As the crisis in Syria continues, with an estimated 1,300 protesters now having been killed and tens of thousands of others arrested, the Syrian regime is facing an economic crisis, writes Bassel Oudat in Damascus While the country's economy was in trouble even before the present wave of demonstrations started three months ago, Syria's economic difficulties have been compounded by the crisis, and observers believe that even if the regime is able to survive the current political turmoil, it will continue to be threatened by the economic crisis. Over the course of the demonstrations against the regime of Syrian President Bashar Al-Assad, the army has been used to occupy many of the country's towns and cities, putting others under siege. The security forces deployed around the country have used live ammunition against protesters, and the regime's decision to resort to a security solution to the protests has influenced all aspects of life in the country. Since the outbreak of political turmoil in Syria, foreign investment has dried up, while government spending has risen, the country's central bank dipping into its foreign currency reserves to ease pressures on the local currency. Overall trade has dropped by more than 40 per cent, with imports dropping by 60 per cent and exports dropping by 30 per cent. Tourism has become almost non-existent, and withdrawals at Syrian banks have risen sharply, with deposits falling to a minimum. In response, the Syrian government has attempted to maintain the country's economy and to avoid collapse, while helping citizens to confront their difficulties in the hope of appeasing the protests. Interest rates have been raised to between seven and nine per cent in order to encourage deposits, importers have been granted tariff and tax exemptions to help reduce the cost of consumer goods, wages have been raised by 20 to 25 per cent, and fuel costs have been cut by nearly 25 per cent. Syrians having difficulty paying utility bills have been exempted from late fees, and red tape has been cut for the country's importers and exporters, with further economic changes on the way. However, many observers describe such economic steps as being either attempts to mollify the Syrian people and to try to persuade them to end their protests, or arbitrary measures to try to save the already weak Syrian economy. Such measures, observers say, will fail in both the medium and long term. Meanwhile, the protests in the country have continued despite the new economic measures, with demonstrators responding to them by raising banners stating that they are not hungry and do not want charity. Instead, the banners say, they want freedom, dignity and political reform. It is now the case that the country's general population, which has long born the brunt of poverty in Syria, is taking to the streets demanding the overthrow of the regime, with the middle classes, up to now considered to be the silent majority, threatening to join in the demonstrations should middle-class families find that they can no longer afford to send their children to school, pay health bills, or maintain current living standards. Meanwhile, the country's capitalist class, a key partner to senior figures in the Syrian regime, is likely to be able to absorb some losses, though if current trends continue it too is likely to demand reform. The Syrian pound has dropped by five per cent against the dollar, primarily as a result of Syrians withdrawing their money from local banks, with some reports indicating that eight per cent of the reserves of Syrian banks have been transferred abroad. Tourism, which represents 18 per cent of national domestic income according to official figures, has been hard hit by the crisis, with tourism companies operating in the Middle East avoiding Syria as a destination and many hotels putting up the shutters in several Syrian cities. Sources in the tourism and hotel industry said that hotel occupancy rates in Syria stood at around four per cent and that they were continuing to drop. Ordinarily, at this time of year occupancy rates average at 65 to 80 per cent. The economic crisis has not only affected hotels. Tourist sites have also seen dramatic falls in the number of visitors. Restaurant and cafe owners have been compelled to lay off staff, and sources in the tourism industry say that if the crisis continues it will do very considerable harm to the tourism sector, which directly employs some 320,000 Syrians and around one million indirectly. Over the past few months, the US has imposed economic sanctions against Syrian officials, including President Al-Assad, and the EU and Canada and Australia have followed suit. The sanctions have often targeted billionaire businessman Rami Makhlouf, the president's cousin, whom many Syrians believe enjoys considerable influence inside the government. Syrian sources say that Makhlouf has sold his shares in the country's stock market and banks, withdrawing tens of millions of dollars from Syria and transferring them to Lebanon and Dubai. Internationally, Qatar has frozen a number of investment projects in Syria, and the EU has frozen all economic and training projects. The European Investment Bank has also stopped funding infrastructure projects. Meanwhile, EU economic sanctions are expected to expand to include firms owned by Syrian officials or their associates. The volume of trade between Syria and the EU, which in recent years reached $11 billion, is expected to drop sharply. Observers and economic analysts predict that further sanctions will include a ban on the purchase of oil to increase pressures on the regime, since revenue from Syria's oil exports amounts to $7 million to $8 million a day, and they predict that Syria will have to seek foreign assistance by the end of the year if it is to keep its economy afloat. For its part, Damascus has refused to admit that the country is approaching economic meltdown, insisting that Syria is strong enough to be unaffected by the pressures being put upon it. According to the Syrian finance minister, the economy "is strong and steadfast", and Syria "is self-sufficient in terms of food, with foreign reserves estimated at $18 billion". The country's prime minister said that "Syria's economy has been subjected to a media campaign aiming to spread doubt about its capabilities and weaken it by implying that a large number of economic activities will collapse and workers will be fired as a result of conditions in the country." This was not true, he said. Meanwhile, the Syrian opposition is warning against further economic deterioration, which it says will harm the people as much as it does the government. As a result, the opposition is calling on the regime to implement reforms to end the current political crisis, as well as to assist the economy. The regime should admit that the country is in crisis and that what is occurring in Syria is as a result of a deep-seated crisis and not because of "saboteurs" or a "domestic or foreign conspiracy," as regime statements have insisted. Without comprehensive political reform to end the current crisis, economic reform will be impossible, the opposition says. However, the opposition is not alone in worrying about the Syrian economy: such sentiments are shared by all economic actors, as well as by the public at large.
