Syria after COVID-19: No relief for an ailing economy

April 2020
Syria after COVID-19- No relief for an ailing economy_v03_Page_01
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Since the first confirmed case of COVID-19 in Syria was announced on 22 March, major military operations in the country have been frozen, localized clashes have mostly ceased, and large-scale population movements — to include returns and displacement — have halted. Syria’s economic deterioration, however, has not abated. Lockdown restrictions have brought vulnerable Syrian households closer to the brink of financial ruin. Severe contraction of the national economy has eliminated tens of thousands of jobs. Meanwhile, the foreign remittances that have sustained many Syrian households amidst a sharp decline in real purchasing power are also drying up as the Syrian diaspora weathers the global impact of the pandemic. That said, COVID-19 itself has not significantly changed Syria. Rather, Syria’s pandemic response has accelerated the economic deterioration that was already in motion long before the virus reached the country. In this respect, COVID-19 has revealed the extent of Syria’s deep-rooted economic fragility. The structural weaknesses of the Syrian economy that are now clearly surfacing will persist long after the restrictions imposed to contain the virus have been lifted, and the international Syria response will be forced to contend with these conditions for the foreseeable future.

This paper is a preliminary assessment of the economic impact of COVID-19 on Government-held Syria. Arguably, Syria’s economy has felt the effects of the pandemic more comprehensively than any other sector. This paper assesses the most notable such impacts, and provides a preliminary forecast for the ways in which the pandemic will shape the trajectory of the continuing Syria crisis. Early indicators are grim. At present, it appears likely that the pandemic will accelerate and deepen Syria’s economic contraction. Alongside significant wage loss, currency devaluation, rising unemployment, and a permissive environment for cross-border smuggling, these conditions are likely to amplify livelihoods needs and place Syrian households under greater economic stress, as costs of goods continue to outstrip purchasing power. Above all, these indicators suggest that the relaxation of restrictions on personal mobility and trade will not unleash a wave of pent-up economic activity in Syria. On the contrary, Syria’s economic recovery is likely to be gradual and piecemeal, and over time, households will be forced to contend with growing livelihoods and material needs.

Syria after COVID-19- No relief for an ailing economy_v03_Page_01
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Please note, this paper concludes with an annex in which seven outside figures, to include leading Syria analysts, subject-matter experts, and academics, each provide a brief assessment of how they envisage COVID-19 shaping the Syria context in coming months.

Key takeaways

  • COVID-19 itself has not significantly changed Syria. Rather, the pandemic has merely accelerated the economic deterioration that was already in motion long before the virus reached the country. In that sense, the pandemic has revealed the extent of Syria’s deep-rooted and widespread economic fragility, which will persist long after restrictions imposed to contain the virus have been lifted
  • Although the Government of Syria has announced a timetable for the gradual lifting of pandemic-related restrictions, it remains possible that restrictive measures will be reintroduced, particularly on a narrowly tailored basis, if reinfection occurs or outbreaks appear in specific localities. 
  • The impact of Syria’s economic slowdown varies across sectors. Services, the retail trade, construction, and transport are the hardest hit. Jobs in services and retail in particular will likely be slow to return, due to the fact that demand in these sectors has softened as Syrian households have lost income and have delayed or foregone consumption.
  • The majority of Syria’s salaried workers are paid by the state and have received nominal income guarantees, However, the 31% of salaried workers in the private sector enjoy no such guarantees. Additionally, 55% of private sector workers (approx. 1.15 million) are classified as ‘self-employed’ and therefore rely on short-term or intermittent work to generate income. These workers are particularly vulnerable to wage loss due to the pandemic, as they are heavily represented among the sectors that have been hardest hit by reduced demand and forced closures. 
  • Remittances are a vital lifeline for Syrians. However, the global slowdown from COVID-19 places this income stream in significant jeopardy. Not only will Syrian families feel the impact of reduced remittances, but without a dependable supply of foreign currency reserves, the Central Bank of Syria will struggle to finance imports or halt the devaluation of the Syrian pound. Both of these outcomes will have the greatest impact on the most disadvantaged Syrians.    
  • For the foreseeable future, humanitarian actors in Syria must anticipate a significant and potentially prolonged rise in livelihoods and material needs as individuals struggle to find labor and alternate supports disappear. Notably, households may struggle to cover rising costs despite full employment, and market shortages of basic goods are distinctly possible.

Curve flattened, economy spiking

Nearly a decade of conflict conditions have set the stage for the prolonged pandemic to wreak havoc on Syria’s national economy. Intensely militarized armed conflict has decimated much of the nation’s vital infrastructure while destroying manufacturing and labor hubs such as Aleppo. These conditions have been compounded by fiscal mismanagement and shortsighted economic policy-making. In a budgetary sense, the Government of Syria has consistently faced an acute ‘guns vs. butter’ dilemma, and cash-strapped decision-makers have elected to fund military accounts despite growing service and governance shortfalls. Without doubt, external factors have also placed Syria’s economy under strain. Remittances are down. Lebanon’s banking crisis has locked up sizable volumes of Syrian deposits, and sanctions have to some extent impeded Syria’s capacity to rebuild infrastructure and rehabilitate the economy.

