Country Report Syria January 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, there will be ongoing tensions within the ruling elite, 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 the heightened Israel-Gaza conflict.
• Syria's drive to increase investment and boost tourism will be affected by the global economic downturn, with real GDP growth falling from 4.8% in 2008 to 3.1% in 2009, before recovering slightly to 4.1% in 2010.
• Inflation will decline sharply from its 2008 peak, averaging 7.7% in 2009 and 7% in 2010, as the global slowdown depresses global commodity prices.
• The current-account deficit will widen sharply in 2009, to around US$2.7bn (5.1% of GDP), before easing to 3.5% of GDP in 2010.

Monthly review

• The EU and Syria have initialled an updated Association Agreement, four years after an earlier version was stalled by political tensions. Syria now expects the free-trade agreement to be signed in the first half of 2009.
• Syria's main court of appeal has overturned a court decision for the early release of two jailed opposition activists, Michel Kilo and Mahmoud Issa.
• The Israeli assault on Gaza has complicated Syrian diplomacy, making the prospect of further Israeli-Syrian peace talks more remote, and highlighting the differences between Syria and pro-Western Arab states.
• With support from the UN, Syria is initiating a two-year study into reforms needed to make a credible bid for World Trade Organisation membership.
• The Central Bank has issued fresh monetary data, showing M2 expanding by 17.2% year on year at end-August, the fastest money-supply growth rate since 2002. IMF data shows inflation at 19% at end-July.
• Foreign assets in the banking system fell by 25% year on year to end-August, and overall net foreign assets fell by 13%, to the equivalent of US$14.2bn, fitting with our estimate that the current account fell into deficit in 2008.
• Dedeman Hotels & Resorts of Turkey has taken over the management of three five-star hotels in Syria from the Meridien Group under a 12-year contract intended to boost investment in them as the tourism sector grows.

This report covers the following industry codes:
SIC Code: 60;48
NAICS Code: 52;517

This report covers the following industry codes:
SIC Code: 60;48
NAICS Code: 52;517