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The winners and losers of the Levant’s crisis-shaken economy

BEIRUT | - January 16, 2015, 12h42
Par Cindy Riechau
The World Bank Group publishes its first systematic report about how the crisis in Syria and Iraq affects certain economical sectors in the states of the Middle East.
The World Bank Group has published a new study regarding the “Economic Effects of the Syrian War and the Spread of the Islamic State on the Levant”.

In the same-titled paper the authors Elena Ianchovichina and Maros Ivanic quantify those effects by using a global computable general equilibrium model and adding new details from the economies of Syria, Iraq, Jordan, Egypt, Turkey and Lebanon and their developments up until mid 2014.

The study is the first systematic analysis of the direct and indirect effects on the regional economy and shows that Syria and Iraq have to bear the biggest part of the costs, which the civil war along with the rise of ISIS has imposed. While Syria and Iraq, due to the “resulting productivity shocks”, lost 14 to 16 percent per capita welfare, other countries lost less. Lebanon, with the largest refugee-to-citizen ratio still drops almost eleven percent though.

While the countries at war bear the biggest economical losses, neighboring countries, according to the report, in certain ways even benefit from the war – or more precisely from the inflow of refugees. In Lebanon and Jordan for example, the booming population goes along with sectoral expansions because of the refugees’ demands for goods and services. Lebanon for instance profits from retail trade activities. The study also considers the real returns to land and capital as positive with land rents rising to nearly 40 percent.

But while landlords and capitalists in this country profit from the inflow, their Syrian counterparts are the ones who are hit the hardest, the two authors write.

As the most important factors for the Levant’s economic problems, the report names the loss of lives, the change in population and labor, the ISIS spread’s weakening of the regional trade, the destruction of infrastructure and productivity as well as the embargo on trade with Syria. But the study also reflects on the halt of the regional trade integration process, which was agreed on between the six countries even before the Arab Spring had started. This intra-Levant association was meant to lead to high gains in the economic efficiency and expansion of all six countries.

The exact magnitudes of all economic effects, however, depend on the further course of the civil war. The study failed to mention how the countries could deal better with the economic situation.
#Business, #SyrianConflict
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