SYRIA ECONOMIC MONITOR Syria’s Economy in Ruins after a Decade-long War Winter 2022/23 Syria Economic Monitor Syria’s Economy in Ruins after a Decade-long War Winter 2022/23 Middle East and North Africa Region ©2023 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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TABLE OF CONTENTS List of Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix ‫امللخص التنفيذي‬.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii 1.  The Conflict Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.  Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Economic challenges persist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Trade activities have declined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Inflation remains elevated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Fiscal policies have tightened . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Household welfare continues to worsen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 3.  Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 Special Focus: Syria Joint Damage Assessment of Selected Cities . . . . . . . . . . . . . . . . . . . . . . . .29 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 iii List of Figures Figure 1 Despite a General Decline, Syria’s Conflict-Related Fatalities Remain Significant . . . . . . . . . .2 Figure 2 More than Half of Syria’s pre-Conflict Population Remained Displaced . . . . . . . . . . . . . . . . . . 2 Figure 3 Nighttime Light Emissions Suggest Economic Activities Have Further Contracted since 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 4 Syria’s Cholera Outbreak Has Been Spreading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 5 Severe Water Restrictions Have Led to Record-low Agricultural Production in 2021–2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 6 Oil Production Remained Much Weaker than Pre-2011 Levels . . . . . . . . . . . . . . . . . . . . . . . . . .9 Figure 7 Syria Has Relied Heavily on Imports of Essential Commodities since the Conflict . . . . . . . . . 9 Figure 8 Syrian Exports and Imports Steeply Declined after the Start of the Conflict . . . . . . . . . . . . . .10 Figure 9 Maritime Data Show a Decline in Syria’s 2022 Trade Volume . . . . . . . . . . . . . . . . . . . . . . . . . .11 Figure 10 Passengers and Cargo Arriving in Syria Declined in 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 11 Higher Profit Margins Led to an Upsurge in Fuel Smuggling between Syria and Lebanon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Figure 12 Analysis of Nighttime Light Emissions Reveals Key Areas for Cross-Border Fuel Smuggling Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Figure 13 During the Peak Smuggling Season, Official Checkpoints Showed no Appreciable Increase in Congestion or Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Figure 14 Mobile Phone Data Shows Greater Activity along the Border during the Peak Smuggling Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Figure 15 Currency Depreciation Was Accompanied by Rising Inflation . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 16 Global Inflation and Domestic Policies Both Contributed to Price Increases . . . . . . . . . . . . .17 Figure 17 The Pass-through Effect of the Exchange Rate on Inflation Has Increased Markedly since Late 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Figure 18 Price Increases of Essential Goods Have Varied Considerably across Regions . . . . . . . . . . 18 Figure 19 Subsides of Essential Goods Declined in 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Figure 20 Food Is Becoming Increasingly Difficult to Afford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Figure 21 Share of Households Relying on Extreme Coping Strategies Increased in 2022 . . . . . . . . . 22 Figure 22 More Vulnerable People Were Pushed to Enter the Labor Market in 2022 . . . . . . . . . . . . . . .23 Figure 23 Bulk of Damage in Syria Found in Agri-Food Value Chains, Housing, Transport and Electricity Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Figure 24 More than Half of the Damage in Assessed Cities Was in Aleppo . . . . . . . . . . . . . . . . . . . . . .31 Figure 25 IDPs Continue to Greatly Outnumber Returnees in Syria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 List of Tables Table 1 Subsidies by Items in Syria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Table 2 Macro Outlook Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 List of Boxes Box 1 The Spread of Cholera across Syria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Box 2 Cross-Border Fuel Smuggling between Syria and Lebanon . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Box 3 The Exchange Rate Pass-through to Inflation in Syria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 iv SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR LIST OF ABBREVIATIONS ACLED Armed Conflict Location & Event Data HNAP Humanitarian Needs Assessment Project Programme AIS Automatic Identification System HTS Hay’at Tahrir Al-Sham BdL Bank du Liban ICRC International Committee of the Red CBS Central Bank of Syria Cross CHIRPS Climate Hazards Group InfraRed IDMC Internal Displacement Monitoring Precipitation with Station data Center COVID-19 Corona Virus Disease 2019 IDPs Internally Displaced Persons CPI Consumer Price Index ISIS Islamic State in Iraq and Syria DA Damage Assessment MENA Middle East and North Africa DMSP US Air Force Defense Meteorological MODIS Moderate Resolution Imaging Satellite Program Spectroradiometer EIA US Energy Information Administration MOF Ministry of Finance ERPT Exchange Rate Pass-Through MTI Macroeconomics, Trade & Investment EU European Union Global Practices FAOSTAT Food and Agriculture Organization NDVI Normalized Difference Vegetation Index of the United Nations Statistics NGOs Non-governmental Organizations Department NTLs Nighttime Lights FCV Fragile, Conflict, and Violence OCHA Office For the Coordination of FTS Financial Tracking Service Humanitarian Affairs FX Foreign Exchange Market OCV Oral Cholera Vaccines FY Fiscal Year OHCHR Office of the High Commissioner for GDP Gross Domestic Product Human Rights GFSAD Global Food Security-Support Analysis PDNA Post-Disaster Needs Assessment Data RDNA Rapid Damage and Needs Assessment GMM Generalized Method of Moments SAR Synthetic Aperture Radar GPS Global Positioning System SCI Statistical Capacity Indicator v SDF Syrian Democratic Forces US United States SIG Syrian Interim Government US$ United States Dollar SYP Syrian Pound USD United States Dollar UAE United Arab Emirates VHR Very High Resolution UN United Nations VIIRS Visible Infrared Imaging Radiometer Suite UNCTAD United Nations Conference on Trade WASH Water, Sanitation and Hygiene and Development WFP World Food Programme UNHCR United Nations High Commissioner for WHO World Health Organization Refugees WSS Water Supply and Sanitation UNICEF United Nations International Children’s yoy Year on Year Emergency Fund vi SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR PREFACE T he Syria Economic Monitor is a semi-annual trends and analyze unrecorded activities that are economic publication on the Syrian Arab prominent in war-torn economies like Syria. Republic, produced by the Macroeconomics, The Syria Economic Monitor was prepared by a Trade and Investment (MTI) Global Practice of the team comprising Luan Zhao (Senior Economist, Task World Bank. The report aims to provide an update Team Leader), Alain Willy Aeschlimann (Senior Econo- on key economic developments, outlook, risks, and mist), Ali Ibrahim Almelhem (Economist), Anthony policies in Syria. The Syrian Economic Monitor is part Biswell (Consultant), Albin Szakola (Consultant), of a more general effort by the MTI Global Practice Andres Chamorro (Geographer), Armine Juergenli- at the World Bank to better understand economic emk (Senior Agriculture Specialist), Gabriel Stefanini and social dynamics in fragile, conflict, and violence Vicente (Data Scientist), Ghizlane Aqariden (Con- (FCV) settings, notwithstanding the lack of physical sultant), Joanne Matossian (Consultant), Joy Aoun in-country access in some cases. Conflicts are the (Disaster Risk Management Specialist), Hadi M.W. dominant source of development regression and Fathallah (Consultant), Holly Krambeck (Program Man- are projected by the World Bank to account for up to ager, Data Lab), Ibrahim Jamali (Consultant), Katriel two-thirds of the extreme poor by 2030 (Corral et al. Friedman (Consultant), Maria Ruth Jones (Senior Sur- 2020). vey Economist), Mounir Mahmalat (Consultant), Needa Economic monitoring in FCV contexts presents Arshad Malik (Disaster Risk Management Analyst), unusual challenges, not the least of which is the lack Ola Hisou (Consultant), Robert Andrew Marty (Data of reliable, timely, and comprehensive data. In 2020, Scientist), Sahiti Sarva (Consultant), Silvia Redaelli Syria ranked last among the 146 surveyed countries on (Senior Poverty Economist), Sherin Varkey (Senior the World Bank’s Statistical Capacity Indicator (SCI). Health Specialist), Priyanka Kanth (Health Specialist), To overcome such a severe limitation to data access Xinyi Wang (Consultant), and Yahui Zhao (Consultant). for economic monitoring, the World Bank’s teams The Special Focus Chapter, “Syria joint damage have been resorting to the use of a mix of standard assessment of selected cities”, was prepared by Joy tools and innovative geospatial and remote-based Aoun, Needa Arshad Malik, and Ghizlane Aqariden. data sources (e.g., nighttime lights, shipping-position Sherin Varkey, Katriel Friedman, and Priyanka Kanth data, traffic congestion data, aviation statistics, mobile prepared the box “The spread of cholera across Syria”. phone location data, remote sensing vegetation indi- Anthony Biswell, Albin Szakola, Robert Andrew Marty, ces, and conflict intensity maps) to reveal economic Gabriel Stefanini Vicente, Andres Chamorro, and vii Luan Zhao prepared the box “Cross-border fuel smug- Yuill, for editing the report. Special thanks to Ekaterina gling between Syria and Lebanon”. Ibrahim Jamali Georgieva Stefanova (Senior Program Assistant) for and Luan Zhao prepared the box “the exchange rate administrative support, and to Abdullah Alruwaishan pass-through to inflation in Syria”. In addition, Silvia for the Arabic translation of the Executive Summary. Redaelli prepared the welfare analysis and Armine The team is grateful to Robert W. Reinecke, Salem Juergenliemk and Hadi M.W. Fathallah contributed to Massalha, and Shehab El-Dien (design, communica- the analysis of the agricultural sector. tion, and videography experts) for their impeccable The Syria Economic Monitor benefits from work on the formatting, design and video/infographic assistance from Data Lab that advised on using contents related to the dissemination of this report. alternative data to monitor changing trends in trade The findings, interpretations, and conclusions and economic activity in Syria. A technical note, “Sup- expressed in this Monitor are those of World Bank port for World Bank Syria Economic Monitor – Using staff and do not necessarily reflect the views of the Alternative Data to Understand Changing Trends in Executive Board of The World Bank or the govern- Trade and Economic Activity”, was prepared by Holly ments they represent. Krambeck (Project Lead), Andres Chamorro, Gabriel The data cut-off date for this Syria Economic Stefanini Vicente, Maria Ruth Jones, Sahiti Sarva, and Monitor was December 20, 2022. The Syria Eco- Robert Andrew Marty. nomic Monitor was written prior to the February 6, The authors are grateful to Jean-Christophe 2023 earthquake that affected Turkey and Syria. Carret (Country Director), Eric Le Borgne (Practice The preliminary macroeconomic impact of this Manager), Norbert Fiess (Lead Economist), Fatima earthquake is analyzed in the World Bank publication, Shah (Country program Coordinator), Salim Rouhana “Syria Earthquake 2023 Rapid Damage and Needs (Sector Lead), Alexis Madelain (Senior Energy Spe- Assessment (RDNA)”. cialist, Program Leader), Dina N. Abu-Ghaida (Lead For information about the World Bank and Economist, Program Leader), Željko Bogeti (Lead its activities in Syria, including e-copies of this Economist), Mohamed Hedi Bchir (Senior Economist), publication, please visit https://www.worldbank.org​ Nadia Fernanda Piffaretti (Senior Economist), and /en/country/syria/overview#1. For questions and com- Franz Ulrich Ruch (Senior Economist), for invaluable ments on the content of this publication, please contact discussions and comments during the preparation and Eric Le Borgne (eleborgne@worldbank.org), Norbert review of this report. The team is grateful to Zeina Khalil Fiess (nfiess@worldbank.org), and Luan Zhao (lzhao1@ (Senior External Affairs Officer), who led on report pub- worldbank.org). Questions from the media can be lishing, communications, and outreach, and to Barbara addressed to Zeina Khalil (zelkhalil@worldbank.org). viii SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR EXECUTIVE SUMMARY The Syria Economic Monitor was written prior to the February 6, 2023 earthquake that affected Turkey and Syria. The preliminary macroeconomic impact of this earthquake is analyzed in the World Bank publication, “Syria Earthquake 2023 Rapid Damage and Needs Assessment (RDNA)”. A lthough large-scale armed conflict has hard hit by the conflict. Crude oil production declined subsided, Syria continues to rank among by an estimated 80 percent between 2010 and 2022, the top countries in terms of violent deaths. largely due to conflict-related damage to the energy Around 5,600 conflict-related deaths were recorded in infrastructure and disruptions stemming from disputes the first 11 months of 2022.1 Most of the active fighting between the Syrian government and opposition forces. is concentrated in northern Syria, while northern and Multiple domestic and external shocks southern regions have become even more unstable are adversely affecting the economy. Severe following the recent uptick in Islamic State violence. water restrictions have been weighing on agricultural These conflicts, along with natural disasters, continue production since 2021. After a decade of war, a to cause large-scale