## _wp16123

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---

### Key messages
- The civil war has set the country back by decades in economic, social, and human development.
- Syria’s GDP today is less than half of what it was before the war started and it could take two decades or more for Syria to return to its pre-conflict GDP levels.
- Reconstructing damaged physical infrastructure will be monumental; rebuilding Syria’s human capital and social cohesion will be an even greater and lasting challenge, with half of the population displaced, many children no longer schooled, and many people of all ages traumatized by the war.
- Findings are subject to an extraordinary degree of uncertainty due to extreme limitations on information and the government publishing few economic data; the paper draws heavily on third-party information.

### I. Before the conflict — structural and social context
- Economic reform and indicators (early 2000s–2010):
  - Non-oil growth averaged 4.4 percent during 2000–09.
  - Public debt at the end of 2009: 31 percent of GDP.
  - International reserves at the end of 2010: more than nine months of imports of goods and services.
  - Foreign direct investment averaged about 1.3 percent of GDP during 2000–09.
  - Key reform milestones: private banks allowed (2004); stock market re-opened (2009); WTO request (2001); free trade agreement with Turkey (2007).
  - IMF technical assistance areas: banking supervision and regulation; monetary framework modernization; government debt market development; revenue administration; public financial management.
- Social and labor outcomes pre-conflict:
  - Poverty rose in the second half of the 2000s after falling between 1997 and 2004.
  - Rural poverty higher than urban; northeast region poverty ratio about 15 percent in 2007.
  - Unemployment more than 16 percent in 2006/07.
  - Youth (age 15–24) unemployment: 22 percent in 2006/07.
- Business environment and governance:
  - 2009 Doing Business ranking: 137 out of 181 countries.
  - Over 80 percent of firms expected to give gifts to public officials to “get things done,” vs regional average of 37 percent.
  - Heritage Index: ranked “repressed” or “mostly unfree” between 2006–09; fourth-lowest regional ranking in rule of law.
- Political reform: presidential advocacy for reform from 2000, but slow pace and political frictions.

### II. Five years into the conflict — humanitarian and social impacts
- Demographics and casualties:
  - Population in 2010: about 22.1 million.
  - Population estimated to have shrunk by at least 20 percent since March 2011.
  - UNHCR reports more than 250,000 people killed and more than 800,000 injured.
  - As of February 2016, about 4.7 million people have fled to Syria’s immediate neighbors—Iraq, Jordan, Lebanon, and Turkey.
  - Almost 900,000 refugees had declared political asylum in the EU by December 2015.
  - OCHA reports 7.6 million internally displaced people within Syria.
- Poverty, unemployment, and housing:
  - SCPR estimates more than 60 percent of the labor force (about 3.5 million) is unemployed, with some 3 million having lost their jobs as a result of the conflict.
  - SCPR estimated overall poverty rate in 2014 at 83 percent (compared to 12.4 percent in 2007).
  - More than two-thirds of Syrians are living in extreme poverty.
  - UN reports some 2.1 million homes destroyed.
- Children, education, and health:
  - School attendance dropped by more than half; more than 2 million children in Syria out of school.
  - Enrolled children: 3.6 million in 2014 from 5.2 million in 2010.
  - Non-attendance rates in conflict areas: 60–75 percent; national average non-attendance: 48 percent in 2014.
  - Over 700,000 children of Syrian refugees are out of school.
  - UNICEF: 3.7 million Syrian children born since the conflict began in 2011 are born as refugees.
  - SCPR reports life expectancy declined by 20 years within four years: to 56 years in 2014, down from 76 years in 2010.
  - Health system: one-fifth of primary health care facilities not functioning and another one-fifth functioning at limited levels; half of hospitals destroyed.
  - Doctors per population: 1:4,000 in 2014, down from 1:661 in 2010.
  - Vaccination rates fell to 50–70 percent from 99–100 percent pre-crisis; polio, measles, typhoid reappeared.
  - About two thirds of children without safe and reliable water; only one third of sewage treated.
- Humanitarian needs and service collapse:
  - UNICEF estimates more than 4 million children and women in need of nutritional assistance.
  - Mid-2014 government subsidy cuts on bread, rice, sugar, and water; government bakeries closed in opposition-held areas.
  - OCHA and SCPR estimate as of early 2016: 13.5 million people in Syria in need of humanitarian aid, including six million children; 4.6 million in hard-to-reach areas; close to 500,000 in besieged areas.
  - UN appeal for Syria response plan underfunded over past four years.
  - Foreign NGO operations constrained by formal authorization requirements and international sanctions.

