Country Report Syria June 2009

Outlook for 2009-10

• The president, Bashar al-Assad, is expected to remain in power in 2009-10 and, despite some tensions within the regime, there is no significant threat to his rule. Some limited domestic political reform is expected.
• Relations with the US are forecast to improve, albeit gradually, although any open Syrian interference in Lebanon would work against this and would also jeopardise recently restored relations with a number of leading Arab states.
• Although peace talks between Israel and Syria may resume under Binyamin Netanyahu, the new Israeli prime minister, it is unlikely that the Golan Heights will be returned to Syria within the forecast period.
• 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% in 2009, before recovering slightly to 3.5% in 2010.
• Inflation will decline sharply from its 2008 peak, to an average of 7.7% in 2009-10, as the global economic slowdown depresses commodity prices.
• The current-account deficit will widen to around US$1.1bn (2.1%of GDP) in 2009 and further to around US$1.2bn in 2010.

Monthly review

• The US president, Barack Obama, has renewed economic sanctions on Syria, which were imposed by the last US administration. This signals that the status quo is unchanged, and US officials have visited Syria apparently to stress this.
• A report suggests that Russia has cancelled a plan to supply MiG fighter planes to Syria. Various explanations have been proposed as to why, including pressure from Israel or Syria's inability to foot the large bill.
• A new income tax law has raised the highest tax rate to 22%, but other changes mean that the tax burden will be reduced for anyone earning less than about S1.79m (US$37,600) a year.
• The new governor of Aleppo, in northern Syria, has threatened to close commercial establishments that violate Arabic language laws, including displaying Arabic names in twice the size of Latin versions.
• Full year data for 2008 show that net foreign assets in the banking system declined sharply by 16.5%, reflecting the decline in Syria's balance of payments.
• Al Furat Petroleum Company expects that production from its Euphrates Basin fields will average just 100,000 b/d this year, down from 125,000 b/d in 2008 and from around 400,000 b/d at the peak in the mid-1990s.

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