Syria political/economic forecast 2006-07
OVERVIEW
The consequences of the assassination in February of the former Lebanese prime minister, Rafiq al-Hariri, continue to overshadow Syria’s political outlook. A report mandated by the UN Security Council has appeared to confirm widespread international suspicion that Syria was responsible for the killing. If Syria refuses to co-operate with the continuing investigation it will almost certainly face international sanctions. Co-operating, however, may be even more hazardous, particularly as the inquiry is likely to lead to charges being levelled against very senior figures within the regime. Economic policymaking will gain little attention within this environment, and economic growth will be weak, slowed by declining oil output. The buoyant outlook for oil prices over the coming year will ensure that the government finances remain comfortable and the trade and current accounts stay in surplus next year. The position will weaken in 2007, however, as falling production compounds the impact of lower oil prices.
Key changes from last month
Political outlook
The conclusions of the recent UN report have significantly increased the risk of international sanctions being imposed on Damascus. Should this occur, the regime would be weakened and would be left even more isolated, but it is likely that it would be able to retain its grip on power. There remains no prospect of the US leading military action against Syria.
Economic policy outlook
The Economist Intelligence Unit’s economic policy outlook is unchanged, although the threat of sanctions will act as a further obstacle to reform. Should the UN ultimately impose significant punitive measures, the reform agenda would be derailed.
Economic forecast
The increasingly threatening political environment that Syria faces has led us to adjust our forecast for economic growth downward since our previous report. The imposition of sanctions would prompt us to cut the projections further still, particularly if the measures curtailed the state's capacity to export oil. This would also have a marked impact on the public finances and the external accounts.
Risk ratings
Overall Overall Political Economic Economic Liquidity
rating score risk policy risk structure risk risk
October D 67 E D C D
September D 63 E C C D
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Short-term risk event
The recently released UN mandated report into the assassination of former prime minister, Rafiq al-Hariri, has strongly suggested that Syria was directly involved in the plot, substantially increasing the risk of sanctions being imposed on Damascus.
Political risk
The initial results of the UN Hariri investigation have increased pressure on the regime, and appear set to deepen its isolation. However, it remains unlikely that the regimes grip on power will be broken, particularly at a time when unrest in neighbouring Iraq has heightened an awareness of the risks of enforced regime changes in the region.
Economic outlook
Recent political developments have undermined Syria’s economic prospects, although this has been offset to some degree by the positive outlook for international oil prices, which will minimise the pressure on the public finances and keep the current account in surplus in 2005-06. The position will weaken significantly in 2007, however, as oil prices fall.
Financing outlook
The signing of a restructuring agreement with Russia on Soviet-era debt has cut the value of Syria’s debt stock, but boosted its servicing obligations. Despite this, Syria’s financing position will remain comfortable in 2005 and 2006, but deteriorate in 2007 as oil prices and production fall.
Risk ratings: Economic forecast summary
Economic forecast summary
2005 2006 2007
Real GDP (% change) 1.4 0.8 1.0
Consumer prices (% change; av) 2.6 3.0 3.5
Neighbouring country rate (av) 48.5 48.5 48.5
Current account (US$ m)
Goods: exports fob 6,344 6,176 5,571
Goods: imports fob -5,973 -6,093 -6,154
Trade balance 370 83 -582
Current-account balance 980 537 -111
Current-account balance (% of GDP) 4.6 2.4 -0.5
External financing (US$ m)
Financing balance 673 217 -430
Total debt 8,590 8,514 8,489
Total debt service 641 699 727
Debt-service ratio, paid (%) 6.4 7.1 7.8
Debt-service ratio, due (%) 6.8 7.5 8.3
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Outlook for 2006-07: Domestic politics
Syria’s political outlook has deteriorated further with the release in late October of a UN Security Council mandated report into the assassination of the former Lebanese prime minister, Rafiq al-Hariri, earlier this year. The report makes clear the investigating team’s belief that Syria, its officials in Lebanon and its Lebanese allies were directly involved in the killing. A new Security Council resolution is currently being prepared which is likely to endorse the report’s findings, and authorise a further, more detailed inquiry as a final step before bringing individuals suspected of involvement in the assassination to trial.
Syria’s options in the face of the pressures that are building on it appear limited. Its official response has been to reject the allegations, maintaining that it had no connection with the killing and suggesting that the UN report is politically motivated. However, to withhold co-operation from the next phase of the investigation would leave the Security Council with little option but to impose sanctions, and would also seem to confirm its guilt. Co-operating would buy Syria some time, but would prove difficult and potentially even more hazardous. The next stage of the investigation will seek primarily to determine not if Damascus was responsible, but how far up the ranks of the political and military intelligence elite the conspiracy rose. This could prove to be very high indeed, with witnesses telling the UN team that as well as key members of the intelligence establishment, close members of President Bashar al-Assad’s own family were involved in the conspiracy. To allow these figures to be interrogated and then, potentially, be summoned abroad to stand trial would humiliate Mr Assad, and generate immense opposition within the military and intelligence services over which his authority already appears weak. It might also not necessarily save Syria from punitive sanctions if its role in the assassination were proven.
Syria could adopt a more aggressive stance, seeking to warn the US and others away from continuing their campaign against Damascus. This could include steps to promote unrest in Lebanon (including along the border with Israel), where it continues to have influence, while also reminding the US of the threat it could pose to efforts to promote stability in Iraq. The regime can also stress to its opponents abroad the danger of instability in Syria itself, hinting that sectarian conflict of the kind seen in Iraq could emerge if its authority is weakened further. This might carry weight in some circles, particularly if it were to be coupled with Syrian undertakings to address issues such as domestic political reform, the Middle East peace process, relations with Lebanon and links with armed anti-Israeli groups. Indeed, there have been many reports of indirect negotiations between Syria and key interested parties abroad on a deal that would see Damascus offer concessions to avoid the most severe repercussions of the Hariri murder. However, the regime would have to work very hard to restore its credibility abroad, which was in sharp decline well before the assassination of Mr Hariri took place. While recognising the dangers of destabilising the regime, many also believe that there is little prospect of Syria reforming other than under sustained pressure.
Indeed, there are grounds to suspect that neither the US nor Syria are interested in making a deal. For the former, sanctions over the assassination of Mr Hariri offer a means to keep Syria weak and isolated and provide a lever to exert pressure for long-term change. Mr Assad, meanwhile, may judge that the concessions necessary to make a deal carry a greater threat to his domestic position than the prospect of sanctions and isolation. As things stand, the regime appears likely to ride out the current crisis—at least over the forecast period—although it will be severely weakened. The president has tightened his grip on power, having clamped down on opposition groups and appointed his own allies to key post. This has enhanced his control, albeit at the cost of narrowing his power base. Moreover, the security forces and intelligence services remain effective and, despite the frustration many within the elite feel, organising against the regime carries a high risk of detection and retribution—a factor that might account for the recent “suicide” of the interior minister, Ghazi Kenaan. There is also no prospect that the UN deliberations on the Hariri murder will lead to military action, particularly while US forces remain tied down in Iraq. Even the scope of economic sanctions imposed by the Security Council may be moderated by the concerns of Russia and China, who have historical ties with Damascus as well as oil sector interests.
Outlook for 2006-07: International relations
Syria’s isolation has strengthened the position of Israel at its expense. In a bid to ameliorate the pressure it is under, Damascus has offered to recommence peace talks with Israel and has sent out a number of signals of intent. However, Israel has come under no pressure to accept, and has instead been able to set preconditions for talks to take place—a position that has been endorsed openly by the US and tacitly by a number of European states. In light of recent developments over Iraq, there is even less prospect of real efforts being made to restart peace talks with Israel. Indeed, the pressure is likely to focus instead on Syria being an obstacle to peace between Israel and its Arab neighbours through its support for militant Palestinian groups, which will increase the likelihood of Israel carrying out military strikes against positions in Syria in response to attacks by Palestinian groups in Israel.