### III. Five years into the conflict — macroeconomic impacts (2010–2015; estimates and projections)
- Overall contraction and uncertainty:
  - Economy projected to have contracted in real terms by 57 percent since 2010.
  - Non-oil real GDP declined on average by 14 percent between 2011 and 2015.
  - Oil and gas GDP both fell by an average of 28 percent during the same period.
  - Output losses concentrated in oil, manufacturing, transportation, and construction.
  - Significant uncertainty due to informal economy growth, breakdown of data collection, and multiple war economies.
- Selected annual indicators (Real GDP change in percent; Oil and Non-oil; Nominal GDP; unemployment; prices; fiscal and external indicators):
  - Real GDP change (percent): 2008: 4; 2009: 6; 2010: -6; 2011: -21; 2012: -17; 2013: -17; 2014: -15.
  - Oil (Real GDP change in percent): 2008: 0; 2009: 0; 2010: 3; 2011: -10; 2012: -29; 2013: -14; 2014: -23; 2015: -70.
  - Non-oil (Real GDP change in percent): 2008: 5; 2009: 7; 2010: -5; 2011: -20; 2012: -18; 2013: -16; 2014: -9.
  - Nominal GDP ($ billions) 1/: 2008: 53; 2009: 54; 2010: 60; 2011: 59; 2012: 42; 2013: 30; 2014: 21; 2015: 14.
  - Overall unemployment rate (in percent): 2008: 11; 2009: 8; 2010: 9; 2011–2015: ......60...
  - GDP deflator (change in percent): 2008: 16; 2009: -3; 2010: -7; 2011: 8; 2012: 22; 2013: 46; 2014: 18; 2015: 31.
  - CPI inflation (period average): 2008: 15; 2009: 3; 2010: 4; 2011: 5; 2012: 7; 2013: 9; 2014: 29; 2015: 26.
  - Central government revenue (percent of GDP): 2008: 20; 2009: 24; 2010: 21; 2011: 15; 2012: 14; 2013: 9; 2014: 7; 2015: 6.
  - Central government expenditure (percent of GDP): 2008: 23; 2009: 27; 2010: 29; 2011: 30; 2012: 30; 2013: 28; 2014: 29; 2015: 30.
  - Overall balance (percent of GDP): 2008: -3; 2009: -3; 2010: -8; 2011: -16; 2012: -16; 2013: -18; 2014: -22; 2015: -24.
  - Gross public debt (percent of GDP): 2008: 37; 2009: 31; 2010: 30; 2011: 38; 2012: 64; 2013: 86; 2014: 119; 2015: 150.
  - Current account balance (percent of GDP): 2008: 0; 2009: -1; 2010: 1; 2011: -4; 2012: -9; 2013: -21; 2014: -28; 2015: -35.
  - Official Gross foreign assets (in billions of U.S. dollars): 2008: 17; 2009: 17; 2010: 21; 2011: 20; 2012: 12; 2013: 8; 2014: 5; 2015: 1.
  - Reserves (in months of imports of GNFS): 2008: 11; 2009: 13; 2010: 12; 2011: 12; 2012: 9; 2013: 6; 2014: 4; 2015: 1.
  - Official nominal exchange rate (LS/$, average): 2008: 47; 2009: 47; 2010: 46; 2011: 48; 2012: 65; 2013: 109; 2014: 154; 2015: 260.
  - Parallel market nominal exchange rate (LS/$, average): 2008: 47; 2009: 47; 2010: 46; 2011: 48; 2012: 80; 2013: 150; 2014: 179; 2015: 297.
- Sources for table: Syrian authorities; Syrian Center for Policy Research, World Bank, and Fund staff estimates and projections.
- Additional macro highlights:
  - Cumulative CPI increased by more than 300 percent between March 2011 and May 2015.
  - We estimate the 2015 current account deficit to be 13 percent of GDP, compared with about 0.6 percent of GDP in 2010.
  - Exports very roughly estimated to have collapsed by about 70 percent to about $4 billion between 2010–15.
  - Imports expected to have declined by almost 40 percent to $10.5 billion between 2010 and 2015.
  - International reserves estimated to have dropped to $1 billion by the end of 2015 (equivalent to about 1 month of imports).
  - Syrian pound lost at least 85 percent of its value against the U.S. dollar since March 2011 in both official and parallel markets.
  - Official trading level described: officially trading just below 400 against one dollar, compared to 47 in March 2011.
  - Central Bank policy measures: August 2013 ban on use of foreign currency for commercial transactions within Syria; 2014 exporters forced to surrender 50 percent of foreign currency earnings; April 2015 increased surrender rate to 100 percent; November 2015 limit on imports to essential goods.

### IV. Sectoral damages and economic structure
- Energy sector:
  - Crude oil production in government-held areas declined to about 9,000 b/p in 2014 from 386,000 b/p in 2010 (98 percent decline in oil GDP).
  - Total oil production including rebel-held output estimated to be 40,000 b/p in 2014.
  - Gas output: 1.1 bcfd in 2010 to 0.5 bcfd in 2014; projected 0.4 bcfd in 2015 after ISIL seizure near Palmyra.
  - State refineries (Homs, Banias) operating at half capacity.
  - By early 2013, more than 30 power stations inactive; at least 40 percent of high voltage lines attacked.
- Agriculture and food production:
  - Agriculture pre-conflict: one-fifth of GDP.
  - Wheat production 2015: 2.5 million tons (20 percent lower than 2010).
  - Barley 2015: 0.9 million tons (40 percent increase since 2010).
  - Livestock declines since 2010: cattle down 30 percent; sheep and goats down 40 percent; poultry down 50 percent.
  - Olive production: 400,000 tons per year in 2015 from one million tons per year.
  - Sugar beet: from 1.7 million tons in 2010 to 29 thousand tons in 2015.
  - Transportation and storage losses and loss of government control impeded food movement to markets.
- Services and manufacturing:
  - Services contracted sharply: retail, wholesale, transportation, construction, banking, tourism.
  - Tourism earnings were $4 billion in 2010 and have completely dried up.
  - Manufacturing centers (Aleppo, Homs, suburbs of Damascus) severely affected; capital and equipment plundered or relocated.
  - Turkey: Syrians accounted for 26 percent of new businesses registered in Turkey in 2014; Turkey’s exports to Syria recovered to $1.8 billion in 2014 from $500 million in 2012.
- Inflation and living standards:
  - Drivers of inflation: supply shortages, subsidy cuts, currency depreciation.
  - FAO/WFP: households spending well over 50 to 60 percent on food in many areas.

