AMMAN (Reuters) - In the relatively affluent Arnous neighborhood of Damascus, power cuts now extend to three hours each afternoon, disturbing the daily routine of Abdallah Zaitoun, a contractor whose business was thriving until a popular uprising hit Syria 10 months ago.
"I always felt we were privileged when I passed by the poor shanty towns on the fringe of the city. I am now so afraid every day this crisis continues with no light at the end of the tunnel," said Zaitoun, 44 , speaking at his office in the Syrian capital's Seven Lakes commercial district.
Zaitoun's 14-year old son Abdullah, who attends an elite private school, now struggles to get his homework done on his Toshiba laptop due to the power cuts. His wife Zainab, a teacher, is trying to save by cutting items from a regular shopping list that used to include imported chocolate bars, French cheeses and fruit juices.
They and many other residents of the capital's upscale neighborhoods, previously insulated from the unrest that has rocked Syria in a revolt against President Bashar al-Assad's rule, say they are starting to feeling the pinch and fear the worst is yet to come.
The International Monetary Fund says Syria's economy is set to shrink 2 percent this year, the first contraction since 2003, as a result of the domestic turmoil, which began last March.
Independent economists say tighter sanctions imposed by Western and Arab countries on Syria in the wake of violence in the country will reduce crucial oil revenues and exports even though the authorities say that new export markets in Iraq and Iran could cushion the impact of the loss of lucrative markets in the Gulf.
The government has braced residents for wider power rationing, blaming terrorists for the sabotage of power plants, in what economists and business leaders say is an effort to conserve scarce fuel oil as the political crisis hits the economy more deeply.
Stealing electricity by running wires into a public electricity unit has become common this winter, some residents in Damascus say.
"The authorities are not giving us fuel because most of it is going to the army tanks that are everywhere " said Yassen Fara from Daria, a sprawling suburb of the capital.
More well-off residents, and companies, are installing private generators, prices of which have shot up, residents contacted in several cities said.
Along with deteriorating economic conditions, carnage in the heart of the Syrian capital in recent weeks, after three bombings left scores dead, has instilled a deeper fear among many ordinary Syrians of wider violence and a slide to sectarian strife.
In the normally busy streets of crowded cities such as Aleppo in the north, the country's economic hub and most populous city, as well as Damascus, residents talk of depression gripping a middle class, which before the uprising, had enjoyed several years of prosperity after authorities eased Soviet-style controls on the private sector.
"People are tired and are not satisfied. Yes, there is activity but our sales our almost a quarter of what they were," said Sadeq Omar, who runs a women's accessories store in the middle-class shopping district of Shalaan in Damascus.
Long queues to get heating oil and petrol, along with bread shortages, even in areas of the country that have not witnessed months of protests are adding to the discomfort and misery, Syrians say.
The government has raise official prices of fuel, to 50 pounds a liter from 44 pounds three weeks ago, prompting many residents to buy on a flourishing blackmarket.
Inflation is difficult to predict as official data, which showed inflation at 5.7 percent by the end of November, is dismissed by independent economists, who estimate overall prices have risen on average by 30 percent since September after the authorities restricted state financing of imports to conserve depleting foreign currencies.
"The middle class has been hit. Their purchasing power has gone down by at least 18 to 22 percent and as for the low income (households), they have been hammered," Essam Zamrick, vice president of the Damascus Chamber of Industry and owner of a food-processing plant.
More city dwellers are using public transport as taxi drivers, who complain of a sharp drop in business, have raised their fares by at least 25 percent, in line with the increase in petrol prices, he said.
In the shops, luxury items and some food products, are scarce and the price of a 50 kg bag of sugar has nearly tripled in the past two months to around 2,500 pounds, traders and residents contacted in several locations across the country said.
"Grocers only have mostly vegetables, cucumbers and tomatoes on display. Imported fruits are no longer on sale," said Daya Jundi, a resident of the southwestern city of Zabadani along the border with Lebanon, which was a popular resort for Gulf Arab tourists but is now a hotbed of anti-Assad protests.
Even meat consumption has slumped as far less is on sale and a kilogram of fresh lamb now costs about 1,000 pounds against 600 pounds just a few weeks ago, locals say.
"My customers would normally buy 1 kilogram of meat every several days. Now they barely get a quarter of that," said Abu Yazan, a butcher, echoing the plight of many small shopkeepers in Deraa, in the southern border area, which is seeing protests and security clampdowns daily.
Import prices have soared as the Syrian pound has depreciated 21 percent against the dollar since the uprising last March and Syrians are hoarding goods, fearing prices will rise further, economists say.
"The cost of living has gone up because the pound has dropped and the cost of imports has gone up," said Nabil Sukr, a former World Bank economist and consultant.
The worsening economic situation has prompted officials, who for months had parroted the economy's resilience in the face of sanctions, to adopt a more realistic tone.
"This crisis has made the country lose a lot and we are seeing this cost everyday," Mohammad Nidal al-Shaar, minister for the economy and trade, said in a recent interview to state media. He blamed profiteering traders and hoarding of goods for most of the price rises.
While the middle class is suffering, poorer citizens in the rural heartlands adjoining cities that have borne the brunt of the conflict, are suffering much greater hardship.
"People are cutting trees to get heating with the severe shortage of heating gas and continued electricity cuts that can stretch for several days," said Rateb al-Nimr, a teacher in the Bayada neighborhood of the city of Homs in central Syria, which has become the hub of revolt in the country.
Rising unemployment in hotbeds of unrest in Homs, Hama and Idlib and in the poorer areas of the big cities is aggravating social unrest.
Officials say the unemployment rate hovered around 8.9 percent in 2010 with 468,009 out of work, but those figures are dismissed by independent economists as too low.
Officials say the economy needs to generate at least 250,000 new jobs annually to generate sustainable economic growth in the country of around 23 million.
Sameh Nawar, 38, a former financial controller in the municipality of Rastan, north of Homs, lost his 15,000 pound monthly salary after he participated in peaceful protests calling for greater political rights in his hometown.
"My home has been shelled and I am now living in a makeshift residence with relatives," he said.
Rastan, a town of around 80,0000 is a hotbed of unrest where many residents blame poor economic opportunities and political marginalization for fueling the uprising and social unrest.
"It's tough but I cannot hope for a decent living until this revolution brings me and my children the opportunity that repression robbed me," Nawar said. ($1 = 57.0000 Syrian pounds) (Editing by Susan Fenton)