Ammon News - Lebanese and Jordanian economies hard hit by civil war next door

BEIRUT (Asharq Al-Awsat) — A new UN report has highlighted the impact of the Syrian crisis on neighboring Lebanon and Jordan, with serious economic dislocation recorded in all three countries since the start of the crisis in 2011.

The report, from the UN Economic and Social Commission for Western Asia (ESCWA), was launched at a news conference at its headquarters in Beirut on Thursday, attended by Lebanese economy minister Niqola Nahhas and Jordanian minister for planning and international cooperation Ibrahim Sayf.

The data presented at the conference by ESCWA showed the extent of the relationship between Lebanese and Syrian economies, and Syrian and Jordanian economies, where most economic indices have recorded noticeable declines.

In particular, the report said that the relationship between the Lebanese and Syrian markets was very strong, demonstrated by estimates which showed a fall in the GDP in Syria of 31 percent in 2012 and 7 percent since the start of 2013, together with a fall in the GDP growth in Lebanon from 7 percent to 1.5 percent over 2011, and to 1.2 percent in 2012.

ESCWA, using data from official and non-official sources, as well as research by its experts, said the number of Syrian refugees in Lebanon had exceeded one million, including 300,000 Syrian workers who were in Lebanon before the start of the conflict who invited their families after the situation in Syria worsened. It added that 71 percent of Syrians living in Lebanon were living in squalid conditions and under the poverty line, pointing to the challenges faced by Lebanon, especially in the fields of demography, health, education, work and unemployment.

Regarding Syria, during the first session of the conference the head of the economic analysis section at ESCWA, Mohamed Hadi Bashir, expected the continuation of the conflict to cause Syria to lose around 60 percent of its GDP. He said the expected rate of unemployment for 2013 was close to 45 percent, while the budget deficit was between 14 percent and 15 percent.

Bashir added that “all Syrian economic sectors have been affected by the conflict, especially with recession reaching a very high level (31 percent).”

He said there was a noticeable decline in the essential sectors. The industrial sector is one of the most affected, with its contribution to the GDP falling from 7 percent in 2010 to 2 percent in 2013, according to ESCWA estimates. Estimates of agriculture sector contributions were 27 percent in 2013, compared to 17 percent in 2010.

Bashir said the effect on oil and gas sectors was limited to production, not capital. He pointed out that Syrian production had fallen by 95 percent since the start of the conflict, and while the sector’s contributions reached 13 percent of GDP, estimates say contribution in 2013 will only be around 3 percent.

In regards to economic indices, ESCWA estimates say unemployment rates reached 44 percent in 2012 and will rise to 49 percent in 2013. They are expected to reach 65 percent if the conflict continues into 2015. Meanwhile, inflation reached 51 percent in 2012 and estimates say the GDP deficit has risen from 14.5 percent in 2012 to 21.4 percent in 2013.

In a report presented to the conference about the effects of the Syrian conflict on Lebanon, ESCWA expert Sandra Snow said: “A number of sectors will be affected in Lebanon, most prominent of which [are the] trade, tourism, real estate, finance and banking sectors.” She did not exclude the possibility of the Syrian conflict having a negative effect on Lebanon’s GDP, where estimates of growth have varied between 1.8 percent by ESCWA, and 2.5 percent by the International Monetary Fund, and between 2 percent and 4 percent according to the Central Bank of Lebanon.

Snow pointed out that inflation would not be affected by the Syrian refugees, while trade balance continues to hover within the deficit range. According to estimates from data covering 2008 to 2013, Lebanon has a trade deficit of between 30 percent to 40 percent of GDP. The Syrian conflict has contributed to an increase in this deficit because of the disruption to transit routes through Syria.

Tourism has also suffered. The number of tourists visiting Lebanon fell by 24 percent between 2010 and 2011, and a further 18 percent between 2011 and 2012, due to regional developments and domestic unrest. In particular, there was a in the number of Arab tourists due to warnings in the Gulf region about the Syrian conflict. More than 35 percent of tourists visiting Lebanon come from Arab countries.

ESCWA estimates predicted a larger fall in tourism of 25 percent in 2013. Tourism contributes between 10 percent and 12 percent of Lebanon’s GDP, so the effect of such a fall could lead to a 2.5 percent in GDP.

Snow added that the arrival of large numbers of Syrians has led to an increase in demand on housing, and caused a steady increase on rental prices, and to a lesser extent on property prices.

The Lebanese banking sector has also been affected practically by the Syrian conflict. Despite indications showing deposits of Syrian funds to the value of USD 11 billion in Lebanese banks, only USD 1 billion has benefited the Lebanese consumer economy. The Bank of Lebanon estimates the losses of Lebanese banks operating in Syria to be at around USD 400 million (representing 18.7 percent of total banking sector profits).

Jordanian planning and international cooperation minister Ibrahim Sayf said more than 650,000 Syrian refugees had arrived in Jordan, 136,000 of which were housed in camps, and the rest in towns and cities. He said the burden was increasing on the Jordanian government and Jordanian communities. Estimates of the direct cost of hosting 650,000 refugees to the Jordanian government reach around USD 468 million.

Jordan has been affected in a similar way to Lebanon. The health and education sectors have suffered from increased demand, and prices of fruit and vegetables have increased due to the imbalance between supply and demand. Property prices have also increased due to rental market demand. The refugees have also added to the problem of water shortages.