### V. Public finances, debt, and financial sector stress
- Fiscal developments:
  - Fiscal data scarce; government not releasing detailed budget information.
  - Assumption: central government collecting no revenue from governorates under rebel control.
  - Fiscal deficit estimated to have widened to over 20 percent of GDP in 2015 from 8 percent of GDP in 2010.
  - Nominal budget: SP800 billion in 2010 to SP1.3 trillion in 2015; in real terms 2015 budget is 40 percent lower than 2010 budget.
  - Revenue estimated to have fallen to 6 percent of GDP from 21 percent of GDP before the crisis.
  - Capital spending expected to be negligible; current spending higher as percent of GDP due to public sector wages, military spending, and imports of essential commodities.
  - Assumption: public workforce and number of pensioners declined by 30 percent since 2010.
- Public debt and financing:
  - Public debt above 100 percent of GDP at end-2015, up from 31 percent at end-2009.
  - External debt expected to have risen to 60 percent of GDP from 9 percent at end-2009.
  - Iranian credit assumed to be the only external financial support between 2011 and 2015; remaining deficit covered domestically by Central Bank and commercial banks.
  - Net claims to central government from banking system increased by 340 percent between end-2010 and end-2011.
  - Central Bank stopped producing monetary statistics at end-2011.
  - Likely accumulation of domestic arrears and delayed salary payments.
- Financial sector integrity and risks:
  - Central and state-owned banks account for three-quarters of banking assets and largely shut off from international systems due to sanctions.
  - NPLs estimated to have risen from 4 percent at end-2010 to 35 percent by September 2013.
  - Pre-conflict AML/CFT strategic deficiencies per FATF; conflict and weakened enforcement likely reversed progress.
  - ISIL funding methods include criminal activities, illegal exploitation of oil and petroleum products, extortion, and bank robberies; part of ISIL funds reportedly moved through regulated bank branches and MVTS.

### VI. Damage estimates, reconstruction costs, and recovery scenarios
- Reconstruction cost and damage estimates:
  - Reconstruction cost estimates range from $100 to $200 billion.
  - SCPR: physical infrastructure destruction between 2011 and 2014 at US$72–75 billion (about 120 percent of 2010 GDP).
  - MPMR early 2015: oil industry losses US$27 billion from destruction.
  - UN ESCWA estimate: about $180 to $200 billion required.
- World Bank remote in-conflict Damage Assessment (six cities; six sectors):
  - Damage estimates for six cities range from about $3,579 million (low) to $4,375 million (high).
  - City concentration: Aleppo accounts for 40 percent of estimated overall damage.
  - TOTAL VALUE OF DAMAGES BY SECTOR ($ Millions):
    - Housing: Low Estimate 2,386; High Estimate 2,916
    - Health: Low Estimate 203; High Estimate 248
    - Education: Low Estimate 101; High Estimate 123
    - Energy: Low Estimate 648; High Estimate 791
    - WASH: Low Estimate 61; High Estimate 75
    - Roads: Low Estimate 180; High Estimate 221
    - Total: Low Estimate 3,579; High Estimate 4,375
  - Housing accounts for 65 percent of estimated damages in the DA (external structural damage only).
  - Water sector: 260 water sector assets surveyed; about one-quarter suffered damage.
  - Agricultural damages appear small in the DA because selected areas cover approximately 30 percent of Syria’s food production.
  - Accuracy caveats: in-conflict assessment subject to data fragmentation, confidentiality, and temporal issues; damages calculated to December 2014 baseline.
- Human capital losses:
  - Syria’s population has shrunk by 20–30 percent; 50 percent of the population is internally displaced.
  - SCPR estimated loss of years of schooling represents human capital deficit of $5 billion in education investment (2014).
  - UNICEF report placed loss in human capital at $10.5 billion from loss of education of children and youth.
- Illustrative recovery scenarios:
  - Hypothetical: post-conflict rebuilding begins in 2018 and the economy grows at trend rate of about 4½ percent.
    - Under this assumption, it would take the country about 20 years to reach its pre-war real GDP level.
  - With a one-standard deviation higher growth rate relative to trend, it would take Syria 10 years to catch up to 2010 GDP levels.
  - Scenarios assume quick restoration of production capacity and human capital and that the country remains intact as a sovereign territory.

### VII. Reform priorities and governance imperatives
- Short-run priorities:
  - Stabilization and helping the poorest, including humanitarian assistance.
  - Addressing output and employment collapse in tradable sectors, low international reserves, infrastructure destruction, exchange rate depreciation, dollarization, high inflation, and frozen assets issues.
- Medium- to long-run reform agenda:
  - Priorities include developing non-oil sectors, maintaining fiscal sustainability while expanding social protection, private sector development, and increasing productivity through skills and technology.
  - Environmental/resource management: address water scarcity (pre-war irrigation consumed 90 percent of available water; domestic use 8 percent; industry 2 percent), groundwater over-extraction, and sanitation deficits.
  - Regional disparities: reconstruction should address income and social inclusion gaps, and consider greater fiscal decentralization with accountability and transparent resource use.
- Governance and institutional rebuilding:
  - Re-establish effective, fair, and transparent fiscal policy and management.
  - Develop rule of law and judiciary independence.
  - Rebuild capacity for monetary operations and banking supervision.
  - Reform bank regulatory framework, including AML/CFT regime.
  - Donor coordination and consistent technical assistance strategy at outset of post-conflict phase are critical.

