Syria's flailing economy could prove the tipping point for the autocratic regime of Bashar al-Assad as he seeks to quell a pro-democracy revolt posing a major threat to his rule, analysts say. "There are some wild cards left in Syria, and the economy is one of them," said one Western diplomat, speaking from Damascus. "As this revolt drags on and as the merchant classes of Aleppo and Damascus -- which so far have not joined the protests -- have to close factories and lay off workers, they could start looking for an alternative," he told AFP, requesting that he not be identified.
The popular uprising is now in its fourth month, and Syria's once-stable economy has begun to show cracks, with the International Monetary Fund downgrading the country's outlook and the tourism season entirely shot. More than 1,300 people have been killed and tens of thousands displaced as troops crack down on the protesters, according to rights groups. How the political loyalty of the bourgeoisie and trade classes sways will largely depend on how their business shapes up and whether they find they have any viable alternatives, say experts.
"The Syrian economy is in a really bad state ... and that is affecting everyone in Syria, especially those involved in trade, manufacturing and tourism," said Lahcen Achy, an economic expert at the Carnegie Middle East Center in Beirut. "It's much easier for those who are poor and deprived to decide they have no benefit in keeping the situation as it is and to want to move to something new that they hope will be better," Achy told AFP. "But for people who have assets, it's much more difficult for them to move without any real vision of what comes next."
The International Monetary Fund has revised the country's growth rate sharply downward from 5.5 per cent in 2010 to three per cent in 2011, a move experts say is a sign that the state-controlled economy has taken a harder blow than is visible to the outside world.
"The Syrian central bank has been very cautious not to deplete its reserves and seems to be tightening its grip on whatever foreign reserves it has," said one banker in Lebanon with business in Syria. "This is a huge decline and implies that Syria's budget deficit is significant and that foreign ... reserves are on the decline," added Achy.
Nowhere is the economic impact more visible than in the country's tourism sector, which in recent years has seen foreign tourists flood the streets of Damascus, Aleppo and other cities. Tourism accounted for 12 per cent of Syria's gross domestic product in 2010 with revenues of $6.5 billion (4.5 billion euros). Some 11 per cent of Syria's labour force works in tourism, in a country where unemployment officially stands at eight percent but independent analysts estimate the actual figure as much higher.
Today, the streets of Syria's historic cities are painfully empty, leaving thousands of families who survived on business in the summer season desperate for a source of income. Plans for development are also waning: one economics expert based in Damascus said a five-year development plan worth close to $100 billion, which began in 2011, could take a serious blow should the protests continue.
Also hit hard by the unrest is foreign investment in Syria, which ranks 126th of 180 states on Transparency International's list.
"Many investors have already halted their investments," Achy said. "Investors from the Gulf, especially Qatar, as well as other countries are reassessing their investments in Syria."
In 2006, Assad launched a string of economic reforms that introduced private banking into the country and saw the launch of the Damascus Stock Exchange in 2009. In May, in a bid to fight the flight of foreign currency triggered by the anti-regime protests, Syria permitted savings in dollars and euros for the first time. But authorities have maintained their iron grip on the economy, as sparse oil revenues continue to fall and the state's budget deficit rises.
"From my understanding, there is a brutally low ceiling on withdrawals, at a time when many people with significant savings are rushing to withdraw their money," said the banker, who requested anonymity. In a bid to appease protesters, Assad has also announced boosts to economic benefits for state employees and students, among others. But even those measures target only selected groups within Syria, a factor experts say will further anger deprived groups.
"Assad made economic concessions ... that are costly in terms of the budget, but not all categories of the population have benefited," said Achy.
"This is one of the major issues: the fact that social inequality is ongoing, and some regions are more deprived. These regions will protest."