The following text is my contribution to a survey of four experts on the state of the Syrian economy conducted by the Syria in Crisis page of the Carnegie Endowment for International Peace:
The continuing deterioration of the Syrian economy witnessed in the past four and a half years will accelerate in 2016.
Fundamentally, the Syrian economy suffers from several curses: the destruction of the country’s physical infrastructure and productive capacity; the outflow of financial and human capital; the fragmentation of the territory and the disruption of trade and other business networks; the collapse of state institutions and services in areas outside regime control; and Western sanctions.
Provided the war goes on, these factors will continue to weigh on the economic situation.
Business sectors that had survived relatively well until now, such as agricultural production, had a dismal year. The fragmentation of the country has increased transport costs to such an extent that importing wheat from the Black Sea is now cheaper than buying it from Hasakah and carrying it to Damascus.
The value of the dollar, one of the most closely followed indicators, almost doubled from 215 pounds at the beginning of 2015 to 390 by early December. The supply of foreign currencies in the market remains structurally well below demand and there are no obvious limits as to how low the Syrian currency can fall in the coming months.
One positive aspect for the government has been its capacity, despite low fiscal revenues, to pay salaries and maintain the functioning of basic services. This was due to the implementation of new taxes, the reduction of subsidies on essential goods such as heating oil and bread, and aid from its allies.
This has been, however, at the expense of the population, an overwhelming number of which now live under the poverty line. The attacks by the international coalition on Islamic State-controlled oil fields are already making matters worse: electricity blackouts and shortages of oil products in the market have increased, which will only push inflation higher in the coming weeks.
Year 2016 will see Syrians poorer, living a more miserable life, and emigrating in higher numbers.