### Key statistics and indicators (condensed)
- Population 2010: about 22.1 million.
- Population decline since March 2011: at least 20 percent (est.).
- Fatalities reported: more than 250,000 killed; more than 800,000 injured.
- Refugees to neighbors (as of February 2016): about 4.7 million.
- Internally displaced: 7.6 million (OCHA).
- Refugees in EU by December 2015: almost 900,000 declared political asylum.
- Economy: projected real contraction of 57 percent since 2010.
- Nominal GDP ($ billions): 2010: 60; 2015: 14.
- Gross public debt: 2010: 30 percent of GDP; 2015: 150 percent of GDP.
- International reserves (official gross foreign assets, $ billions): 2010: 21; 2015: 1.
- Reserves in months of imports: 2010: 12; 2015: 1.
- Official exchange rate (LS/$, average): 2010: 46; 2015: 260.
- Parallel market exchange rate (LS/$, average): 2010: 46; 2015: 297.
- CPI inflation (period average): 2014: 29; 2015: 26.
- Current account balance (percent of GDP): 2010: 1; 2015: -35.
- Reconstruction cost estimates range: $100 to $200 billion; UN ESCWA: $180 to $200 billion.
- World Bank DA total damages (six cities): Low Estimate $3,579 million; High Estimate $4,375 million.
- Housing share in DA damages: 65 percent.
- Wheat production 2015: 2.5 million tons (20 percent lower than 2010).
- Olive production 2015: 400,000 tons per year (from one million tons per year in 2010).
- Sugar beet production: 2010: 1.7 million tons; 2015: 29 thousand tons.
- Healthcare indicators: life expectancy 2010: 76 years; 2014: 56 years.
- Doctors-to-population ratio 2010: 1:661; 2014: 1:4,000.
- School enrollment: 2010: 5.2 million; 2014: 3.6 million.
- Children out of school in Syria: more than 2 million; over 700,000 refugee children out of school.
- SCPR poverty estimate 2014: 83 percent (2007: 12.4 percent).

*Source: IMF working paper _wp16123 (excerpt provided).*

### References .............................................................................................................

### _wp16123 - References .............................................................................................................

### Key messages
- The civil war has set the country back by decades in economic, social, and human development.
- Syria’s GDP today is less than half of what it was before the war started and it could take two decades or more for Syria to return to its pre-conflict GDP levels.
- Reconstructing damaged physical infrastructure will be monumental; rebuilding Syria’s human capital and social cohesion will be an even greater and lasting challenge, with half of the population displaced, many children no longer schooled, and many people of all ages traumatized by the war.
- Findings are subject to an extraordinary degree of uncertainty due to extreme limitations on information and the government publishing few economic data; the paper draws heavily on third-party information.

### I. Before the conflict
- Early 2000s: gradual economic liberalization to spur growth, motivated partly by decline in oil production and proven oil reserves affecting fiscal sustainability.
- Structural reforms aimed at deregulating and diversifying the state-focused economy, phasing out energy subsidies, and streamlining the tax regime.
- 2004: private banks allowed to operate; 2009: stock market re-opened after more than 40 years.
- Syria requested WTO membership in 2001 and signed a free trade agreement with Turkey in 2007.
- IMF technical assistance supported reforms including strengthening banking supervision and regulation, modernizing the monetary framework, developing a government debt market, strengthening and streamlining revenue administration, and improving public financial management.
- Economic indicators and conditions:
  - Non-oil growth averaged 4.4 percent during 2000–09.
  - Public debt at the end of 2009: 31 percent of GDP.
  - International reserves at the end of 2010: more than nine months of imports of goods and services.
  - Foreign direct investment averaged about 1.3 percent of GDP during 2000–09, focused on pharmaceuticals, food processing, and textiles.
- Social and labor outcomes before conflict:
  - Poverty rose in the second half of the 2000s after falling between 1997 and 2004.
  - Rural poverty higher than urban; northeast region poverty ratio about 15 percent in 2007 and accounted for more than half of the poor in Syria.
  - Unemployment almost doubled within a decade to more than 16 percent in 2006/07.
  - Youth (age 15–24) unemployment: 22 percent in 2006/07.
- Business environment and rule of law:
  - 2009 Doing Business ranking: 137 out of 181 countries.
  - Firms cited corruption, an inadequately educated workforce, and electricity as top obstacles.
  - More than 80 percent of firms indicated they were expected to give gifts to public officials to “get things done,” versus a regional average of 37 percent.
  - Heritage Index: Syria ranked “repressed” or “mostly unfree” between 2006–09 and had the fourth-lowest regional ranking in rule of law.
- Political reform: President Bashar al Assad advocated political reforms from 2000, but pace of reform was slow and frictions emerged between reform advocates and status quo allies.

### II. Five years into the conflict
- Conflict overview:
  - Since March 2011 the uprising evolved into a crippling civil war with fierce fighting between the regime and various secular and Islamist opposition groups.
  - Political disintegration into autonomous provinces and territories controlled by the central government, Islamic State of Iraq and the Levant (ISIL), and various rebel groups.
  - Conflict attracted financial and military support from external powers.
- Box 1: Syria’s Divisions
  - ISIL controls about half of Syria’s territory (by land mass), particularly the resource-rich north and the eastern/central part of the country.
  - Kurds hold about 5 percent of the territory (by land mass) in the northeast and a small pocket in the northwest.
  - The government controls most of the west—the coastal area and some parts of the south.
  - The west and Damascus account for about 55 to 70 percent of the population.