That said, COVID-19 itself is by no means the root cause of Syria’s economic collapse. Rather, the economic conditions that will emerge once pandemic-related restrictions are lifted will be a continuation of the economy’s long-running deterioration. Notably, this deterioration will hit Syria’s most vulnerable populations the hardest. Already, these conditions have eroded what little state support and social safety net were available in Syria. Even before the pandemic, the vast majority of the Syrian population was already below the poverty line. In the past six months, economic shocks have worsened conditions through unprecedented currency depreciation and market inflation. Now, the global economic impact of COVID-19 will make it all the more difficult to arrest these downward trends. As a result, for the foreseeable future, humanitarian actors in Syria must anticipate a significant rise in livelihoods and material needs as individuals struggle to find livelihoods activities. More worrying is the fact that fully employed workers in both the public and private sector will increasingly struggle to cover rising costs, and as trade conditions worsen market shortages of basic goods are distinctly possible.

Syria relaxes COVID-19 restrictions

In mid-March, the Government of Syria began to implement severe movement restrictions to contain the spread of COVID-19. Central authorities imposed a cordon sanitaire around only two communities — Monin and Sayyeda Zeinab, both in Rural Damascus — yet business activity throughout the country has been deeply impacted by curfews, movement restrictions, the closure of markets, and lockdown orders. Meanwhile, government institutions either shut down entirely (judicial and education institutions) or continued operating at limited capacity (local civil registries).[footnote]Local reports indicate that other than the health sector, almost none of the government institutions that are presumably open is offering services to the public. Local sources surmise that continued operation is limited to internal bureaucratic activity.[/footnote]

At least partially in response to lobbying by business interests, on 13 April, the “Governmental Committee for Coronavirus Response”[footnote]The committee includes Emad Khamis, the Prime Minister; Nizar Yazgi, the Minister of Health; Omar Rahmoun, the Minister of Interior; Hussain Makhlouf, the Minister of Local Administration and Environment; Atif Naddaf, the Minister of Internal Trade and Consumer Protection; and Rima Qadri, the Minister of Social Affairs and Labour.[/footnote] permitted small enterprises operating in multiple sectors to reopen at reduced capacity, conditional upon avoidance of overcrowding. Businesses in the retail trade and textiles, jewelry and repair shops, and taxi drivers were among those that were permitted to reopen for limited hours. Shortly thereafter, on 29 April, the Syrian cabinet announced a timetable for the further relaxation of restrictions. The statement clarified that all markets, shops, trade facilities, and dental clinics were allowed to resume operation immediately. As of this writing, public transportation remains frozen. However, the announcement did stipulate the immediate resumption of travel within governorates, and it set the timetable for the limited resumption of inter-governorate travel beginning between 30 April and 2 May. Furthermore, restaurants and tourism facilities will return to operation after the Eid Al-Fitr holiday, conditional upon as-yet unspecified requirements. In terms of education, the announcement indicated that national brevet and baccalaureate exams will begin on 21 June.

It remains possible that restrictive measures will be reintroduced if reinfection occurs or new outbreaks appear. That said, the announcement signals the end of the most severe restrictions that had been put in place to contain the pandemic. However, the economic impact of the lockdown measures has already been deeply felt, and will likely persist for the foreseeable future. Indeed, these measures have dramatically affected Syria’s overall economic activity and shrunk government revenues, while the most notable consequence may be in the heavy toll in lost jobs and income, particularly for non-state employees.

Jobs and income lost

Syria’s labor force consists of three main types of workers: salaried and hourly employees, business owners, and the ‘self employed’ — i.e. wage laborers or informal workers who draw their income from short-duration or informal labor activities. Salaried and hourly employees may work in either the public or private sector. Business owners and self-employed workers  fall within the private sector. How Syrian workers will weather the economic fallout of the pandemic will depend to a large extent upon where they are situated within Syria’s labor market. The Government of Syria has pledged to continue paying public-sector employees’ salaries despite the closure of institutions and reduced operations. There were no such guarantees for private-sector employees. Indeed, on 25 March, many private businesses reportedly reduced worker salaries by an average of 25%.[footnote][/footnote] Even more vulnerable are the estimated 1.15 million self-employed workers, who account for 55% of all private sector workers. Despite the limited resumption of activities in certain sectors, many self-employed workers have already lost considerable income, and in the long term they remain at risk of losing further working days, especially as the overall economic slowdown blunts non-essential activities. The precise scope of the impact remains unclear, but early estimates are staggering. For instance, the Damascus-based General Federation of Labor Unions estimates that approximately 2 million workers — some 10 million individuals, when dependents are counted — are at risk of losing income due to the pandemic.[footnote][/footnote]

For Syrian workers, depressed economic conditions could not arrive at a worse time. Most Syrians have long faced dire economic jeopardy.[footnote]It is worth noting that many of Syria’s poor do generate income and participate in the workforce in some capacity, yet are simply unable to secure the equivalent of $1.90 per person per day required to escape the poverty threshold.[/footnote] Indeed, according to UNOCHA’s Humanitarian Needs Overview (HNO), as of March 2019, 83% of Syria’s population lived under the poverty line.[footnote][/footnote] Of note, this figure was likely far higher when COVID-19 reached Syria, due to the impact of the financial crisis in Lebanon. Since October 2019, the rapidly accelerating depreciation of the Syrian pound has been largely attributed to the ongoing banking-sector crisis in neighboring Lebanon (see: Two Countries, One Crisis: The Impact of Lebanon’s Upheaval on Syria).

