Economy of Syria

Infobox Economy
country = Syria
currency = Syrian pound (SYP)
year = Calendar year
organs = GAFTA
rank = 63rd
gdp = $87.091 billion (2007 est.)
growth = 3.3% (2007 est.)
per capita = $4,488 (2007 est.)
sectors = Agriculture (24%), Industry (18%), Services (58%) (2005 est.)
inflation = 8% (2006 est.)
poverty = 11.9% (2006 est.)
labor = 5.5 million (2006 est.)
occupations = Agriculture (26%), Industry (14%), Services (60%) (2003 est.)
unemployment = 12.5% (2005 est.)
industries = petroleum, textiles, food processing, beverages, tobacco, phosphate rock mining, cement, oil seeds crushing
exports = $6.9 billion (2006 est.)
export-goods = crude oil, petroleum products, fruits and vegetables, cotton fiber, clothing, meat and live animals, wheat
export-partners = Iraq 27.4%, Germany 12.2%, Lebanon 9.5%, Italy 6.6%, Egypt 5.3%, Saudi Arabia 4.8% (2006 est.)
imports = $6.6 billion (2006 est.)
import-goods = machinery and transport equipment, electric power machinery, food and livestock, metal and metal products, chemicals and chemical products, plastics, yarn, paper
import-partners = Saudi Arabia 12.1%, China 7.7%, Egypt 6.1%, UAE 5.9%, Italy 4.8%, Ukraine 4.7%, Germany 4.7%, Iran 4.4%, (2006 est.)
debt = $8.3 billion (12% of GDP) (2006 est.)
revenue = $8.7 billion (2006)
expenses = $9.9 billion (2006)
aid = recipient $180 million (2002 est.)
cianame = n/a

Syria is a middle-income, developing country with a diversified economy based on agriculture, industry, and energy. Its [http://earthtrends.wri.org/text/economics-business/variable-638.html current GDP per capita] expanded 80% in the 1960s reaching a peak of 336% of total growth during the 1970s. But this proved unsustainable and it shrank by 33% during the 1980s. However current GDP per capita registered a very modest total growth of 12% (1,1% per year on average) during the Nineties due to successful diversification.

Foreign Aid to Syria In 1997, foreign aid totaled an estimated US$199 million. The World Bank reported that as of July 2004 it had committed a total of US$661 million for 20 operations in Syria. One investment project remained active at that time.

Macro-economic trend

This is a chart of trend of gross domestic product of Syria at market prices [http://www.imf.org/external/pubs/ft/weo/2006/01/data/dbginim.cfm estimated] by the International Monetary Fund with figures in millions of Syrian Pounds.Average wages in 2007 hover around $9-11 per day.

During the 1960s, citing its socialist ideology, the government nationalized most major enterprises and adopted economic policies designed to address regional and class disparities. This legacy of state intervention and price, trade, and foreign exchange controls still hampers economic growth, although the government has begun to revisit many of these policies, especially in the financial sector and the country's trade regime. Despite a number of significant reforms and ambitious development projects of the early 1990s, as well as more modest reform efforts currently underway, Syria's economy still is slowed by large numbers of poorly performing public sector firms, low investment levels, and relatively low industrial and agricultural productivity.

Taken as a whole, Syrian economic reform thus far has been incremental and gradual. The government has begun to address structural deficiencies in the economy such as the lack of a modern financial sector through changes to the legal and regulatory environment. In 2001, Syria legalized private banking. In 2004, four private banks began operations. In August 2004, a committee was formed to supervise the establishment of a stock market. Beyond the financial sector, the Syrian Government has enacted major changes to rental and tax laws, and is reportedly considering similar changes to the commercial code and to other laws, which impact property rights.

Of Syria's 72,000 square miles (186,000 km²), roughly one-third is arable, with 80% of cultivated areas dependent on rainfall for water. In recent years, the agriculture sector has recovered from years of government inattentiveness and drought. Most farms are privately owned, but the government controls important elements of marketing and transportation.

The government has redirected its economic development priorities from industrial expansion into the agricultural sectors in order to achieve food self-sufficiency, enhance export earnings, and stem rural migration. Thanks to sustained capital investment, infrastructure development, subsidies of inputs, and price supports, Syria has gone from a net importer of many agricultural products to an exporter of cotton, fruits, vegetables, and other foodstuffs. One of the prime reasons for this turnaround has been the government's investment in huge irrigation systems in northern and northeastern Syria, part of a plan to increase irrigated farmland by 38% over the next decade.

