The Syrian conflict which began in 2011 has had devastating effects on the country’s economy which contracted by more than 50 percent, driven by declines in the energy and manufacturing sectors, according to a new report released by London-based think-tank Chatham House.
In the research paper titled “Syria’s Economy: Picking up the Pieces,” inflation in the country is reported to have averaged 51 percent between January 2012 and March 2015 while the country’s currency has depreciated by about 80 percent since the outbreak of the conflict.
Economist and author of the report David Butter, told the BBC that measuring the overall impact on a war torn country is fairly difficult, therefore some data in the report remained foggy.
Butter states that the biggest cost of the war in Syria has been the quarter of a million people who have lost their lives. It is estimated that the country's population has decreased by 23 percent, while 4 million registered refugees have been displaced and are now seeking refuge in neighbouring countries.
The sector which has seen the deepest damage since the beginning of the conflict is the mining and oil production industry, contracting 94 percent in real terms since 2010, the report’s predictions show.
According to the Syrian government, the country's fiscal deficit (excluding subsidies) is currently at 20 percent of GDP, which it has sought to finance mainly through borrowing from the central bank and state-owned commercial banks.
Moreover, oil production under state control has fallen from 387,000 barrels per day (b/d) to less than 10,000 b/d, depriving the government of one of its main sources of revenue.
To cater for this fall, the government said it is currently spending around 20 percent more of national earnings than it receives in income, covering the gap by borrowing from central and state-owned banks. In response to the shortfall, fuel and food subsidies were curbed.
Despite economic downturn, the banking sector on the other hand is seen as remaining functioning, according to the BBC.
Recently, the country’s private banks were told that a majority of its board meetings must be held within the country. According to a Syrian businessman, who asked not to be identified, "the government wants to give a sense there is nothing wrong in Syria,” the BBC reports.