Source: Syrian Central Bureau of Statistics.

NB: These are the most up-to-date and comprehensive data available, yet they should be read critically, as independent assessments remain out of reach. Of note, these numbers reflect conditions only within Government-controlled territory.

Work or starve: differing impacts across sectors

The impact of Syria’s slowdown varies across economic sectors, with services, the retail trade, construction, and transport being the hardest hit. The services sector employs 47% of Syria’s workforce, and even as restrictions gradually lift, the sector remains under severe strain. Restaurants, hotels, and hospitality services have seen significant cuts in productivity as a consequence of the near total shutdown of the tourism industry, the implementation of movement restrictions, the closure of Syria’s land borders, and suspension of air travel.[footnote]The resumption of religious tourism in particular poses a risk, due to the fact that many religious pilgrims to Syria visit from Iran, which has one of the world’s most severe outbreaks.[/footnote] Retail and repair shops, which account for 18% of Syria’s jobs, have also been hit hard by market closures and the reduction in overall economic activity. However, the sector is getting a headstart on recovery, due to the influence of traders and businessmen whose lobbying efforts were a key driver of central authorities’ decision to relax restrictions. The building and construction sector employs approximately 9% of Syria’s labor force and has also been impacted by mobility restrictions that have halted worker movements across governorates and between outlying areas and worksites in urban centers. The transportation sector accounts for 6% of Syria’s jobs, and has naturally been impacted by the ban on public transportation and inter-governorate travel, and the slowdown in cross-border trade. Of note, the agricultural sector, which accounts for 12% of Syria’s workforce, has felt a lesser impact, due primarily to the timing of seasonal crops cycles. That being said, smallholder farmers will face rising costs due to transportation restrictions and price rises on inputs resulting from import challenges.

Crucially, private-sector and independent workers who enjoy no income guarantees are primarily employed in the sectors that have been hardest hit by flagging demand and forced closures. Jobs in services and retail will likely be slow to return, even after restrictions are lifted, due to the fact that demand in these sectors has dwindled as Syrian households have lost income and have delayed consumption as they divert limited capital to essentials, particularly food. Meanwhile, diminished consumption has further reduced the need for labor, thus fueling a vicious circle of diminishing labor and consumption. Likewise, building and construction, transportation, and tourism may also be impacted in the long term, as shifting consumption has also softened demand in these sectors.

Cross-border trade at a crossroads

Cross-border trade with neighbouring countries has diminished considerably. Syria’s border closure orders carved out specific exemptions for vital international commerce, yet trade volume has plummeted nonetheless, suggesting that flagging local demand and domestic mobility restrictions imposed in Syria and in neighboring countries are also an important — and potentially lasting — impediment to cross-border trade. As a result, a rebound in cross-border commerce is likely to be gradual, thus undermining hopes for a boost to the Syrian transport sector, and blunting forecasts for trade-dependent industries and import markets. Indeed, some restrictions on cross-border mobility, particularly for non-commercial civilian movement, will likely remain in place for the foreseeable future. This will have the greatest impact on cross-border movement with Lebanon, which remains Syrians’ primary outlet for international travel and foreign trade.

On 23 March, Syrian officials ordered the country’s borders closed to civilian movement. Although exceptions were made for traders, local reports indicate significant reductions in the volume of border crossings in all corners of the country. Trade through the Kasab crossing with Turkey has virtually halted. At the Nasib border crossing with Jordan, commercial traffic has reportedly fallen to a mere 10-12% of pre-pandemic levels.[footnote][/footnote] These reductions have already caused a significant jump in prices for consumer goods, particularly food products. This has been most visible in southern Syria,[footnote][/footnote] but it has been noted throughout the country. Trade with Iraq has also been affected. However, it is important to note that trade between Syria and Iraq through Abu Kamal did not resume until September 2019, following almost six years of inactivity, and was therefore modest at the time of the border closure. At present, five daily truck shipments are exported to Iraq, down from approximately 15 prior to the pandemic. As of this writing, imports from Iraq have halted completely. Official trade with Lebanon has fallen off, too. However, the Lebanon-Syria frontier has remained the site of the most active cross-border smuggling out of Syria.

Tomorrow’s supply-side challenges: availability and affordability

Smuggling and licensed exports to more lucrative markets, particularly Lebanon, are expected to have an impact on the Syrian market long after COVID-19 restrictions are relaxed. In practical terms, this will pressure the marketplace in two important respects: availability and affordability. Smuggling continues to siphon off basic goods from inside Syria. Notably, trade and smuggling with Lebanon continues at pace despite Lebanon’s economic freefall. Indeed, as Lebanese importers face greater challenges in financing overseas purchases, they may be forced to turn to Sryian producers and traders to fill gaps. To that end, even basic commodities continue to be traded across the border into Lebanon. For instance, on 11 April, Lebanese customs officials seized an illegal shipment of eggs entering the country from Syria.[footnote][/footnote] Other products that are reportedly being smuggled to Lebanon despite lockdown include wheat and fertilizers.[footnote][/footnote] Notably, Syrian smugglers reportedly access the Lebanese market through the mediation of actors affiliated to the Government of Syria.

