Despite the mitigation of the severe drought that plagued the region in the late 1990s and the recovery of energy export revenues, Syria's economy faces serious challenges. With almost 60% of its population under the age of 20, unemployment higher than the current estimated range of 20%-25% is a real possibility unless sustained and strong economic growth takes off. Oil production has leveled off, but recent agreements allowing increased foreign investment in the petroleum sector may boost production in two to three years.
Taken as a whole, Syrian economic reform thus far has been incremental and gradual, with privatization not even on the distant horizon. The government, however, has begun to address structural deficiencies in the economy such as the lack of a modern financial sector through changes to the legal and regulatory environment. In 2001, Syria legalized private banking and in 2003 licensed three private banks. One or more of these banks may begin operating in 2004, as may a nascent stock market. Beyond the financial sector, the Syrian Government has enacted major changes to rental laws, and is reportedly considering similar changes to the commercial code and to other laws, which impact property rights.
Commerce has always been important to the Syrian economy, which benefited from the country's location along major east-west trade routes. Syrian cities boast both traditional industries such as weaving and dried-fruit packing and modern heavy industry. Given the policies adopted from the 1960s through the late 1980s, Syria failed to join an increasingly interconnected global economy. In late 2001, however, Syria submitted a request to the World Trade Organization to begin the accession process. Syria had been an original contracting party of the former General Agreement on Tariffs and Trade but withdrew in 1951 because of Israel's joining. Major elements of current Syrian trade rules would have to change in order to be consistent with the WTO. Syria is intent on signing an Association Agreement with the European Union that would entail significant trade liberalization.
The bulk of Syrian imports have been raw materials essential for industry, agriculture, equipment, and machinery. Major exports include crude oil, refined products, raw cotton, clothing, fruits, and grains. Earnings from oil exports are one of the government's most important sources of foreign exchange.
Of Syria's 72,000 square miles, roughly one-third is arable, with 80% of cultivated areas dependent on rainfall for water. In recent years, the agriculture sector has recovered from years of government inattentiveness and drought. Most farms are privately owned, but the government controls important elements of marketing and transportation.
The government has redirected its economic development priorities from industrial expansion into the agricultural sectors in order to achieve food self-sufficiency, enhance export earnings, and stem rural migration. Thanks to sustained capital investment, infrastructure development, subsidies of inputs, and price supports, Syria has gone from a net importer of many agricultural products to an exporter of cotton, fruits, vegetables, and other foodstuffs. One of the prime reasons for this turnaround has been the government's investment in huge irrigation systems in northern and northeastern Syria, part of a plan to increase irrigated farmland by 38% over the next decade.
Syria has produced heavy-grade oil from fields located in the northeast since the late 1960s. In the early 1980s, light-grade, low-sulphur oil was discovered near Dayr az Zawr in eastern Syria. This discovery relieved Syria of the need to import light oil to mix with domestic heavy crude in refineries. Recently, Syrian oil production has been about 530,000 barrels per day. Although its oil reserves are small compared to those of many other Arab states, Syria's petroleum industry accounts for a majority of the country's export income. The government has successfully begun to work with international energy companies to develop Syria's promising natural gas reserves, both for domestic use and export. U.S. energy firm, ConocoPhillips, completed a large natural gas gathering and production facility for Syria in late 2000, and will continue to serve as operator of the plant until December 2005. In 2003, Syria experienced some success in attracting U.S. Petroleum companies, signing an exploration deal with partners Devon Energy and Gulfsands and a seismic survey contract with Veritas.
Ad hoc economic liberalization continues to provide hope to Syria's private sector. In 1990, the government established an official parallel exchange rate (neighboring country rate) to provide incentives for remittances and exports through official channels. This action improved the supply of basic commodities and contained inflation by removing risk premiums on smuggled commodities.
Over time, the government has increased the number of transactions to which the more favorable neighboring country exchange rate applies. The government also introduced a quasi-rate for noncommercial transactions in 2001 broadly in line with prevailing black market rates. Nonetheless, some government and certain public sector transactions are still conducted at the official rate of 11.2 Syrian pounds to the U.S. dollar or at other rates, and exchange-rate unification remains an elusive goal. Pressure is building for Syria to harmonize its exchange rate system.
Given the poor development of its own capital markets and Syria's lack of access to international money and capital markets, monetary policy remains captive to the need to cover the fiscal deficit. Although in 2003 Syria lowered interests rates for the first time in 22 years, rates remain fixed by law. In a positive move in 2003, Syria canceled an old and troublesome law governing foreign currency exchange; however, new regulations have yet to be implemented. Some basic commodities continue to be heavily subsidized, and social services are provided for nominal charges.
Syria has made progress in easing its heavy foreign debt burden through bilateral rescheduling deals with virtually all of its key creditors in Europe, although debt owed to the former Soviet Union remains an unsolved problem.
GDP: purchasing power parity - $50.9 billion (2000 est.)
GDP - real growth rate: 0% (1999 est.)
GDP - per capita: purchasing power parity - $2,500 (1999 est.)
GDP - composition by sector:
services: 49% (1997)
Population below poverty line: 15%-25%
Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%
Inflation rate (consumer prices): 2.3% (1999 est.)
Labor force: 4.7 million (1998 est.)
Labor force - by occupation: agriculture 40%, industry 20%, services 40% (1996 est.)
Unemployment rate: 12%-15% (1998 est.)
revenues: $3.5 billion
expenditures: $4.2 billion, including capital expenditures of $NA (1997 est.)
Industries: petroleum, textiles, food processing, beverages, tobacco, phosphate rock mining
Industrial production growth rate: 0.2% (1996 est.)
Electricity - production: 17.5 billion kWh (1998)
Electricity - production by source:
fossil fuel: 42.86%
other: 0% (1998)
Electricity - consumption: 16.275 billion kWh (1998)
Electricity - exports: 0 kWh (1998)
Electricity - imports: 0 kWh (1998)
Agriculture - products: wheat, barley, cotton, lentils, chickpeas, olives, sugar beets; beef, mutton, eggs, poultry, milk
Exports: $3.3 billion (f.o.b., 1999 est.)
Exports - commodities: petroleum 65%, textiles 10%, manufactured goods 10%, fruits and vegetables 7%, raw cotton 5%, live sheep 2%, phosphates 1% (1998 est.)
Exports - partners: Germany 14%, Turkey 13%, Italy 12%, France 9%, Lebanon 9%, Spain (1998 est.)
Imports: $3.2 billion (f.o.b., 1999 est.)
Imports - commodities: machinery and equipment 23%, foodstuffs/animals 20%, metal and metal products 15%, textiles 10%, chemicals 10% (1998 est.)
Imports - partners: Ukraine 16%, Italy 6%, Germany 6%, Turkey 5%, France 4%, South Korea, Japan, US (1998 est.)
Debt - external: $22 billion (1999 est.)
Economic aid - recipient: $199 million (1997 est.)
Currency: 1 Syrian pound = 100 piastres
Exchange rates: Syrian pounds per US$1 - 46 (1998), 41.9 (January 1997); official fixed rate - 11.225 Syrian pounds per US$1
Fiscal year: calendar year