EASING TENSION? Why Syria is reverting to socialist economic policies
Many Syrians say economic liberalisation enriched oligarchs close to the Assad family. But the government's retreat from reform is worrying businessmen, who have long blamed public sector inefficiency, bureaucracy and rampant corruption for stifling the private sector.
July 6, 2012 5:34 by Reuters
In a drab state-owned supermarket in the heart of the Damascus suburb of Midan, Nazeer Khatib’s shopping trolley is packed with everything from Thai rice to a Chinese-made electric fruit mixer, all on sale at prices far lower than in shops nearby.
“I never used to go to the state consumer cooperative but now it really helps me get at least 30 percent less on essential items including my rations of rice and sugar,” said Nazeer.
A father of six, Nazeer is now living on paltry savings since his small carpentry business was burnt down last month in Harasta, a suburb that has been rocked by violence almost daily since the outbreak of the uprising against President Bashar al-Assad’s regime 15 months ago.
For many low-wage earners, who make up the majority of Syria’s 20 million population, cheaper prices at state supermarkets, reminiscent of those in the Soviet Union, offer some reprieve from the economic fallout of the uprising, which has hammered key hard currency revenues from oil and tourism and sent the Syrian pound plunging.
A product of a 1960s nationalisation programme, state supermarkets had lost some of their appeal after modest economic liberalisation began in 2005, which boosted the variety of goods available in private shops, spurring a consumer boom.
Now they are seeing a revival as the government is being forced to roll back moves to a more market-oriented economy as it tries to ease economic hardship for the poor and contain social unrest.
“Economic policy is now subordinate to political priorities and for the Assad regime this is retention of power,” said one senior Syrian businessman who serves on the board of several quasi-government bodies.
The IMF forecast last September that the Syrian economy would contract by 2 percent in 2011 and that it would grow this year, but it has since excluded Syria from its Middle East/North Africa forecasts due to the uncertain political situation.
Independent economists say the economic contraction has deepened and large swathes of the country are now severed from major industrial centres of production due to the fighting between the Syrian army and rebel forces.
Plans to gradually remove government subsidies on items such as petrol and electricity, announced before the uprising began in a bid to ease pressure on government finances, are now being reversed.
“We have reduced prices in our outlets between 15 to 25 percent in line with our policy of supplying basic items especially foodstuffs,” said Ahmad Ismail al-Kishek, manager of a state-owned supermarket in Reef al-Sham area, a rural area on the outskirts of the capital.
Subsidies will account for at least 30 percent of the record $27 billion the government plans to spend this year, according to its 2012 budget.
Economists and bankers say the government is drawing on its foreign reserves and printing money to finance a budget deficit, which is officially projected to rise sharply to around $6.7 billion this year, due to falling tax and customs revenues and the cost of subsidizing energy.
Inflation now stands at around 30 percent, economists say.
Since the unrest began in March 2011 , the authorities have also stepped up a nationwide crackdown on unscrupulous traders who resell heavily subsidised cooking gas and diesel at three to four times the official price in a flourishing black market.