Country Report Syria February 2009

Outlook for 2009-10

• The president, Bashar al-Assad, is expected to remain in power in 2009-10 and there is no significant threat to his rule. However, tensions within the ruling elite will persist, exacerbated by external pressures.
• Mr Assad will continue the push to reduce Syria's political isolation, but any open interference in Lebanon would work against this, alienating new interlocutors such as France's president, Nicolas Sarkozy.
• There is unlikely to be progress on negotiations with Israel, owing to a lack of public and parliamentary support in Israel for returning the occupied Golan Heights to Syria and to the intensification of the conflict in the Gaza Strip.
• Syria's drive to increase investment and boost tourism will be undermined by the global economic downturn, with real GDP growth falling from 4.8% in 2008 to 2.9% in 2009, before recovering slightly to 3.7% in 2010.
• Inflation will decline sharply from its 2008 peak, to an average of 5.7% in 2009-10, as the global economic slowdown depresses commodity prices.
• The current-account deficit will widen to around US$1.4bn (2.7% of GDP) in 2009, before easing to US$1.3bn (2.2% of GDP) in 2010.

Monthly review

• Mr Assad has gained status in the Arab world by taking a firm stance on Israel's assault on Gaza, announcing the suspension of indirect peace talks and declaring that Israel had killed the Arab peace initiative.
• During an Arab summit in Kuwait, King Abdullah of Saudi Arabia, long at loggerheads with Syria, made a rare public move towards reconciliation with Mr Assad in the context of forging a unified stance on Gaza.
• The government has hinted that it might reduce the official price of diesel, which was fixed when global oil prices were high and, owing to falling prices, is now 65% higher than the world market price.
• The government has reiterated its commitment to launching the Damascus Stock Exchange in March. Syriatel and MTN Syria, two mobile operators, are expected to make up the bulk of the market capitalisation.
• The finance minister has expressed serious concerns about the economy, warning that the deficit will exceed the already high 2009 budget projection of 9.5% of GDP, and that remittances and foreign direct investment will fall.
• Syria has secured more than US$600m of fresh loans from the European Investment Bank and the Kuwait-based Arab Fund for Economic and Social Development to finance electricity and other development projects.

This report covers the following industry codes:
SIC Code: 49;60
NAICS Code: 22;52