Outlook for 2006-07: Policy trends
Prospects for economic reform have worsened. The June conference of the Baath party approved several key resolutions on economic policy, including one that symbolically replaced “Arab socialism” with “market economics” as the ruling party’s official strategy. Several high-profile advocates of economic reform within the president’s circle also gained promotion around the time of the congress, indicating that their influence may be rising. Indeed, as has been the case since his accession, Mr Assad hopes to be able to forestall pressure for domestic political reform by moving ahead with economic reform—an approach some within the regime like to characterise as following the “China model”. The problems afflicting oil output, which appears to have dropped far more sharply over the past year than officials had previously suggested, should also provide an incentive for reform.
However, the likelihood of substantive reform measures being implemented soon has fallen in line with the outcome of the UN report into the Hariri killing and the likelihood of sanctions being imposed. Although it is unclear what form sanctions might take, they will prove further obstacles to the already difficult task of overhauling the Syrian economy, not least to efforts to draw in foreign investment. Moreover, despite the elevation of a few reformers, there does not appear to be a consensus within the elite over the necessity or direction of economic reform, particularly on sensitive measures such as cuts to the subsidy system or restructuring the country’s highly inefficient state-owned enterprises. In addition to political concerns, the reform process will be slowed by the limited capabilities and generally conservative stance of many within the upper and middle ranks of various state institutions, which leave them ill-placed to support a task as complex and contentious as structural reform. The long delay now likely in bringing the EU Association Agreement into effect has also removed a potentially useful framework for reform and a lever to implement change.
Outlook for 2006-07: Fiscal policy
The government’s fiscal position will weaken in the second half of the forecast period, as the impact of falling oil pries is compounded by a continued downturn in production. The Economist Intelligence Unit expects total earnings to reach S£294bn (US$6bn) this year, falling slightly to around S£286bn in 2006 and more markedly to around S£250bn in 2007. Assessing spending trends remains hazardous given the paucity of official data, but the modest increases in expenditure included in the recently released 2005 budget suggest that the pace of growth may be relatively low. Falling oil production together with the more threatening political environment may also encourage greater fiscal restraint, and on average we expect spending to rise by no more than 3% a year—only slightly above the projected pace of inflation. Nevertheless, this will leave the government with a widening deficit, which will increase from around 4% of GDP this year to 5.2% and 7.3% in 2006 and 2007 respectively. Moreover, the outlook is beset with downside risks, with the imposition of sanctions that curtailed Syria’s capacity to export oil, or that led to a freeze on its foreign assets, likely to put the public finances under considerable additional pressure in 2006 and 2007.
Outlook for 2006-07: Monetary policy
The piecemeal liberalisation of monetary policy apparent in recent years may persist into the forecast period, although the threatening political environment is likely to see the pace of change remain very slow. Over the past couple of years, interest rates have been altered for the first time in two decades, foreign-currency rules have been relaxed and the first steps have been made towards the establishment of an interbank market—a key development if liquidity management is to become more effective. However, there is still a long way to go. The Central Bank of Syria continues to lack flexible, indirect monetary tools, and recent changes in savings rates are only a first step towards establishing a more effective monetary system. Credit continues to be predominantly centrally allocated, and the banking sector is still dominated by state-owned institutions. The Central Bank also continues to constrain the workings of the small private banks, setting interest rate caps, for example, and retaining restrictions on foreign-currency operations. These shortcomings will be addressed, but only cautiously as the authorities seek to build capacity and guard stability, as well as protect the public-sector entities that would be heavily exposed by rapid moves towards a fully market-oriented system.
Outlook for 2006-07: International assumptions
We estimate that global growth (measured using purchasing power parity exchange rates) will average around 4.3% this year—a performance that stands slightly above the long-term average, but that marks a deceleration on the 5.1% recorded in 2004. We expect global growth to ease further but remain relatively strong in 2006 and 2007, at around 4%. We have raised our already bullish forecast for international oil prices since our previous report, with the benchmark dated Brent Blend now expected to average around US$56/barrel this year and next—an increase of 50% on last year’s average, which was at that time a record high. This exceptional performance reflects the difficulty of expanding supply quickly enough to keep pace with demand. With most producers operating at close to their maximum, the market has little spare capacity, putting prices under sustained upward pressure. We anticipate that the market will begin to loosen over the latter stages of next year, however, as supply growth outstrips increases in demand. The trend will persist into 2007 when prices are expected to average just under US$47/b—still more than double the ten-year average (1995-2004).
Outlook for 2006-07: Economic growth
The outlook for economic growth remains poor, with the economy expected to expand by an average of just 1.2% a year in 2005-07. The forecast is driven in large part by declining oil production, which will curb industrial output and lead to a sustained contraction of exports in real terms throughout the forecast period. The hostile political environment also undermines growth prospects, and is likely to see local and foreign investor confidence remain weak—a position that will undermine Syria’s efforts to draw urgently needed foreign finance into the oil and gas sectors. The political issues absorbing the regime’s energies also make it unlikely that there will be significant forward movement with economic reform, further damaging growth prospects. Firm oil prices will support some increase in government consumption, however, and the booming economies of the Gulf may provide a modest increase in regional investment and tourism demand. The large number of Iraqis that are now living and working in the country has also provided an additional impetus to local demand. Nevertheless, the risks remain on the downside, particularly if sanctions are imposed that compromise the country’s capacity to export oil. A bar on investment or access to key imported inputs would also push the country rapidly towards recession.
Outlook for 2006-07: Inflation
The weakness of the US dollar, to which the Syrian pound will retain its peg, will create some inflationary pressure, keeping the cost of various imported goods high, particularly those sourced from the euro zone. However, the slow pace of economic growth together with the likely maintenance of subsidies and fixed prices for key goods and services will keep consumer price inflation in check, and all told we expect prices to rise by an annual average of 3%—little changed on 2004. Nevertheless, official data are patchy and there are signs that the consumer price index basket does not reflect real trends in a number of unregulated areas of the economy (notably private-sector rents), where prices may be rising more strongly.
Outlook for 2006-07: Exchange rates
The governor of the Central Bank, Adib Mayaleh, has signalled his determination to address the rigidities of the foreign-exchange regime, and we expect to see further reforms introduced over the forecast period. This will probably include the abolition of the few remaining secondary exchange rates and a further liberalisation of the foreign-currency laws. If the government follows through, this could all but end the black market in foreign currency, which has run parallel to the official currency regime since the balance-of-payments crisis of the late 1980s. It is highly unlikely, however, that the currency will be allowed to float freely, with the government continuing to favour stability over the emergence of a potentially more volatile market rate.
As a result, we expect the prevailing legal rate for the pound to remain at close to S£50:US$1. The regime can support this approach through the dominant position of the state-owned banks and the control the Central Bank will retain over foreign-currency transactions, even if some laws are relaxed. Given the outlook for international oil prices, the currency is unlikely to come under pressure during the forecast period. However, the threat of international sanctions has increased the downside risk, with the imposition of punitive economic measures (such as a freeze on Syrian foreign assets) likely to lead the government to reverse whatever liberalisation measures had been introduced, to allow it to tighten controls on the allocation and management of foreign exchange. This would leave convertibility in doubt and, assuming substantial reform had been introduced earlier, would lead to the rapid re-emergence of the black market.
Outlook for 2006-07: External sector
Official data put export earnings at US$5.7bn in 2004 (a fall on the previous year’s total, despite a 30% rise in oil prices), and this is expected to increase to an estimated US$6.3bn this year as oil prices continue to surge. Earnings will decline to around US$6.2bn in 2006 and US$5.6bn in 2007 as oil revenue falls. Import spending rose surprisingly sharply in 2004, but we expect increases over the forecast period to be far more modest given the slow pace of domestic demand growth. Nevertheless, the trade position will steadily deteriorate, with a surplus of around US$370m this year falling to around US$80m in 2006, before giving way to a deficit of close to US$600m in 2007. Non-merchandise earnings appear to have strengthened in 2004, largely because of the arrival of large numbers of Iraqis (both business people and those fleeing the conflict) and some pick-up in tourism. This upward trend is unlikely to gain momentum given prevailing political conditions, and remittances from expatriate workers will probably ease because of antipathy towards Syrian workers in neighbouring Lebanon. Income debits will rise this year following the debt rescheduling agreement reached with Russia in January, which will boost servicing costs. Higher oil prices will also push up foreign oil firm profit repatriation. The net effect of these trends will be to leave the current account with a surplus of around US$980m (4.6% of GDP) in 2005 and US$540m in 2006, compared with about US$200m in 2004. The current account will register a deficit of around US$110m in 2007—its first shortfall since 1994.
