Country Report Syria March 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, and the prospects of better relations with the US are improving, but any open interference in Lebanon would work against this.
• Although peace talks between Israel and Syria may resume once a new Israeli government has been formed, public and parliamentary opposition in Israel is likely to prevent the return of the Golan Heights within the outlook 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 2.6% in 2009, before recovering slightly to 3.6% 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 over US$900m (1.7% of GDP) in 2009 and just under US$1.1bn in 2010.

Monthly review

• Several senior members of the US Congress have visited Syria, showing the new administration's interest in reframing the relationship, although the countries have differing views on how the re-engagement should proceed.
• Relations between Syria and Saudi Arabia, and possibly Egypt, appear to be thawing. The head of Saudi intelligence visited Mr Assad in Damascus, and the Syrian foreign minister was received in Riyadh by the Saudi King.
• Protectionist measures have been introduced to support the cement and textile industries. Cement imports have been banned and import tariffs on clothes will now be calculated on the basis of weight rather than value.
• The government is moving ahead with its plans to restructure state-owned enterprises, by closing down the most chronic lossmakers and making most of the remainder autonomous from the state budget and liable to tax.
• Mr Assad has issued decrees that will create two new regulatory bodies, covering the upstream and downstream aspects of the hydrocarbons sector.
• The net foreign assets of Syria's state-owned banks were down by 48% year on year at end-November 2008, according to new data.
• Work on Syria's first major coastal tourism resort, near the old city of Tartous, has been given the go-ahead. The development is expected to cost around US$800m.

This report covers the following industry codes:
SIC Code: 15
NAICS Code: 23