Executive summary

The regular depreciation of the Syrian pound is a symptom of the failing Syrian economy, causing unchecked price increases and reducing households’ already-limited purchasing power. Imports are severely restricted while exports are almost non-existent, and the budget is shrinking. Infrastructure damaged during the conflict remains damaged. At black market inflation rates of over 100% so far in 2023, it is difficult to understand how normal Syrians are coping. Affordability, a key indicator of economic performance, is extremely low, particularly for public sector employees and unskilled daily wage workers – the average government employee has to work for over half a year to be able to afford the minimum items households need to survive. In government-held Syria, Damascus has implemented several reactionary policies to try to stabilize the economy, to limited effect. Blanket pay rises for public sector employees combined with subsidy cuts have only worsened the problem, increasing prices further, while inefficiencies in market interventions have interrupted supply chains, causing shortages and again, higher prices. External sanctions continue to restrict the Syrian economy, preventing efficient imports and causing further shortages. Deteriorating living standards have fuelled protests and social instability, particularly in As-Sweida governorate, however, wide-scale reform looks unlikely. As it stands, the government has neither the political will nor the finances to implement the changes needed to stabilize the economy.

With growing food insecurity, poverty and social instability, all factors exacerbated by fuel shortages for the upcoming winter, humanitarian organizations must prioritize their activities to enable households to receive food, fuel, medicine, electricity and water. There could also be further social instability as people protest deteriorating living standards, and protection issues of child labor and child marriage, already coping mechanisms for the poorest families, could worsen.

Introduction

The value of the Syrian pound has been in freefall since the onset of the Syrian conflict, now worth just SYP 13,850 per USD on the parallel (black) market. Annual depreciation stands at over 100% in 2023, from SYP 6,825 per USD in January to SYP 13,850 as of November, and still rising. The inflationary pressure on prices caused by the constantly depreciating black-market value of the pound has meant that Syrians are finding it difficult to cope. The unaffordability of basic commodities remains high, as shown by CA–SYR’s calculation for affordability – which measures how many working days it would take to be able to purchase a Survival Minimum Expenditure Basket (SMEB) – while a reduction in subsidies continues to weigh on the vulnerabilities of households, particularly those relying on day labor for income.

Beyond affordability and purchasing power, conflict-damaged utilities and infrastructure continue to suffer from poor maintenance, as repairs and reconstruction are slow. Small pockets of the population have been able to restore some service provision, either through fundraising or through patronage networks; however the vast majority of people have to either resort to using expensive private services or go without. Shortages of fuel, food and medicine have been present throughout the year, and with winter upcoming, many households are again going to have to work out how to heat their homes with few resources and with minimal government support.

External factors continue to put negative pressure on the Syrian economy. The implementation of new sanctions in 2023 and the end of the post-earthquake Caesar sanctions waiver have further hampered the government’s ability to recover. Much foreign trade and investment is blocked, decreasing revenues and increasing the government’s balance of payments deficit. Promoting domestic production looks to be a priority for the government, however with limited money to spend on developing industry, progress is slow. In the meantime, there is more borrowing, more debt, and continued deterioration of living standards.

The Syrian government is keen to show progress in the country, to further legitimize and solidify its position in leadership, particularly in parallel to attempts at normalization with regional actors as exemplified during the Summer of 2023. With international sanctions still in place, and the north of the country fractured and lying outside its control, this remains precarious. Despite the apparent warming of relations with regional actors, the Syrian government has failed to do enough to resolve key terms for reintegration, including combating the narcotics trade, countering Iranian influence, encouraging refugee returns, or moving towards a political solution to the conflict. Domestically, the military, security and intelligence services maintain tight control over the population, but despite this, widespread dissatisfaction with Damascus is very evident. As protests in As-Sweida show, desperate living conditions and a lack of livelihood opportunities can often (and have) spread unrest. It is vitally important that the economy improves, with the hope that social stability improves.

This thematic report discusses the impact of rising prices and black-market inflation on households in government-held areas in Syria. Focusing on the continued depreciation of the Syrian pound as a symptom of a flailing economy, it will explore the impact on market prices, affordability, and how Syrian families are coping and responding and will provide a forward-looking analysis of what humanitarian organizations should consider as priorities in the medium term.

Methodology

A mixed-methods approach was used, with the collection of qualitative and quantitative research to provide novel analysis. CA-SYR referred to primary and secondary sources including media sources, government documents, and studies to understand the economic situation inside the country, track the government’s policies and mitigation measures, and determine the factors that have contributed to the economic decline. CA-SYR made use of quantitative data to provide indicators of economic decline. For example, the change in night lights reflectance (NLR) of major cities under Syrian government control was used to assess changes in economic activity. Affordability was calculated by using data collected on market prices and quantities of specific items required by a five-member household. These figures were then averaged and compared to salaries for public sector employees and daily wage laborers prior to 15 August, and the new salaries following a 100% increase. Ways to improve short-to medium-term living standards are then given, for humanitarian actors to be able to help households cope.