Search

 

Cablegate: Inflation Continues to Afflict Syria

VZCZCXYZ0009
RR RUEHWEB

DE RUEHDM #0890/01 2421403
ZNR UUUUU ZZH
R 301403Z AUG 07
FM AMEMBASSY DAMASCUS
TO SECSTATE WASHDC 4118

UNCLAS DAMASCUS 000890

SIPDIS

SIPDIS

NEA/ELA; DOC FOR 4520/IEP/ANESA/ONE/NWIEGLER

E.O. 12958: N/A
TAGS: ECON SY
SUBJECT: INFLATION CONTINUES TO AFFLICT SYRIA

REF: DAMASCUS 403

1. (SBU) Summary: The IMF recently estimated average
inflation in Syria at eight percent, close to the rate
estimated by Post's 2006-7 price survey. This rate does not
tell the whole story, however, as black market prices and
subsidies mask inflation in Syria. Local Syrian economists
take issue with the IMF estimate and assert that while
inflationary pressures have abated since a high in 2006,
average inflation remains well over ten percent. The local
government-controlled Syrian press also continues to
regularly report on the crisis associated with increasing
prices.

GAUGING INFLATION
-----------------
2. (SBU) Prices of goods in Syria's consumer market, imported
and locally produced, began to increase in late 2005. In
calendar year 2006, independent Syrian economists estimated
that the inflation rate was well over ten percent, and closer
to 20 percent when adding in the spike in real estate prices
(reftel). In order to better gauge this inflationary trend,
Post developed its own price survey tool which uses
approximately 100 consumer items divided into nine
categories. The categories are food, goods and services,
utilities, housing, health care, travel and transportation,
clothing, recreation, and education and communication. In
the period between June 2006 and June 2007, Post collected
prices on a quarterly basis from five neighborhoods
representing different Syrian income groups. This was a
first modest attempt to gauge inflation in Syria and Post
will continue to refine its price survey tool moving forward.

PRICE SURVEY REVEALS CONTINUED INFLATION
----------------------------------------
3. (SBU) Post's recent price survey revealed that Syria
continues to suffer from inflation, with the average
inflation rate between June 2006 and June 2007 at 5.18
percent. This result is slightly lower than an IMF report
that states average inflation in Syria during the first
quarter of 2007 was eight percent. Post's survey probably
reflects an artificially low inflation rate because it does
not include black market prices and the SARG's subsidy system
often masks inflation. Local Syrian economists assert that
while inflationary pressures have abated since a high in
2006, average inflation remains well over ten percent and
that the cumulative effect of inflation over the past two
years is decreasing the purchasing power of average Syrians.
The price survey revealed that the prices of necessary goods
and services, including food items, have disproportionally
increased, while some luxury goods, including automobiles,
decreased.

SUBSIDIES MASK INFLATION
------------------------
4. (SBU) The SARG's subsidy system masks inflation in Syria.
The SARG subsidizes many basic utilities and commodities,
including heating oil, electricity, butane (cooking) gas,
gasoline, water, wheat, sugar, rice, cotton, sugar beets and
flour. Subsidies affect everyday life, as diesel and
gasoline cost a fraction of international prices, irrigation
water is paid for by the SARG, and electricity is
artificially cheap. Despite the severe drought this spring,
the price of bread -) arguably the most important food item
for Syrians -- has not changed for the past decade. This may
soon be changing, however, as SARG officials have recently
made public statements that the government is developing a
plan to gradually reduce the subsidy system.
SHARP INCREASE IN REAL ESTATE PRICES
------------------------------------
5. (SBU) Real estate prices increased by four-fold over the
past three years. The influx of relatively wealthy Iraqi
refugees, population growth in Syria, the growing demands of
the nascent Syrian financial sector, and interest from Gulf
investors contributed to an increase in rental and housing
prices. The large-scale housing and tourism projects with
Gulf investment also led to a sharp increase in the price of
land. In addition, the increase in the international prices
of some building materials (steel and aluminum), and the
shortage of some locally produced construction materials
(cement) also drove up costs.