displacements. According to severely degraded health care system is preventing the latest figures of the United Nations High Com- an effective response to ongoing cholera outbreaks. missioner for Refugees (UNHCR), more than half of Economic instability in neighboring Lebanon and Syria’s pre-conflict population remains displaced, Turkey, and new US sanctions under the Caesar Act,2 including 6.8 million internally displaced people (IDPs) are further exacerbating crisis conditions. and 6.9 million refugees abroad. Macroeconomic conditions have substan- Conflict undermines economic activity in tially deteriorated since the start of the war on Syria. The destruction of physical capital, casualties, Ukraine. With nearly half of oil consumption and forced displacement, and the breakup of economic networks halved Gross Domestic Product (GDP) between 2010 and 2020. Nighttime light emissions— 1 The data is from the Armed Conflict Location & Event Data Project (ACLED). one way to assess economic activity when no formal 2 The Caesar Syria Civilian Protection Act of 2019 gives statistics are available—suggest that output has further the US sanctioning authority against entities that support contracted since 2020, particularly in conflict-intensive the Syrian government's ability to commit human rights regions. The hydrocarbon sector has been particularly violations. ix about one-third of cereal consumption imported, show no increase in exit movement of gasoline and higher commodity prices, triggered by the Ukraine diesel from Lebanon to Syria between 2020 and 2021. war, have weakened the fiscal and external positions, Already very high, the vulnerability of Syr- and are fueling inflation. The market exchange rate ian households is on the rise. Since 2019, the WFP of the Syrian pound depreciated by about 48 per- minimum food basket price index has grown twice as cent against the US dollar between February and fast as non-skilled labor wages in Syria, suggesting November 2022. Currency depreciation has been that food is becoming increasingly difficult to afford. accompanied by rising inflation. Syria’s food prices, As of the summer of 2022, according to Humanitarian as proxied by the World Food Programme’s (WFP) Needs Assessment Programme (NHAP) data, only 15 minimum food basket price index, were 44 percent percent of households reported enough income to higher in September than February 2022. satisfy essential needs, and close to 50 percent had With higher costs of essential goods, fiscal to sell assets to make ends meet. Increased house- policy has become more restrictive. From late 2021 hold vulnerability went hand in hand with an increase to early 2022, the authorities removed around 600,000 in labor force participation, especially for workers at of 4 million smart card holders from governmental the margins of the labor market with relatively limited assistance, or an estimated 15 percent of the popula- earning opportunities, which includes women, youth, tion. Immediately after the start of the war on Ukraine, and the elderly. As households increasingly struggle authorities strictly prioritized cuts to already inadequate to make ends meet, this increase in labor force partici- public spending, further tightening subsidy programs. pation among vulnerable people could be interpreted Authorities also rationed the supply of essential food as a sign of distress, with individuals increasingly and fuel commodities in an effort to sustain supply forced to accept any available income opportunity, for a longer period. The FY2023 budget reaffirms the irrespective of quality. government’s plans to further cut subsidies. Subject to high uncertainty, real GDP is Conflict-related disruptions have had a dev- projected to contract by 3.2 percent in 2023, astating impact on foreign trade. Mirror statistics following a 3.5 percent decline in 2022. Conflict, from the UN Comtrade database, showing other coun- high input costs, and water scarcity are projected to tries’ reported imports from Syria, indicate that Syrian limit crop production. In addition, fuel shortages are exports fell dramatically from $18.4 billion in 2010 to expected to further weaken manufacturing and dis- $1.8 billion in 2021, largely due to a sharp decline in oil rupt transportation and services. Inflation is projected and tourism receipts. Given a high import dependence to decline but remain high in 2023, due to exchange for essential commodities, imports have declined rate pass-through, persistent food and fuel shortages, somewhat less than exports, dropping from $22.7 and further cuts to subsidies. The fiscal deficit is billion in 2010 to $6.5 billion in 2021. Maritime data, expected to remain large in 2023, as efforts to reduce as well as passenger and cargo flights arrival data, fiscal subsidies will only partly offset the cost-driven indicate that trade activities slowed further in 2022, increase in expenditures. partly driven by new government policies that restrict Risks to the growth outlook are significant food exports and imports of non-essential goods. and tilted to the downside. Recurring climate Conflict and sanctions have also increased shocks may severely affect crops and agricultural smuggling. Nighttime light emissions data suggest livelihoods. A prolonged war on Ukraine could push that towns and regions close to smuggling routes expe- up commodity prices even higher, negatively affecting rienced a short-lived economic boom between early Syria’s position as a food and energy importer. Inad- 2020 and the summer of 2021, when profit margins for equate health facilities could exacerbate the impact smuggling Lebanese diesel into Syria increased sig- of rapidly spreading contagious diseases. Despite nificantly. Nighttime light emissions and mobile device growing needs, there is a risk of further reductions in usage data further indicate that smuggling bypassed humanitarian assistance for Syria. On the upside, the official checkpoints. Indeed, Lebanese customs data United Nations (UN) recently exempted the provision x SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR of humanitarian assistance in northwest Syria from Assessment (DA) of Selected Cities in Syria. The UN sanctions, which may potentially facilitate trade, Damage Assessment, relying heavily on remote- investment, and humanitarian operations in Syria. based analysis, provides information on the impact of ongoing conflict in Syria on the population, physical infrastructure, and quality of service delivery in tar- Special Focus: Syria Joint Damage geted cities. The Damage Assessment shows that, as Assessment of Selected Cities of January 2022, total damages across the assessed 14 cities and 11 sectors (physical infrastructure, The World Bank, in collaboration with the European social, and crosscutting) range between $8.7 billion Union (EU), conducted the 2022 Syria Joint Damage to $11.4 billion. Executive Summary xi ‫الملخص التنفيذي‬ ‫تم إعداد املرصد االقتصادي لسوريا قبل حدوث زلزال ‪ 6‬شباط‪/‬فرباير ‪ 2023‬الذي رضب تركيا وسوريا‪ .‬يتضمن تقرير البنك الدويل تحت عنوان "زلزال‬ ‫سوريا ‪ :2023‬تقييم رسيع لألرضار واالحتياجات" بيانات تحليلية أولية حول أثر الزلزال عىل اإلقتصاد الكيل‬ ‫ألقت القيود الشديدة عىل املياه بثقلها عىل اإلنتاج الزراعي منذ عام‬ ‫‪ .2021‬بعد عقد من الحرب‪ ،‬يحول نظام الرعاية الصحية املتدهور بشدة‬ ‫دون االستجابة الفعالة لتفيش الكولريا املستمر‪ .‬كام يؤدي عدم االستقرار‬ ‫عــى الرغــم مــن تراجــع حــدة الن ـزاع املســلح الواســع النطــاق‪،‬‬ ‫ال تــزال ســوريا مــن بــن البلــدان األعــى مرتبــة مــن حيــث‬ ‫الوفيــات الناجمــة عــن العنــف‪ .‬تــم تســجيل ‪ 5,600‬حالــة‬ ‫ع‬ ‫االقتصادي يف الدول املجاورة‪ ،‬أي يف لبنان وتركيا‪ ،‬والعقوبات األمريكية‬ ‫وفــاة مرتبطــة بالن ـزاع يف األشــهر األحــد عــر األوىل مــن عــام ‪،2022‬‬ ‫الجديدة مبوجب قانون قيرص‪ ،2‬إىل تفاقم ظروف األزمة‪.‬‬ ‫وهــو مــا ميثــل املرتبــة الحاديــة عــرة األعــى يف العــامل‪ .1‬ترتكــز معظــم‬ ‫تدهــورت ظــروف االقتصــاد الــكيل بشــكل كبــر منــذ بدايــة‬ ‫املعــارك املحتدمــة يف شــال ســوريا‪ ،‬بينــا أصبحــت املناطــق الشــالية‬ ‫الحــرب عــى أوكرانيــا‪ .‬يف ظــل اســترياد مــا يقــرب مــن نصــف الكميــات‬ ‫والجنوبيــة أكــر اضطرابــاً يف أعقــاب التصعيــد األخــر للعنــف مــن‬ ‫املســتهلكة مــن النفــط وحــوايل ثلــث الكميــات املســتهلكة مــن الحبــوب‪،‬‬ ‫جانــب تنظيــم داعــش‪ .‬ال ت ـزال هــذه النزاعــات‪ ،‬إىل جانــب الكــوارث‬ ‫أدى ارتفــاع أســعار الســلع األساســية‪ ،‬الناجــم عــن الحــرب عــى أوكرانيــا‪،‬‬ ‫الطبيعيــة‪ ،‬تتســبب يف حــاالت نــزوح واســعة النطــاق‪ .‬وفقــاً ألحــدث‬ ‫إىل إضعــاف الوضــع املــايل والخارجــي‪ ،‬األمــر الــذي يتســبب يف ارتفــاع‬ ‫األرقــام الصــادرة عــن املفوضيــة الســامية لألمــم املتحــدة لشــؤون‬ ‫مســتويات التضخــم‪ .‬انخفــض ســعر رصف اللــرة الســورية يف الســوق‬ ‫الالجئــن‪ ،‬فــإن نصــف ســكان ســوريا (وفــق اإلحصــاءات قبــل الن ـزاع)‬ ‫بنحــو ‪ 48‬باملائــة مقابــل الــدوالر األمريــي بــن شــباط‪/‬فرباير وترشيــن‬ ‫باتــوا نازحــن‪ ،‬مبــا يف ذلــك ‪ 6.8‬مليــون شــخص مــن النازحــن داخليـاً و‬ ‫الثاين‪/‬نوفمــر ‪ ،2022‬وترافــق انخفــاض قيمــة العملــة مــع ارتفــاع التضخم‪.‬‬ ‫‪ 6.9‬مليــون شــخص مــن الالجئــن يف الخــارج‪.‬‬ ‫وقــد ارتفعــت أســعار املــواد الغذائيــة يف ســوريا‪ ،‬وفقـاً ملــؤرش الحــد األدىن‬ ‫النـزاع يقــوض النشــاط االقتصــادي يف ســوريا‪ .‬أدى تدمــر رأس‬ ‫ألســعار ســلة الغــذاء الخــاص بربنامــج األغذيــة العاملــي‪ ،‬بنســبة ‪ 44‬باملائــة‬ ‫املــال املــادي والخســائر البرشيــة والنــزوح القــري وتفــكك الشــبكات‬ ‫يف أيلول‪/‬ســبتمرب مقارنــة مبــا كان عليــه يف شــباط‪/‬فرباير ‪.2022‬‬ ‫االقتصاديــة إىل خفــض الناتــج املحــي اإلجــايل إىل النصــف بــن عامــي‬ ‫يف ظــل ارتفــاع تكاليــف الســلع األساســية‪ ،‬أصبحــت السياســة‬ ‫‪ 2010‬و ‪ .2020‬تشــر انبعاثــات األضــواء الليليــة – وهــي إحــدى طــرق‬ ‫املاليــة أكــر تقييــداً‪ .‬منــذ أواخــر عــام ‪ 2021‬حتــى أوائــل العــام ‪،2022‬‬ ‫تقييــم النشــاط االقتصــادي عندمــا ال تتوفــر إحصــاءات رســمية – إىل‬ ‫أن الناتــج قــد انكمــش عــى نحــو أكــر منــذ العــام ‪ ،2020‬ال ســيام‬ ‫يف املناطــق التــي تشــتد فيهــا حــدة الن ـزاع‪ .‬وقــد تــرر قطــاع النفــط‬ ‫ ‪1‬البيانــات مأخــوذة مــن مــروع بيانــات األحــداث وموقــع النــزاع‬ ‫والغــاز بشــكل خــاص مــن النـزاع‪ .‬انخفــض إنتــاج النفــط الخــام بنحو ‪80‬‬ ‫املســلح‪.‬‬ ‫باملائــة بــن عامــي ‪ 2010‬و ‪ ،2022‬ويعــود ذلــك إىل حــد كبــر إىل األرضار‬ ‫ ‪2‬مينــح قانــون قيــر لحاميــة املدنيــن يف ســوريا لســنة ‪ 2019‬الواليــات‬ ‫املرتبطــة بالن ـزاع التــي لحقــت بالبنيــة التحتيــة للطاقــة واالضطرابــات‬ ‫املتحــدة ســلطة فــرض عقوبــات ضــد الكيانــات التــي تدعــم قــدرة‬ ‫الناجمــة عــن النزاعــات بــن الحكومــة الســورية وقــوات املعارضــة‪.‬‬ ‫الحكومــة الســورية عــى ارتــكاب انتهــاكات لحقــوق اإلنســان‪.‬‬ ‫تؤثر الصدمات الداخلية والخارجية املتعددة سلباً عىل االقتصاد‪.‬‬ ‫‪Executive Summary‬‬ ‫‪xiii‬‬ ‫العاملــة‪ ،‬وخاصــة بالنســبة للعــال عــى هامــش ســوق العمــل مــع‬ ‫اســتبعدت الســلطات مــا يُقــدر بنحــو ‪ 15‬باملائــة مــن الســكان أو حــوايل‬ ‫فــرص محــدودة نســبياً لكســب الدخــل‪ ،‬والتــي تشــمل النســاء والشــباب‬ ‫‪ 600,000‬شــخص مــن أصــل ‪ 4‬ماليــن مــن حامــي البطاقــات الذكيــة‬ ‫واملســنني‪ .‬بينــا تكافــح األرس بشــكل متزايــد لتغطيــة نفقاتهــا‪ ،‬تعتــر‬ ‫مــن املســاعدات الحكوميــة‪ .‬وفــور انــدالع الحــرب عــى أوكرانيــا‪ ،‬أعطــت‬ ‫هــذه الزيــادة يف مشــاركة أف ـراد األرس الهشــة يف القــوة العاملــة دلي ـاً‬ ‫الســلطات األولويــة الصارمــة لخفــض اإلنفــاق العــام غــر الــكايف أص ـاً‪،‬‬ ‫عــى ضيــق الحــال واملعانــاة‪ ،‬حيــث يضطــر الفــرد بشــكل متزايــد إىل‬ ‫مــا زاد مــن تقليــص برامــج الدعــم‪ .‬كــا قامــت الســلطات برتشــيد‬ ‫قبــول أي فرصــة متاحــة لكســب الدخــل‪ ،‬بغــض النظــر عــن نوعيتهــا‪.‬‬ ‫إمــدادات الســلع الغذائيــة األساســية والوقــود ســعياً منهــا لضــان‬ ‫يف ظــل درجــة عاليــة مــن عــدم اليقــن‪ ،‬مــن املتوقــع أن‬ ‫اســتمرارها لفــرة أطــول‪ .‬وتعيــد ميزانيــة الســنة املاليــة ‪ 2023‬التأكيــد‬ ‫ينكمــش إجــايل الناتــج املحــي الحقيقــي بنســبة ‪ 3.2‬باملائــة يف العــام‬ ‫عــى خطــط الحكومــة للمزيــد مــن خفــض الدعــم‪.‬‬ ‫‪ ،2023‬بعــد انخفاضــه بنســبة ‪ 3.5‬باملائــة يف العــام ‪ .2022‬مــن املتوقــع‬ ‫كان لالضطرابــات املرتبطــة بالن ـزاع أثــر مدمــر عــى التجــارة‬ ‫أن يــؤدي النــزاع وارتفــاع تكاليــف املدخــات وشــح امليــاه إىل الحــد‬ ‫الخارجيــة‪ .‬تشــر اإلحصائيــات املتطابقــة مــن قاعــدة البيانــات‬ ‫مــن إنتــاج املحاصيــل‪ .‬باإلضافــة إىل ذلــك‪ ،‬قــد يــؤدي نقــص الوقــود إىل‬ ‫اإلحصائيــة لتجــارة الســلع األساســية الخاصــة باألمــم املتحــدة‪ ،‬والتــي‬ ‫إضعــاف التصنيــع وتعطيــل النقــل والخدمــات‪ .‬كــا يُتوقــع أن ينخفــض‬ ‫تُظهــر واردات دول أخــرى مــن ســوريا‪ ،‬إىل أن الصــادرات الســورية‬ ‫معــدل التضخــم‪ ،‬لكنــه ســيظل مرتفعـاً يف عــام ‪ ،2023‬بســبب انتقــال أثر‬ ‫انخفضــت بشــكل كبــر مــن ‪ 18.4‬مليــار دوالر أمريــي يف عــام ‪2010‬‬ ‫أســعار الــرف واســتمرار نقــص الغــذاء والوقــود واملزيــد مــن تقليــص‬ ‫إىل ‪ 1.8‬مليــار دوالر أمريــي يف عــام ‪ ،2021‬ويُعــزى ذلــك إىل حــد‬ ‫الدعــم‪ .‬ومــن املتوقــع أيضـاً أن يبقــى عجــز املاليــة العامــة كبـرا ً يف عــام‬ ‫كبــر إىل االنخفــاض الحــاد يف عائــدات النفــط والســياحة‪ .‬بالنظــر إىل‬ ‫‪ ،2023‬حيــث أن الجهــود املبذولــة لخفــض الدعــم املــايل ســتؤدي إىل‬ ‫االعتــاد الكبــر عــى واردات الســلع األساســية‪ ،‬تراجعــت الــواردات إىل‬ ‫تعويــض الزيــادة يف النفقــات املرتبطــة بالتكلفــة بشــكل جــزيئ فقــط‪.‬‬ ‫حــد مــا بقــدر أقــل مــن الصــادرات‪ ،‬حيــث انخفضــت مــن ‪ 22.7‬مليــار‬ ‫املخاطــر عــى توقعــات النمــو كبــرة ومتيــل إىل اإلتجــاه ســلباً‪.‬‬ ‫دوالر أمريــي يف عــام ‪ 2010‬إىل ‪ 6.5‬مليــار دوالر أمريــي يف عــام ‪.2021‬‬ ‫ميكــن أن تؤثــر الصدمــات املناخيــة املتكــررة بشــدة عــى املحاصيــل‬ ‫تشــر البيانــات البحريــة‪ ،‬باإلضافــة إىل بيانــات وصــول الرحــات الجويــة‬ ‫وســبل العيــش الزراعيــة‪ .‬كــا ميكــن أن يــؤدي اســتمرار الحــرب عــى‬ ‫للمســافرين والبضائــع‪ ،‬إىل أن األنشــطة التجاريــة تباطــأت أكــر يف العــام‬ ‫أوكرانيــا لفــرة طويلــة إىل ارتفاع أســعار الســلع األساســية‪ ،‬مام يؤثر ســلباً‬ ‫‪ ،2022‬وهــو أمــر ناجــم جزئيــاً عــن السياســات الحكوميــة الجديــدة‬ ‫عــى وضــع ســوريا كبلــد مســتورد للغــذاء والطاقــة‪ .‬وقــد يــؤدي نقــص‬ ‫التــي تقيــد الصــادرات الغذائيــة وواردات الســلع غــر األساســية‪.‬‬ ‫املرافــق الصحيــة إىل تفاقــم أثــر االنتشــار الرسيــع لألم ـراض املعديــة‪.‬‬ ‫أدى النــزاع وفــرض العقوبــات إىل زيــادة عمليــات التهريــب‪.