Quarterly indicators
Syria: Quarterly indicators
2003 2004 2005
4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr
Exchange rate (other rates apply; S£:US$)
Average (neighbouring countries rate) 46.30 46.30 46.30 46.30 46.30 48.50 48.50
End-period (official rate) 11.23 11.23 11.23 11.23 11.23 11.23 11.23
Domestic indicators (% change)
Money supply M1 27.0 28.7 – – – – –
Money supply M2 7.8 7.4 – – – – –
Energy indicators
Petroleum production ('000 b/d) 520 475 510 500 495 490 –
Financial indicators (US$ m)
Commercial banks' foreign assets 52,724 – – – – – –
Commercial banks' foreign liabilities 1,209 – – – – – –
Commercial banks' net foreign assets 51,515 – – – – – –
Assets with BIS-reporting banks 24,824 24,488 24,832 25,261 25,463 25,700 –
Liabilities with BIS-reporting banks 510 500 784 527 580 688 –
IMF credit (net) 0 0 0 0 0 0 0
Symbols
0, 0.0 nil or negligible
– not applicable or not available
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Economic structure
Syria: Economic structure
2001a 2002a 2003a 2004b 2005b 2006c 2007c
GDP at market prices
Nominal GDP (US$ bn) 20.6 21.6 25.6 21.2 21.4 22.4 22.5
Nominal GDP (S£ bn) 954.1 999.5 1,183.4 1,028.4 1,036.7 1,086.1 1,090.0
Real GDP (S£ bn at 2000 prices) 938.7 978.8 1,004.3 1,009.8 1,024.4 1,032.9 1,043.5
Expenditure on GDP (% real change)
GDP 3.8 4.3 2.6 0.5 1.4 0.8 1.0
Private consumption -4.0 4.0 11.4 2.0 2.4 1.8 2.0
Government consumption 2.0 4.9 12.0 3.0 5.0 2.5 2.5
Gross fixed investment 25.9 0.0 13.7 3.1 2.0 -1.0 1.0
Exports of goods & services 13.0 8.7 -23.3 -4.0 -3.0 -1.0 -1.0
Imports of goods & services 10.4 6.8 -4.1 2.0 1.2 0.5 2.0
Origin of GDP (% real change)
Agriculture 8.6 8.2 -2.7 3.0 2.0 3.2 3.2
Industry 1.8 -2.4 -1.2 0.5 0.5 1.5 1.5
Services 2.6 6.8 8.2 3.0 2.2 2.0 2.0
Ratios, GDP at market prices (%)
Gross fixed investment/GDP 20.9 20.0 19.0 21.6 21.1 19.2 18.8
Exports of goods & services/GDP 37.7 40.4 39.9 39.7 38.8 41.4 40.1
Imports of goods & services/GDP 31.1 32.4 27.2 42.0 42.7 41.5 41.8
Gross national savings/investment 106.9 108.1 103.6 101.0 105.0 102.9 99.4
Ratios, GDP at factor cost (%)
Agriculture/GDP 25.9 26.9 25.5 26.1 26.2 26.8 27.4
Industry/GDP 32.7 30.7 29.8 29.8 29.5 29.8 29.9
Services/GDP 41.4 42.4 44.7 45.8 46.1 46.7 47.1
Ratios, policy indicators (%)
Budget revenue/GDP 27.3b 27.8b 24.4b 25.0 26.6 24.7 23.1
Budget expenditure/GDP 24.9b 25.8b 24.0b 29.3 30.5 30.0 30.3
Budget balance/GDP 2.4b 1.9b 0.4b -4.3 -3.9 -5.2 -7.3
Energy indicators
Petroleum production ('000 b/d) 550 545 530 444 404 384 370
Petroleum reserves (m barrels; end-period) 2,500 2,500 2,500b 2,500 2,500 2,500 2,500
Money supply (% change)
M1 13.9 17.8 27.0 14.0 13.0 10.0 10.0
M2 23.5 18.5 7.8 14.9 13.6 11.5 10.6
Prices and exchange rates
Interest rate (%; av lending rate) 9.0 9.0 7.5 7.0 7.0 7.0 –
Consumer prices (% change; av) 3.0 1.0 4.8 2.1 2.6 3.0 3.5
Neighbouring country exchange rate (av) 46.3 46.3 46.3 48.5a 48.5 48.5 48.5
Population and income
Population (m) 17.24 17.68 18.13 18.58a 19.03 19.46 20.11
Population growth (%) 2.6 2.6 2.5 2.5a 2.4 2.3 3.3
GDP per head (US$) 1,200 1,220 1,410 1,140 1,120 1,150 1,120
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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Foreign payments
Syria: Foreign payments
2001a 2002a 2003a 2004b 2005b 2006c 2007c
Current account (US$ m)
Current-account balance 1,221 1,440 728 205a 980 537 -111
Goods: exports fob 5,706 6,668 5,762 5,561a 6,344 6,176 5,571
Goods: imports fob -4,282 -4,458 -4,430 -5,935a -5,973 -6,093 -6,154
Trade balance 1,424 2,210 1,332 -374a 370 83 -582
Services: credit 1,781 1,559 1,331 2,614a 2,671 2,618 2,487
Services: debit -1,694 -1,883 -1,806 -1,980a -1,919 -1,958 -1,977
Services balance 87 -324 -475 634a 752 660 509
Income: credit 379 250 282 385a 431 518 626
Income: debit -1,162 -1,175 -1,139 -1,114a -1,192 -1,311 -1,259
Income balance -783 -925 -857 -729a -761 -794 -633
Current transfers: credit 512 499 743 690a 622 591 597
Current transfers: debit -19 -20 -15 -16a -3 -3 -2
Current transfers balance 493 479 728 674a 619 588 595
Financing (US$ m)
Financing requirement 360 441 -267b -861 673 217 -430
Principal repayments due -861 -999 -995 -1,066 -307 -320 -319
Medium- & long-term debt inflows 0 0 0b 200 275 175 225
Inward direct investment 110b 115b 130b 150 185 200 200
Outward direct investment -5b -4b -4b -4 -4 -4 -4
Net direct investment flows 105b 111b 126b 146 181 196 196
IMF credit 0 0 0 0a 0 0 0
Increase in interest arrears (if any) 119 86 107 164 0 10 10
Increase in principal arrears (if any) 760 890 830 895 0 35 36
Other capital flows (net) -844b -728b -1,046b -119 -979 -508 -387
Change in international reserves (– indicates increase) -500b -800b 250b -425 -150 -125 350
International reserves (US$ m)
Total 2,979b 3,779b 3,529b 3,954 4,104 4,229 3,879
Foreign-exchange reserves 2,950b 3,750b 3,500b 3,925 4,075 4,200 3,850
Gold, national valuation 29 29 29 29 29 29 29
Commercial banks' foreign assets 44,742 51,819 52,724 54,954 57,153 59,439 61,816
Commercial banks' foreign liabilities 347 990 1,209 985 897 816 742
Commercial banks' net foreign assets 44,395 50,829 51,515 53,969 56,256 58,623 61,074
Months of import cover 6.0b 7.2b 6.8b 6.0 6.2 6.3 5.7
Ratios (%)
Current-account balance/GDP 5.9 6.7 2.8 1.0 4.6 2.4 -0.5
Trade balance/GDP 6.9 10.2 5.2 -1.8 1.7 0.4 -2.6
Exports of goods & services/imports of goods & services 125.3 129.7 113.7 103.3a 114.2 109.2 99.1
Exports of goods/exports of goods & services 76.2 81.1 81.2 68.0a 70.4 70.2 69.1
Imports of goods/imports of goods & services 71.7 70.3 71.0 75.0a 75.7 75.7 75.7
Services balance/GDP 0.4 -1.5 -1.9 3.0 3.5 2.9 2.3
Income balance/GDP -3.8 -4.3 -3.4 -3.4 -3.6 -3.5 -2.8
Current transfers balance/GDP 2.4 2.2 2.8 3.2 2.9 2.6 2.6
Memorandum items (US$ m)
Flow of export credits -58 94 76 237 6 19 10
Capital flight -525b -732b -1,039b -149 -1,330 -1,139 -1,018
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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External trade
Syria: External trade
2001a 2002a 2003a 2004a 2005a 2006b 2007b
Goods: exports fob (US$ m)
Total 5,193 6,068 5,244 5,174 5,773 5,620 5,070
Crude petroleum 3,752 4,192 3,652 3,353 4,025 3,741 2,991
Fruit & vegetables 326 333 343 353 367 382 397
Textiles 321 325 331 338 344 351 358
Cotton 201 203 207 211 215 220 224
Services: credits (US$ m)
Tourism receipts 1,130 1,000 875 1,450 1,475 1,500 1,425
Goods: imports cif (US$ m)
Total 4,570 4,758 4,728 6,334 6,493 6,623 6,689
Machines & equipment 1,773 1,880 1,955 2,033 2,114 2,157 2,221
Metals & metal products 1,268 1,370 1,411 1,467 1,541 1,602 1,682
Transport equipment 583 642 674 721 771 810 858
Foodstuffs 570 598 604 622 635 654 680
Volume and prices (% change)
Export volume of goods 4.0 11.0 -23.3 -4.0 -3.0 -1.0 -1.0
Import volume of goods 10.4 6.8 -4.1 2.0 1.2 0.5 2.0
Export prices 6.6 5.3 12.7 2.8 15.0 -1.7 -8.9
Import prices 4.2 -2.5 3.6 31.3 1.3 1.5 -1.0
Terms of trade (1990=100) 67.9 73.3 79.8 62.4 70.9 68.7 63.2
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.
