hospitals, schools, water wells, tanks, pipelines and very large numbers of residential buildings. The real Gross Domestic Product (GDP) (at constant USD of 2010) decreased from 60 billion U.S. Dollars in 2010 to 56 billion in 2011, then to 40 billion in 2012, to around 33 billion in 2013. The estimated loss of real GDP (at constant USD prices of 2010) during the past three years would be of 70.67 billion USD. According to the data provided in the report, the Syrian economy entered an inflationary recession and a significant increase in consumer prices inflation reaching its highest level (89.62 per cent) during 2012-2013. More specifically, the prices of food and beverages inflated and increased by 107.87 per cent during the same period. The acceleration of the inflation is the result of the devaluation of the Syrian Pound against foreign currencies on the black market, leading to an increase of 173 per cent in prices during 2010-2013. The total losses incurred by the Syrian economy during the three years of the crisis (2011-2013) are estimated at 139.77 billion USD, the private sector lost 95.97 billion USD, representing 68.7 per cent of total economic losses, while the losses of the public sector amounted to 43.8 billion USD. The second chapter of the report consisted of the Millennium Development Goals, where Syria had made progress before the crisis, as in the last report of 2010, it was ranked third among Arab countries in achieving the Millennium Development Goals. Falling now to the penultimate position among Arab countries before Somalia. From 1997 to 2010, Syria had succeeded in reducing the proportion of people whose income is less than 1.25 USD per day to the total population from 7.9 per cent to 0.2 per cent. This situation radically changed with the start of the crisis. All poverty indicators increased, as well as the upper and lower extreme poverty lines due to several factors such as: the increase in unemployment rates due to the disruption of economic activities in most sectors, the high increase in prices of materials due to the reduced domestic production of goods and services and their scarcity, the economic embargo which led to a significant decrease in the volume of imports, the reduced purchasing power of the Syrian Pound and the number of people below the upper poverty line reaching 4 million which makes out 18 per cent of the population. The proportion of net enrollment in primary education dropped from 98.4 per cent in 2011 to 70 per cent in 2013. The crisis had a greater impact on the education of girls in secondary and higher education. The rates of vaccination of children decreased significantly. After the proportion of vaccination by all types of vaccines ranged between 99-100 per cent in all the Syrian provinces before the crisis, it dropped for most types of vaccines to 50-70 per cent according to provinces, reaching zero in some regions. The maternal mortality rate continues to increase since the start of the crisis in 2011. It is expected to reach 62.7 deaths per 100 births in 2013,as a result of poor health reproductive services due in turn to damaged infrastructure and health facilities, lack of medicines because of the interrupted domestic production, the external embargo and the lack of security on the roads in several provinces of the country (cities and countryside). The crisis led to the appearance of diseases that had long disappeared in Syria, as well as to the aggravation of illnesses whose spreading rates were low. Such as the reappearance of Poliomyelitis after fourteen years of its eradication and the increase in the spread of: measles, typhoid, viral hepatitis and parotid. The Leishmaniasis disease contaminated 41 000 people during the first half of 2013 due to: widespread pollution, poor hygiene, poor sanitation and garbage spread in several parts of the country, specifically in the province of Aleppo. The crisis created as well a favorable environment for new cases of HIV and AIDS,as a result of the arrival of foreign people to Syria, the deterioration of the economic situation and the increasing psychological pressure. The flora was not left out from the negative impacts of the crisis, which affected the country, its citizens and their multiple indicators. As fires destroyed vast areas of forests containing trees that Syrian generations inherited hundreds of years ago in the provinces of Lattakia and Quneitra. Moreover, due to increased prices of heating fuel and their lack of availability, people resorted to cutting trees located in forests, gardens, sidewalks and natural reserves. Under the pressure of economic and financial sanctions imposed by a large group of countries, most countries stopped their aid and development programmes that were led by international missions who left the country, with the exception of United Nations agencies. The final chapter of the report addressed the future prospects of the Millennium Development Goals with the ongoing crisis in the Syrian Arab Republic, namely, the governance situation, the socio-economic situation and the potential advancement opportunities. This chapter confirms that the forecasts of experts regarding the economic breakdowns and major losses during the crisis have occurred and have had an impact on the daily lives of people. The reserves of the central bank in foreign currencies fell by 67 per cent in only three years, in order to stabilize the exchange rate of the Syrian Pound to the USD at 150-160 Pound equivalent to one USD. The fate of the Syrian pound in 2015 is subject to the proceedings of the crisis and the level of external support. Moreover, the value of the GDP decreased by 16.7 per cent in 2013, after decreasing by 28.2 per cent in 2012 reaching half of its 2011 rate. The decline is expected to continue at a slower pace of 14.27 per cent in 2014 and reaching 4.68 per cent in 2015, when the GDP will reach the amount of 27.3 billion U.S. Dollars, equivalent to the quarter of its amount before the crisis as expected by international institutions during the same year. If the conflict situation is maintained, the economic downturn will lead to social difficulty on several levels: In 2015, the mortality rate of children under five years of age is expected to increase to 28.8 child per thousand people and the infantile mortality rate of children under one year old is expected to reach 28.7 infant per thousand people, compared to 23.3 in 2013. The rate of children immunized against measles is projected to decrease to 40 per cent and the maternal mortality rate is prospected to increase to 73.4 deaths per one hundred thousand births. Due to current circumstances, the rate of births delivered by skilled health personnel will drop to 50 per cent and the rate of use of family planning methods to 36 per cent. In the few coming years, the rate of enrollment to primary education is anticipated to decrease to 50 per cent for the 6-11 age group, and to 30 per cent among students in the first and final grade of primary education. This low enrollment rate will have a negative impact on the country for decades to come. Experts predict that the generation of children who are under 15 today will grow up illiterate. Despite the expectations for the near future that the literacy rate among the 15-24 age group will be of 94.3 per cent, it is certain that this percentage will sharply decrease in the coming years due to the current and projected decline in enrollment rates. The expected enrollment ratio of girls to boys during 2015 is of 90.8 in primary education, 92.5 in secondary education and 53.6 in vocational education. The expected enrollment ratio of girls to boys in university will lower to 76.1. The most serious prospects of the report would be the estimations of experts regarding poverty with a lower poverty line of 59.5 per cent and an upper poverty line of 89.4 per cent. These estimations lead to the conclusion that if the crisis continues until 2015, 90 per cent of Syrians will be considered as poor. Under the current circumstances, the report cannot study the governance of the Syrian Arab Republic as it lacks of the basic components of governance, due to the lack of large parts of the country being subject to one central authority, the weak and disabled governmental institutions and the field being the only real mechanism of governance. The constitution of 2012 is currently applied theoretically on part of the country only. This applies as well to legislations, electoral laws, political parties and the media. Under this difficult situation, we have to right to wonder about the possibility to save what is left from the Syrian Arab Republic and its people and what should be done. The report shows that even if this task is getting harder day by day, due to the increasing financial, human and political costs of the crisis, it is still not impossible to save what is left of Syria. In order to save the Syrian Arab Republic, it is necessary to develop a road map with a first pillar on the efforts that should be made by all concerned parties, internationally and domestically, in order to reach a political solution where all parties shall take a courageous step towards stopping human and material losses. Starting with the recognition of their historical responsibilities and their concern towards the future of the country and its citizens. **** For more information: Contact ESCWA Communication and Information Unit (ECIU) at: 966-70-993144/ 03-910930/ 76-046402 or on email: escwa-ciu@un.org