‬‬ ‫عــى الرغــم مــن االحتياجــات املتزايــدة‪ ،‬هنــاك خطــر حــدوث املزيــد‬ ‫تشــر بيانــات انبعاثــات األضــواء الليليــة إىل أن البلــدات واملناطــق القريبة‬ ‫مــن التقليــص يف املســاعدات اإلنســانية لســوريا‪ .‬يف الجانــب اإليجــايب‪،‬‬ ‫مــن مســالك التهريــب شــهدت طفــرة اقتصاديــة اســتمرت لفــرة قصــرة‬ ‫أعفــت األمــم املتحــدة مؤخ ـرا ً تقديــم املســاعدات اإلنســانية يف شــال‬ ‫بــن أوائــل العــام ‪ 2020‬وصيــف العــام ‪ ،2021‬عندمــا زادت هوامــش‬ ‫غــرب ســوريا مــن العقوبــات التــي كانــت قــد فرضتهــا‪ ،‬مــن املحتمــل أن‬ ‫الربــح الناتجــة عــن تهريــب املــازوت (الديــزل) مــن لبنــان إىل ســوريا‬ ‫تــؤدي إىل تســهيل التجــارة واالســتثامر والعمليــات اإلنســانية يف ســوريا‪.‬‬ ‫بشــكل كبــر‪ .‬وتشــر انبعاثــات األضــواء الليليــة والبيانــات حــول اســتخدام‬ ‫األجهــزة املحمولــة إىل أن التهريــب تجــاوز نقــاط التفتيــش الرســمية‪ .‬يف‬ ‫الواقــع‪ ،‬ال تُظهــر بيانــات الجــارك اللبنانيــة أي زيــادة يف حركــة خــروج‬ ‫فصل تحلييل خاص‪ :‬التقييم املشرتك لألرضار يف مدن مختارة‬ ‫البنزيــن و املــازوت (الديــزل) إىل ســوريا بــن عامــي ‪ 2020‬و ‪.2021‬‬ ‫يف سوريا‬ ‫تشــهد األرس الســورية‪ ،‬الهشــة أصــاً‪ ،‬تدهــوراً إضافيــاً يف‬ ‫وضعهــا املعيــي‪ .‬منــذ عــام ‪ ،2019‬ارتفــع مــؤرش الحــد األدىن ألســعار‬ ‫أجرى البنك الدويل‪ ،‬بالتعاون مع االتحاد األورويب‪ ،‬تقييامً مشرتكاً لألرضار‬ ‫ســلة الغــذاء الخــاص بربنامــج األغذيــة العاملــي بصــورة رسيعــة مبقــدار‬ ‫يف مدن مختارة يف سوريا لعام ‪ .2022‬يوفر هذا التقرير حول تقييم‬ ‫الضعفــن مقارنــة بالزيــادة يف أجــور العاملــة غــر املاهــرة يف ســوريا‪،‬‬ ‫األرضار‪ ،‬والذي يستند إىل حد كبري إىل التقييم عن بُعد‪ ،‬معلومات حول‬ ‫مــا يشــر إىل الصعوبــة املتفاقمــة يف تحمــل تكلفــة الغــذاء‪ .‬حتــى‬ ‫أثر النزاع املستمر يف سوريا عىل السكان والبنية التحتية املادية وجودة‬ ‫صيــف العــام ‪ ،2022‬اســتطاعت ‪ 15‬باملائــة فقــط مــن األرس الحصــول‬ ‫تقديم الخدمات يف املدن املشمولة‪ .‬يُظهر التقرير أن حتى تاريخ كانون‬ ‫كاف لتلبيــة االحتياجــات األساســية‪ ،‬يف حــن أن حــوايل ‪50‬‬ ‫عــى دخــل ٍ‬ ‫الثاين‪/‬يناير ‪ ،2022‬يرتاوح إجاميل األرضار يف ‪ 14‬مدينة و‪ 11‬قطاع بني ‪8.7‬‬ ‫باملائــة مــن األرس اضطــرت إىل بيــع األصــول لتغطيــة نفقاتهــا‪ ،‬ذلــك‬ ‫مليار و ‪ 11.4‬مليار دوالر أمرييك‪ .‬وقد شملت هذه القطاعات البنية‬ ‫بحســب بيانــات برنامــج تقييــم االحتياجــات اإلنســانية (‪.(HNAP‬‬ ‫التحتية املادية واالجتامعية والقطاعات املشرتكة‪.‬‬ ‫ترافــق تزايــد هشاشــة األرس جنبـاً إىل جنــب مــع زيــادة مشــاركة القــوى‬ ‫‪xiv‬‬ ‫‪SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR‬‬ 1 THE CONFLICT CONTEXT A lthough large-scale armed conflict has rioration in socio-economic conditions. Protests subsided, Syria continues to rank among took place in As-Sweida in response to the loss of gov- the top countries in terms of violent ernment subsidies, in Deir-ez-Zor against alleged fraud deaths. Syria recorded around 5,600 conflict-related in the Autonomous Administration of North and East deaths in the first 11 months of 2022, the eleventh Syria, and in Aleppo against the extremely high price highest in the world, according to the Armed Conflict and inconsistent supply of energy. Protests against Location & Event Data Project (ACLED).3 As in previ- Hay’at Tahrir Al-Sham (HTS) policies occurred because ous years, most of the active fighting continued to the armed organization struggled to pay employees and take place in northern Syria’s governorates of Aleppo, provide essential services in the regions it controlled; Ar-Raqqa, Deir-ez-Zor, and Idleb (Figure 1). The protestors included teachers, locals, and internally dis- additional threat of a Turkish incursion has resulted placed people (IDPs). Strikes and demonstrations also in clashes between the Syrian government, the Syrian persisted throughout northeast Syria as the Autono- Democratic Forces (SDF), and Turkish forces, killing mous Administration failed to put forth a strategy that and injuring civilians and soldiers. The northern and addressed the region’s socioeconomic problems. southern regions of Syria have become even more Conflicts, along with natural disasters, unstable following the recent uptick in Islamic State continue to trigger large-scale displacements. violence. Southern Syria, notably in regions under dis- Conflict and violence triggered about 130,000 inter- puted control, also saw an increase in conflict-related nal displacements in Syria in the first eight months killings. Several local armed opposition groups and of 2022, according to the United Nations Office for the pro-government force Qouwat al-Fajjr were even- the Coordination of Humanitarian Affairs (OCHA).4 tually dissolved following violent clashes that started in the As-Sweida governorate back in June 2022. 3 ACLED (https://acleddata.com/). Widespread demonstrations arose through- 4 Sum of the monthly IDP movements recorded by OCHA out Syria in 2022, sparked by the continued dete- on their “Syrian Arab Republic: IDP Movements” reports 1 FIGURE 1 • Despite a General Decline, Syria’s Conflict-Related Fatalities Remain Significant 2017 2022* Source: Armed Conflict Location & Event Data Project (ACLED); World Bank staff estimates. Note: * The data for 2022 covers the months of January through November. FIGURE 2 • More than Half of Syria’s Pre-Conflict Population Remained Displaced A. The stock of Syrian refugees by hosting countries B. The stock of internally displaced persons (IDPs) (Million) (Million) 8 8 7 7 6 6 5 4 5 3 4 2 3 1 0 2 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* 1 0 Turkey Lebanon Jordan 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* Germany Iraq Others Source: UNHCR’s Refugee Population Statistics Database; World Bank staff estimates. Note: (A) Both registered refugees and asylum-seekers are included. Asylum-seekers refers to individuals who have sought international protection but whose claims for refugee status have not yet been determined. * The data for 2022 covers the months of January through June. Additionally, the Internal Displacement Monitoring remained displaced, including 6.8 million IDPs and Center (IDMC)5 reports that in the first half of 2022, 6.9 million refugees displaced abroad (Figure 2.A and around 20,000 individuals have been forced to flee Figure 2.B). their homes because of natural disasters, including devastating winter storms in early 2022 that brought from January to August 2022; updates from OCHA’s significant snowfall to the northern Aleppo and Idlib reliefweb.int. areas. According to statistics from the United Nations 5 IDMC is a non-governmental organization focused on High Commissioner for Refugees (UNHCR), by mid- collecting and analyzing data on internal displacement, 2022, more than half of Syria’s pre-conflict population see https://www.internal-displacement.org/. 2 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR Ongoing armed clashes continue to cause the central Tell Abiad region was also attacked, dam- extensive infrastructural damage throughout aging residential areas and public facilities, including Syria. The fighting in northern Aleppo in mid-2022 hospitals. A recent damage assessment conducted has damaged important infrastructure, including by the World Bank in collaboration with the European administrative structures, schools, mosques, markets, Union (EU) in early 2022 concluded that damage and civilian homes. As a result of the intermittent to physical infrastructure remained substantial (see battle between the SDF and the Syrian National Army, Special Focus). The Conflict Context 3 2 RECENT ECONOMIC DEVELOPMENTS Economic challenges persist health care system is preventing an effective response to the ongoing cholera outbreaks (Box 1). Economic Conflict undermines economic activity in Syria. instability in neighboring Lebanon and Turkey, and new The destruction of physical capital, as well as US sanctions under the Caesar Act, are further exacer- casualties, forced displacement, and the breakup of bating crisis conditions. Owing to its heavy dependence economic networks conspired to halve Gross Domes- on food and fuel imports, higher commodity prices tic Product (GDP) between 2010 and 2020. In the triggered by the war on Ukraine have substantially absence of GDP data for 2020 and beyond, nighttime weakened Syria’s fiscal and external positions. light emissions—one way to assess economic activity Agricultural production fell to a record low when no formal statistics are available6—suggest that for the second consecutive year. Wheat production, output has further contracted since 2020, particularly estimated at around 1 million tons in 2021 and 2022, in conflict-intensive regions (Figure 3.A). In Lattakia is much lower than the 2.8 million tons produced in and Tartous, two port cities that have experienced lim- 2020 and just about one-fourth of the 4.1 million tons ited conflict, nighttime light emissions also declined, recorded on average in the pre-conflict years between likely caused by weakened trade activity. In general, nighttime light emissions indicate that economic 6 Data on nighttime light emissions are high-frequency, activities appear to be stronger in certain border granular, and free from human error or misinterpretation areas (Figure 3.B). (e.g., misinformation). As such, they are particularly Besides the conflict, multiple domestic welcome in a conflict context as they provide more and external shocks are adversely affecting the timely, granular (spatial information is readily available), comprehensive (they cover 100 percent of Syria’s territory), economy. Since 2021, severe droughts, worsened by and potentially more reliable information than official heightened competition for water across international national accounts data. However, nighttime light emissions boundaries, have negatively impacted agricultural may not be a good indicator of economic activity in rural production. After a decade of war, a severely degraded areas with a higher share of agricultural output. 5 FIGURE 3 • Nighttime Light Emissions Suggest Economic Activities Have Further Contracted since 2020 A. Change in nighttime light emissions, 2022 relative to 2020 B. Nighttime light emissions, 2022 Source: Satellite images from the US Commerce Department’s Visible Infrared Imaging Radiometer Suite (VIIRS); World Bank staff estimates. Note: Nighttime light emissions are commonly used as a proxy for economic activities. All figures remove locations with gas flaring. The Nighttime Light emission data covers January to August and is applied for both 2020 and 2022 to avoid seasonality issues. BOX 1: THE SPREAD OF CHOLERA ACROSS SYRIA Even prior to the conflict, Syria was vulnerable to cholera outbreaks. FIGURE 4 • Syria’s Cholera Outbreak Has Been In 2009, a cholera outbreak resulted in 1,000 infections and several Spreading deaths, though it was successfully contained to two governorates.a (daily new cases) Cholera spreads through water and food contaminated with fecal matter from infected people. Almost all Syrians had access to safe 350 water at the time, but the few gaps in coverage and rationing due to water shortages evidently enabled outbreaks nonetheless.b 300 The conflict has devastated both the health system and water 250 infrastructure, worsening existing vulnerabilities. More than 50 percent of the health infrastructure has been damaged or destroyed.c 200 Recent reports show that even among undamaged or rehabilitated facilities, many are not operating or providing only limited services; 150 44 percent of primary health centers and 34 percent of hospitals are either not functioning or partially functioning.d Closures of border 100 crossings in 2020 have interfered with humanitarian deliveries of medical supplies, especially in northeast and northwest Syria.e 50 These challenges were exacerbated by a mass exodus of health 0 workers, who fled routine attacks against health care providers.f 8/26/2022 9/2/2022 9/9/2022 9/16/2022 9/23/2022 9/30/2022 10/7/2022 10/14/2022 10/21/2022 10/28/2022 11/4/2022 11/11/2022 11/18/2022 By 2015, infectious disease surveillance was particularly weak in government-controlled areas.g The water sector faces similar challenges as a result of damage to water facilities and electricity shortages. Almost 47 percent of the population relies on potentially Source: OCHA and WHO 2022. a Sparrow, A., et al. 2016. b World Bank 2017. c Devi S. 2021. d WHO (World Health Organization) 2022. WHO Summary of Key Indicators – Whole of Syria Dashboard. Accessed November 29, 2022. https://app.powerbi.com/ view?r=eyJrIjoiYzdkN2Y5YWYtNmE4OS00YjNkLWFkZjktMGJhYzA4MGQzMDk1IiwidCI6ImY2MTBjMGI3LWJkMjQtNGIzOS04MTBiLTNkYzI4MGFmYjU5MCIsImMiOjh9. e OCHA 2021. f Fouad et al. 2017. g Sparrow, A., et al. 2016. (continued on next page) 6 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR BOX 1: THE SPREAD OF CHOLERA ACROSS SYRIA (continued) unsafe alternatives to piped water, and at least 70 percent of sewage is discharged untreated.h Moreover, the conflict has displaced tens of thousands of Syrians into overcrowded settings with limited safe water and sanitation supplies, where they are at high risk.i As with other protracted humanitarian situations, donor fatigue has set in, and humanitarian agencies identify funding shortfalls as the main challenge for their cholera response operations.j The outbreak of cholera is widespread. Suspected cholera cases have been reported from all 14 governorates.k Illustrating the multifarious harmful effects of climate change, the outbreak may have originated in the Euphrates River, whose water quality has worsened with a decrease in water levels, driven by a drought that began in 2021.l As of November 19, a total of 46,409 suspected cases and 97 suspected cholera- attributable deaths had been identified. Apparent clinical outcomes are consistent with acceptable care quality, with a recorded case fatality rate of 0.2 percent compared to the WHO’s benchmark of under 1 percent, but underreporting is likely. Figure 4: Syria’s cholera outbreak has been spreading shows the rapid spread from the first detected case to hundreds of weekly cases. Cases in the Aleppo governorate were first reported on September 10, and by October 2, cases had been found in 11 governorates. As the outbreak in Syria has grown, cholera has also spread to neighboring Lebanon, which had been free of the disease for decades. Massive supply shortages are impeding an effective response. Domestic supply shortages are pervasive, and because of the impact of the protracted conflict on health and water systems, many local communities have resorted to compromised sources to fetch their water, such as rivers or open canals.m This poses the danger of the cholera outbreak continuing to affect vulnerable families. Despite concerns about a global shortage of oral cholera vaccines (OCV), two million doses of OCV have recently arrived in Damascus.n Health workers often lack the capacity to treat complex cholera cases, including with respect to dehydration and the appropriate use of antibiotics. In some areas, active conflict reduces access and poses other operational challenges. The UN and other humanitarian partners are mobilizing critical water, hygiene, and sanitation (WASH) and health supplies, response services, and expertise in the affected governorates, along with support for the communication of key messages and enhanced treatment and surveillance capacity. Syria requires a focused strategy to contain cholera, protect other essential health services, and, over a longer term, deepen the resilience of its health, water, and sanitation systems. Climate-smart investments in rebuilding health and water systems devastated by war are crucial priorities for preventing future outbreaks of water-borne disease. h OCHA 2022a. i World Health Organization. “WHO in Syria: Communicable Diseases.” Accessed November 18, 2022. https://www.emro.who.int/syria/priority-areas/communicable-diseases. html. j OCHA and WHO 2022. k OCHA and WHO 2022a. l Mercy Corps, 2022. “Cholera Spreads Across Syria Putting Vulnerable People at Serious Risk.” October 21, 2022. https://www.msf.org/cholera-spreads-across-syria-putting- vulnerable-people-serious-risk. m Médecins Sans Frontières. 