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Trends in foreign trade
Syria: Trends in foreign trade
2001a 2002a 2003a 2004a 2005a 2006b 2007b
Main destinations of exports (% share)
Germany 19.0c 17.5c 20.7c 16.4c – – –
Italy 16.4c 15.8c 12.4c 13.0c – – –
UAE 11.7c 6.6c 7.5c 9.6c – – –
Lebanon 4.6c 4.7c 6.2c 8.0c – – –
Main origins of imports (% share)
China 3.8c 5.5c 6.2c 7.3c – – –
Italy 8.4c 8.0c 6.9c 7.2c – – –
Germany 6.9c 7.4c 7.0c 6.7c – – –
Turkey 4.8c 4.1c 5.3c 4.1c – – –
Principal exports (% share)
Crude petroleum 72.3 69.1 69.6 64.8 69.7 66.6 59.0
Fruit & vegetables 6.3 5.5 6.5 6.8 6.4 6.8 7.8
Textiles 6.2 5.3 6.3 6.5 6.0 6.3 7.1
Cotton 3.9 3.3 3.9 4.1 3.7 3.9 4.4
Principal imports (% share)
Machines & equipment 38.8 39.5 41.3 32.1 32.6 32.6 33.2
Metals & metal products 27.8 28.8 29.8 23.2 23.7 24.2 25.2
Transport equipment 12.8 13.5 14.2 11.4 11.9 12.2 12.8
Foodstuffs 12.5 12.6 12.8 9.8 9.8 9.9 10.2
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.
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External debt stock
Syria: External debt stock
2001a 2002a 2003a 2004b 2005b 2006c 2007c
Foreign debt stock (US$ m)
Total 21,347 21,418 21,605 21,824 8,590 8,514 8,489
Public medium- & long-term 15,817 15,798 15,885 15,910 5,360 5,243 5,177
Private medium- & long-term 0 0 0 0 0 0 0
IMF 0 0 0 0 0 0 0
Short-term 5,530 5,620 5,720 5,914 3,230 3,271 3,312
Interest arrears 2,529 2,615 2,722 2,886 172 182 192
Official creditors 2,390 2,470 2,570 2,724 0 0 0
Private creditors 139 145 152 162 172 182 192
Ratios (%)
Total debt/exports of goods & services 254.8 238.6 266.1 237.0 85.3 86.0 91.5
Total debt/GDP 103.6 99.2 84.5 102.9 40.2 38.0 37.8
International reserves/total debt 14.0b 17.6b 16.3b 18.1 47.8 49.7 45.7
Debt per head (US$) 1,238 1,211 1,192 1,175 451 437 422
Net debt (US$ m)
Total 18,368b 17,639b 18,076b 17,870 4,486 4,285 4,610
Ratios (%)
Net debt/exports of goods & services 219.2b 196.5b 222.7b 194.1 44.6 43.3 49.7
Net debt/GDP 89.1b 81.7b 70.7b 84.3 21.0 19.1 20.5
Medium- and long-term debt (US$ m)
Total 15,817 15,798 15,885 15,910 5,360 5,243 5,177
Official creditors 14,757 14,718 14,775 14,804 4,259 4,149 4,091
Bilateral 14,200 14,200 14,300 14,154 3,559 3,374 3,296
Multilateral 557 518 475 650 700 775 795
Private creditors 1,060 1,080 1,110 1,106 1,101 1,094 1,086
Memorandum items (US$ m)
Export credits 527 621 697 934 940 959 968
Principal arrears 10,580 11,470 12,300 13,195 1,167 1,202 1,238
Official creditors 9,540 10,400 11,200 12,062 0 0 0
Private creditors 1,040 1,070 1,100 1,133 1,167 1,202 1,238
Debt owed to BIS banks (US$ m)
Total 530 497 544 613 – – –
0-1 year 192 174 372 423 – – –
1-2 years 3 2 27 39 – – –
Over 2 years 335 321 145 – – – –
Memorandum items (US$ m)
BIS banks' undisbursed credit commitments 159 551 199 9 – – –
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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External debt service
Syria: External debt service
2001a 2002a 2003a 2004b 2005b 2006c 2007c
Foreign debt service (US$ m)
Total paid 280 281 339 430 641 699 727
Medium- & long-term debt 165 158 220 291 482 510 508
Official creditors 164 157 215 287 477 503 500
Private creditors 2 2 4 4 5 7 8
IMF debits & charges 0 0 0 0a 0 0 0
Short-term debt (interest only) 115 123 119 139 159 189 219
Total due 1,159 1,257 1,276 1,489 686 744 773
Ratios (%)
Debt-service ratio, paid 3.3 3.1b 4.2b 4.7 6.4 7.1 7.8
Debt-service ratio, due 13.8 14.0b 15.7b 16.2 6.8 7.5 8.3
Debt service paid/GDP 1.4 1.3 1.3 2.0 3.0 3.1 3.2
Principal repayments (US$ m)
Total paid 101 109 165 171 272 285 283
Medium- & long-term debt 101 109 165 171 272 285 283
Official creditors 100 108 161 167 267 278 275
Private creditors 1 1 4 4 5 7 8
IMF debits 0 0 0 0a 0 0 0
Total due 861 999 995 1,066 307 320 319
Interest payments (US$ m)
Total paid 179 172 174 259 369 414 444
Medium- & long-term debt 64 49 55 120 210 225 225
Official creditors 64 49 54 120 210 225 225
Private creditors 0 0 0 0 0 0 0
IMF charges 0 0 0 0a 0 0 0
Interest on short-term debt 115 123 119 139 159 189 219
Total due 298 258 281 423 379 424 454
Ratios (%)
Interest paid/debt service paid 63.8 61.1 51.3 60.2 57.5 59.2 61.1
Interest paid/exports of goods & services 2.1 1.9 2.1b 2.8 3.7 4.2 4.8
Interest due/exports of goods & services 3.6 2.9 3.5b 4.6 3.8 4.3 4.9
Interest paid/GDP 0.9 0.8 0.7 1.2 1.7 1.8 2.0
Memorandum items
Effective interest rate (%) 0.4 0.3 0.3 0.8 1.3 4.2 4.3
Effective maturity (years) 157.2 144.6 95.7 92.7 58.4 18.8 18.5
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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The consequences of the assassination in February of the former Lebanese prime minister, Rafiq al-Hariri, continue to overshadow Syria’s political outlook. A report mandated by the UN Security Council has appeared to confirm widespread international suspicion that Syria was responsible for the killing. If Syria refuses to co-operate with the continuing investigation it will almost certainly face international sanctions. Co-operating, however, may be even more hazardous, particularly as the inquiry is likely to lead to charges being levelled against very senior figures within the regime. Economic policymaking will gain little attention within this environment, and economic growth will be weak, slowed by declining oil output. The buoyant outlook for oil prices over the coming year will ensure that the government finances remain comfortable and the trade and current accounts stay in surplus next year. The position will weaken in 2007, however, as falling production compounds the impact of lower oil prices.