### A. Syria’s People — humanitarian and social impacts
- Demographics and casualties:
  - Population in 2010: about 22.1 million.
  - Population estimated to have shrunk by at least 20 percent since March 2011.
  - UNHCR reports more than 250,000 people killed and more than 800,000 injured as a result of the fighting.
  - As of February 2016, UNHCR reports about 4.7 million people have fled to Syria’s immediate neighbors—Iraq, Jordan, Lebanon, and Turkey.
  - Almost 900,000 refugees had declared political asylum in the EU by December 2015.
  - OCHA reports 7.6 million internally displaced people within Syria.
- Poverty and unemployment:
  - Syria Center for Policy Research (SCPR) estimates more than 60 percent of the labor force (about 3.5 million) is unemployed, with some 3 million having lost their jobs as a result of the conflict.
  - SCPR estimated overall poverty rate in 2014 at 83 percent (compared to 12.4 percent in 2007).
  - More than two-thirds of Syrians are living in extreme poverty.
  - UN reports some 2.1 million homes destroyed.
- Children and education:
  - School attendance has dropped by more than half; more than 2 million children in Syria out of school.
  - Number of enrolled children dropped to 3.6 million in 2014 from 5.2 million in 2010.
  - Average years of schooling is falling; non-attendance rates are highest in conflict areas (60–75 percent) compared to national average of 48 percent in 2014.
  - Over 700,000 children of Syrian refugees are out of school.
  - UNICEF reports 3.7 million Syrian children born since the conflict began in 2011 are born as refugees.
- Health:
  - SCPR (updating UNDP estimates of 2013) reports life expectancy declined by 20 years within four years: to 56 years in 2014, down from 76 years in 2010.
  - One-fifth of all primary health care facilities not functioning and another one-fifth functioning at limited levels.
  - Half of the country’s hospitals have been destroyed.
  - Ratio of doctors to overall population: 1:4,000 in 2014, down from 1:661 in 2010.
  - Vaccination rates for children have fallen to 50–70 percent from 99–100 percent before the crisis.
  - Diseases reappeared: polio, measles, typhoid.
  - About two thirds of children in Syria are without safe and reliable water.
  - Only one third of Syria’s sewage now treated.
- Food, water, electricity, and humanitarian aid:
  - UNICEF estimates more than 4 million children and women in need of nutritional assistance.
  - Since mid-2014, the government cut price subsidies on bread, rice, sugar, and water, and closed government-run bakeries in opposition held areas.
  - Significant water infrastructure destroyed; tactical water and power cuts used in some cases.
  - Alternative service providers selling drinking water and electricity typically charge high prices; government rules to control prices not enforceable.
  - UN appeal for Syria response plan underfunded over past four years.
  - OCHA and SCPR estimate as of early 2016: 13.5 million people in Syria in need of humanitarian aid, including six million children.
  - Of these, 4.6 million people are in hard-to-reach areas, including close to 500,000 people in besieged areas.
  - Foreign NGOs face restrictions in assistance distribution, including formal authorization by the government and constraints from international sanctions.

### B. Syria’s Economy — macroeconomic impacts (2010–2015, rudimentary and tentative)
- Analysis based heavily on third-party sources with strong assumptions due to scattered information and administrative fragmentation; macro framework presented for Syria as one country.
- Table 1: Key Economic Indicators (Est., 2008–2015; Proj. for 2015)
  - Real Sector (Real GDP change in percent)
    - 2008: 4
    - 2009: 6
    - 2010: -6
    - 2011: -21
    - 2012: -17
    - 2013: -17
    - 2014: -15
  - Oil (Real GDP change in percent)
    - 2008: 0
    - 2009: 0
    - 2010: 3
    - 2011: -10
    - 2012: -29
    - 2013: -14
    - 2014: -23
    - 2015: -70
  - Non-oil (Real GDP change in percent)
    - 2008: 5
    - 2009: 7
    - 2010: -5
    - 2011: -20
    - 2012: -18
    - 2013: -16
    - 2014: -9
  - Nominal GDP ($ billions) 1/
    - 2008: 53
    - 2009: 54
    - 2010: 60
    - 2011: 59
    - 2012: 42
    - 2013: 30
    - 2014: 21
    - 2015: 14
  - Overall unemployment rate (in percent)
    - 2008: 11
    - 2009: 8
    - 2010: 9
    - 2011–2015: ......60...
  - Prices (change in percent)
    - GDP deflator
      - 2008: 16
      - 2009: -3
      - 2010: -7
      - 2011: 8
      - 2012: 22
      - 2013: 46
      - 2014: 18
      - 2015: 31
    - CPI inflation (period average)
      - 2008: 15
      - 2009: 3
      - 2010: 4
      - 2011: 5
      - 2012: 7
      - 2013: 9
      - 2014: 29
      - 2015: 26
  - Central government finances (in percent of GDP)
    - Revenue
      - 2008: 20
      - 2009: 24
      - 2010: 21
      - 2011: 15
      - 2012: 14
      - 2013: 9
      - 2014: 7
      - 2015: 6
    - Expenditure
      - 2008: 23
      - 2009: 27
      - 2010: 29
      - 2011: 30
      - 2012: 30
      - 2013: 28
      - 2014: 29
      - 2015: 30
    - Overall balance
      - 2008: -3
      - 2009: -3
      - 2010: -8
      - 2011: -16
      - 2012: -16
      - 2013: -18
      - 2014: -22
      - 2015: -24
    - Gross public debt
      - 2008: 37
      - 2009: 31
      - 2010: 30
      - 2011: 38
      - 2012: 64
      - 2013: 86
      - 2014: 119
      - 2015: 150
  - Balance of payments
    - Current account balance (in percent of GDP)
      - 2008: 0
      - 2009: -1
      - 2010: 1
      - 2011: -4
      - 2012: -9
      - 2013: -21
      - 2014: -28
      - 2015: -35
    - Official Gross foreign assets (in billions of U.S. dollars)
      - 2008: 17
      - 2009: 17
      - 2010: 21
      - 2011: 20
      - 2012: 12
      - 2013: 8
      - 2014: 5
      - 2015: 1
    - (in months of imports of GNFS)
      - 2008: 11
      - 2009: 13
      - 2010: 12
      - 2011: 12
      - 2012: 9
      - 2013: 6
      - 2014: 4
      - 2015: 1
  - Exchange rate
    - Official nominal exchange rate (LS/$, average)
      - 2008: 47
      - 2009: 47
      - 2010: 46
      - 2011: 48
      - 2012: 65
      - 2013: 109
      - 2014: 154
      - 2015: 260
    - Parallel market nominal exchange rate (LS/$, average)
      - 2008: 47
      - 2009: 47
      - 2010: 46
      - 2011: 48
      - 2012: 80
      - 2013: 150
      - 2014: 179
      - 2015: 297
- Sources for table: Syrian authorities; Syrian Center for Policy Research, World Bank, and Fund staff estimates and projections.