2022. “Combatting Cholera Amidst Displacement and the Remnants of War.” News Release November 22, 2022. https://reliefweb.int/report/syrian- arab-republic/combatting-cholera-amidst-displacement-and-remnants-war-enar. n UNICEF and WHO 2022. 2002 and 2011 (Figure 5.A). Remote sensing indices infrastructure and disruptions stemming from for vegetation reveal that cereal yields have been disputes between the Syrian government and weaker during the 2021–2022 growing seasons rela- opposition forces. According to the data from the tive to the previous years, especially in northeast Syria US Department of Energy’s statistical arm, the Energy (Figure 5.B). A contraction of the harvestable cereal Information Administration (EIA), Syria’s crude oil area, damaged irrigation systems, a shortage of agri- production has gradually recovered since 2017, reach- cultural inputs, and the high cost of fuel for pumping ing 84,000 barrels per day in the first seven months water have strained crop production since the start of 2022, but remains substantially below the pre-2011 of the conflict. In addition, agricultural production was output of over 400,000 barrels per day (Figure 6.A). particularly low in 2021 and 2022 due to severe water Similar trends can be observed in nighttime light emis- restrictions caused by insufficient rainfall and reduced sions from gas flaring, which is commonly used as a Euphrates River water flows from Turkey into Syria proxy for oil production. After the conflict started in (Figure 5.C and Figure 5.D). 2011, several armed groups, including the Islamic State Oil production remained weak in 2022, in Iraq and Syria (ISIS), and opposition groups, suc- owing to conflict-related damage to the energy cessively took control of most of Syria’s oil resources, Recent Economic Developments 7 FIGURE 5 • Severe Water Restrictions Have Led to Record-Low Agricultural Production in 2021–2022 A. Wheat harvested area, yields, and production B. Changes in average Normalized Difference Vegetation Index (NDVI), (Thousand tonnes; thousand hectares; tonne/hectare) 2022 relative to 2020 6,000 3 5,000 4,000 2 3,000 2,000 1 1,000 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Harvested area Production Yields (RHS) C. NDVI and precipitation D. Water levels at Syria’s Tabqa Dam (Daily average in a year; millimeters; cropland during growing cycle) (Meters cubed per second) 1.2 20 305 0.8 16 304 303 0.4 12 302 0 8 301 –0.4 4 300 –0.8 0 299 1 2 3 4 5 6 7 8 9 10 11 12 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* Month NDVI – zscore Rainfall (RHS) 2018 2019 2020 2021 2022 Source: Anomaly Hotspots of Agricultural Production, Joint Research Centre, European Commission, https://mars.jrc.ec.europa.eu/asap/country.php?cntry=238; NDVI from Moderate Resolution Imaging Spectroradiometer (MODIS), processed by authors in Google Earth Engine; OCHA; World Bank staff estimates. Note: RHS = Right-Hand Side. (B) NDVI is a satellite-derived proxy of vegetation status, which represents agricultural production to some extent. The standardized anomalies Z-score of NDVI indicates how many standard deviations the NDVI is from its historical average. The average NDVI is calculated from MODIS images that overlap the agricultural growing season in Syria (October to June). The crop extent layer is derived from the Global Food Security-Support Analysis Data (GFSAD). (C) Rainfall data is provided by the Climate Hazards Group at 0.05° spatial resolution. * The data for 2022 covers the months of January through November. leading to persistent bombings and clashes. Oil High commodity prices triggered by the infrastructure remains a major target of bombings in war on Ukraine have adversely impacted Syria 2022, particularly in northeast Syria, where natural gas as a net food and fuel importer. Since the start of and oil installations have been frequently attacked.7 the conflict, Syria, once the largest oil producer in the Oil production is concentrated in northeast Syria, with the SDF controlling the vast majority of the oil fields 7 Al-Khalidi, Suleiman. 2022. “Turkish Strikes Hit Oil (Figure 6.B).8 In April 2022, the SDF stopped shipping Installations in Northern Syria, Sources Say.” Reuters, November 24, 2022. crude oil to the regime-controlled areas, temporarily 8 The Syrian Observer. 2022. “The Syrian Oil: Time for New reducing Syria’s oil production; shipments resumed Approach? – The Syrian Observer ” November 10, 2022. in June 2022, following agreements between the SDF https://syrianobserver.com/commentary/80046/the- and the Syrian government. syrian-oil​-time-for-new-approach.html. 8 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR FIGURE 6 • Oil Production Remained Much Weaker than Pre-2011 Levels A. Crude oil production B. Nighttime lights in gas flaring locations (Thousands of barrels per day) (Monthly average from January–August of 2022) 700 20 600 18 16 500 14 400 12 10 300 8 200 6 4 100 2 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Crude oil Nighttime lights in gas production flaring locations (RHS) Source: Central Bureau of Statistics of Syria; data from the US Department of Energy’s Energy Information Administration (EIA). https://www.eia.gov/international/data/country/SYR; satellite images from the VIIRS and the US Department of Defense’s Defense Meteorological Satellite Program (DMSP). World Bank staff estimates. Note: Nighttime lights in gas flaring locations are considered as a proxy for oil production. * 2022 is an estimate based on data in the first eight months of the year. FIGURE 7 • Syria Has Relied Heavily on Imports of Essential Commodities since the Conflict A. Crude oil B. Cereals (Million barrels) (Million tonnes) 100 5 50 4 3 0 2 –50 1 –100 0 –150 –1 –200 –2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* Imports Exports Net imports Imports Exports Net imports Source: Food and Agriculture Organization of the United Nations Statistics Department (FAOSTAT) Trade Indices and Food Balances databases; EIA; World Bank staff estimates. Note: (A) Syria’s oil imports during 2000-2018 are estimates from EIA. Syria’s oil imports during 2019-2022 are estimates based on Syria’s oil imports from Iran, according to TankerTrackers.com, an independent online service that tracks global shipments of crude oil, and Syria’s unofficial fuel imports from Lebanon (see Box 2). * 2022 is an estimate based on data in the first three quarters of the year. eastern Mediterranean, has become an oil importer increased the country’s import bills, adversely affected due to a sharp decline in oil production (Figure 7.A). its trade balance, and depleted its foreign reserves. Although Syria was already a food importer before 2011, reliance on imports has increased due to the conflict (Figure 7.B). During 2011–2021, nearly half Trade activities have declined of domestic oil consumption and about one-third of domestic cereal consumption in Syria came from Conflict-related disruptions have led to a collapse of imports. In light of Syria’s high import dependency foreign trade since 2011. Mirror statistics from the UN on essential commodities, higher global commod- Comtrade database, showing other countries’ reported ity prices stemming from the war on Ukraine have imports from Syria, indicate that Syrian exports fell dra- Recent Economic Developments 9 FIGURE 8 • Syrian Exports and Imports Steeply Declined after the Start of the Conflict A. Gross exports B. Gross imports (Billion US$) (Billion US$) 20 25 18 16 20 14 12 15 10 8 10 6 4 5 2 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Textiles Agriculture Stone Minerals Metals Chemicals Vehicles Machinery Electronics Other Services Source: UN Comtrade database; World Bank staff estimates. Note: The analysis uses mirror trade statistics from Syria’s trading partners. matically from $18.4 billion in 2010 to $1.8 billion in 2021, Both passengers and cargo arriving in Syria largely due to a sharp decline in oil and tourism receipts declined in 2022. As COVID-19 restrictions eased, (Figure 8.A).9 The prolonged civil war has led to a collapse commercial flights to Syria slowly recovered in 2021 in domestic industrial output and agricultural supply, and continued to increase in 2022, after countries making the country heavily reliant on manufactured goods and foodstuffs produced overseas. While imports have also contracted since the start of the conflict, the 9 In 2021, Syria exported primarily agricultural products, including olive oil, seeds, barley, other nuts, and decline has been less pronounced than for exports, which tomatoes. The top five destinations for Syrian exports dropped from $22.7 billion in 2010 to $6.5 billion in 2021 were Saudi Arabia, Turkey, Lebanon, Jordan, and Egypt. (Figure 8.B).10 These figures should be treated with caution. 10 In 2021, the top five suppliers of Syria’s imports were The introduction of sanctions in Syria may have triggered Turkey, Russia, China, the United Arab Emirates (UAE), evasion strategies, causing a larger share of trade to go and Egypt. unreported after the start of the conflict, as evidenced by 11 Over 80 percent of global merchandise trade by volume and more than 70 percent of its value is carried by the international large imports of oil smuggled from Lebanon (see Box 2). shipping industry (United Nations Conference on Trade and Maritime data suggest that trade activities Development (UNCTAD, 2018). Cargo ships are equipped have further moderated in 2022. In the absence of with a device that periodically emits a signal (Automatic official trade statistics, maritime data from the Automatic Identification System message, or AIS), which contains Identification System (AIS) is applied to monitor recent information on the vessel’s location, speed, draught, etc. trade activity.11 Estimates from maritime data suggest that 12 In anticipation of supply chain disruptions from Russia’s war on Ukraine, the Syrian government announced import volume in terms of metric tons has further declined policies on February 24 to suspend import licenses for a in 2022. This is possibly due to new policies implemented number of goods and materials. in early 2022 that restricted the import of non-essential 13 On March 3, the regime restricted Syrian exports of fresh goods.12 Maritime data also indicate that export volume produce and animal products. Central to the new rules decreased in 2022, likely reflecting the impact of the export are stiff restrictions on any wheat exports. ban on selected agricultural products in order to meet 14 Anecdotally, “Ships are supposed to keep their AIS trackers on, but vessels wanting to hide their movements domestic demand (Figure 9.A and Figure 9.B).13 It is worth often turn theirs off. Those heading to Syrian ports noticing that measuring trade through AIS may also under- routinely do so”, according to the article https:// report activity, as ships seeking to hide their movements financialpost.com/pmn/business-pmn/satellite-images- may turn off their AIS transporters near Syrian waters.14 show-first-ship-out-of-ukraine-in-syria. 10 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR FIGURE 9 • Maritime Data Show a Decline in Syria’s 2022 Trade Volume A. Number of port calls B. Metric tons of cargo (Number of port visits, monthly average in a year, all vessel categories) (Daily average in a year, all vessel categories) 40 9,000 35 8,000 30 7,000 6,000 25 5,000 20 4,000 15 3,000 10 2,000 5 1,000 0 0 2016 2017 2018 2019 2020 2021 2022* 2016 2017 2018 2019 2020 2021 2022* Imports Exports Imports Exports Source: Cerdeiro et al. (2020) https://public.tableau.com/app/profile/uncomtrade/viz/CerdeiroKomaromiLiuandSaeed2020AISdatacollectedbyMarineTraffic/AISTradeDashboard; UN Comtrade Monitor https://comtrade.un.org/data/ais; World Bank staff estimates. * Based on data from January to September 2022. FIGURE 10 • Passengers and Cargo Arriving in Syria Declined in 2022 A. Number of flights arrival into Syria B. Flight payload, arrival into Syria (Total number in a month) (Total tons in a month) 4,000 1,000 10,000 3,500 900 9,000 800 8,000 3,000 700 7,000 2,500 600 6,000 2,000 500 5,000 1,500 400 4,000 300 3,000 1,000 200 2,000 500 100 1,000 0 0 0 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Passenger Freighter (RHS) Passenger Freighter Source: World Bank Global Aviation Dashboard, http://aviation.worldbank.org; World Bank staff estimates. Note: Payload is the available weight of passengers, cargo, and baggage, referring to the carrying capacity of the flights. including the UAE, Armenia,15 Pakistan,16 and Jordan 15 Syrian Arab Republic Ministry of Transport. 