Key changes from last month
Political outlook
The conclusions of the recent UN report have significantly increased the risk of international sanctions being imposed on Damascus. Should this occur, the regime would be weakened and would be left even more isolated, but it is likely that it would be able to retain its grip on power. There remains no prospect of the US leading military action against Syria.
Economic policy outlook
The Economist Intelligence Unit’s economic policy outlook is unchanged, although the threat of sanctions will act as a further obstacle to reform. Should the UN ultimately impose significant punitive measures, the reform agenda would be derailed.
Economic forecast
The increasingly threatening political environment that Syria faces has led us to adjust our forecast for economic growth downward since our previous report. The imposition of sanctions would prompt us to cut the projections further still, particularly if the measures curtailed the state's capacity to export oil. This would also have a marked impact on the public finances and the external accounts.
Risk ratings
Overall Overall Political Economic Economic Liquidity
rating score risk policy risk structure risk risk
October D 67 E D C D
September D 63 E C C D
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Short-term risk event
The recently released UN mandated report into the assassination of former prime minister, Rafiq al-Hariri, has strongly suggested that Syria was directly involved in the plot, substantially increasing the risk of sanctions being imposed on Damascus.
Political risk
The initial results of the UN Hariri investigation have increased pressure on the regime, and appear set to deepen its isolation. However, it remains unlikely that the regimes grip on power will be broken, particularly at a time when unrest in neighbouring Iraq has heightened an awareness of the risks of enforced regime changes in the region.
Economic outlook
Recent political developments have undermined Syria’s economic prospects, although this has been offset to some degree by the positive outlook for international oil prices, which will minimise the pressure on the public finances and keep the current account in surplus in 2005-06. The position will weaken significantly in 2007, however, as oil prices fall.
Financing outlook
The signing of a restructuring agreement with Russia on Soviet-era debt has cut the value of Syria’s debt stock, but boosted its servicing obligations. Despite this, Syria’s financing position will remain comfortable in 2005 and 2006, but deteriorate in 2007 as oil prices and production fall.
Risk ratings: Economic forecast summary
Economic forecast summary
2005 2006 2007
Real GDP (% change) 1.4 0.8 1.0
Consumer prices (% change; av) 2.6 3.0 3.5
Neighbouring country rate (av) 48.5 48.5 48.5
Current account (US$ m)
Goods: exports fob 6,344 6,176 5,571
Goods: imports fob -5,973 -6,093 -6,154
Trade balance 370 83 -582
Current-account balance 980 537 -111
Current-account balance (% of GDP) 4.6 2.4 -0.5
External financing (US$ m)
Financing balance 673 217 -430
Total debt 8,590 8,514 8,489
Total debt service 641 699 727
Debt-service ratio, paid (%) 6.4 7.1 7.8
Debt-service ratio, due (%) 6.8 7.5 8.3
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Outlook for 2006-07: Domestic politics
Syria’s political outlook has deteriorated further with the release in late October of a UN Security Council mandated report into the assassination of the former Lebanese prime minister, Rafiq al-Hariri, earlier this year. The report makes clear the investigating team’s belief that Syria, its officials in Lebanon and its Lebanese allies were directly involved in the killing. A new Security Council resolution is currently being prepared which is likely to endorse the report’s findings, and authorise a further, more detailed inquiry as a final step before bringing individuals suspected of involvement in the assassination to trial.
Syria’s options in the face of the pressures that are building on it appear limited. Its official response has been to reject the allegations, maintaining that it had no connection with the killing and suggesting that the UN report is politically motivated. However, to withhold co-operation from the next phase of the investigation would leave the Security Council with little option but to impose sanctions, and would also seem to confirm its guilt. Co-operating would buy Syria some time, but would prove difficult and potentially even more hazardous. The next stage of the investigation will seek primarily to determine not if Damascus was responsible, but how far up the ranks of the political and military intelligence elite the conspiracy rose. This could prove to be very high indeed, with witnesses telling the UN team that as well as key members of the intelligence establishment, close members of President Bashar al-Assad’s own family were involved in the conspiracy. To allow these figures to be interrogated and then, potentially, be summoned abroad to stand trial would humiliate Mr Assad, and generate immense opposition within the military and intelligence services over which his authority already appears weak. It might also not necessarily save Syria from punitive sanctions if its role in the assassination were proven.
Syria could adopt a more aggressive stance, seeking to warn the US and others away from continuing their campaign against Damascus. This could include steps to promote unrest in Lebanon (including along the border with Israel), where it continues to have influence, while also reminding the US of the threat it could pose to efforts to promote stability in Iraq. The regime can also stress to its opponents abroad the danger of instability in Syria itself, hinting that sectarian conflict of the kind seen in Iraq could emerge if its authority is weakened further. This might carry weight in some circles, particularly if it were to be coupled with Syrian undertakings to address issues such as domestic political reform, the Middle East peace process, relations with Lebanon and links with armed anti-Israeli groups. Indeed, there have been many reports of indirect negotiations between Syria and key interested parties abroad on a deal that would see Damascus offer concessions to avoid the most severe repercussions of the Hariri murder. However, the regime would have to work very hard to restore its credibility abroad, which was in sharp decline well before the assassination of Mr Hariri took place. While recognising the dangers of destabilising the regime, many also believe that there is little prospect of Syria reforming other than under sustained pressure.
Indeed, there are grounds to suspect that neither the US nor Syria are interested in making a deal. For the former, sanctions over the assassination of Mr Hariri offer a means to keep Syria weak and isolated and provide a lever to exert pressure for long-term change. Mr Assad, meanwhile, may judge that the concessions necessary to make a deal carry a greater threat to his domestic position than the prospect of sanctions and isolation. As things stand, the regime appears likely to ride out the current crisis—at least over the forecast period—although it will be severely weakened. The president has tightened his grip on power, having clamped down on opposition groups and appointed his own allies to key post. This has enhanced his control, albeit at the cost of narrowing his power base. Moreover, the security forces and intelligence services remain effective and, despite the frustration many within the elite feel, organising against the regime carries a high risk of detection and retribution—a factor that might account for the recent “suicide” of the interior minister, Ghazi Kenaan. There is also no prospect that the UN deliberations on the Hariri murder will lead to military action, particularly while US forces remain tied down in Iraq. Even the scope of economic sanctions imposed by the Security Council may be moderated by the concerns of Russia and China, who have historical ties with Damascus as well as oil sector interests.
Outlook for 2006-07: International relations
Syria’s isolation has strengthened the position of Israel at its expense. In a bid to ameliorate the pressure it is under, Damascus has offered to recommence peace talks with Israel and has sent out a number of signals of intent. However, Israel has come under no pressure to accept, and has instead been able to set preconditions for talks to take place—a position that has been endorsed openly by the US and tacitly by a number of European states. In light of recent developments over Iraq, there is even less prospect of real efforts being made to restart peace talks with Israel. Indeed, the pressure is likely to focus instead on Syria being an obstacle to peace between Israel and its Arab neighbours through its support for militant Palestinian groups, which will increase the likelihood of Israel carrying out military strikes against positions in Syria in response to attacks by Palestinian groups in Israel.
