Tue June 21, 2011
Syria's Assad Warns Of Dangerous Economic Climate
Syria has been hit hard by a protest movement that has disrupted business, farming and trade.
In a speech to the country at Damascus University Monday, President Bashar Assad told his supporters: "The most dangerous thing we face in the coming period is the collapse of the economy."
It's feared financial pressures may be a greater threat than protests.
In normal times, the Lebanese-Syrian border is a busy place. But now, there are hardly any cars, hardly anyone standing in line to cross.
The few who are crossing are Syrians looking for work in Lebanon. They stop at a local shop for a Coke and a bag of chips.
The men say there is no work since the troubles. That's how they describe a protest movement that has swept the country.
They don't even glance at the TV above the cash register in this border grocery store. It's tuned to a channel that broadcasts Syrian protest videos all day.
Lebanon is one gateway for the Syrian economy but cross-border trade has stalled, with long delays for security checks. Syria's tourism industry has all but collapsed.
Businessmen reached by phone in Aleppo, Syria's commercial capital, say there are widespread layoffs in private companies. Shops, they say, are empty as Syrians put off purchases at a time of uncertainty.
"I go to Syria every week, I have not stopped. I have a feeling the economic activity has gone down several notches," says Shadi Karam.
The Lebanese economist knows as much as anyone about the Syrian economy. Karam advised Syria's government on modernizing banks. He helped introduce the first ATMs and a stock market. He predicts economic pressure could add to the unrest.
"The ranks of the people in the streets today may be augmented, may be inflated by the ranks of those who are going to start protesting because the economic situation is affecting them, because they have been laid off, inflation is increasing, it's the economy stupid, as they say," Karam chuckles.
Pressure is building in every sector — in particular, agriculture, an important part of the domestic economy. According to business sources, the cost of getting produce to market has tripled because the main highway from the north to the capital has been closed by the army.
Farmers, says Chris Doyle of the Council for Arab British understanding, are suffering.
"It's been extremely difficult to harvest the fruits and the vegetables to take them to market," Doyle says. "This will have significant consequences for the regime."
Another cost: government subsidies introduced in hopes of quelling the discontent.
Take for example the price of diesel fuel which is subsidized way below the market price. But there are now reports of shortages, says Andrew Tabler, at the Washington Institute for Near East Policy in Washington, D.C.
"Diesel fuel for Syria is the basic energy commodity that everyone uses, from farmers to those who are trying to heat their homes," Tabler says. "All of these small signs point to a lot of market pressure over the last three months."
And pressure on the central bank, says economist Karam. So far, Syria's currency, the value of the Syrian pound when exchanged for other currencies, has remained steady.
In his speech to the country, Syria's president thanked private citizens for depositing dollars. Some businessmen reportedly deposited millions to help keep the currency a float.
They put their own cash in the central bank to demonstrate their support. How long can the central bank continue to spend its reserves?
"The Syrian central bank's vital statistics, let's use that term, are a national security issue," Karam says. "I don't think anyone knows how much reserves the central bank owns at the moment."
A stable currency is one public measure of the economy.
"It's working, how long this policy will be sustainable, frankly, I would be at a loss to say," Karam adds.
But time is working against the regime.
"When you have people dying on the streets every day, especially every Friday, time becomes very short, it is unacceptable, unacceptable," Karam says.
Syria's president warned that unless the unrest ends, the country faces economic collapse. But he offered no plan to stop the momentum of the protests, and bring this crisis to an end.