2021a. “‫وصول‬ resumed travel to Syria in order to improve bilateral ties ‫أول رحلة طريان من العاصمة األرمينية إىل مطار حلب الدويل‬.” “The arrival of the first flight from the Armenian capital to Aleppo Inter- (Figure 10.A).17 However, the passenger payload into national Airport.” September 5, 2021. ‫وصول أول رحلة طريان من‬ Syria has notably decreased since mid-2021, likely as ‫( العاصمة األرمينية إىل مطار حلب الدويل‬mot.gov.sy). fewer people are boarding these flights (Figure 10.B). 16 Syrian Arab Republic Ministry of Transport. 2021. “‫إىل مطار‬ On the other hand, cargo flights to Syria have started ً ‫دمشق الدويل قادم‬ ‫ وصول أوىل رحالت الخطوط‬..‫ بحضور وزير النقل‬.‫ة من مطار كراتيش‬ to decrease significantly since the implementation ‫“ ”الجوية الباكستانية‬In the presence of the Minister of Transport, of US sanctions under the Caeser Act in mid-2020. Pakistan International Airlines’ (PIA) first flight arrives at Da- mascus International Airport from Karachi Airport.” Septem- Cargo flights remained extremely low in 2022, with ber 17, 2021. ‫ وصول أوىل رحالت الخطوط الجوية الباكستانية‬..‫بحضور وزير النقل‬ not a single one recorded between March and May. ً ‫( إىل مطار دمشق الدويل قادم‬mot.gov.sy). (PIA) ‫ة من مطار كراتيش‬ Cross border trade is not always captured 17 SachKhabrain. 2021. “Damascus: Arab Flights in official records and does not always occur Resumed to Syria.” March 6, 2021. https://sachk Recent Economic Developments 11 BOX 2: CROSS-BORDER FUEL SMUGGLING BETWEEN SYRIA AND LEBANON Between mid-2020 and mid-2021, fuel subsidies in Lebanon caused the price of diesel and gasoline in Lebanon to fall significantly below levels in Syria, making diesel smuggling highly profitable (Figure 11.A). Anecdotal evidence indicates a surge in cross-border fuel smuggling activity in 2020 and 2021,a primarily linked to the implementation of a fuel subsidies program that Banque du Liban (BdL) introduced in late 2019b until being significantly reduced in September 2021.c Nighttime light emissions indicate a short-lived economic boom along the Syria-Lebanon border during the periods when diesel smuggling was most profitable. The economic externalities generated by smuggling activities are expected to increase light reflectance from trucking activity and also from adjacent economic activity built around informal fuel markets, such as restaurants, warehousing, and expanded petrol stations. Nighttime light emissions show, indeed, a noticeable increase in activity in several key border towns on the Syria side of the border, demonstrating a clear correlation with the time period when the price differential between the cost of fuel in Lebanon and Syria was most pronounced, i.e., from April to September 2021. The Syrian village along the Akkar border north of the Qalamoun mountains and along the Baalbek-Hermel border with Rural Damascus had the largest surge of nighttime light emissions during this period (Figure 11.B). Tfail was the only location in Lebanon identified as a likely smuggling node (Figure 12). While profits were likely generated on both sides of the border, the adopted measurement approach was limited in identifying smuggling locations in Lebanon because of the continuously decreasing nighttime light emissions across the country due to the ongoing electricity crisis. Smuggling activity does not appear to be concentrated near official checkpoints. A remote-sensing radar-based analysis of traffic congestion indicates little change in traffic across the official checkpoints over time (Figure 13.A). Similarly, night light brightness and the number of observed mobile devices both confirm no notable increase in activities within these border crossings (Figure 13.B and Figure 13.C). Instead, analysis of mobile location data suggests that informal movement has been consistently observed around Joussieh (Al-Qaa) and Jdeidet Yabbous (Al Masnaa) (quarterly, between 2020–2022) (Figure 14).d Indeed, Lebanese Customs data suggests no increase of gasoline and FIGURE 11 • Higher Profit Margins Led to an Upsurge in Fuel Smuggling between Syria and Lebanon A. The ratio of dollarized diesel prices between Syria and Lebanon B. Nighttime light emissions in selected Syrian villages near (Market rates, February 2020 to September 2022) Syria-Lebanon border (May 2020 to September 2022) 8 80 1.0 0.9 0.8 6 60 0.7 0.6 4 40 0.5 0.4 0.3 2 20 0.2 0.1 0 0 0 2/2020 6/2020 10/2020 2/2021 6/2021 10/2021 2/2022 6/2022 2/2020 9/2020 1/2021 5/2021 9/2021 1/2022 5/2022 The optimal smuggling period The optimal smuggling period The ratio of dollarized diesel prices Falita Sirghaya Al-Jarajeer Source: Syrian Pound Today, https://sp-today.com/en/; Dollar to Lebanese Lira Today, https://lirarate.org/; VIIRS satellite data; Tahaleel Limited’s estimates. Note: (A) Higher ratio of diesel prices between Syria and Lebanon indicate higher profitability for smuggling from Lebanon to Syria. The dark yellow shading highlights the months when diesel smuggling was most profitable (April to July 2021). a Dadouch, Sarah and Nader Durgham. 2021. “Smugglers Are Partly Behind Lebanon’s Energy Crisis. The Army Is Struggling to Stop Them.” The Washington Post, July 5, 2021. https://www.washingtonpost.com/world/middle_east/lebanon-economic-energy-crisis/2021/07/04/b8367752-d8fe-11eb-8c87-ad6f27918c78_story.html. b BdL introduced fuel subsidies on September 30, 2019: the central bank would provide importers with US dollars at the official rate of 1507.5 Lebanese lira to the US dollar for 85 percent of the import bills of diesel and 95 octane gasoline. At that time, the Lebanese lira was trading at 1700 to the US dollar, a rate that has sharply depreciated as the financial crisis significantly worsened in the following months. The support that BdL provided to help cover the cost of the import bills was increased to 90 percent on June 8, 2020. By then, the Lebanese lira’s rate to the USD had dropped to 7,600, a 78 percent depreciation in value from the time subsidies were first introduced. c BdL cut its subsidy scheme through September 2021 and instead transitioned fuel traders to its Sayrafa currency trading platform, where importers of gasoline could exchange lira for US dollars at a rate slightly below the parallel market rate. Lebanon’s last remaining subsidies for fuel came to an end on September 12, 2022, when the then-minimal foreign exchange support for Octane 95 gasoline imports was cut. d This study, using the Global Positioning System (GPS) mobile data, considers longitudinal panel data to compare movement in the proximity of border checkpoints (formal activity) and alongside the border (informal activity). (continued on next page) 12 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR BOX 2: CROSS-BORDER FUEL SMUGGLING BETWEEN SYRIA AND LEBANON (continued) diesel exports and re-exports into Syria during 2020–2021. It is likely that the limited smuggling activity near official checkpoints is due to the increased police/military presence in those areas. Furthermore, following a July 2020 Syrian government decree, Syrians entering the country are obligated to exchange $100 for Syrian pounds at the official exchange rate, discouraging people from using official checkpoints.e The 2020–2021 uptick in Lebanon’s fuel imports, despite a crisis-driven decline in its domestic demand, suggests increased fuel smuggling from Lebanon to Syria over this period. In 2020, Lebanon imported a record high of 3.0 million metric tons of diesel, up 0.7 million metric tons from 2019. The total number fell to 2.6 metric tons in 2021, when diesel imports started decreasing with the cutting of subsidies in September. Lebanon’s domestic demand for oil has declined with the onset of the economic crisis and depression. Based on Tahaleel Limited’s Lebanon diesel model,f Lebanon’s diesel import surplus to demand is estimated at 1.1 million barrels and 1.6 million metric tons in 2020 and 2021, respectively. If a vast majority of the diesel surplus has been smuggled to Syria, Syria’s unofficial fuel imports from Lebanon could be substantial. However, the majority of Syria’s oil imports still come from Iran, estimated at 15.0 million and 27.7 million barrels in 2020 and 2021, respectively, according to TankerTrackers.com. FIGURE 12 • Analysis of Nighttime Light Emissions Reveals Key Areas for Cross-Border Fuel Smuggling Activity Source: VIIRS satellite data. Tahaleel Limited’s estimates. Note: Locations where the nighttime light emissions were at least 30 percent higher during the optimal smuggling period (April to July 2021) compared to the previous four months (December 2020 to March 2021), and at least 30 percent lower in the post-fuel crisis period (September to December 2021) than the optimal smuggling period, were identified as likely significant nodes in the diesel smuggling network. e Kayyali, Sara. 2022. “Syria’s 100 Dollar Barrier to Return.” Human Rights Watch, September 23, 2020. https://www.hrw.org/news/2020/09/23/syrias-100-dollar-barrier-return. f The model estimates Lebanon’s diesel end-usage demand based on methodologies developed in a 2020 World Bank report, see Ahmad, Ali, “Distributed Power Generation for Lebanon: Market Assessment and Policy Pathways,” https://openknowledge.worldbank.org/handle/10986/33788?show=full) and Lebanon’s Fourth Biennial Update Report on Climate Change to the UNFCCC (United Nations Framework Convention on Climate Change), see https://unfccc.int/sites/default/files/resource/Lebanon%20BUR4%202021.pdf. (continued on next page) Recent Economic Developments 13 BOX 2: CROSS-BORDER FUEL SMUGGLING BETWEEN SYRIA AND LEBANON (continued) FIGURE 13 • During the Peak Smuggling Season, Official Checkpoints Showed no Appreciable Increase in Congestion or Activity A. Normalized congestion volume B. Nighttime light emissions C. Unique devices from GPS mobility data Al Abbudiyah Al Abbudiyah Al Aridah Al Abbudiyah Al Aridah 10,000 12.5 40 10.0 Number of Unique Devices 7,500 30 Traffic Index 7.5 Luminosity 5,000 20 5.0 2,500 10 2.5 0 0 0 2022 2022 2022 2022 2022 2018 2020 2020 2021 2021 2020 2021 2020 2021 2016 2019 2019 2020 Al Aridah Al Buqayaa Al Masnaa Al Buqayaa Al Masnaa 10,000 12.5 40 10.0 Number of Unique Devices 7,500 30 Traffic Index 7.5 Luminosity 5,000 20 5.0 2,500 10 2.5 0 0 0 2022 2022 2022 2022 2022 2018 2020 2021 2020 2021 2020 2021 2016 2019 2020 2020 2021 2019 Matraba Al Qaa Matraba Al Qaa Matraba 10,000 12.5 40 10.0 Number of Unique Devices 7,500 30 Traffic Index 7.5 Luminosity 5,000 20 5.0 2,500 10 2.5 0 0 0 2022 2022 2022 2022 2022 2016 2018 2020 2020 2021 2020 2021 2020 2021 2019 2021 2019 2020 Lebanon Syria Sources: SpaceKnow, https://spaceknow.com; VIIRS satellite data; Digital Envoy Data for Impact, https://www.digitalenvoy.com; World Bank staff estimates. Notes: (A) The normalized traffic congestion volume indicates the amount of reflectance from metallic objects. Along roads, more metallic reluctance is associated with more traffic. (B) The nighttime light emissions are measured within two kilometers of the official checkpoints on both sides of the border. (C) The charts present the monthly average of unique mobile devices around the checkpoints observed daily. The mobility data is provided by Outlogic and is derived from smartphone GPS-enabled device locations. 14 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR BOX 2: CROSS-BORDER FUEL SMUGGLING BETWEEN SYRIA AND LEBANON (continued) FIGURE 14 • Mobile Phone Data Shows Greater Activity along the Border during the Peak Smuggling Period A. Change in informal activity in April-July 2021 compared to B. Normalized difference between formal and informal activity in December 2020-March 2021 April-July 2021 Sources: Digital Envoy Data for Impact, https://www.digitalenvoy.com; World Bank staff estimates. Notes: “Activity” is defined as the number of stay locations generated by sub-panels of devices based on whether they were detected at least once in the proximity of points- of-interest through the time horizon. We approximate formal activity based on the stay locations generated by the sub-panel of devices seen within a 1Km radius of border checkpoints and informal activity based on the stay locations generated by the sub-panel of devices seen within a 500-meter border strip between Lebanon and Syria, excluding official border checkpoints. (A) The figure is a snapshot of the change in informal border activity in April–July 2021 (the optimal smuggling period) compared to December 2020–March 2021. In red, areas with a 75 percent or more decrease in informal activity; in green, areas with a 75 percent or more increase. (B) The image presents a snapshot map of the sub-panel's activity. The activity index is a normalized difference between the formal and informal sub-panels and ranges from –1 to 1 (informal to formal). For instance, an activity index of –0.5 indicates that the informal sub-panel's devices were 3 times as many as the formal sub-panel's devices within an area. at official border crossings. To identify unofficial to Syria during 2020–2021. Nevertheless, the fact that border crossings, new trade centers and corridors, Lebanon imported record levels of gasoline and diesel the Monitor makes use of alternative data sources. during 2020–2021, despite a crisis-driven decline in its Analysis from nighttime light emissions suggests that domestic demand, suggests increased fuel smuggling towns and regions adjacent to smuggling routes in from Lebanon to Syria over this period (Box 2). Syria experienced a short-lived economic boom when the profit margin for smuggling Lebanese diesel into Syria increased notably from early 2020 to the summer Inflation remains elevated of 2021. Nighttime light emissions in Syrian villages near Lebanon’s border declined significantly since Since the war on Ukraine, the market exchange the summer of 2021, which appears to be linked to rate of the Syrian pound has depreciated by the narrowed gap in fuel prices between Lebanon and about 48 percent against the US dollar, falling to Syria after the Lebanese subsidies ended. Smuggling about SYP 5,400 per dollar in November 2022. activity does not appear to bypass official checkpoints, The decline in the Syrian pound is attributed to