Economic Growth in Syria - Or Not?

I recieved two very useful comments on my post "Would it be Better for Syria to have Regime-Change Now or in 5 Years?". (By the way this article appeared translated in Arabic and slightly pared down on Syria-news.com, which is co-funded by Firas Tlas. Click here).

Correction: I originally wrote that Syria-News.com is owned by Firas Tlass, the eldest son of Mustafa Tlass, who was Hafiz al-Asad's long-time Minister of Defense. This is not true.

Nidal Maalouf, the General Manager of the Syrian Economic Center and Editor of Syrian-News, recently wrote me to explain that

Syria-News site is run by the Syrian Economic Center, a limited partnership that is co-funded by Mr. Tlass. SEC was established in 1995, and Mr. Tlass became partner in 2004.

I would like to thank Mr. Maalouf for correcting me and to apologize for my misattribution.

The first comment came from:
Maurice Saade
Agricultural Policy Officer
FAO Regional Office for the Near East
Cairo, Egypt

I beg to differ with your conclusions regarding economic growth rates in Syria. The data in the FAO report that you have quoted can be very misleading if you do not read it correctly. The growth rates calculations are made in Syrian Pounds (SL) and not in $US. Keeping in mind that the exchange rate until the early 1980s was around 3.5-4.0 SL per $US (compared to 50 S per $ since the early 1990s), so you can imagine how distorted the analysis can be if it is based on SL. Unfortunately, I couldn’t find GDP figures from the 1960s or 1970s. But I recall very well that in 1975, the per capita GDP in Syria was around US$ 1500, compared to World Bank estimates of $1160 in 2003, and this is measured in current terms, i.e. not taking inflation into consideration. So in real terms, $1500 in 1975 is equivalent to at least $3000 (probably much more) in today’s terms. Therefore, the real per capita income DECLINED by more than 60% in the past 30 years. Needless to point out that in 1975 there were very little oil revenues and Syria was still reeling from the 1973 war with Israel. It is this long-term trend that most Syrians have felt over the past few decades, particularly the middle class which has seen its purchasing power steadily decline since the early 1970s until it was almost wiped out during the hyper-inflation of the late 1980s. The relative very modest improvements in income during the 1990s may look somewhat impressive, but this is only when they are compared to the abyss rates of 1985-1990.

Best regards, Maurice Saade
P.S. The above remarks reflect my own personal views and not the official position of FAO.

The second comes from:
Jihad Yazigi
Editor-in-chief
The Syria Report
Rue du Paradis, 75010 Paris, France Tel/Fax: 01 43 27 05 14
editor@syria-report.com http://www.syria-report.com

There are a number of factors you have to take into account when you talk of Syria's GDP or in general of the statistics in the country.

The paragraph of the FAO report you mention is referring to GDP growth in Syrian Pounds. This is not very significant data as the rate of the Syrian Pound to the dollar has plunged dramatically since the mid-eighties. So, as a rule and in order to compare with other countries you should use the dollar rates.

In practice, for the last twenty-five years, the Syrian economy has stagnated, with the exception of the first 5 years of the nineties (1990-95). These five years witnessed a conjunction of factors: a surge in production of oil, three successive years of good rain and of growth in agricultural production (which makes up around 25-30% of GDP), capital inflows from the Gulf (following Syria's opposition to Iraq's invasion of Kuwait) and also to a lesser extent private capital inflows that followed the enactment of investment Law N°10. However, in practice, Syria's current per capita GDP stands very much at the same rate as it was in 1980, around US$1,000.

For your information, the seventies witnessed an extraordinary period of economic growth. This was accompanied by a growth in literacy and life expectancy and if I remember well (I have to check the figures here), Syria had during the seventies the third highest average annual growth rate in the world in HDI (Human Development Index).

Another thing you have to take into account is that the economic figures published by all international institutions are based on local Sryian statistics. These statistics grossly underestimate private sector production. Syrian business owners do not report the correct earnings of thier companies in order to escape taxation. According to national statistics the private sector made up around 70% of industrial GDP (outside the oil & gas sector) in 2002. So you can imagine that there is a large gap between what the statistics indicate what reality really is.

Finally, just one remark on relates to unemployment, a subject you did not cover, but which I think is interesting. If GDP growth is higher than population growth you get an increase in per capita GDP. That's all fine but you have to know that in order to obtain a fall in unemployment rates, it is simply not enough to have growth in per capita GDP, because with time comes also growth in productivity, that is the increase in the production produced by every single person.

In France for instance, annual increase in productivity is 2% per annum. Population growth there is 0.5% per annum. As a result, in order for unemployment to fall, the French need a rate of at least 2.5% per year. If the same rate of 2% applied in Syria and you add up around 2.7% in population growth, you actually need a per capita GDP growth of at least 4.7% before unemployment can fall. As long as it isn't the case, unemployment keeps rising.

Best, Jihad

Thanks to both Maurice and Jihad for helping us to understand the long-term economic growth rates in Syria. To someone who has lived off and on in Syria since 1981, it does seem like the economic situation has improved for many people and not just the upper-class. All the same many Syrians have insisted to me that things are actually worse and that the average Syrian is poorer now than in the 1970s. I find that hard to believe. Maurice thinks so. Jihad says they are roughly the same, but that Syrian state statistics may under-report national wealth.