*Source: _wp16123 - References .............................................................................................................*

### 15.      The conflict has devastated the

### _wp16123 - 15.      The conflict has devastated the

### Economic contraction and overall impact
- We project that the economy has contracted in real terms by 57 percent since 2010.
- Non-oil real GDP declined on average by 14 percent between 2011 and 2015.
- Oil and gas GDP both fell by an average of 28 percent during the same period.
- Output losses and physical infrastructure destruction are particularly concentrated in the oil, manufacturing, transportation, and construction sectors.
- Considerable uncertainty surrounds estimates and reported data due to the likely flourishing of the informal economy amid the breakdown of the rule of law, breakdown in government economic data collection and reporting, and disintegration into multiple war economies.

### Energy sector: oil, gas, and infrastructure
- Crude oil production in areas under government control declined to about 9,000 barrels per day (b/p) in 2014 from 386,000 b/p in 2010, a 98 percent decline in oil GDP.
- Taking into account output from fields under rebel control (sold via the black market), total oil production is estimated to have amounted to 40,000 b/p in 2014.
- Gas output declined to 0.5 billion cubic feet per day (bcfd) in 2014 compared to 1.1 bcfd in 2010.
- After ISIL’s seizure in early 2015 of the gas fields near Palmyra, production was projected to have fallen to 0.4 bcfd in 2015.
- Energy infrastructure—including oil and natural gas pipelines and electricity transmission networks—has been damaged.
- Syria’s two state-owned refineries—one in Homs, the other in Banias—are operating at half capacity, mainly due to damage to pipelines and other infrastructure around the refinery at Homs.
- The lack of fuel inputs has limited power generation; before the war, 94 percent of electricity generation came from conventional thermal power plants.
- By early 2013, more than 30 of Syria’s power stations were inactive, and at least 40 percent of the country’s high voltage lines had been attacked.

### Agriculture and food production
- Agricultural production, which accounted for one-fifth of GDP before the conflict, has experienced significant losses.
- Agricultural areas affected by destruction of farmland and shortages of inputs (seeds, fertilizer, pesticide, fuel, farm labor), damage to irrigation systems, mills, and farming equipment; livestock sold off or moved across borders.
- Fertile areas such as Aleppo and Raqqa governorates, which accounted for half of Syria’s agricultural production, are largely outside government control.
- Transportation and storage problems due to loss of government control over roads and territory have impeded moving food from production areas to core markets.
- Wheat production was estimated at 2.5 million tons in 2015, 20 percent lower than 2010.
- Barley increased by 40 percent to 0.9 million tons since 2010.
- Since 2010, livestock production declined by 30 percent in cattle, by 40 percent in sheep and goats, and by 50 percent in poultry.
- Livestock accounted for about 35–40 percent of total agricultural production and occupied about 20 percent of the rural labor force.
- Olive production declined to 400,000 tons per year in 2015 from one million tons per year.
- Citrus production (about one million tons per year) has been less affected.
- Industrial crops such as sugar beet, cotton, and tobacco have also fallen (example: sugar beet production dropped from 1.7 million tons in 2010 to 29 thousand tons in 2015).

### Services and manufacturing sectors
- Services (retail, wholesale, transportation, construction, banking, tourism) estimated to have contracted sharply due to collapse of the overall economy, heightened security risks, destruction of roads, and economic fragmentation.
- Banking further impacted by economic sanctions.
- Government initially contributed positively to growth as public sector wages and military spending increased sharply between 2011 and 2013; since then cuts in provision of services occurred due to falling revenue and export oil earnings.
- Manufacturing production likely suffered disproportionately large decline due to shortages in fuel, power, and raw materials, limited access to trade finance, and severe infrastructure destruction.
- Centers of manufacturing (Aleppo, Homs, suburbs of Damascus) were most affected.
- Reports indicate factory equipment plundered; some businesses relocated to secure coastal locations; anecdotal evidence of capital and equipment moved abroad.
- In 2014, Syrians accounted for 26 percent of new businesses registered in Turkey; Turkey’s exports to Syria recovered to $1.8 billion in 2014 from $500 million in 2012.

### Inflation and living standards
- Cumulative consumer price index (CPI) increased by more than 300 percent between March 2011 and May 2015.
- Drivers: supply shortages of basic goods (food, medicine, fuel), cuts in government subsidies (water, food, electricity, fuel), and depreciating currency.
- Food prices increased again in 2015 after being relatively stable in 2014, driven by subsidy cuts, supply shortages, and faster exchange rate depreciation.
- FAO/WFP report found households spending well over 50 to 60 percent on food in many areas.

### External sector: trade, current account, reserves, and exchange rate
- We estimate the 2015 current account deficit to be 13 percent of GDP, compared with about 0.6 percent of GDP in 2010.
- Most deterioration stems from collapse in oil exports and tourism.
- Trade patterns shifted: trade with EU countries collapsed entirely after late 2011 sanctions; importance of Iraq and Saudi Arabia increased.
- Exports are very roughly estimated to have collapsed by about 70 percent to about $4 billion between 2010–15.
- Imports are expected to have declined by almost 40 percent to $10.5 billion between 2010 and 2015.
- Car imports fell from 87,000 in 2010 to 1,000 in 2014.
- Imports of essential goods (medicine, finished food, wheat, baby milk, sugar, seeds), military goods, and crude oil and petroleum products have increased.
- Earnings from tourism (which was $4 billion in 2010) have completely dried up.
- Transfers have held up: Syrian expatriate informal remittances and NGO donor support through UNHCR; UN agencies have spent a total of about $1 billion per year.
- International reserves estimated to have dropped to $1 billion by the end of 2015 (equivalent to about 1 month of imports).
- In projecting reserves, assumption that 80 percent of the Central Bank’s international reserves at the end of 2011 were available for intervention while the rest was frozen.
- The Syrian pound lost at least 85 percent of its value against the U.S. dollar since March 2011 in both official and parallel markets.
- The Syrian pound is officially trading just below 400 against one dollar, compared to 47 in March 2011.
- Central Bank measures: August 2013 ban on use of foreign currency for commercial transactions within Syria; 2014 forced exporters to surrender 50 percent of foreign currency earnings; April 2015 increased surrender rate to 100 percent; November 2015 limit on imports to essential goods such as agricultural inputs and finished agricultural products.