Outlook for 2006-07: Policy trends
Prospects for economic reform have worsened. The June conference of the Baath party approved several key resolutions on economic policy, including one that symbolically replaced “Arab socialism” with “market economics” as the ruling party’s official strategy. Several high-profile advocates of economic reform within the president’s circle also gained promotion around the time of the congress, indicating that their influence may be rising. Indeed, as has been the case since his accession, Mr Assad hopes to be able to forestall pressure for domestic political reform by moving ahead with economic reform—an approach some within the regime like to characterise as following the “China model”. The problems afflicting oil output, which appears to have dropped far more sharply over the past year than officials had previously suggested, should also provide an incentive for reform.
However, the likelihood of substantive reform measures being implemented soon has fallen in line with the outcome of the UN report into the Hariri killing and the likelihood of sanctions being imposed. Although it is unclear what form sanctions might take, they will prove further obstacles to the already difficult task of overhauling the Syrian economy, not least to efforts to draw in foreign investment. Moreover, despite the elevation of a few reformers, there does not appear to be a consensus within the elite over the necessity or direction of economic reform, particularly on sensitive measures such as cuts to the subsidy system or restructuring the country’s highly inefficient state-owned enterprises. In addition to political concerns, the reform process will be slowed by the limited capabilities and generally conservative stance of many within the upper and middle ranks of various state institutions, which leave them ill-placed to support a task as complex and contentious as structural reform. The long delay now likely in bringing the EU Association Agreement into effect has also removed a potentially useful framework for reform and a lever to implement change.
Outlook for 2006-07: Fiscal policy
The government’s fiscal position will weaken in the second half of the forecast period, as the impact of falling oil pries is compounded by a continued downturn in production. The Economist Intelligence Unit expects total earnings to reach S£294bn (US$6bn) this year, falling slightly to around S£286bn in 2006 and more markedly to around S£250bn in 2007. Assessing spending trends remains hazardous given the paucity of official data, but the modest increases in expenditure included in the recently released 2005 budget suggest that the pace of growth may be relatively low. Falling oil production together with the more threatening political environment may also encourage greater fiscal restraint, and on average we expect spending to rise by no more than 3% a year—only slightly above the projected pace of inflation. Nevertheless, this will leave the government with a widening deficit, which will increase from around 4% of GDP this year to 5.2% and 7.3% in 2006 and 2007 respectively. Moreover, the outlook is beset with downside risks, with the imposition of sanctions that curtailed Syria’s capacity to export oil, or that led to a freeze on its foreign assets, likely to put the public finances under considerable additional pressure in 2006 and 2007.
Outlook for 2006-07: Monetary policy
The piecemeal liberalisation of monetary policy apparent in recent years may persist into the forecast period, although the threatening political environment is likely to see the pace of change remain very slow. Over the past couple of years, interest rates have been altered for the first time in two decades, foreign-currency rules have been relaxed and the first steps have been made towards the establishment of an interbank market—a key development if liquidity management is to become more effective. However, there is still a long way to go. The Central Bank of Syria continues to lack flexible, indirect monetary tools, and recent changes in savings rates are only a first step towards establishing a more effective monetary system. Credit continues to be predominantly centrally allocated, and the banking sector is still dominated by state-owned institutions. The Central Bank also continues to constrain the workings of the small private banks, setting interest rate caps, for example, and retaining restrictions on foreign-currency operations. These shortcomings will be addressed, but only cautiously as the authorities seek to build capacity and guard stability, as well as protect the public-sector entities that would be heavily exposed by rapid moves towards a fully market-oriented system.
Outlook for 2006-07: International assumptions
We estimate that global growth (measured using purchasing power parity exchange rates) will average around 4.3% this year—a performance that stands slightly above the long-term average, but that marks a deceleration on the 5.1% recorded in 2004. We expect global growth to ease further but remain relatively strong in 2006 and 2007, at around 4%. We have raised our already bullish forecast for international oil prices since our previous report, with the benchmark dated Brent Blend now expected to average around US$56/barrel this year and next—an increase of 50% on last year’s average, which was at that time a record high. This exceptional performance reflects the difficulty of expanding supply quickly enough to keep pace with demand. With most producers operating at close to their maximum, the market has little spare capacity, putting prices under sustained upward pressure. We anticipate that the market will begin to loosen over the latter stages of next year, however, as supply growth outstrips increases in demand. The trend will persist into 2007 when prices are expected to average just under US$47/b—still more than double the ten-year average (1995-2004).
Outlook for 2006-07: Economic growth
The outlook for economic growth remains poor, with the economy expected to expand by an average of just 1.2% a year in 2005-07. The forecast is driven in large part by declining oil production, which will curb industrial output and lead to a sustained contraction of exports in real terms throughout the forecast period. The hostile political environment also undermines growth prospects, and is likely to see local and foreign investor confidence remain weak—a position that will undermine Syria’s efforts to draw urgently needed foreign finance into the oil and gas sectors. The political issues absorbing the regime’s energies also make it unlikely that there will be significant forward movement with economic reform, further damaging growth prospects. Firm oil prices will support some increase in government consumption, however, and the booming economies of the Gulf may provide a modest increase in regional investment and tourism demand. The large number of Iraqis that are now living and working in the country has also provided an additional impetus to local demand. Nevertheless, the risks remain on the downside, particularly if sanctions are imposed that compromise the country’s capacity to export oil. A bar on investment or access to key imported inputs would also push the country rapidly towards recession.
Outlook for 2006-07: Inflation
The weakness of the US dollar, to which the Syrian pound will retain its peg, will create some inflationary pressure, keeping the cost of various imported goods high, particularly those sourced from the euro zone. However, the slow pace of economic growth together with the likely maintenance of subsidies and fixed prices for key goods and services will keep consumer price inflation in check, and all told we expect prices to rise by an annual average of 3%—little changed on 2004. Nevertheless, official data are patchy and there are signs that the consumer price index basket does not reflect real trends in a number of unregulated areas of the economy (notably private-sector rents), where prices may be rising more strongly.
Outlook for 2006-07: Exchange rates
The governor of the Central Bank, Adib Mayaleh, has signalled his determination to address the rigidities of the foreign-exchange regime, and we expect to see further reforms introduced over the forecast period. This will probably include the abolition of the few remaining secondary exchange rates and a further liberalisation of the foreign-currency laws. If the government follows through, this could all but end the black market in foreign currency, which has run parallel to the official currency regime since the balance-of-payments crisis of the late 1980s. It is highly unlikely, however, that the currency will be allowed to float freely, with the government continuing to favour stability over the emergence of a potentially more volatile market rate.
As a result, we expect the prevailing legal rate for the pound to remain at close to S£50:US$1. The regime can support this approach through the dominant position of the state-owned banks and the control the Central Bank will retain over foreign-currency transactions, even if some laws are relaxed. Given the outlook for international oil prices, the currency is unlikely to come under pressure during the forecast period. However, the threat of international sanctions has increased the downside risk, with the imposition of punitive economic measures (such as a freeze on Syrian foreign assets) likely to lead the government to reverse whatever liberalisation measures had been introduced, to allow it to tighten controls on the allocation and management of foreign exchange. This would leave convertibility in doubt and, assuming substantial reform had been introduced earlier, would lead to the rapid re-emergence of the black market.
Outlook for 2006-07: External sector
Official data put export earnings at US$5.7bn in 2004 (a fall on the previous year’s total, despite a 30% rise in oil prices), and this is expected to increase to an estimated US$6.3bn this year as oil prices continue to surge. Earnings will decline to around US$6.2bn in 2006 and US$5.6bn in 2007 as oil revenue falls. Import spending rose surprisingly sharply in 2004, but we expect increases over the forecast period to be far more modest given the slow pace of domestic demand growth. Nevertheless, the trade position will steadily deteriorate, with a surplus of around US$370m this year falling to around US$80m in 2006, before giving way to a deficit of close to US$600m in 2007. Non-merchandise earnings appear to have strengthened in 2004, largely because of the arrival of large numbers of Iraqis (both business people and those fleeing the conflict) and some pick-up in tourism. This upward trend is unlikely to gain momentum given prevailing political conditions, and remittances from expatriate workers will probably ease because of antipathy towards Syrian workers in neighbouring Lebanon. Income debits will rise this year following the debt rescheduling agreement reached with Russia in January, which will boost servicing costs. Higher oil prices will also push up foreign oil firm profit repatriation. The net effect of these trends will be to leave the current account with a surplus of around US$980m (4.6% of GDP) in 2005 and US$540m in 2006, compared with about US$200m in 2004. The current account will register a deficit of around US$110m in 2007—its first shortfall since 1994.
