The Impact of the Global Economic Crisis on Syria Essay Example for Free

The Impact of the Global Economic Crisis on Syria Essay Introduction: The Syrian Arab Republic lies on the eastern coast of the Mediterranean Sea, between Turkey and Lebanon, stretching eastward towards Iraq and Jordan. Of its total area (18. 5 million ha) one-third is arable land or forest. The remainder consists mainly of steppe (Al Badia) or rocky areas. The Mediterranean climate, rainy winters and dry, hot summers separated by two short transitional seasons, prevails in the Syrian Arab Republic. The Syrian Arab Republic compares in land size with Tunisia, Senegal, Uruguay or Cambodia, and in population (16. 7 million) with much smaller Netherlands or much larger Chile or Madagascar. Syrian resident population increases by 0. 4 million per year, a still high rate of 2. 45 percent, despite the long term deceleration. Demographic growth imposes a heavy pressure on the economy and its natural resource base. Population is evenly distributed between urban and rural areas, making almost half of it depend mainly on agricultural and related activities. Indeed, agriculture is the main source of employment for the Syrian labour force. Agricultural land (arable land and permanent crops) account for about one-third of the total land area, a proportion similar to Tunisia, slightly above Greece and slightly below Bulgaria, while the rural density of population (1. 15 rural inhabitant per ha of agricultural land) compares with those of Greece or Morocco. Type of State: Syria is a republic officially based on a parliamentary democracy but in reality it is controlled by an authoritarian, military dominated regime where the President and his ruling party have immense powers. Type of economy: Lower-middle-income economy. A country which depends a lot on its petroleum activity. It ranks 29th in the world with production of 26 million tones. Agriculture has an important place: the sector employs 35% of the active population. Economy overview The Syrian economy grew by an estimated 3. 3% in real terms in 2007 led by the petroleum and agricultural sectors, which together account for about one-half of GDP. Higher crude oil prices countered declining oil production and led to higher budgetary and export receipts. Damascus has implemented modest economic reforms in the past few years, including cutting lending interest rates, opening private banks, consolidating all of the multiple exchange rates, raising prices on some subsidized items, most notably gasoline and cement, and establishing the Damascus Stock Exchange which is set to begin operations in 2009. In October 2007, for example, Damascus raised the price of subsidized gasoline by 20%, and may institute a rationing system in 2008. In addition, President ASAD signed legislative decrees to encourage corporate ownership reform, and to allow the Central Bank to issue Treasury bills and bonds for government debt. Nevertheless, the economy remains highly controlled by the government. Long-run economic constraints include declining oil production, high unemployment and inflation, rising budget deficits, and increasing pressure on water supplies caused by heavy use in agriculture, rapid population growth, industrial expansion, and water pollution. Real GDP and growth rate of Syria: GDP real growth rate: 4. 3% (2007 est. ) Definition: This entry gives GDP growth on an annual basis adjusted for inflation and expressed as a percent. The economy of Syria has seen a moderate growth over the last three years as can be depicted in the real GDP growth rate which averaged 5 percent over the last three years. In 2005, real GDP grew significantly by 21. 74, 25% between 2006-7 and 22. 86 between 2007-8. Inflation rate (consumer prices): 12. 2% (2007 est. ) Year Inflation rate (consumer prices) Percent Change Date of Information 2006 5. 00 % 138. 10 % 2005 est. 2007 8. 00 % 60. 00 % 2006 est. 2008 12. 20 % 52. 50 % 2007 est. Definition: This entry furnishes the annual percent change in consumer prices compared with the previous years consumer prices. The chart shows an increase in consumer price from 2005 to 2008. Year Export Import Net export 2005-6 424300 502369 -78069 2006-7 505012 531324 -26312 2007-8 579034 684557 -105523 Exports and Imports of Syria: Our export rose from 2006 to 2008 but also on the second hand, our export rose from 2006 to 2008. In all the years we can notice that our import is more than our export which is reflects badly on GDP. Government Tax, government expenditures and fiscal deficit: Syrias system of income tax is apportioned into three main income categories: (1) profits from an industrial, commercial, or non-commercial activity; (2) wages; and (3) income derived from movable capital assets. While the overall fiscal deficit increased to about 3 percent of GDP in 2007 the non-oil deficit remained stable. This reflected a drop in expenditures by about one percent of GDP, as both current and capital outlays declined. This was achieved despite the pressure on budgetary expenditure arising from the large number of Iraqi refugees. Oil revenue decreased by about 2 percent of GDP as the net external oil trade surplus virtually disappeared. Non-oil receipts, also declined, partly reflecting the reduction in customs tariffs. The external current account deficit widened to an estimated 3. 