### Fiscal sector and public finances
- Fiscal data are very scattered; government does not release details on approved budget, fiscal outcomes, or financing.
- Assumption that the central government is collecting no revenue from governorates under rebel control.
- We estimate the fiscal deficit widened to over 20 percent of GDP in 2015 from 8 percent of GDP in 2010.
- Nominal budget increased from SP800 billion in 2010 to SP1.3 trillion in 2015, but in real terms the 2015 budget is 40 percent lower than the budget of 2010.
- Revenue estimated to have fallen to 6 percent of GDP, compared to 21 percent of GDP before the crisis.
- Capital spending expected to be negligible.
- Current spending as a percent of GDP is higher than in 2010 due to more spending on public sector wages, the military, and imports of essential commodities.
- Government cut back on subsidies for food (wheat, bread, sugar), fuel, water, and electricity.
- Assumption that the public workforce and the number of pensioners have declined by 30 percent since 2010 due to refugees, war casualties, and closure of government services.

*Source: Fund staff estimates and projections as presented in the provided content.*

### 27.      Public debt is large and mostly financed domestically. The Iranian credit is

### 27.      Public debt is large and mostly financed domestically. The Iranian credit is

### Public debt and external financing
- The Iranian credit is assumed to have been the only external financial support between 2011 and 2015; the remaining deficit had to be covered domestically by the Central Bank and commercial banks.
- Public debt estimates:
  - Public debt was above 100 percent of GDP at the end of 2015, up from 31 percent of GDP at the end of 2009.
  - External debt is expected to have risen to 60 percent of GDP from 9 percent at the end of 2009.
- Domestic banking support and statistical notes:
  - Net claims to the central government from the banking system increased by 340 percent between end-2010 and end-2011, accounting for the lion share of domestic credit growth.
  - The Central Bank stopped producing monetary statistics at the end of 2011.
  - Similar to other conflict countries, it is likely the government has built up domestic arrears, including by delaying salary payments.

### Financial sector: structure, stress, and integrity
- Isolation and sanctions:
  - Central and state-owned banks account for three-quarters of banking assets and are largely shut off from international payment and settlement systems and credit markets due to international sanctions.
  - Foreign bank exposures to Syrian banks sharply declined since the onset of the conflict; assets held abroad in countries that have imposed sanctions have been frozen.
- Banking system performance:
  - The banking system has experienced outflows of deposits and collapse in economic activity, though there have been no reported bank closures.
  - The Damascus stock exchange has remained open throughout the conflict with a small number of investors trading regularly.
- Non-performing loans (NPLs):
  - NPLs are estimated to have risen from 4 percent at the end of 2010 to 35 percent by September 2013.
  - Banks initially had relatively robust capital buffers, high liquidity, and low exposure to foreign exchange risks, which helped absorb some losses from rising NPLs and destroyed collateral.
- Financial crime and terrorist financing risks:
  - Syria had pre-conflict strategic deficiencies in AML/CFT according to FATF; the conflict and weaker enforcement likely reversed many efforts.
  - A FATF report outlined ISIL’s funding methods within Syria, including proceeds from criminal activities, illegal exploitation of oil and petroleum products, extortion, and bank robberies.
  - Reports indicate part of ISIL money has been moved through regulated bank branches and MVTS they control in Syria.

### Recovery horizon and macroeconomic outlook
- Dependencies for reconstruction:
  - The timeframe and success of reconstruction depend on when and how the conflict is resolved, the scope and pace of political and economic reforms, and the availability of external assistance and private investment.
  - Quick wins suggested: energy sector, agriculture, and labor-intensive industries such as textile and food processing.
- Illustrative recovery scenario:
  - Hypothetical assumption: post-conflict rebuilding period begins in 2018 and the economy grows at its trend rate of about 4½ percent.
  - Under this assumption, it would take the country about 20 years to reach its pre-war real GDP level.
  - With a one-standard deviation higher growth rate relative to trend, it would take Syria 10 years to catch up to 2010 GDP levels.
  - These scenarios assume quick restoration of production capacity and human capital and that the country remains intact as a sovereign territory.

### Physical and human capital: damages and losses
- Overall reconstruction cost estimates and sectoral damage:
  - Reconstruction cost estimates range from $100 to $200 billion.
  - SCPR estimates destruction of physical infrastructure between 2011 and 2014 at US$72–75 billion, equivalent to about 120 percent of 2010 GDP.
  - MPMR estimated in early 2015 the oil industry has lost US$27 billion from destruction of wells, pipelines, and refineries.
  - UN ESCWA more recently estimated Syria would require about $180 to $200 billion—three times the 2010 GDP.
- Socioeconomic and human capital impacts:
  - Syria’s population has shrunk by 20–30 percent; 50 percent of the population is internally displaced.
  - SCPR estimated in 2014 the loss of years of schooling by children represents a human capital deficit of $5 billion in education investment.
  - A recent UNICEF report placed the loss in human capital at $10.5 billion from the loss of education of Syrian children and youth.
  - Many children born into conflict have exposure to violence with long-term generational effects.
- Implications for reconstruction:
  - Significant resources will be required to rebuild lives of internally displaced people and to encourage return and reintegration of refugees.
  - Conflict has exacerbated and created divisions across sectarian communities that must be addressed to promote social and political cohesion.