Affordability is also becoming a signal concern in the Syrian markets. Prices of goods have increased to more than 20 times their 2011 value, due largely to the destruction of Syria’s productive sector, high transportation costs, rising cost of imports, and currency devaluation. In addition to these challenges, the government’s shrinking foreign currency reserves have forced the Central Bank to abandon or restructure price supports and import mechanisms. Absent effective state-supported financing, merchants have been forced to resort to the black market to source the dollars needed to finance imports, including consumer goods and industrial and agricultural inputs. The increased costs of these transactions have ultimately been passed onto consumers. Consumers have also been squeezed by currency devaluation. Depleted foreign reserves have caused the pound to fall from 500 to 1,000 SYP to the dollar in the closing months of 2019, while the exchange rate currently hovers near 1,300 SYP to the dollar. In effect, currency depreciation and price hikes have consistently eroded Syrians’ real income while consuming household savings.

At the same time, household purchasing power has never been more inadequate to cover rising costs. One study conducted by a Damascus-based newspaper estimates that the average cost of living in Damascus during the first quarter of 2020 rose to 430,000 SYP (approx. $334) per month, partly reflecting the expected impact of pandemic response measures.[footnote][/footnote] Reportedly, average monthly food consumption alone amounted to 230,000 SYP (approx $180). Notably, despite the steady rise in prices, salaries have not increased. Average monthly salaries remained fixed between 50,000-80,000 SYP (approx. $39-62) for both the public and private sector. A more recent report by another Damascus-based newspaper indicated that since the first COVID-19 case was reported in Syria, prices have increased by approximately 75%.[footnote] [/footnote] This rise was partly attributed to the increased demand for food products during Ramadan, which began in late April and is a period during which spending on food is often prioritized, adding upward pressure to food prices. The report estimated that the average monthly food costs for a family of five rose to 600,000 SYP (approx. $465).

Remittances: A fraying lifeline

Foreign remittances constitute a vital economic lifeline to Syria. The importance of this support has increased as Syria’s economic crisis has deepend, and over time, remittances have become a crucial safety net as inflation and currency depreciation have exhausted Syrians’ savings. However, the global nature of the COVID-19 pandemic also jeopardizes the livelihoods of the Syrian diaspora, which is centered predominantly in the Gulf and Europe, thus placing greater strain on Syrians in Syria. Of note, remittances have also been important to the Government of Syria itself. Foreign money transfers have become a crucial source of foreign reserves, particularly in light of the stark decline in oil exports and tourism revenues throughout the conflict.[footnote] [/footnote] Without a dependable supply of foreign reserves, the Central Bank will struggle to finance imports or halt the devaluation of the Syrian pound. Both of these outcomes will disproportionately affect the most at-risk Syrians.

However, there is evidence to suggest that the volume of remittances was in dramatic decline even prior to the current epidemic. Damascus University economics professor Ali Kanaan projects[footnote][/footnote] that all daily foreign transfers into Syria will decrease to approximately $2 million in 2020 (approx. $700 million annually), down from $12 million in 2018 (approximately $4.4 billion annually), although the exact volume of remittances is difficult to verify.[footnote]The source data used to compile these estimates is unclear, and they are likely to be exaggerated. However, a severe decline is expected, while assessments of the changing levels of foreign transfers remain rare.[/footnote] Three factors explain this decline. The first is domestic. The Government of Syria’s security measures to crackdown on black market transfers have limited foreign currency inflows. These efforts culminated in the 18 January decrees imposing severe punishments in a desperate attempt to protect the Syrian pound through intimidation and severe restrictions (see: Syria Update 27 January). However, this did little to achieve its intended effect, as the measures merely pushed black market currency change operations further outside the Government’s purview.

The second and third factors are external. The Lebanese debt and banking crisis impacted both remittance flows from Syrian workers and money deposited by Syrian investors in Lebanese banks. This money is unlikely to be unlocked any time soon, effectively blocking one of Syria’s most important sources of foreign currency. Finally, all these factors were compounded by the global impact of the COVID-19 pandemic, which has caused migrant workers across the world to lose wages or employment, including Syrians in Lebanon, the Gulf, and Europe.

Crises are abundant, resources are scarce

Considered holistically, the impact of COVID-19 on the Syrian economy is highly complex. As restrictions are relaxed, it is clear that losses of jobs and overall output vary considerably by economic sector. Workers’ fates have differed as well. State employees have received nominal income guarantees, while private-sector workers have been left to brave market forces without a meaningful safety net. However, in one respect, the pandemic has had a consistent impact: It has demonstrated the Government of Syria’s inefficiency in dealing with a social and economic crisis that requires broad, multisectoral coordination, comprehensive public support, and significant capital outlays. The Government of Syria has taken few concrete steps to mitigate the profound economic consequences of the pandemic, and the measures it has implemented have had little practical effect apart from demonstrating the severe shortcomings of the state’s economic capacity.