the as indicated by both the nighttime light emissions and country’s worsening economic conditions, dollar the observed mobile devices data. A remote-sensing appreciation, and the contagion effect from currency radar-based analysis of traffic congestion confirms depreciation in neighboring Lebanon and Turkey. little change in traffic across official checkpoints over time. Indeed, the Lebanese Customs data suggests no habrain.com/en/world/damascus-arab-flights-resumed- increase in gasoline and diesel exports and re-exports to-syria/. Recent Economic Developments 15 FIGURE 15 • Currency Depreciation Was Accompanied by Rising Inflation A. Official and market exchange rates in Syria B. Inflation and exchange rate in Syria (SYP/US$) (yoy percent) 6,000 350 300 5,000 250 4,000 200 3,000 150 100 2,000 50 1,000 0 0 –50 2021 2021 2014 2018 2020 2022 2015 2016 2017 2019 2014 2020 2015 2016 2017 2018 2019 2022 Official exchange rate Market exchange rate CPI Market exchange rate WFP minimum food basket price Food CPI Source: Syrian Pound Today, https://sp-today.com/en/; World Food Programme (WFP) Syria Price Database; Central Bureau of Statistics, Syria; World Bank staff estimates. Over the past months, the Central Bank of Syria (CBS) Global inflation and domestic policies both has taken several measures to ease currency depre- contributed to price increases. Even accounting ciation, including curtailing foreign currency demand, for higher global commodity prices, the pass-through tightening import licensing, and raising the interest from the exchange rate to food inflation also increased rates on Syrian pound deposits. Nevertheless, the since late 2021, due in part to the withdrawal of price ability of the authorities to stabilize the currency has subsidies in Syria (Box 3). This is in sharp contrast to proven limited. To narrow the widening gap between most Middle East and North Africa (MENA) countries, the official exchange rate and the market exchange where increased subsidies have limited the pass- rate, the CBS has devalued the Syrian pound twice through from global inflation to domestic prices.18 since early 2022, with the latest official exchange rate In addition, the record-low domestic agricultural recording SYP 3,015 per dollar (Figure 15.A). production, combined with supply chain disruptions Currency depreciation has triggered stemming from the war on Ukraine, also contributed high inflation since early 2022. According to to the high price increases of certain food and energy preliminary data from the authorities, consumer goods in Syria in recent months (Figure 16.B). inflation increased by 55 percent between December Price increases have varied considerably 2021 and September 2022. Since food accounts for across regions, likely reflecting weak market inte- about 40 percent of the consumption basket, food gration as the cost of transacting across control price increases have contributed significantly to high zones in Syria is high. Figure 18 shows the prices inflation in Syria. Syria’s food prices, as proxied by the of main commodities (bread, wheat flours, diesel, and World Food Programme (WFP) minimum food basket gas) in different locations since 2020. By September price index, were 44 percent higher in September 2022, self-administration areas in northeast Syria, than February 2022 (Figure 15.B). Syria’s food prices where food and energy are mainly produced, have the have grown faster than global food prices since the onset of the war on Ukraine (Figure 16.A). In US 18 World Bank. 2022. A New State of Mind: Greater Trans- dollar terms, Syria’s food basket prices increased by parency and Accountability in the Middle East and North 9 percent between February and September 2022. In Africa. October. Washington DC: World Bank. https:// contrast, the WFP global food price index in US dollar www.worldbank.org/en/region/mena​/publication/middle- terms declined by 4 percent during this period. east-and-north-africa-economic​-update. 16 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR FIGURE 16 • Global Inflation and Domestic Policies Both Contributed to Price Increases A. Decomposition of food inflation B. Decomposition of inflation, by products (yoy percent change) (Aggregate percent change from February 2022 to September 2022) 4 100% 80% 3 60% 40% 2 20% 0% 1 –20% –40% 0 –60% –80% –1 –100% 2021 Beef Wheat Rice Sugar Cooking Diesel 2014 2020 2015 2016 2017 2018 2019 2022 Chicken flour oil Currency depreciation Global food price changes Currency depreciation Global price changes Domestic factors Domestic factors Headline inflation rates Source: WFP Syria Price Database; World Bank Commodities Price Data (The Pink Sheet) https://www.worldbank.org/en/research/commodity-markets; World Bank staff estimates. BOX 3: THE EXCHANGE RATE PASS-THROUGH TO INFLATION IN SYRIA The exchange rate pass-through (ERPT) measures the extent FIGURE 17 • The Pass-through Effect of the to which fluctuations in the exchange rate lead to changes in Exchange Rate on Inflation aggregate prices (i.e., food inflation). The coefficient is, therefore, Has Increased Markedly since akin to an elasticity coefficient in that it measures the sensitivity of Late 2019 food inflation to the exchange rate. 2 In line with the literature (see, for example, Gopinath, Itskhoki, and Rigobon 2010), standard exchange rate pass-through regressions are employed to gauge the ERPT coefficient: 1 n n f 3 com ∆pt = α + Σ j=0 βj ∆et–j + Σ γ ∆p + Σ j=0 j t–j j=0 δj ∆p t–j + εt , 0 where pt is the Consumer Price Index (CPI) in Syria, et is the exchange rate quoted as units of SYP per USD, p ft is the foreign price level proxied for using the CPI of the US, and p com t is a commodity –1 price index. As noted in Gopinath, Itskhoki, and Rigobon (2010), the Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22 statistic of interest, which measures the effect of changes in the market exchange rate on inflation, is β(n) ≡ Σ n j = 0 β j . Equation (1) is estimated using monthly data from February 2011 to September Source: Central Bureau of Statistics, Syria; World Bank staff estimates. Note: The graphs provide (rolling window) estimates of the effect of exchange 2022, with a lag length of 12. The Syrian authorities have ceased rate changes on inflation, b(12), in standard pass-through regression. Given that to release data on the money supply since the start of the conflict. coefficients from various months are added up, the confidence intervals cannot be As a result, it is impossible to analyze the money supply and its computed. contribution to inflation in Syria quantitatively. The ERPT coefficient, which gauges the pass-through of exchange rate changes to inflation, β(12), is estimated to be between 1.088 and 1.171. That is, a 100 percent depreciation of the Syrian pound against the US dollar increases inflation by 109–117 percent over a 12-month horizon. This is a very high level of pass-through from exchange rate movement to inflation. For comparison, Jašová, Moessner, and Takáts (2019), estimate a yearly pass-through coefficient of 0.222 to 0.231 for emerging market economies and -0.0127 to 0.00592 for advanced economies.a Two factors may explain why Syria’s inflation is sensitive to the depreciation of the Syrian pound. First, Syria’s heavy dependence (continued on next page) Recent Economic Developments 17 BOX 3: THE EXCHANGE RATE PASS-THROUGH TO INFLATION IN SYRIA (continued) on imports for essential goods implies that a depreciation of the pound would quickly feed into higher domestic prices. Second, Syria financed its fiscal deficit primarily through Central Bank borrowing. Monetary financing debases the value of the currency, which immediately affects the exchange rate and domestic prices. Time-varying estimates suggest that the pass-through effect of the exchange rate on inflation has increased markedly with the Lebanese financial crisis. (Figure 17). This increase can likely be attributed to higher inflation expectations in Lebanon, which fed inflation expectations in Syria. The pass-through has accelerated again since late 2021, likely due to the withdrawal of subsidies in both countries. a Jasova, Moessner, and Takáts (2019) estimate the ERPT in the post-2008 crisis using data for a panel of developed and emerging market economies and a Generalized Method of Moments (GMM) estimation of a hybrid New Keynesian Phillips curve. FIGURE 18 • Price Increases of Essential Goods Have Varied Considerably across Regions A. Bread (at shop) B. Wheat flour (SYP/kg) (SYP/kg) 3,500 4,000 3,000 3,500 2,500 3,000 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 0 Jan-20 Jan-21 Jan-22 Jan-20 Jan-21 Jan-22 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Mar-22 May-22 Jul-22 Sep-22 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Mar-22 May-22 Jul-22 Sep-22 C. Diesel D. Gas (SYP/Litre) (SYP/kg) 6,000 4,500 4,000 5,000 3,500 4,000 3,000 2,500 3,000 2,000 2,000 1,500 1,000 1,000 500 0 0 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Opposition-controlled Self-administration Syrian government Turkish-controlled Source: WFP Syria Price Database https://dataviz.vam.wfp.org/economic_explorer/prices?adm0=238; World Bank staff estimates. Note: The zones of control are defined according to boundaries obtained from Live Universal Awareness Map, https://syria.liveuamap.com/. lowest food and energy prices. Prices in government- connectivity, trade restrictions across zones of control, controlled areas, on the other hand, are the highest and insecurity along major trade routes, could explain across products. Various factors, including inadequate the weak market integration in Syria. Price variations 18 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR TABLE 1 • Subsidies by Items in Syria (Billion SYP) 2017 2018 2019 2020 2021 2022 2023 Subsidies on energy 594 976 1150 722 4,500 6,350 7,410 Petroleum 177 275 430 11 2,700 2,700 3,000 Electricity (off-budget) 417 701 720 711 1,800 3,650 4,410 Subsidies on agriculture 408 367 371 347 750 2,799 1,887 Wheat and flour 398 357 361 337 700 2,400 1,500 Sugar and rice / / / / / 300 300 Agricultural support fund* 10 10 10 10 50 50 50 Fund for transition to modern irrigation / / / / / 22 30 Fund for droughts and natural disasters / / / / / 27 7 National fund for social aid** 15 15 10 15 50 50 50 Total budgeted subsidies 423 657 811 373 3,500 5,549 4,937 Total subsidies (including subsidies for electricity) 840 1,357 1,531 1,084 6,300 9,199 9,347 Memorandum items: Total budgeted expenditures 2,660 3,187 3,882 4,000 8,500 13,325 16,550 Total expenditures (including subsidies for electricity) 3,077 3,888 4,602 4,711 10,300 16,975 21,470 Source: World Bank estimates using various MOF reports. Notes: * Agricultural support fund was established to help farmers cope with rising input prices; ** National Fund for Social Aid offers a variety of social assistance programs to retired soldiers, women, and small businesses. have incentivized cross-region smuggling; in response, 19 The SIG’s ministry of interior issued an order to the police both the Syrian Interim Government (SIG) and the directorates in northern Syria on May 20, 2022, prohibiting Autonomous Administration formally announced poli- wheat smuggling between them and areas controlled by the cies to combat wheat smuggling.19, 20 government and SDF by conducting patrols, tightening con- trol over traders, and seizing the smuggled quantities. Syria TV. 2022. “‫خرباء يدقون ناقوس الخطر تهريب القمح ينذر بكارثة شاميل سوريا‬.” “Experts sound the alarm, wheat smuggling portends disas- Fiscal policies have tightened ter in northern Syria.” June 30, 2022. ..‫خرباء يدقون ناقوس الخطر‬ ‫( تهريب القمح ينذر بكارثة شاميل سوريا‬syria.tv). Higher spending associated with higher prices for 20 The Autonomous Administration of North and East Syria's essential goods has reduced fiscal space, forcing executive council issued a circular on June 2, 2022, pro- hibiting the transfer of wheat across its areas without an fiscal policies to tighten. Fiscal subsidies accounted official document from the Agricultural Community Devel- for more than half of total government expenditures in opment Company, in an effort to stop wheat smuggling. 2021 (Table 1). To rein in the subsidy bill, the Syrian Hamo, Adnan. 2022. “‫ اإلدارة الذاتية متنع نقل القمح داخل‬...‫منعاً للتهريب‬ government authorities, from late 2021 to early 2022, ‫مناطقها‬.” “To prevent smuggling, the Autonomous Adminis- removed from government assistance an estimated tration prevents the transport of wheat within its regions.” 15 percent of the population, or around 600,000 North Press Agency. June 2, 2022. https://npasyria. of 4 million smart card holders.21 Those removed com/110217/. 