### Damage Assessment for Selected Cities/Sectors (World Bank DA summary)
- Scope and methodology:
  - Remote in-conflict damage assessment in six cities: Aleppo, Homs, Latakia, Dar’a, Idlib, and Hama; covers six sectors: agriculture, health, education, energy, transport, and housing.
  - Conducted using satellite imagery and social media analytics; assesses damage on a unit cost basis and does not include estimates of rebuilding costs.
- Key findings:
  - Damage estimates for the six cities range from about $3.7 to 4.5 billion; Aleppo accounts for 40 percent of the estimated overall damage.
  - Sector distribution (TOTAL VALUE OF DAMAGES BY SECTOR in $ Millions):
    - Housing: Low Estimate 2,386; High Estimate 2,916
    - Health: Low Estimate 203; High Estimate 248
    - Education: Low Estimate 101; High Estimate 123
    - Energy: Low Estimate 648; High Estimate 791
    - WASH: Low Estimate 61; High Estimate 75
    - Roads: Low Estimate 180; High Estimate 221
    - Total: Low Estimate 3,579; High Estimate 4,375
  - Housing accounts for 65 percent of estimated damages in the DA (external structural damage only).
  - Water sector: 260 water sector assets surveyed; about one-quarter suffered damage, predominantly water towers; Aleppo and Dar’a suffered the most damage.
  - Agricultural damages appear small in the DA because the assessment covered governorates that are not Syria’s core agricultural production zones (selected areas cover approximately 30 percent of Syria’s food production).
- Data limitations:
  - As an in-conflict assessment, accuracy could be undermined due to data fragmentation, confidentiality reasons, and temporal issues; damages calculated according to pre-2011 baseline through December 2014.

### Economic reform priorities (short run and reconstruction phase)
- Short-run priorities:
  - Focus on stabilization and helping the poorest, including humanitarian assistance.
  - Immediate challenges: output and employment collapse in the tradable sector, low level of international reserves, destruction of infrastructure, accelerated exchange rate depreciation, dollarization, high and rising inflation, and legal/financial issues associated with frozen assets.
- Medium- to long-run reform agenda:
  - Prioritized and sequenced reform program could focus on:
    - (1) Developing non-oil sectors to cope with decline in oil production and to create jobs.
    - (2) Maintaining fiscal sustainability while providing social protection to a growing number of young unemployed.
  - Further diversification through private sector development is critical.
  - Increasing productivity by raising labor force skills and improving the technological base.
- Environmental and resource management:
  - Syria is semi-arid; water scarcity and variability are major challenges.
  - Pre-war irrigation consumed 90 percent of available water resources compared to 8 percent for domestic use and 2 percent for industry.
  - Groundwater is the primary supply and most aquifers were severely over-exploited pre-crisis; over-extraction and pollution impaired water quality and quantity.
  - Sanitation sector was challenged pre-crisis; damage has further stressed water supply and sanitation.
- Regional disparities and governance:
  - Poverty and extreme poverty have worsened and are highest in governorates most affected by conflict and historically poorest.
  - Reconstruction should address regional disparities in income and social inclusion via improved public service provision, employment prospects, and access to finance at regional levels.
  - Institutional and governance arrangements should consider greater fiscal decentralization and local authority control over service delivery, contingent on accountability and transparent resource use.

*Source: IMF staff summary of the referenced chapter/section.*

### 40.      Rebuilding public institutions and improving governance will be key. This

### _wp16123 - 40.      Rebuilding public institutions and improving governance will be key. This

### Governance and institutional reform
- Rebuilding public institutions and improving governance will be key. This includes:
  - making fiscal policy and fiscal management effective, fair, and transparent;
  - developing the rule of law and judiciary independence;
  - re-establishing and strengthening the capacity for monetary operations and banking supervision; and
  - reforming the bank regulatory framework, including the anti money laundry and combating terrorist financing (AML/CFT) regime.
- Lessons from other post conflict countries show that framing an overall consistent technical assistance strategy at the outset of the post-conflict phase and securing donor coordination are critical for successful implementation of economic and institutional reforms.

### Economic, social, and human-development impact
- The conflict has set the country back decades in terms of economic, social, and human development.
- Syria’s GDP today is less than half of what it was before the war started.
- Inflation is high double digits, and there has been a large depreciation of the exchange rate.
- International reserves have been depleted to finance large fiscal and current account deficits, while public debt has more than doubled.
- Syria’s people are struggling with the devastating effects of the conflict, including widespread unemployment and poverty, homelessness, food and medicine shortages, and destruction of public services and infrastructure.
- The situation for those who have stayed in Syria is dire:
  - half of the population is displaced;
  - many children are no longer schooled;
  - access to medicine, food and clean water is limited; and
  - many people of all ages are traumatized by the war.

### Reconstruction priorities and reform agenda
- Rebuilding the country will be a complex and monumental task. Priority areas identified:
  - Reconstructing damaged physical infrastructure will require substantial international support and prioritization.
  - Rebuilding Syria’s human capital and social cohesion will be an even greater and lasting challenge.
  - Considerable resources will need to go to rebuilding the lives of internally displaced people, and to encouraging the return and reintegration of refugees along with reducing the divisions and tensions between various sectarian communities.
- Immediate focus:
  - urgent humanitarian assistance;
  - restoring macroeconomic stability; and
  - rebuilding institutional capacity to implement cohesive and meaningful reforms.
- Medium-term reform agenda could include:
  - diversifying the economy;
  - creating jobs for the young and displaced;
  - tackling environmental issues; and
  - addressing long-standing issues such as the regional disparities in income and greater political and social inclusion.

### Key statistics and indicators (as reported)
- Syria’s GDP today is less than half of what it was before the war started.
- Inflation: "high double digits".
- Public debt: "has more than doubled".
- Population displacement: "half of the population is displaced".

*Source: IMF working paper _wp16123 (excerpt provided).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16123.pdf_