For instance, on 26 March, authorities announced the reprogramming of 100 billion pounds (approx. $78 million) to support “pandemic-related economic measures.” It remains unclear how this money will be spent, and to date, no tangible outputs have materialized. Likewise, the Prime Minister’s Economic Committee has announced that businesses in the tourism sector that have been affected by lockdown measures will be exempted from taxes for the months of March and April, but no substantive relief has been provided. Additionally, in a nominal effort to prevent overcrowding at bakeries, the Government has introduced bread to the Smart Card system. The Smart Card is the chief instrument used by the state to ration consumption and control the cost of its overall expenditure on subsidies. This move was met with public outcry, as many suspected that bread quantities would decrease. As feared, prices have already begun to rise.[footnote] [/footnote]

To a large extent, the Government of Syria and its supporters in Iran in particular have blamed its ineffective response on economic sanctions imposed by Western governments. The subject of sanctions is among the most deeply politicized international dimensions of the conflict. Indeed, international financial institutions and suppliers alike have expressed hesitancy to engage the Sryian market, for fear of unwittingly triggering violations. To the extent that specific humanitarian carve-outs are ambiguous, explicit messaging may play a constructive role in facilitating permitted transactions. That said, the direct impact of sanctions on Syria’s ability to manage its pandemic response is likely far less significant than the structure of the Syrian state itself. To that end, the state’s inability to address severe inequities has created space for local initiatives to respond to unmet local needs.

Civil society actors fill the gaps

One notable consequence to the failure of the Syrian government to meet local needs is the creation of purpose-formed local civil society initiatives. For instance, in Homs, Rural Damascus, and As-Sweida governorates, local civil society actors have launched initiatives to deliver free bread door-to-door, thus avoiding overcrowding at distribution points. In Jaramana, Rural Damascus, a local initiative has been arranged to pay rents to avoid forcible evictions. In At-Tall, Rural Damascus, and Shin, in rural Homs, local actors have organized fundraising drives to solicit donations, allowing them to purchase produce directly from farmers and re-sell it at reduced prices, while mobile vendors have also been contracted to deliver produce directly to individuals’ homes. It remains to be seen to what extent the Government of Syria will tolerate such initiatives. The risk remains that local or central authorities may seek to snuff out or co-opt locally popular initiatives that haf succeeded in filling unmet local needs.

Looking ahead

In many respects, COVID-19 has cast renewed attention on the extreme depth and breadth of Syria’s long and painful economic decline. Years of conflict and a crumbling economy have exhausted Syrians’ savings. The particular risk now is that households cannot expect support from vital lifelines such as the social safety net, income guarantees, and remittances, which are now also in jeopardy, due to underfunding, limited applicability, or diminishing volume. For Syrian households, these challenges have appeared at the worst conceivable time, as real purchasing power declines and consumer goods are on course to continue rising in price. Forecasting the precise political fallout of these stark conditions is difficult. No doubt popular resentment will grow as conditions become increasingly dire. Whether these sentiments will manifest in popular demonstrations hinges upon authorities’ capacity to identify stopgaps. The state’s willingness to tolerate or encourage substrate initiatives to meet demand on a local level may also be critical. In the longer term, it will be necessary for the state to locate sustainable sources of revenue to fund vital lifelines. Ultimately, however, Syria’s broader economic decline will not be reversed until the conflict ends and Syria is able to shed its pariah status and normalize its political and economic relations. While a collapse of the Government of Syria due to economic stress is unlikely, there is no doubt that the state is already in economic freefall. While the state apparatus itself may weather such conditions handedly, it is vulnerable Syrians who will pay the greatest price.

Image courtesy of Rudaw.

Annex: Outside experts weight in

COAR has asked seven individuals, to include analysts, subject-matter experts, and academics, to weigh in on the impact of COVID-19 on Syria. Each has provided a brief assessment forecasting how the pandemic will shape the Syria context in coming months.

Jihad Yazigi - Journalist and Editor-in-Chief of The Syria Report

Providing forecasts on Syria’s economy is always complicated because of the lack of data and information, and regular indicators. What one can say is that obviously things are going badly in the country, from an economic and social point of view. We are even seeing reports of increasing difficulties in areas where government control is weak, particularly the south of course, but also in Aleppo and Hama countryside, etc. As I wrote in a recent paper, the country will be affected this year by a number of factors. Most prominently before the COVID-19 crisis, the Lebanese banking, financial, and economic crisis. This will have an enduring and lasting impact on Syria in the coming months and weeks. There are some small indicators which can help to get an idea of the impact that the Lebanese crisis and coronavirus is having on the Syrian economy. For instance, the number of containers that reached the Latakia airport, which began to fall in February, then fell further in March. That is an indication that international trade is declining, reflecting lack of demand and investment in the country.

We are going to see an increased number of companies closing down and more people laid off. We will see less remittances coming into Syria and less dollars entering the country. This will have an impact on imports and inflation. Most remittances come from Syrians living in the Gulf and Europe, where they are losing revenues and jobs. In the Gulf, workers will feel the impact of declining oil revenues. There are a few hundred thousand Syrians in the Gulf that send a significant amount of money every year; this will decline significantly in the next few months. Additionally, the shortages of dollars in Lebanon is extremely significant. Money deposited in Lebanese banks by a lot of Syrian traders will be lost, or at least blocked, prohibiting any use of the money. This will harm their capacity to import and pay for a number of their bills.

