Abstract
Engagement with Syria has emerged as a top priority for US President Obama' s
administration, as
evidenced by the flurry of diplomatic activity since
the new president took office in January. We expect
these efforts to bear
some fruit, not least because of the poor state of the Syrian economy. The
prospect of
improved trade ties and the likelihood of increased inward
investment will act as a major incentive. Not
that the path will be easy.
Binyamin Netanyahu, Israel' s prime minister-designate, has declared
himself
hostile to the return of the Golan Heights to Syria - one of
Damascus' key demands. This will make any
resumption of peace talks
difficult. Furthermore, there are still plenty of questions hanging over
Syria' s
commitment to the US vision: its support of Iran, Hamas and
Hizbullah is popular at home, while recent
reports have suggested that
Syria has concealed the extent of its nuclear research facilities.
There
is bad news on several fronts for the Syrian economy in 2009, and we are
forecasting a slump in
real GDP growth to just 1.4%, down from an
estimated 4.1% in 2007. Conditions will remain tough in
2010, when we see
growth rising only slightly to 1.8%, before recovering further to 2.6% in
2011. A poor
growth outlook, twin deficits on the fiscal and current
accounts, and a lack of inward investment, are
likely to exert downside
pressure on the currency during our forecast period.
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