Syria has produced heavy-grade oil from fields located in the northeast since the late 1960s. In the early 1980s, light-grade, low-sulphur oil was discovered near Dayr az Zawr in eastern Syria. This discovery relieved Syria of the need to import light oil to mix with domestic heavy crude in refineries. Recently, Syrian oil production has been about 530,000 barrels per day. Although its oil reserves are small compared to those of many other Arab states, Syria's petroleum industry accounts for a majority of the country's export income. The government has successfully begun to work with international energy companies to develop Syria's promising natural gas reserves, both for domestic use and export. U.S. energy firm, ConocoPhillips, completed a large natural gas gathering and production facility for Syria in late 2000, and will continue to serve as operator of the plant until December 2005. In 2003, Syria experienced some success in attracting U.S. Petroleum companies, signing an exploration deal with partners Devon Energy and Gulfsands and a seismic survey contract with Veritas.

Ad hoc economic liberalization continues to provide hope to Syria's private sector. In 1990, the government established an official parallel exchange rate (neighboring country rate) to provide incentives for remittances and exports through official channels. This action improved the supply of basic commodities and contained inflation by removing risk premiums on smuggled commodities.

External trade and investment

Despite the mitigation of the severe drought that plagued the region in the late 1990s and the recovery of energy export revenues, Syria's economy faces serious challenges. With almost 60% of its population under the age of 20, unemployment higher than the current estimated range of 20%-25% is a real possibility unless sustained and strong economic growth takes off. Oil production has levelled off, but recent agreements allowing increased foreign investment in the petroleum sector may boost production in two to three years.

Commerce has always been important to the Syrian economy, which benefited from the country's location along major east-west trade routes. Syrian cities boast both traditional industries such as weaving and dried-fruit packing and modern heavy industry. Given the policies adopted from the 1960s through the late 1980s, Syria failed to join an increasingly interconnected global economy. In late 2001, however, Syria submitted a request to the World Trade Organization to begin the accession process. Syria had been an original contracting party of the former General Agreement on Tariffs and Trade but withdrew in 1951 because of Israel's joining. Major elements of current Syrian trade rules would have to change in order to be consistent with the WTO. In March 2007, Syria signed an Association Agreement with the European Union that would encourage both sides to negotiate a free trade agreement before 2010. Nonetheless, EU member states have yet to ratify the Association Agreement.

The bulk of Syrian imports have been raw materials essential for industry, agriculture, equipment, and machinery. Major exports include crude oil, refined products, raw cotton, clothing, fruits, and cereal grains. Earnings from oil exports are one of the government's most important sources of foreign exchange.

Over time, the government has increased the number of transactions to which the more favorable neighboring country exchange rate applies. The government also introduced a quasi-rate for non-commercial transactions in 2001 broadly in line with prevailing black market rates. Exchange-rate unification remains an elusive goal as pressure is building for Syria to harmonize its exchange rate system.

Given the poor development of its own capital markets and Syria's lack of access to international money and capital markets, monetary policy remains captive to the need to cover the fiscal deficit. Although in 2003 Syria lowered interest rates for the first time in 22 years and again in 2004, rates remain fixed by law. In a positive move in 2003, Syria canceled an old and troublesome law governing foreign currency exchange; however, new regulations have yet to be implemented. Some basic commodities continue to be heavily subsidized, and social services are provided for nominal charges.

Foreign Debt

Syria has made progress in easing its heavy foreign debt burden through bilateral rescheduling deals with virtually all of its key creditors in Europe.In December 2004, Syria and Poland reached an agreement by which Syria would pay $27 million out of the total $261.7 million debt. In January 2005, Russia and Syria signed a deal that wrote off nearly 80% of Syria's debt to Russia, approximately €10.5 billion ($13 billion). The agreement left Syria with less than €3 billion (just over $3.6 billion) owed to Moscow. Half of it would be repaid over the next 10 years, while the rest would be paid into Russian accounts in Syrian banks and could be used for Russian investment projects in Syria and for buying Syrian products. This agreement was part of a weapons deal between Russia and Syria. And later that year Syria reached an agreement with Slovakia, and the Czech Republic to settle debt estimated at $1.6 billion. Again Syria was forgiven the bulk of its debt, in exchange for a one time payment of $150 million. Syria has also settled its debt with Iran and the World Bank. [http://www.state.gov/r/pa/ei/bgn/3580.htm]

References

[http://www.state.gov/r/pa/ei/bgn/3580.htm US Department of State]