The Syrian battlefield witnessed major developments in the last three months of 2014 which reveal that the conflict is gaining more reach. The Islamic State (IS) made headlines by entering the Kurdish town of Kobane situated at the Syrian-Turksih border in October. This move is a heavyweight as it sparked concerns over a Turkish intervention and increased appeal for US led airstrikes to help rid the Kurds of the IS’s grip. Jabhat al Nusra, the Qaeda affiliate, made advancements in Idlib and more critically mobilized in Sarmada, also a town near the Syrian Turkish border. With these dangerous strategic advancements and with Syria’s key allies, Russia and Iran, dealing with their own troubles back home, the economy is victim of more strains.
According to the Economist Intelligence Unit, inflation slowed from 82.3% in January 2014 to 48.9% in May. Food price inflation averaged 79.5% in the first five months of the year while Housing, water and fuel inflation averaged 36% in the January-May period. According to news reports, meat, cucumbers, lemons, sugar and olive oil, all essential elements, have witnessed exceptional surges in price since the start of the conflict.
Syria’s oil sector has continued to suffer from the ripples of the war. It has become greatly difficult to get crude delivered to refineries and the country is now suffering from a shortage of supply. According to the Ministry of Petroleum and Mineral Resources, oil production in Syria dropped by 67% y-o-y in 2014 and stood at 9,329 barrels per day in 2014 compared to 28,000 barrels daily in the previous year.
The crisis has forced the import and distribution of oil and fuel imports to be taken from the hands of the state. The Ministry of Economy and Trade has started to allow imports of fuel oil and diesel by private traders which are processed through the Homs and Banias refineries in exchange for a fee to be paid for the state. The state is in dire need for revenues and has even cancelled fuel subsidies for manufacturers in October. The state also had to bend the rules applied in the free-zone in light of the crisis. Leasing fees can now be paid in installments and have been adjusted to each location depending on its specification, loosening conditions for companies operating in the free-zone. Payments can be made in dollars or in Syrian pounds. Moreover, pick-up trucks, buses, public works machinery which are older than 9 years can now be offered on the local market for consumption. The industrial plants can now be moved from dangerous zones to safe zones, a decision that attracted some industrialists to come operate in the free-zone. With more industrialists in the free zone, revenues will increase and the stature of Syrian products on the local market will be preserved. A memorandum of understanding joining the Syrian and Iranian free-zones is currently in the works.
The crisis has also compelled Syrian authorities to reshuffle some trade rules. The union of exporters called for applying taxes on goods coming from countries who apply taxes on Syrian exports. Moreover, exporters have decided not to offer any support in the form of subsidies to any Syrian company operating outside of Syria until the company moves back into the country. Moreover, importers who ship their products before receiving the import license will pay a fine of 1% of the goods’ value for their 1st strike, 5% for their second strike and 10% for the third.
Until 21 December 2014, exports at the Port of Tartous increased by a yearly 81,000 tons to reach 900,000 tons. The main exported goods were phosphate, cars, containers and food stuffs. As for imports, they declined by a yearly 915,000 tons to reach 4.4 million tons. The main imports were iron, wood, corn, coal and sugar. The Port of Tartous authorities increased fees and charged $100 for each container coming through the port.
Tonnage of the incoming and outgoing merchandise at the Lattakia port fell by a yearly 22.22 tons to reach 1.17M tons in 2014. Revenues of the port totaled $32.92M (SYP 5.9B) in 2014 with the main incoming products being wheat, corn, soya, sugar, flour, wood, rice and beans.
On the fiscal front, figures for the 2015 budget have been submitted for review by the Ministry of Finance. Spending was set at $9B (1,554 B SYP) of which $5.49B (983 B SYP) will be spent on subsidizing goods and services: $2B (338B SYP) for petroleum products, $2B (413B SYP) for electricity and $1.09B (195B SYP) for flour, rice and sugar and $0.21B (37B SYP) for utilities companies. $1.77B (317 billion SYP) will be allocated to disburse the public sector salary bill. As for revenues, they have been estimated at $5.54B (992 B SYP).
The central bank is having a hard time preserving the value of the Syrian pound against the dollar. The Syrian pound has increasingly lost ground going from 164.65 to the dollar at the end of October, to 170.2 at the end of November and finally to 179.2 at the end of December, the lowest value of the Syrian pound since 2009. The foreign exchange quotation specific to banks also shows the rapid deterioration of the Syrian pound with the latest figures from the central bank pointing to a value of 216.58. On the black market, the Syrian pound has reached the levels of 230 to the dollar.
The Damascus Stock Index gained 2% in 2014 following the trade of 25M shares, worth SYP 3.3B. The total number of shareholders exceeded 55,000 and the total number of listed companies increased to 24 after the listing of Cham Bank and Al Baraka Bank on the Damascus Stock Exchange. According to officials from the stock exchange, most of the listed companies posted positive results for the year and some even distributed dividends: Arope Syria distributed dividends of 6 SYP/share, Al Ahlia Vegetable Company distributed 25 SYP/share, The National Insurance Company disbursed dividends of 15 SYP/share, the United Insurance Company handed out dividends of 8 SYP/share and Al-Ahlia Company for Transport distributed dividends of 10 SYP/share.
N.B: The Exchange rate used to express values in USD is the official quote as at end December: One dollar = 179.2 SYP.