With the regime under close scrutiny from its people and the international community, the direction in which it will steer the economy will be a crucial component of its future.

It is important to keep in mind that information on the state of the Syrian economy remains hard to attain since the regime still retains control over what data on the economy is released. However, estimates show that for the year 2011, the GDP growth rate for the country was at -2%. For 2012, the World Bank estimated this to decline by another 6.4%. In addition, the Syrian pound has lost 51.06% of its value. All this comes with a diminishing monetary reserve that has been cut in half. To back this up, the Central Bank has been supporting the pound with its reserves of hard currency and increasing interest rates on local currency deposits. This is expected to encourage people to keep their money in local banks and to continue using the Syrian currency.

Apart from the numbers and the general figures, the economic situation is translating to tangible hardships felt by the Syrian people. After increased investment in tourism, and total revenue of 8 billion dollars from this sector alone in 2010, tourist arrivals decreased by 41% in 2011, and a further decrease of 25% is expected for 2012 (marketresearch.com). There is a huge shortage of fuel across the country, and consequently, electricity is unavailable for hours every day. Even in the capital Damascus, residents are complaining of a lack of power affecting the pace of their lives. Moreover, the prices of food items have reached new heights with the rate of inflation reaching 7% in 2011. The domestic situation is not alone in crippling the economy; sanctions imposed by the international community are also expected to intensify the situation.

The political crisis has caused great economic implications and their scope is spreading to Syria’s neighbors. Iraq and Lebanon are two of its most important trading partners. In both directions, the movement of imports and exports has decreased significantly. In the case of Iraq, violence on the Syrian border disrupts the country’s only access to Mediterranean ports. In Lebanon, a substantial amount of the country’s agricultural supplies are imported from Syria. While the damage to its economy was of course not as serious, Lebanon’s GDP growth still recorded a poor 2% in 2011. Numbers for 2012 remain ambiguous with estimates ranging from 1% to 3%.

In addition to inhibiting the trade between Syria and Lebanon, the crisis has decreased the assets of Lebanese banks’ affiliates in Syria by 400 million dollars (according to Lebanon This Week, a Byblos Bank report published November 12th, 2012). This is expected to keep rising with the continuous conflict. Lebanese banks are very active in Syria, but have been adhering to international sanctions. This will exacerbate their loss as more assets are frozen.

Apart from the banking sector, tourism in Lebanon has also been sharing a piece of the situation in Syria. According to the Lebanon This Week report mentioned above, the number of tourists for the first 10 months of 2012 decreased by 15.8% from the same period the year before. Expectedly, the number of travelers coming into Lebanon by land has severely shrunk. On the other hand, the continuous entry of Syrian refugees into the country is pressuring the Lebanese state to alter the management of its resources to accommodate for this change.

This far on into the political and economic developments of Syria, basic items that are generally consumed by lower income families have had their prices controlled by the government. This however does not solve anything since most of these price ceilings have been imposed at the expense of foreign currency reserves, which, in accordance with the monetary reserve have been declining as well. The government has also issued more currency in order to enhance liquidity. This will prove counterproductive, as the devaluation of the Syrian lira to 71 pounds per US dollar (previously at 47 pounds) will only cause more inflation. With the regime’s current standing being so closely linked to its responsiveness to the people, a sound economic policy would be a turning point. But with the crisis expanding well beyond the political, this might just be too late.