Syria war could push Lebanon, Jordan into slump

BEIRUT Thu May 9, 2013 11:25am EDT

A sign which reads for rent is seen on the door of a closed restaurant in downtown Beirut November 20, 2012. REUTERS/Mohamed Azakir

A sign which reads for rent is seen on the door of a closed restaurant in downtown Beirut November 20, 2012.

Credit: Reuters/Mohamed Azakir

BEIRUT (Reuters) - The economic devastation of Syria's war could drive the economies of neighboring Lebanon and Jordan into reverse, Syria's former deputy prime minister said on Thursday.

Pointing to the sharp slowdown in Lebanon's economic growth since the start of Syria's conflict in 2011, from 7 percent to barely 2 percent, Abdallah al-Dardari said there was a direct link to the ever-deepening economic collapse in Syria.

Jordan's economic growth had remained steadier, between 2 and 3 percent, but was still affected by the Syrian turmoil and was below the level needed to provide enough jobs for its fast-growing population, he said.

The Syrian conflict "has a very destabilizing effect," said Dardari, now chief economist for the regional United Nations body ESCWA. "It is in the interest of the whole region for Syria to regain peace and quiet, and start rebuilding."

Dardari said Syria's economy had already shrunk between 35 to 40 percent and would fall 60 percent from its level at the start of the uprising if the fighting continued.

Every one percentage point of economic slowdown in Syria produced a 0.2 percentage point slowdown in Lebanon, he said.

With Syria's economy still collapsing "we can speak about negative growth in Lebanon and Jordan if the situation in Syria continues as it is today for the next two years," he told Reuters in an interview at the U.N.'s central Beirut offices.

The former deputy prime minister for economic affairs was dismissed by President Bashar al-Assad in a cabinet reshuffle shortly after the uprising erupted. He has since been working at the U.N. on plans for Syria's post-conflict reconstruction.

SYRIA CRISIS HITS TOURISM, TRADE

Economists in Lebanon say domestic factors also played a part in the country's economic slowdown, including the political uncertainty when former Prime Minister Saad al-Hariri's government was toppled in early 2011.

But Dardari said the Syrian crisis was hitting tourism, trade, development assistance from Gulf Arab oil states and even remittance levels from Lebanon's huge expatriate population, who worry about security in their homeland.

The flood of cheap Syrian labor into Lebanon could also drag down average salaries by 14 percent because of the increase in labor supply of hundreds of thousands of refugees and laborers arriving in a country of just 4 million.

Lebanon's Central Bank governor Riad Salameh, speaking at a conference in Beirut on Thursday, agreed that the Syrian conflict was weighing on Lebanon's performance but reiterated his forecast of 2 percent growth this year.

The impact on Jordan would be slightly less because its economy was less tied to Syria's, Dardari said. "However you can see in the last five to 10 years Syria and Jordan dramatically improved their trade relations and bilateral investments, and have tremendous plans for further integration."

"That has all stopped now".

Dardari's prediction was gloomier than the IMF, which said in March it expected Jordan's economic growth to accelerate above 3 percent, reflecting an increase in government capital spending, higher domestic consumption and a recovery in exports.

However Syria faced almost unimaginable challenges even if the fighting were to stop tomorrow, Dardari said. He put the economic cost at $70-$80 billion, including $28 billion to rebuild 1.2 million houses and provide them with infrastructure.

The country would need 30 million metric tons of cement a year - more than three times pre-crisis quantities - to repair damaged homes and keep up with the need for new housing, he said. "Thirty million metric tons of cement requires more than 1 billion cubic meters of water. We don't have that much water."

Sustained fighting on the other hand could only bring greater calamity, including staggering levels of unemployment and absolute poverty, he said.

"Over the next few years, if the fighting continues, we will have to look at it as a disaster zone rather than a normal economy functioning according to economics as we know it."

(Editing by Jon Hemming)

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Comments (6)
50cal wrote:
I hear about these “big oil and gas” countries in economic trouble, think of the Dakota reserves and smile.

May 09, 2013 12:07pm EDT  --  Report as abuse
Fromkin wrote:
Read from alternative news sites:

3500 fighters from the Takfiri groups and Syrian opposition militants who are under siege in Qusayr area- Homs sent many urgent messages and envoys to propose their surrender to the Syrian official authorities.

US officials working on the Syrian crisis line, proposed to their Russian counterparts that they would accept if Moscow nominates a name of its choice to replace Bashar Assad in the Syrian Presidency. The Russians refused categorically and insisted that they have only one name; Bashar Assad.

After the heavy defeats they received in many Syrian areas, the opposition groups have become more flexible in their conditions to negotiate with the Syrian government. According to Lebanese sources handling the mediation efforts, the opposition has dropped the condition that Syrian President leaves office to start negotiations.

The Syrian opposition forces are suffering three major problems after the recent defeats in battlefield: the first one has to do with the severe demoralization of the fighters, the second, is the severe siege against them by the government forces, and the third is their inability to attract more fighters or to rally support.

They are losing. Syria and Russia must be careful about new conferences which are just diversionary tactics.

May 09, 2013 12:43pm EDT  --  Report as abuse
50cal wrote:
Fromkin

I’m still smilling.

May 09, 2013 1:27pm EDT  --  Report as abuse
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