21 The Syrian electronic smart card enables eligible Syrian included doctors and lawyers; several categories of families in government-held areas to purchase a set merchants; owners of commercial, industrial, and quantity of essential products and services, like sugar, tourist establishments; people owning multiple prop- rice, and heating fuel, in predetermined amounts and at erties; and owners of cars manufactured after 2011. discounted rates. Recent Economic Developments 19 FIGURE 19 • Subsides of Essential Goods Declined in 2022 A. FX subsidies for imports B. Budgeted subsidies in fiscal expenditures (Million US$) (Million US$) 800 4,500 700 4,000 600 3,500 3,000 500 2,500 400 2,000 300 1,500 200 1,000 100 500 0 0 2021 2021 2018 2020 2017 2019 2022 2023 2018 2020 2015 2016 2017 2019 2022 Petroleum Electricity Agriculture Source: United Nations Conference on Trade and Development (UNCTAD); Syrian Pound Today; WFP; CBS; Syria Ministry of Finance (MOF); World Bank staff estimates. Note: (A) The mirror trade data from the UN Comtrade database is applied to estimate goods that are imported at the preferential exchange rate. (B) The fiscal data pertains to the Central Government in Damascus and excludes all taxes, transfers, and expenses incurred by the autonomous region in northeastern Syria. Estimates include off-budget subsidies for electricity. Fiscal budget figures are converted from local currency to US dollars based on the market exchange rates during the third quarter of the previous year. With higher costs of essential goods further narrowed as of August 2022. A widen- triggered by the war on Ukraine, fiscal policy ing gap between the official exchange rate and the has become more restrictive. Unlike in many parallel market rate led to sharp increases in the countries, the Syrian government has been unable foreign exchange market (FX) subsidies for imports to implement fiscal policies to cushion the impact of in 2019. To preserve its foreign reserves, the Central commodity price shocks on its citizens. Immediately Bank of Syria has, since 2020, stopped subsidizing after the start of the war, the Syrian government most imported goods. Starting in August 2022, the announced a limit on public spending to cover Central Bank only finances the imports of a few only priorities over the next months. Since February essentials at a preferable exchange rate of SYP/$US 2022, over 30 categories of individuals have been 2,500; these essential goods include wheat, baby excluded from subsidy programs, including doctors formula, medicine, and specific medicinal production and attorneys, business owners, and those formerly inputs and supplies.24 Consequently, the FX subsidies classified as middle-class, such as working profes- for imports dropped sharply, from a peak of $684 mil- sionals, vehicle owners, and parents with children in lion in 2019 to $178 million in 2022 (Figure 19.A). private schools. The government has also tightened The FY2023 budget reaffirms the gov- the rationing of essential goods. Authorities imposed ernment’s plan to further reduce subsidies new limits on fuel allotments for public facilities and (Figure 19.B). Total subsidies amounting to SYP 9.35 heating oil for households in March 2022, halving trillion are planned for 2023, approximately the same the allocations for gasoline and heating oil for each (in nominal terms) as this year but a reduction in real family.22 Additionally, the government has reduced terms (i.e., adjusted for inflation) (see Table 1). The bread rations for families. A typical household of five was allocated 12 packets of subsidized bread 22 Etana Syria. 2022. “Syria Brief – Economic Crisis per week in August 2022, as opposed to 14 packets – 8 March 2022.” https://etanasyria.org/syria-brief- per week in July 2021.23 economic-crisis-8-march-2022/. The list of essential items that receive 23 The Syria Report 2022a. subsidized foreign currency for imports was 24 The Syria Report 2022. 20 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR FIGURE 20 • Food is Becoming Increasingly Difficult to Afford A. The ratio of the WFP minimum food basket price to unskilled wage labor B. Number of people in acute food insecurity, top 10 countries globally (Working days needed to purchase the food basket) (Million person, top 10 countries) 40 Congo 35 30 Ethiopia 25 Nigeria 20 Yemen 15 Afghanistan 10 Syrian 5 Sudan 0 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-22 May-22 Sep-22 South Sudan Somalia Opposition-Controlled Self-Administration Sri Lanka Syrian Government Turkish-Controlled 0 5 10 15 20 25 30 Source: Central Bureau of Statistics of Syria; CBS; WFP Syria Market Price Watch Bulletin; WFP Hunger Hotspots: October 2022 to January 2023 Outlook; World Bank staff estimates. Note: (A) The standard food basket is a group of essential food commodities. In Syria, as defined by the WFP, the food basket is set at a group of dry goods providing 2,060 kcal a day for a family of five during a month. The basket includes 37 kg bread, 19 kg rice, 19 kg lentils, 5 kg of sugar, and 7 liters of vegetable oil. The zones of control are defined according to boundaries obtained from Live Universal Awareness Map, https://syria.liveuamap.com/. spending plan calls for a sharp reduction in agricultural insecurity. As such, Syria ranks among the 10 most subsidies, primarily driven by a reduced allocation of food-insecure countries globally (Figure 20.B) subsidized wheat and flour. On the other hand, energy Already very high, the vulnerability of Syrian subsidies, which account for the vast majority of total households is on the rise. According to data from subsidies, would increase further in nominal terms the Humanitarian Needs Assessment Programme in 2023, driven by the planned increase in electric- (HNAP),26 between summer 2021 and summer 2022, ity subsidies. Adjusted for inflation, however, energy the share of households having to rely on at least one subsidies would be roughly unchanged in 2023. extreme negative coping strategy27 increased from 59 to 76 percent. As shown in Figure 21, deteriorating welfare conditions are well evidenced by the sub- Household welfare continues to stantial increase in households forced to reduce their worsen expenditure on essential items, take up high risk and exploitative work, or even rely on child labor. As of Rising prices have eroded real wages, leading the summer of 2022, only 15 percent of households to a severe inaccessibility of sufficient food. reported having enough income to satisfy essential Since 2019, the WFP’s minimum food basket price needs, and close to 50 percent had to sell their has grown twice as fast as non-skilled labor wages assets—either productive, unproductive, or both—to across all zones of control in Syria,25 suggesting make ends meet. that food is becoming increasingly costly to afford (Figure 20.A). In September 2022, low-skilled workers 25 According to the WFP, non-skilled labor wages represent in Turkish-controlled and opposition-controlled areas wages in construction and agriculture. were unable to afford the minimum food basket for a 26 The Humanitarian Needs Assessment Programme is part of the United Nations’ refugee agency, the UN High five-person household, even if they worked 30 days Commissioner for Refugees. a month. According to the WFP, nearly 9.5 million 27 Coping strategies are defined as extreme when they Syrians were severely food insecure in June 2022, adversely affect the welfare of the household as a whole with an additional 2.5 million at risk of falling into food or of any of its members. Recent Economic Developments 21 FIGURE 21 • Share of Households Relying on Extreme Coping Strategies Increased in 2022 (Percent) 80 75.7 75.7 70 60 59.0 59.0 50 40 30 20 75.7 10 59.0 75.7 59.0 59.0 75.7 59.0 75.7 0 At least one extreme Lower expenditure on High risk/ Children Socially Marriage coping strategy essentials (incl. food) exploitative work working degrading jobs young girls 2021 2022 Source: World Bank calculations based on HNAP household survey data (Summer 2021 and 2022). Increased hardships faced by Syrian accepting any available income opportunity, irrespec- households have pushed more vulnerable people tive of its quality.28 to enter the labor market to help support their Welfare challenges of Syrian households families. Deterioration of Syrian households’ welfare are further intensified by a decline in access to between 2021 and 2022 went hand in hand with an basic services. According to HNAP data, between increase in labor force participation and a decline in 2021 and 2022, access to water and electricity saw unemployment (Figure 22.A). With labor force partici- a marked deterioration. The share of households pation of prime-age men (ages 25–54) already above without regular access to any water source increased 95 percent in 2021, the observed increase in labor from 42.4 to 48.2 percent, whereas the share of supply was mostly driven by the greater participa- households without access to electricity increased tion of women, youth, and the elderly (Figure 22.B), from 33.6 to 43.5 percent. categories of workers at the labor market’s margins with relatively limited earning opportunities. As Syrian households increasingly struggle to make ends meet, 28 This interpretation is consistent with the observed increase the increased labor force participation among vulner- in the share of households reporting they had to rely on able people could be interpreted as another sign high risk and/or exploitative work, which increased from of distress, with individuals increasingly forced into 5.4 percent in 2021 to 12.6 percent in 2022. 22 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR FIGURE 22 • More Vulnerable People Were Pushed to Enter the Labor Market in 2022 A. Trends in labor force participation and unemployment B. Changes in labor force participation, by age and gender (Percent) (Difference between 2021 and 2022, percentage points) 60 8 55.5 7 6.9 50.1 50 6 4.7 4.9 40 5 4 30 3 2.6 20 2 13.4 1.0 10.6 1 0.5 10 0 15–24 25–54 55+ 0 2021 2022 Age group Labor force participation Unemployment Female Male Source: World Bank calculations based on HNAP household survey data (Summer 2021 and 2022). Recent Economic Developments 23 3 OUTLOOK AND RISKS S ubject to high uncertainty, real GDP is pro- 2023, down from 77.3 percent in 2022. Assuming the jected to contract by 3.2 percent in 2023 historical relationship between the WFP food basket after declining by 3.5 percent in 2022 price and food inflation remains stable—as well as a (Table 2). The projections assume that conflict activ- stable relation between food inflation and overall infla- ity will continue at a level comparable to 2022, and tion—the 2023 CPI is projected to be 44.0 percent yoy, that the war on Ukraine will continue to impair supply down from 70.1 percent in 2022. chains and the supply of essential commodities. From The fiscal deficit is expected to remain the demand side, private consumption will remain large in 2023, as efforts to reduce fiscal subsidies subdued as purchasing power is eroded by rising will only partly offset the cost-driven increase in prices and currency depreciation. Private investment is expenditures. The government’s fiscal plan projects projected to remain weak given a volatile security situa- a modest (nominal) increase in the budgeted fiscal tion and continued economic and policy uncertainties. deficit, from SYP 4.1 trillion (8.4 percent of GDP) in Lack of financing is expected to constrain government 2022 to SYP 4.9 trillion (8.2 percent of GDP) in 2023. spending, especially for capital expenditures. On the However, if off-budget electricity subsidies and military supply side, conflict, high input costs, and water scar- expenses are included, the fiscal deficit would be con- city are projected to limit crop production. In addition, siderably larger: since 2018, the military budget has fuel shortages are expected to further weaken manu- been excluded from the government’s general budget, facturing and disrupt transportation and services. although in 2017 it accounted for some 20 percent of Inflation is projected to decline but remain total expenditure.29 On the other hand, another SYP high in 2023 due to exchange rate pass-through, 4.4 trillion is planned for off-budget electricity subsidies persistent food and fuel shortages, and further in 2023, up from SYP 3.7 trillion in 2022. Due to a lack cuts to subsidies. Using trends until the first nine of access to domestic and international financing, months of 2022, we forecast that the WFP minimum food basket price index will grow by 48.5 percent in 29 The Syria Report 2022b. 25 TABLE 2 • Macro Outlook Indicators (Annual percent changes unless indicated otherwise) 2017 2018 2019 2020 2021e 2022f 2023f Real GDP growth, at constant prices –0.7 1.4 1.2 –3.9 –2.9 –3.5 –3.2 Inflation (Consumer Price Index) 18.0 1.0 13.4 114.2 118.8 70.1 44.0 Fiscal balance (% of GDP) (on-budget) –8.9 –8.3 –8.1 –8.4 –8.6 –8.4 –8.2 Source: World Bank estimates. Notes: e = estimate, f = forecast. most of the deficit will continue to be financed by Cen- demand for food tends to be less elastic as it is hard tral Bank borrowing. Treasury bonds and foreign loans to substitute. Over the past several years, Syria has combined are projected to cover approximately 20 procured its imported wheat almost exclusively from percent of the budgeted fiscal deficit in 2023, accord- Russia. Likewise, Syria is highly dependent on oil sup- ing to the Syrian government’s fiscal plan. plies from Iran. Reportedly, the temporary suspension Risks to the growth outlook are significant of Iranian oil shipments since early September 2022 and tilted to the downside. Spillovers from further has caused widespread energy shortages across the weakness in neighboring countries, recurring climate country.32 A lack of alternative sources may threaten shocks, and further reductions in humanitarian assis- Syria’s food and fuel supply stability. tance may further deepen the economic contractions The ongoing cholera outbreak could pose in Syria. A prolonged war on Ukraine could lead to a serious threat to the Syrian people. Cholera con- further increases in commodity prices, negatively tinues to sweep through Syria at an alarming pace. If affecting Syria as a food and energy importer. Inad- cholera or other bacterial diseases spread rapidly, the equate health facilities in Syria could exacerbate the limited resilience of Syria’s health, water, and sanita- impact of rapidly spreading contagious diseases. tion systems, devastated by conflict, could exacerbate Recurring climate shocks may severely the impact. affect Syria’s crops and agricultural liveli- Despite growing needs, there is a risk of hoods. Syria is vulnerable to drought, given its strong further reductions in humanitarian assistance for dependence on rainfall and declining groundwater Syria. Humanitarian assistance is needed globally for agriculture.30 Insufficient rainfall in recent years, to cushion the blow from surging commodity prices combined with low water levels in the Euphrates River triggered by the war on Ukraine, and in particular and damaged water infrastructure, have reduced Syr- for Syria, which is facing acute food insecurity. Yet, ians’ access to water for drinking and domestic use reported humanitarian donor funding for Syria in and triggered substantial harvest and income losses, 2022 reached the lowest levels since 2016, according as well as an increase in water-borne diseases. Syria to data collected by the UN Financial Tracking Service is experiencing rising temperatures, which have also (FTS).33 After several cuts in 2021, the WFP further contributed to the growing intensity of drought.31 The frequent climate-induced and human-caused drought shocks could cause widespread crop failure 30 Kelley et al, 2015. and induce large-scale displacement, exacerbating 31 ICRC (The International Committee of the Red Cross), already high levels of food insecurity. 