3 percent of GDP in 2007 (from 2. 8 percent in 2006). The net oil surplus (after subtracting the share of foreign partners) was eliminated due to a decline in output and an increase in domestic consumption. However, non-oil exports, tourism, and transfers, were buoyant partly as a result of strong regional demand and the relaxation of foreign exchange controls. Net foreign assets of the Central Bank of Syria (CBS) and the Commercial Bank of Syria (CBoS) stood at about $17 billion. The World Economic Crisis and the Syrian Economy Prices are rocketing in Syria. All things has doubled its prices and maybe tripled. A quick view to the average of salaries in Syria and comparing it to the prices will give you a quick idea about the World economic crisis and its effects on Syria. Syria Has faced one of the worst seasons in the agriculture field last year. The effect of drought has hit the meat and the framers who are growing ups Goats. Syria is depending on goat as a main source of meat in contrast to other parts of the world, which depends on cows. The prices of meat were at the bottom during last summer. That was owing to the drought and the lack of grasslands in Syria. What happened in this fall is the rocketing of Meat prices, which has doubled. That is only one face of problem. The other face of the economic crisis of the world and its effect on Syria is another issue. The effect of this crisis on Syria is mild. Thanks to George Bush who has put sanction on Syria especially in the financial field. These sanctions have limited the relations between Syrian Financial firms and The American ones. This has saved Syria from the crisis at least till now. Here we have not seen a bankrupted banks or insurance companies. Syrian financial sector still junior and limited to the Syrian market and it has not any big relation with the world financial sector. With an embryonic banking sector, low leverage ratios, and no stock market, Syria seemed ideally positioned to escape the brunt of the global rout. But Syria has not been so lucky. Gathering storm clouds are evident in the shifting tone and statements of Syrian Government officials. Conclusions: Syria’s politicians are much like those in other countries. Few predicted the extent to which their economy would be hit by the global credit crisis. The Russian ruble is under serious attack by currency traders and has fallen more than ten percent over the last few days. Recent economic reforms have opened Syria’s doors to a great array of new imports; tariffs between Arab states have been eradicated altogether, forcing Syrian manufacturers to compete with inexpensive imports for the first time. Chinese goods, falsely labeled as â€Å"made in the UAE† are now entering Syria with few mark ups. To make matters worse, the Syrian pound has risen in value against the dollar at the same time that the government has slashed subsidies on petroleum and electricity. Local producers are reeling from these many challenges. Government officials have responded with a few stop gap measures to protect local producers, such as restricting the source countries of products and by threatening to buy the products that carry suspiciously undervalued invoices. Importers commonly avoid paying import duties by low-balling purchase prices on their invoices for non-Arab produced imports. While such measures look good on paper, they are notoriously hard to implement and police. Syrian import duties are simply too high and importers will continue to find ways to avoid exorbitant duties, whether by by outright smuggling or by falsifying invoices. It is very hard to keep inexpensive foreign manufactures from getting into Syria. This is a war that local producers stand little chance of winning. Syria needs to use the recent drop in commodity prices to devalue its currency and improve its export competitiveness. It also needs to broaden its tax collection base. This can be done by lowering exorbitant import duties that force merchants to cheat and by tightening income tax collection on the countries wealthy and well off. References: Dr.Hayan Ahmed Salman, S. (2008) â€Å"The activation of our foreign trade to face the global financial crisis the concept and Economic Accounting’’ iqtissadiya [online], Vol. 347. Available,www. iqtissadiya. com, [Accessed 10 June, 2009]. Syria. (2009). In Encyclopedia Britannica. Retrieved June 12, 2009, from Encyclop? dia Britannica Online:http://www. britannica. com/EBchecked/topic/578856/Syria, Sarris, A. 2002. Final Report on Agricultural Development Strategy for Syria. December 2001. (Chapter 1)