A rare area of potential positive news for the Syrian economy is the fact that the crisis in Lebanon will limit its imports of a lot of consumer products from Europe and many Lebanese may rather go into buying Syrian consumer products instead, as they are cheaper. However, the impact of this will be very small relative to the overall trend of lower demand, lower dollars, lower remittances, etc.

We also expect to see a further depreciation of the Syria currency, given the absence of dollars. And, of course, the depreciation of the currency means rising inflation and cost of living. This makes the outlook pretty grim. Added to that, typically in a situation of growing impoverishment and falling incomes, you would need more humanitarian aid to compensate for part of the decline. The big problem today is that the economies of the countries that usually fund these humanitarian aid efforts are going themselves to face challenges in their home economies, which requires them direct funds toward the recovery of their economy. This will likely lead to lesser funds going to humanitarian aid. This is an additional negative factor weighing on the prospects for the next few months.

This [decline] of revenues may also lead to growing tensions among the ruling elite in Syria, in the sense that the cake that the ruling figures in the elite share will be smaller. We began to see rising tensions lately between Rami Makhlouf and Asma Assad over the Takamol Company, previously in charge of the Smart Card. We may see more of these tensions in the country.

Politically, and this is not a forecast as much as an attempt to predict possible scenarios over the next months, these rising difficulties due to COVID-19 across the world will change the priorities for a lot of the countries, to include Russia. So one of many possible scenarios, the global difficulties may push Russia and the EU to force some form of agreement in Syria because they don’t want to be distracted with refugees, economic aid needed to fund Syria, and all the problems that relate to what the conflict is generating for them. For the Russians, they would want to avoid tensions with Turkey, obligations to put money into Syria, and tensions with the West at a time when Russia needs cooperation with the West. For European countries, they want to solve the refugee issue, and they can’t keep pouring money into Syria. So, one scenario could be that they may push for some form of deal, particularly because of the 2021 elections deadline in Syria.

Emma Beals - Syria in Context

The situation in Syria will see a marked decline over the coming months. Whether or not a large-scale outbreak of the virus reaches the more vulnerable areas of the country during this first global wave of infection will depend, to some extent, on luck. For now, the outbreak in government-controlled areas is somewhat under control, though lockdown measures are lifting and a second wave of infection is likely. The near impossibility of introducing extensive preventative measures in many areas of the country, and the slow progress being made increasing capacity in ICUs and testing centres, on top of an already-decimated health sector, means that outbreaks in the northwest or northeast would quickly overwhelm healthcare capacity resulting in massive pressure on the sector, with high infection and fatality rates in the population. The time now, while such devastation remains at bay, should be spent rapidly increasing capacity to cope with any eventual outbreak.

The economic impact of the pandemic will have a profound impact on all areas of the country. Lebanon’s economic concerns will continue to impact Syria’s, while the Turkish economy is likely to suffer as their COVID-19 outbreak progresses. Financial pressure on traditional donors will also grow as their domestic pandemic bailouts drain financial resources, while remittances will be likely to decline as Syrians abroad suffer from movement restrictions and economic challenges in countries around the world. Meanwhile, local lockdown measures will impact individual households earning power in addition to the inflationary pressures on their buying power. Addressing these economic needs and their humanitarian consequences will become ever more urgent.

Just a couple of weeks before the pandemic, the Idleb offensive was in full swing, with enduring solutions to the question of the north-west’s future as well as the conflict more generally remaining elusive. In addition, local populations are likely to grow increasingly frustrated with parties in control as their living standards decline and death rates rise, while the scarcity of resources may impact cross-line resource sharing arrangements, as has been seen in northeast Syria in recent weeks. Perceived inequalities in aid provision, or growing variations in either economic circumstances or COVID-19 casualties, may also drive tensions between parties and populations. Refugees are likely to see conditions, and eventually, security, decline in their places of refuge as host countries struggle with the virus’ consequences. Calls for sanctions relief and normalization are likely to increase alongside the declining economic conditions, while the global nature of the pandemic may leave Syria out of mind for many and risk a power vacuum ripe for exploitation. As such, while COVID-19 and its direct impacts is rightly a focus in the short term, losing a sense of dual focus on Syria’s broader issues will only serve to compound them.

Sam Heller - Independent researcher and analyst focused on Syria and the broader Levant

Predicting what Syria will look like in six months is difficult partly because the global coronavirus pandemic is exactly the sort of unanticipated exogenous shock that, it has seemed possible, could derail the trajectory of the country and its civil conflict. Until now, the pandemic’s ramifications globally are unclear. COVID-19 comes on top of Lebanon’s political and economic crisis, which – while maybe more foreseeable than the pandemic – is another big exogenous shock for Syria, and which is likewise still unfolding.

Both those shocks seem likely to test the durability and integrity of the Damascus-led Syrian system, which had already been weakened economically. I worry about interruptions to Syria’s food supply, and about the availability of bread in particular, given how sanctions risk, currency fluctuations, and the Syrian state’s finances might combine to disrupt wheat imports. If Syrians living in areas under government control can’t get enough bread and other staple foods, and if public sector salaries are further diminished by the devaluation of the Syrian pound and inflation, that could lead to the breakdown of public order and new instability. Public health measures to respond to coronavirus only further threaten the economy, although the Syrian government might end up just yielding to economic imperatives and take a lax approach to preventing the virus’s spread.