PRICES OF FOOD ON THE RISE
--------------------------
6. (SBU) Syria experienced a drought this spring that led to
an increase in the price of staples and grains )
traditionally stable commodities in Syria. In addition,
prices of lamb, beef, dairy products and eggs increased due
to the increase in international feed prices. Prices of
chicken decreased dramatically between June 2006 and June
2007 because the threat of Avian Influenza had abated and
poultry producers were back in production. Prices of fruits
and vegetables rose over the same period because of an
increase in domestic demand, legal exports, and smuggling
operations.

PRICES OF IMPORTS INCREASED
---------------------------
7. (SBU) Prices of goods imported from Europe, such as
powdered and infant milk and butter ghee, increased due to
the high value of the Euro coupled with parallel increase in
international prices (Note: Europe is Syria's main trading
partner with a trade balance of USD 762 million in 2006. End
Note.) Furniture prices also noticeably increased because
the SARG imposed strict measures on the import of wood.
While prices of some household goods have increased, due to
the increase in the international prices of plastics, prices
of some household electrical appliances have decreased
slightly due to fierce competition in the local market and
the exemption from customs duties on imports of these goods
from Arab countries.

FIERCE COMPETITION REDUCES CAR PRICES
-------------------------------------
8. (SBU) The SARG's liberalization of the import
restrictions on automobiles, lowering of import duties, and
increasing access to credit from the nascent private banking
sector has encouraged many Syrians to purchase vehicles for
the first time. These changes have also led to strong
competition between car agents and a noticeable decrease in
automobile prices. Public transportation and taxi fares are
set by the SARG and have remained the same over the course of
the year due to the subsidized prices of gasoline and diesel.


COMMODITY PRICE INCREASES OVERFLOW TO SERVICE SECTOR
--------------------------------------------- -------
9. (SBU) Members of the service sector, including doctors,
medical laboratories, barbers, and taxi drivers have
increased their charges and/or tips in response to increases
in the price of commodities.

10. (SBU) Comment: Estimating inflation in Syria is difficult
because of a lack of credible statistics, as well as a
rampant black market and government subsidies on many
commodities. In general, however, while inflationary
pressures may have abated since 2006, the average Syrian's
expendable income is being hit hard by price increases that
are not uniform but fall disproportionally in necessary goods
and services. If the SARG does move forward with its
announced plan to reduce subsidies -- although this remains
open for debate due to the regime's preoccupation with
regional political tensions -- inflation will likely
skyrocket. Even if the SARG finds the resources to delay the
avoidable reduction in the current subsidy level, local
Syrian economists have commented to us that recent statements
by SARG officials on potential changes to the subsidies
system have already encouraged some price increases.
CORBIN

© Scoop Media

 
 
 
World Headlines

 

Gordon Campbell: On The Washington Riot And The Georgia Results
Hong Kong and Washington DC. On the same morning, the tyrants in power in Beijing and their counterpart in the White House have shown how they refuse to accept the legitimacy of any different points of view, and the prospect of losing power… More>>

WHO: Vaccination No Guarantee Of Virus Eradication

In the final World Health Organization (WHO) COVID-19 press conference of the year, on Monday, senior officials warned that the virus is 'not necessarily the big one', and that there is a real chance of another, more serious pandemic spreading ... More>>

Covid: Two Billion COVID Vaccine Doses Secured, WHO Says End Of Pandemic Is In Sight

The end of the pandemic is in sight but we must not let our guard down, the head of the World Health Organization (WHO) said on Friday, as he welcomed the news that the global vaccine partnership COVAX has lined up almost two billion doses of existing ... More>>

UN: Guterres To Seek Second Five-year Term
António Guterres will be seeking a second five-year term as UN Secretary-General, which would begin in January 2022.... More>>


UN Rights Office: Iran Execution Of Child Offender Breaks International Law

The execution of an Iranian man for a crime allegedly committed when he was 16 years old has been condemned by the UN Human Rights Office (OHCHR) and raised concerns over violations of his right to a fair trial. In a statement released on Thursday, ... More>>

UN News: Fighting Displaces Over 500,000 In Northern Mozambique, Reports UN Refuge Agency

Attacks by armed groups in Mozambique’s Cabo Delgado, Nampula, Zambezia and Niassa provinces have displaced more than 530,000 people, many of whom have been forced to move multiple times, the UN refugee agency (UNHCR) said on Friday. According to ... More>>