2021. “Syria: Country-Level Climate Sheet Fact.” Cli- Owing to its heavy reliance on food and fuel mate Centre. https://www.climatecentre.org/wp-content​ /uploads/RCCC-ICRC-Country-profiles-Syria.pdf. imports, Syria is vulnerable to another spike in 32 The Syria Report 2022c. global commodity prices or supply chain disrup- 33 Syrian Arab Republic 2022 – Financial Tracking Service tions. The impact of another spike in global food - OCHA https://fts.unocha.org/countries/218/summary​ prices could be substantial for Syria, given that the /2022. 26 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR reduced the size of food rations in all areas of Syria 34 WFP Syria Country Brief, April 2022 https://api.godocs​ in May 2022, a move attributed to funding constraints .wfp.org/api/documents/6b5e29e015c6412188aad0f9 and rising global food prices.34 A rise in global food 9e7886d6/download/?_ga=2.150466870.1270354178​ prices may force further reductions in food assistance. .1671581871-107722965.1625932630 There are some upside risks to the outlook. 35 On November 24, 2021, the US Treasury Department amended a general license for non-governmental Non-governmental organizations were allowed to carry organizations to allow them to engage in additional out additional transactions and activities in November transactions and activities in support of non-profit 2021, and restrictions on foreign investments in non- activities in Syria, including new investment, the purchase regime held areas of Northeast and Northwest Syria of refined petroleum products of Syrian origin for use in were eased in May 2022.35 More recently, the UN Syria, and certain transactions with parts of the Syrian Security Council exempted humanitarian aid in North- government. In May 2022, the Treasury announced the authorization of activities in certain economic sectors in west Syria from all UN sanctions in December 2022.36 the non-regime-held areas of Northeast and Northwest These measures could potentially facilitate trade, Syria. investment, and humanitarian operations in Syria. 36 In December 2022, The UN Security Council to Nevertheless, given Syria’s worsening economic introduced humanitarian exemptions across UN conditions, trade and investment are unlikely to pick sanctions regimes, including the Islamic State of Iraq up dramatically in the short term, as the private sector and Syria (IS) and Al-Qaida sanctions regime. may continue to pursue de-risking strategies. Outlook and Risks 27 SPECIAL FOCUS: SYRIA JOINT DAMAGE ASSESSMENT OF SELECTED CITIES T he World Bank, in collaboration with the methodology and uses high-resolution satellite imag- EU, conducted the 2022 Syria Joint Dam- ery, social media analytics, mobile signal data, and age Assessment (DA) of Selected Cities. publicly available information. When possible, it uses The assessment provides information on the ongoing damage data from publicly available ground-based conflict in Syria with respect to the population, physi- assessments to confirm findings. cal infrastructure, and quality of service delivery in Damage was calculated against the actual 14 cities37 and 11 sectors.38 The selection of cities for or estimated pre-2011 baseline of physical this assessment was based on several criteria—the assets, in line with the start of the Syrian crisis. extent of physical damage caused by the conflict, Because this DA builds on previous assessments, the security conditions, the accessibility of the area, much of the baseline data relied on previously the presence of humanitarian actors, the ethnic established baselines. The baseline asset inventories diversity of the population, the mix of government were gathered from pre-crisis (in line with standard and opposition-controlled areas, and the number of internally displaced persons (IDPs). Sectors were 37 The selected cities are Afrin, Aleppo, Dar’a, Daraya, Deir- selected based on a combination of factors, including ez-Zor, Al Hasakah, Homs, Idlib, Manbij, Palmyra, Ar- data access and impact. Raqqa, Rastan, Tell Abiad, and Zabadani. This Syria DA provides a broad-brush 38 The 11 selected sectors covered are: (i) Physical estimate of the effects of the Syrian conflict on infrastructure sectors: transport, electricity, water supply physical assets and service delivery. It adapts from and sanitation (WSS), municipal services, cultural the Post-Disaster Needs Assessment (PDNA) meth- heritage, and agrifood value chains; (ii) Social sectors: housing, health, and education; and (iii) Crosscutting odology jointly developed by the EU, World Bank, sectors: environment and public institutions. and United Nations, and has been utilized in numer- 39 European Union, World Bank, United Nations. Post- ous analytical assessments around the world.39 The Disaster Needs Assessments, Volume A Guidelines DA relies primarily on a remote-based assessment (2013). 29 FIGURE 23 • Bulk of Damage in Syria Found in Agri-Food Value Chains, Housing, Transport and Electricity Sectors (Billion US$) 4 3.39 3.36 3.43 Sectoral damages in US$ billion 3 2.59 2.84 2.33 2 1.47 1.75 1.21 1.62 1.19 1 0.80 0.38 0.42 0.52 0.35 0.27 0.38 0.30 0.17 0.12 0.04 0.05 0.03 0.04 0.01 0.01 0 Agriculture Housing Transport Electricity Health Culture and Environment Water Supply Municipal Education Governance heritage & Sanitation services Low estimate – USD billion High estimate – USD billion Average estimate – USD billion Source: World Bank 2022 Syria Joint Damage Assessment of Selected Cities in Syria. PDNA methodology) government sources and crowd- Cross-Cutting sectors. The functionality of agri-food sourced mapping data, and therefore describe assets value chains was the most distorted by the conflict prior to the crisis. For the damage estimation, the aver- (Figure 23). Syria’s wholesale vegetable markets have age was calculated based on the number of damaged been damaged, with 82 percent assessed as either facilities, their physical status (partially damaged or partially damaged or destroyed in the conflict. While completely destroyed), and the estimated pre-crisis the operational status of assets varies across sectors unit cost40 associated with each asset class. In line and cities, the enabling conditions play a significant with standard DA methodology, destroyed assets were role in the functionality of sectors. For example, costed at 100 percent of their unit cost and partially although a large part of the physical infrastructure damaged assets at 40 percent.41 These assessments was undamaged in the Water, Sanitation and Hygiene employed low and high replacement cost estimates, (WASH) sector, 51 percent of assets suffered from based on pre-crisis unit replacements costs. For most reduced functionality, including 11 percent that are sectors, these ranges were based on plus or minus 10 not functioning, which is a significant problem for the percent of the average unit cost or used a reasonable most affected cities. range based on experience.42 Whenever possible, the Within the Physical Infrastructure sectors, damage assessment also estimated the operational the Agrifood Value Chains were by far the most heav- status of facilities (functional or non-functional) to ily affected (50 percent of total physical infrastructure determine the level and quality of service delivery in that sector. 40 Pre-crisis unit cost was adopted as part of the cost The DA finds that as of January 2022, total calculation methodology, since only damages were damage across the assessed cities and sectors assessed in this report. This is the standard practice for was estimated at $8.7 billion to $11.4 billion. Of estimating damages, as the methodology for damage the total damage estimate, 68 percent, or $5.80 bil- estimation is backward looking. 41 For the Transport sector, however, destroyed assets were lion to $7.8 billion, was attributed to damage in the costed at 60 percent instead of 100 percent, in line with Physical Infrastructure sectors; 30 percent, or $2.7 bil- prior damage assessments. lion to $3.3 billion, to damage in the Social Sectors; 42 An exception was the Housing and Environment sectors, and 2 percent, or $175 million to $278 million, to which relied on a fixed cost. 30 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR FIGURE 24 • More than Half of the Damage in Assessed Cities Was in Aleppoa (Million US$) 3,500 3,177 60% Share of average damages across cities (percentage) 3,000 55% 50% Damages across cities in US$ million 2,500 2,259 40% 2,000 30% 1,500 964 20% 1,000 15% 522 421 416 316 255 500 8% 7% 10% 5% 4% 89 115 83 330 2% 58 271 213 1% 0 171 0 Aleppo Idlib Homs Raqqah Deir Ezzor Dara’a Daraya Palmyra Low estimate – US$ million High estimate – US$ million Average estimate of damage share – (%) Source: World Bank 2022 Syria Joint Damage Assessment of Selected Cities in Syria. a The graph does not display all cities covered in this assessment. damage), largely related to irrigation systems, followed and Turkey made it increasingly difficult for IDPs to by Transport (22 percent of total physical infrastruc- seek asylum abroad, resulting in protracted internal ture damage). Within the Social sectors, Housing displacement. Many IDPs live in highly vulnerable incurred the greatest damage (86 percent), followed conditions and are forced to rely on already scarce by Health, at 13 percent of total social sector dam- public services. Except for Ar-Raqqa, Deir-ez-Zor, age. Under the Cross-Cutting sectors, Environment and Al Hasakah, which lost 53, 28, and 27 percent was the most heavily affected (97 percent of total of their populations, respectively, during the conflict, Cross-Cutting sector damage, or $168 million to $269 other governorates witnessed a significant influx of million), followed by Public Institutions43 (3 percent of IDPs since 2011. Idlib, for example, known as the total Cross-Cutting sector damage or $7.0 million to last opposition-controlled area in Syria, has doubled $8.5 million).44 its population to over 2.7 million, with IDPs com- The city analysis reveals that Aleppo prising almost two-thirds of its population in 2021 bore the brunt of the damage, followed by Idlib, (Figure 25.A). Many camps and informal settlements Homs, and Ar-Raqqa (Figure 24). The high dam- remain overcrowded, mostly in the Idlib and Aleppo age estimates for Syria’s largest city, Aleppo, which governorates. With the conflict abating and amid experienced prolonged conflict due to being a key slightly improved security conditions, the northeast- base for several opposition factions, stem largely from the Housing, Electricity, Health, and Transport sectors 43 The Public Institutions sector covers a wide range of (Figure 24). Damage in Idlib was largely in the Electric- government facilities including national, municipal, and ity and Housing sectors. In Homs, the Housing and provincial administrative buildings, courthouses, prisons, Health sectors accounted for most of the damage. fire stations, police stations, vehicle registration offices, Finally, in Ar-Raqqa, damage to the Housing, Water, civil defense, police traffic offices, post offices, real estate and Sanitation sectors accounted for much of the registration offices, and other offices and buildings. 44 It is important to note that the damage estimates are overall damage. not conclusive or representative of the entire sector. The conflict has displaced millions and The scope of each sector’s assessment is defined in continues to do so, with most IDPs losing their its chapter. Given data limitations, some sectors had a livelihoods. The closing of borders with Jordan wider coverage than others. Special Focus: Syria Joint Damage Assessment of Selected Cities 31 FIGURE 25 • IDPs Continue to Greatly Outnumber Returnees in Syria A. Total number of IDP arrivals to returnees from 2016 to August 2022 B. Number of IDP arrivals per governorate from 2016 to 2021 10,000,000 1,200,000 Idlib Aleppo 1,000,000 1,000,000 800,000 Ar-Raqqa Total IDPs Al -Hasakeh Rural Damascus Dar'a 600,000 100,000 Hama Deir-ez-Zor 400,000 Lattakia Homs Damascus 10,000 200,000 Quneitra As-Sweida 0 2016 2017 2018 2019 2020 2021 0 100 1,000 10,000 100,000 1,000,000 Aleppo Al-Hasakeh Ar-Raqqa Dar'a Total Returnees Deir-ez-Zor Homs Idleb Rural Damascus Source: UN Office for the Coordinate of Humanitarian Affairs (2022), IDP movements and IDP spontaneous return movements. Data available at https://data.humdata.org/dataset/ syrian-arab-republic-idp-movements-and-idp-spontaneous-return-movements-data. ern regions registered a drop in IDP arrivals in 2021 not available for each sector or city. This DA addresses compared to 2020 (Figure 25.B). this by collecting data across various sources to Finally, it should be noted that data frag- formulate a baseline for each sector against which mentation, a lack of baseline information, and more recent damage data may be compared. Finally, issues with the accuracy of findings were among given the dynamic situation of the ongoing conflict the challenges encountered while conducting and the frequency and rapidity with which damage this assessment. Fragmentation across sectors, occurs, data may not remain accurate for long. How- time, and countries makes it hard to compare data ever, such assessments are useful to understand the and corroborate findings from multiple data sources. nature and extent of impacts and the broad enabling In addition, confidentiality issues and a reluctance conditions for the return of displaced populations. to share data due to security concerns also lead to This can inform in-depth assessments and help craft fragmentation and gaps in information. Furthermore, strategies and roadmaps for coordinated interven- pre-conflict baseline information at the city level was tions in the future. 32 SYRIA’S ECONOMY IN RUINS AFTER A DECADE-LONG WAR REFERENCES Al-Khalidi, S. 2022. “Turkish Strikes Hit Oil Installa- March 13, 2021. https://www.thelan- tions in Northern Syria, Sources Say.” Reuters. cet.com/journals/lancet​/ article/PIIS0140- November 24, 2022. https://www.reuters.com​ 6736%2821%2900618-8/fulltext. /world/middle-east/turkish-strikes-hit-oil-installa- Douaihy, M., and R. 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