As for parts of Syria outside government control: I think fighting is likely to resume in Idleb, as soon as the timing and other conditions are appropriate for Damascus and Moscow. It’s hard for me to see how Turkey can deliver on the commitments it made in its March agreement with Russia, and I think the latter will enable a Syrian military push for, at minimum, the Lattakia-Aleppo (M4) highway. Meanwhile, Damascus will probably leave Syria’s northeast to be further exhausted by deprivation and insurgent violence, before Damascus attempts to forcibly reimpose its control at some later juncture.

Joseph Daher - an academic working at the Wartime and Post-Conflict in Syria project at the European University Institute, Florence (Italy)

What political economy for Syria in the near future – a deepening of its patrimonial and neoliberal characteristic

With poverty levels of over 80% and reconstruction cost estimated at over $250 billion, it is difficult to envisage a rather positive future for the vast majority of the Syrian population. The COVID-19 crisis has only intensified the deep socio-economic problems faced by large sectors of the population. The partial reopening of the economy in the country with the month of Ramadan will not change the fundamental shortcomings of the Syrian economy.

Sources of income are continuously being reduced and the cost of living is increasing, while the Syrian government’s measures to curb the continuous economic crisis are insufficient. The latest attempts by local communities and groups to palliate the state’s lack of services and socio-economic answers, through independent initiatives and by creating their own assistance networks, are perceived by the regime as a threat to its own networks and authority. This situation could exacerbate the social and political discontent against the regime, but the regime might also use this crisis to reassert and consolidate its authority and authoritarianism through its various power networks (businessmen, Ba’th, tribal notables, religious networks, governmental connected organizations such as Syria Trust for Development, Syria Youth Imprint, al-Bustan, etc.).

While other factors can also be included in understanding the increase pauperization of the Syrian society such as the war’s destruction and sanctions, the regime’s deepening patrimonial and neoliberal nature is the most important element in preventing any significant amelioration of the living conditions for the vast majority of the population in the country.

Syria’s deepening neoliberal policies, most notably through the new economic strategy of National Partnership and the PPP law, both established in 2016, have been presented as necessary and “technocratic” measures by successive Syrian governments in these past few years. However, they should rather be considered as a means to transform the general conditions of capital accumulation and empower economic networks linked to the regime. States have often seized upon crises as moments of opportunity to restructure and promote changes in ways not envisaged before, and in order to significantly expand the reach of the market in a wide range of economic sectors that have previously been largely dominated by the state.

In this perspective, it is important to consider that the war did not create a rupture with the previous economic model, but in fact deepened the speculative commercial economic model found throughout the region, characterised by investment in short-term profit-seeking — mostly in trade, real estate and service sectors — to the detriment of the productive economy.

The further privatization process should therefore be seen as a tool of the regime to expand its predatory activities from the control over “rents derived from the state” to a position that permitted it to dominate “private rents” without any transparency. These new incomes also enabled ruling elites to establish a network of associates, whose loyalty they bought with market shares and protection.

This is despite its being the largest employer and main provider of social services in the country, notably as result of destruction of large segments of the economy, the state has been lacking the means to maintain sufficient services for large sectors of the population, which has also been characterized by authoritarianism and clientelism in its distribution. This situation weakened the regime’s capacities to control and (re)impose a certain form of hegemony, even a passive one, on the society. In the beginning of 2020, demonstrations occurred in As-Sweida to protest against the economic situation, lack of public services, and difficult living conditions, an often repeated criticism in many other areas of the country, and the continued protests and clashes in Dar’a against the regime’s forces, and to a lesser extent in some areas of Rural Damascus, especially in the Ghouta, demonstrate this situation. Many criticisms erupted in mid-April in the way the government dealt with the Smart Card system and distribution of bread, while in the city of Latakia, protesters demonstrated against the government’s decision to move the vegetable market. However, no kind of connections existed between these various forms of dissents, which therefore did not challenge the regime’s survival or stability in the mid-long term.

The Syrian regime’s socioeconomic and political policies are likely to exacerbate social, economic and regional inequalities throughout the country, only deepening problems that were at the heart of the uprising that first started in March 2011.  

In conclusion, this created a situation of continuous instability. Indeed, although the regime’s survival was quasi-secured, mainly as a result of the support of its foreign allies, maintaining a form of passive hegemony on large sectors of the population was not achieved and forms of punctual dissent continued.

Tarek Azizeh - Independent Syrian political researcher and writer

As I see that, a ‘security approach has dominated the Al-Assad regime’s handling of the emerging coronavirus crisis, as is its habit regarding every detail of Syrians’ lives. This can be deduced from the denial of the existence of any case at the beginning of the matter, followed by its announcement that a very limited number of cases had been discovered. Then came strict secrecy concerning the actual numbers of cases and deaths, and the locations where the infection has been discovered, or its source. Although decisions were made to close universities and schools, to stop public transportation, and restrict movement between governorates as well as other measures, the reality of the situation has remained ambiguous, in terms of the extent of the virus’s spread, or the readiness of the health infrastructure to deal with a crisis in the event the epidemic spreads.