Quarterly indicators
Syria: Quarterly indicators
2003 2004 2005
4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr
Exchange rate (other rates apply; S£:US$)
Average (neighbouring countries rate) 46.30 46.30 46.30 46.30 46.30 48.50 48.50
End-period (official rate) 11.23 11.23 11.23 11.23 11.23 11.23 11.23
Domestic indicators (% change)
Money supply M1 27.0 28.7 – – – – –
Money supply M2 7.8 7.4 – – – – –
Energy indicators
Petroleum production ('000 b/d) 520 475 510 500 495 490 –
Financial indicators (US$ m)
Commercial banks' foreign assets 52,724 – – – – – –
Commercial banks' foreign liabilities 1,209 – – – – – –
Commercial banks' net foreign assets 51,515 – – – – – –
Assets with BIS-reporting banks 24,824 24,488 24,832 25,261 25,463 25,700 –
Liabilities with BIS-reporting banks 510 500 784 527 580 688 –
IMF credit (net) 0 0 0 0 0 0 0
Symbols
0, 0.0 nil or negligible
– not applicable or not available
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Economic structure
Syria: Economic structure
2001a 2002a 2003a 2004b 2005b 2006c 2007c
GDP at market prices
Nominal GDP (US$ bn) 20.6 21.6 25.6 21.2 21.4 22.4 22.5
Nominal GDP (S£ bn) 954.1 999.5 1,183.4 1,028.4 1,036.7 1,086.1 1,090.0
Real GDP (S£ bn at 2000 prices) 938.7 978.8 1,004.3 1,009.8 1,024.4 1,032.9 1,043.5
Expenditure on GDP (% real change)
GDP 3.8 4.3 2.6 0.5 1.4 0.8 1.0
Private consumption -4.0 4.0 11.4 2.0 2.4 1.8 2.0
Government consumption 2.0 4.9 12.0 3.0 5.0 2.5 2.5
Gross fixed investment 25.9 0.0 13.7 3.1 2.0 -1.0 1.0
Exports of goods & services 13.0 8.7 -23.3 -4.0 -3.0 -1.0 -1.0
Imports of goods & services 10.4 6.8 -4.1 2.0 1.2 0.5 2.0
Origin of GDP (% real change)
Agriculture 8.6 8.2 -2.7 3.0 2.0 3.2 3.2
Industry 1.8 -2.4 -1.2 0.5 0.5 1.5 1.5
Services 2.6 6.8 8.2 3.0 2.2 2.0 2.0
Ratios, GDP at market prices (%)
Gross fixed investment/GDP 20.9 20.0 19.0 21.6 21.1 19.2 18.8
Exports of goods & services/GDP 37.7 40.4 39.9 39.7 38.8 41.4 40.1
Imports of goods & services/GDP 31.1 32.4 27.2 42.0 42.7 41.5 41.8
Gross national savings/investment 106.9 108.1 103.6 101.0 105.0 102.9 99.4
Ratios, GDP at factor cost (%)
Agriculture/GDP 25.9 26.9 25.5 26.1 26.2 26.8 27.4
Industry/GDP 32.7 30.7 29.8 29.8 29.5 29.8 29.9
Services/GDP 41.4 42.4 44.7 45.8 46.1 46.7 47.1
Ratios, policy indicators (%)
Budget revenue/GDP 27.3b 27.8b 24.4b 25.0 26.6 24.7 23.1
Budget expenditure/GDP 24.9b 25.8b 24.0b 29.3 30.5 30.0 30.3
Budget balance/GDP 2.4b 1.9b 0.4b -4.3 -3.9 -5.2 -7.3
Energy indicators
Petroleum production ('000 b/d) 550 545 530 444 404 384 370
Petroleum reserves (m barrels; end-period) 2,500 2,500 2,500b 2,500 2,500 2,500 2,500
Money supply (% change)
M1 13.9 17.8 27.0 14.0 13.0 10.0 10.0
M2 23.5 18.5 7.8 14.9 13.6 11.5 10.6
Prices and exchange rates
Interest rate (%; av lending rate) 9.0 9.0 7.5 7.0 7.0 7.0 –
Consumer prices (% change; av) 3.0 1.0 4.8 2.1 2.6 3.0 3.5
Neighbouring country exchange rate (av) 46.3 46.3 46.3 48.5a 48.5 48.5 48.5
Population and income
Population (m) 17.24 17.68 18.13 18.58a 19.03 19.46 20.11
Population growth (%) 2.6 2.6 2.5 2.5a 2.4 2.3 3.3
GDP per head (US$) 1,200 1,220 1,410 1,140 1,120 1,150 1,120
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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Foreign payments
Syria: Foreign payments
2001a 2002a 2003a 2004b 2005b 2006c 2007c
Current account (US$ m)
Current-account balance 1,221 1,440 728 205a 980 537 -111
Goods: exports fob 5,706 6,668 5,762 5,561a 6,344 6,176 5,571
Goods: imports fob -4,282 -4,458 -4,430 -5,935a -5,973 -6,093 -6,154
Trade balance 1,424 2,210 1,332 -374a 370 83 -582
Services: credit 1,781 1,559 1,331 2,614a 2,671 2,618 2,487
Services: debit -1,694 -1,883 -1,806 -1,980a -1,919 -1,958 -1,977
Services balance 87 -324 -475 634a 752 660 509
Income: credit 379 250 282 385a 431 518 626
Income: debit -1,162 -1,175 -1,139 -1,114a -1,192 -1,311 -1,259
Income balance -783 -925 -857 -729a -761 -794 -633
Current transfers: credit 512 499 743 690a 622 591 597
Current transfers: debit -19 -20 -15 -16a -3 -3 -2
Current transfers balance 493 479 728 674a 619 588 595
Financing (US$ m)
Financing requirement 360 441 -267b -861 673 217 -430
Principal repayments due -861 -999 -995 -1,066 -307 -320 -319
Medium- & long-term debt inflows 0 0 0b 200 275 175 225
Inward direct investment 110b 115b 130b 150 185 200 200
Outward direct investment -5b -4b -4b -4 -4 -4 -4
Net direct investment flows 105b 111b 126b 146 181 196 196
IMF credit 0 0 0 0a 0 0 0
Increase in interest arrears (if any) 119 86 107 164 0 10 10
Increase in principal arrears (if any) 760 890 830 895 0 35 36
Other capital flows (net) -844b -728b -1,046b -119 -979 -508 -387
Change in international reserves (– indicates increase) -500b -800b 250b -425 -150 -125 350
International reserves (US$ m)
Total 2,979b 3,779b 3,529b 3,954 4,104 4,229 3,879
Foreign-exchange reserves 2,950b 3,750b 3,500b 3,925 4,075 4,200 3,850
Gold, national valuation 29 29 29 29 29 29 29
Commercial banks' foreign assets 44,742 51,819 52,724 54,954 57,153 59,439 61,816
Commercial banks' foreign liabilities 347 990 1,209 985 897 816 742
Commercial banks' net foreign assets 44,395 50,829 51,515 53,969 56,256 58,623 61,074
Months of import cover 6.0b 7.2b 6.8b 6.0 6.2 6.3 5.7
Ratios (%)
Current-account balance/GDP 5.9 6.7 2.8 1.0 4.6 2.4 -0.5
Trade balance/GDP 6.9 10.2 5.2 -1.8 1.7 0.4 -2.6
Exports of goods & services/imports of goods & services 125.3 129.7 113.7 103.3a 114.2 109.2 99.1
Exports of goods/exports of goods & services 76.2 81.1 81.2 68.0a 70.4 70.2 69.1
Imports of goods/imports of goods & services 71.7 70.3 71.0 75.0a 75.7 75.7 75.7
Services balance/GDP 0.4 -1.5 -1.9 3.0 3.5 2.9 2.3
Income balance/GDP -3.8 -4.3 -3.4 -3.4 -3.6 -3.5 -2.8
Current transfers balance/GDP 2.4 2.2 2.8 3.2 2.9 2.6 2.6
Memorandum items (US$ m)
Flow of export credits -58 94 76 237 6 19 10
Capital flight -525b -732b -1,039b -149 -1,330 -1,139 -1,018
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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External trade
Syria: External trade
2001a 2002a 2003a 2004a 2005a 2006b 2007b
Goods: exports fob (US$ m)
Total 5,193 6,068 5,244 5,174 5,773 5,620 5,070
Crude petroleum 3,752 4,192 3,652 3,353 4,025 3,741 2,991
Fruit & vegetables 326 333 343 353 367 382 397
Textiles 321 325 331 338 344 351 358
Cotton 201 203 207 211 215 220 224
Services: credits (US$ m)
Tourism receipts 1,130 1,000 875 1,450 1,475 1,500 1,425
Goods: imports cif (US$ m)
Total 4,570 4,758 4,728 6,334 6,493 6,623 6,689
Machines & equipment 1,773 1,880 1,955 2,033 2,114 2,157 2,221
Metals & metal products 1,268 1,370 1,411 1,467 1,541 1,602 1,682
Transport equipment 583 642 674 721 771 810 858
Foodstuffs 570 598 604 622 635 654 680
Volume and prices (% change)
Export volume of goods 4.0 11.0 -23.3 -4.0 -3.0 -1.0 -1.0
Import volume of goods 10.4 6.8 -4.1 2.0 1.2 0.5 2.0
Export prices 6.6 5.3 12.7 2.8 15.0 -1.7 -8.9
Import prices 4.2 -2.5 3.6 31.3 1.3 1.5 -1.0
Terms of trade (1990=100) 67.9 73.3 79.8 62.4 70.9 68.7 63.2
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.