Even though home quarantine is a necessary preventative measure to reduce the spread of infection, its effectiveness should be questioned as long as it is limited only to nighttime. What the regime enforces is a night curfew that begins at 6 p.m. and continues until 6 a.m., which prompts a question: are the transmission of the virus and the spread of the disease limited only to nighttime? The most important question, however, is the feasibility of closing the borders and airports while exempting Iranian militia from the restrictions. These fighters have not stopped their movement back and forth despite the fact that Iran is one of the biggest hotspots of the spread of coronavirus in the Middle East.

All this indicates that the situation may worsen at any moment, and that the health sector in Syria will not be able to contain or confront it. The Syrian health sector is already suffering from a severe shortage of human resources, medical devices and equipment, and pharmaceuticals. As such, it was not surprising that the UN Special Envoy to Syria, Geir Pedersen, said: “Syrians in particular are the most vulnerable in the face of the virus,” in the context of his statement calling for a comprehensive ceasefire at the national level, in order to focus efforts on combating the new coronavirus.

The most impactful and comprehensive aspect of the coronavirus crisis in Syria — in my view, which may be shared by many — is in the catastrophe that affects the living conditions of the vast majority of Syrians. This is because the measures imposed thus far (suspending public transport, closing restaurants, restricting travel between cities and rural areas) led tens of thousands of people to unemployment without any source of income. This has taken place amid an exorbitant increase in prices, an unprecedented rise in the cost of living, and in the absence of any protective role or a real governmental mechanism to provide social security. Consequently, the social, psychological, and even security (in the criminal sense) effects of this deterioration in living conditions will not be long to surface. Whatever the danger to society, the regime is expected only to do what it has accustomed us to in every crisis facing the country: lying, media misinformation, and a securitized approach of the situation.

Anonymous[footnote]As a condition for participation, this researcher has requested anonymity.[/footnote] – A Syrian Economic Researcher

For the foreseeable future, it is expected that the government will remain incapable of dealing with economic issues and securing essential basic services for citizens. This became especially clear after the bread and fuel crises, the rises in prices, and other issues showed the necessary limitations of any social assistance project, if it were to occur.

With regard to economic activity and workers, there is a large segment whose income has been diminished or has disappeared as a result of restrictions, especially in the informal sector, as a result of the total cessation of their work during this period. Although restrictions have begun to ease, some professions have begun to return to work, and despite the limited improvement this has on these working classes, it is possible that many workers will lose their jobs. This is especially true in sectors where the damage will extend for a relatively longer period as a result of the lockdown and the freeze in demand, such as the transport sector, construction, tourism, and restaurants. These will continue to be affected and constrained under the continued restrictions, according to the new policies. Thus, the presumption that a large proportion of jobs will be lost and unemployment will increase can be accepted on its face.

The high prices that hit the Syrian market before COVID-19 have continued, and even escalated throughout, will place additional burdens on citizens and further weaken their purchasing power, especially with the lack of clarity over policies for controlling prices.

The decrease in external trade will lead to bottlenecks for a number of commodities in the Syrian market and encourage smuggling. It will also cause imbalances in the supply and demand sides of the local market.

The universality of economic effects on the countries around the world will be reflected negatively in terms of expatriate remittances to Syria, which have constituted an important economic inflow to Syria throughout the crisis. It is feared that the negative impact on countries with expatriate Syrians will have long-term effects that will be reflected in Syrians’ remittances to their country.

The coronavirus crisis will also leave a mark on the economic lives of Syrians, and it may be that a large portion of the population be forced to allocate a portion of their income to necessary medical and health treatments in this crisis, which will affect their consumption patterns and put them under further pressure.

Positive points that may reduce the negative economic impact of Corona:

  1. Its occurrence at the beginning of the summer, when the cost of living is much lower than in winter. [The coming] summer season is generally a period of increased economic activity and movement in Syria.
  2. The beginning of Ramadan: The month is considered a period of particular social activity and solidarity, which may assist the most vulnerable groups in finding some channels of social welfare and economic aid.
  3. Some of the social experiences during the COVID-19 period have demonstrated the superiority of local and regional capacities over the policies of a central government, in providing solutions, in light of the current crisis.

In short, the coronavirus crisis will introduce a large imbalance to the economic scene in Syria, especially as it has affected most sectors. Its impact will extend to the behavior of individuals on the economic and social levels. It may also weaken some of the centers of power that previously supported the Syrian economy, such as foreign remittances and the trade and services sector.

The Wartime and Post-Conflict Syria project (WPCS) is funded by the European Union and implemented through a partnership between the European University Institute (Middle East Directions Programme) and the Center for Operational Analysis and Research (COAR). WPCS will provide operational and strategic analysis to policymakers and programmers concerning prospects, challenges, trends, and policy options with respect to a conflict and post-conflict Syria. WPCS also aims to stimulate new approaches and policy responses to the Syrian conflict through a regular dialogue between researchers, policymakers and donors, and implementers, as well as to build a new network of Syrian researchers that will contribute to research informing international policy and practice related to their country.