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Trends in foreign trade
Syria: Trends in foreign trade
2001a 2002a 2003a 2004a 2005a 2006b 2007b
Main destinations of exports (% share)
Germany 19.0c 17.5c 20.7c 16.4c – – –
Italy 16.4c 15.8c 12.4c 13.0c – – –
UAE 11.7c 6.6c 7.5c 9.6c – – –
Lebanon 4.6c 4.7c 6.2c 8.0c – – –
Main origins of imports (% share)
China 3.8c 5.5c 6.2c 7.3c – – –
Italy 8.4c 8.0c 6.9c 7.2c – – –
Germany 6.9c 7.4c 7.0c 6.7c – – –
Turkey 4.8c 4.1c 5.3c 4.1c – – –
Principal exports (% share)
Crude petroleum 72.3 69.1 69.6 64.8 69.7 66.6 59.0
Fruit & vegetables 6.3 5.5 6.5 6.8 6.4 6.8 7.8
Textiles 6.2 5.3 6.3 6.5 6.0 6.3 7.1
Cotton 3.9 3.3 3.9 4.1 3.7 3.9 4.4
Principal imports (% share)
Machines & equipment 38.8 39.5 41.3 32.1 32.6 32.6 33.2
Metals & metal products 27.8 28.8 29.8 23.2 23.7 24.2 25.2
Transport equipment 12.8 13.5 14.2 11.4 11.9 12.2 12.8
Foodstuffs 12.5 12.6 12.8 9.8 9.8 9.9 10.2
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.
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External debt stock
Syria: External debt stock
2001a 2002a 2003a 2004b 2005b 2006c 2007c
Foreign debt stock (US$ m)
Total 21,347 21,418 21,605 21,824 8,590 8,514 8,489
Public medium- & long-term 15,817 15,798 15,885 15,910 5,360 5,243 5,177
Private medium- & long-term 0 0 0 0 0 0 0
IMF 0 0 0 0 0 0 0
Short-term 5,530 5,620 5,720 5,914 3,230 3,271 3,312
Interest arrears 2,529 2,615 2,722 2,886 172 182 192
Official creditors 2,390 2,470 2,570 2,724 0 0 0
Private creditors 139 145 152 162 172 182 192
Ratios (%)
Total debt/exports of goods & services 254.8 238.6 266.1 237.0 85.3 86.0 91.5
Total debt/GDP 103.6 99.2 84.5 102.9 40.2 38.0 37.8
International reserves/total debt 14.0b 17.6b 16.3b 18.1 47.8 49.7 45.7
Debt per head (US$) 1,238 1,211 1,192 1,175 451 437 422
Net debt (US$ m)
Total 18,368b 17,639b 18,076b 17,870 4,486 4,285 4,610
Ratios (%)
Net debt/exports of goods & services 219.2b 196.5b 222.7b 194.1 44.6 43.3 49.7
Net debt/GDP 89.1b 81.7b 70.7b 84.3 21.0 19.1 20.5
Medium- and long-term debt (US$ m)
Total 15,817 15,798 15,885 15,910 5,360 5,243 5,177
Official creditors 14,757 14,718 14,775 14,804 4,259 4,149 4,091
Bilateral 14,200 14,200 14,300 14,154 3,559 3,374 3,296
Multilateral 557 518 475 650 700 775 795
Private creditors 1,060 1,080 1,110 1,106 1,101 1,094 1,086
Memorandum items (US$ m)
Export credits 527 621 697 934 940 959 968
Principal arrears 10,580 11,470 12,300 13,195 1,167 1,202 1,238
Official creditors 9,540 10,400 11,200 12,062 0 0 0
Private creditors 1,040 1,070 1,100 1,133 1,167 1,202 1,238
Debt owed to BIS banks (US$ m)
Total 530 497 544 613 – – –
0-1 year 192 174 372 423 – – –
1-2 years 3 2 27 39 – – –
Over 2 years 335 321 145 – – – –
Memorandum items (US$ m)
BIS banks' undisbursed credit commitments 159 551 199 9 – – –
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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External debt service
Syria: External debt service
2001a 2002a 2003a 2004b 2005b 2006c 2007c
Foreign debt service (US$ m)
Total paid 280 281 339 430 641 699 727
Medium- & long-term debt 165 158 220 291 482 510 508
Official creditors 164 157 215 287 477 503 500
Private creditors 2 2 4 4 5 7 8
IMF debits & charges 0 0 0 0a 0 0 0
Short-term debt (interest only) 115 123 119 139 159 189 219
Total due 1,159 1,257 1,276 1,489 686 744 773
Ratios (%)
Debt-service ratio, paid 3.3 3.1b 4.2b 4.7 6.4 7.1 7.8
Debt-service ratio, due 13.8 14.0b 15.7b 16.2 6.8 7.5 8.3
Debt service paid/GDP 1.4 1.3 1.3 2.0 3.0 3.1 3.2
Principal repayments (US$ m)
Total paid 101 109 165 171 272 285 283
Medium- & long-term debt 101 109 165 171 272 285 283
Official creditors 100 108 161 167 267 278 275
Private creditors 1 1 4 4 5 7 8
IMF debits 0 0 0 0a 0 0 0
Total due 861 999 995 1,066 307 320 319
Interest payments (US$ m)
Total paid 179 172 174 259 369 414 444
Medium- & long-term debt 64 49 55 120 210 225 225
Official creditors 64 49 54 120 210 225 225
Private creditors 0 0 0 0 0 0 0
IMF charges 0 0 0 0a 0 0 0
Interest on short-term debt 115 123 119 139 159 189 219
Total due 298 258 281 423 379 424 454
Ratios (%)
Interest paid/debt service paid 63.8 61.1 51.3 60.2 57.5 59.2 61.1
Interest paid/exports of goods & services 2.1 1.9 2.1b 2.8 3.7 4.2 4.8
Interest due/exports of goods & services 3.6 2.9 3.5b 4.6 3.8 4.3 4.9
Interest paid/GDP 0.9 0.8 0.7 1.2 1.7 1.8 2.0
Memorandum items
Effective interest rate (%) 0.4 0.3 0.3 0.8 1.3 4.2 4.3
Effective maturity (years) 157.2 144.6 95.7 92.7 58.4 18.8 18.5
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
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posted by Marko at 4/25/2006 08:46:00 AM
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