Now moving into its twelfth year, the conflict in Syria has inflicted a devastating impact on the inhabitants and the economy. The size of economic activity between 2010 and 2019 has halved. Extreme poverty has consistently risen since the onset of the conflict, reflecting deteriorating livelihood opportunities and the progressive depletion of household coping capacity.

Beyond the immediate impact of the conflict, the economy suffers from the compounding effects of the pandemic, adverse weather events, regional fragility, and macroeconomic instability. Given Syria’s heavy reliance on imports, currency falls quickly fed into higher domestic prices, causing high inflation. The report estimates that annual inflation reached
90 percent yoy in 2021, after hitting 114 percent yoy in 2020.

The war in Ukraine shocked commodity markets, pushing food and fuel prices in Syria even higher. As a net importer of food and fuel, soaring prices have been adversely affecting Syria’s external balances, inflation, and international reserves. Syria’s high inflation has affected the poor and vulnerable disproportionately. Food prices —proxied by the World Food Programme (WFP) minimum food basket price index—rose by 97 percent during 2021, on top of a 236 percent increase in 2020.

Driven by the noticeable increase in commodity prices, government subsidies on essential food and fuel products have dramatically risen over the past years, accounting for over half of the total budgeted expenditures for 2021 and 2022. To save its budget, Syria’s government has tightened rationing, which has inevitably deteriorated the already dire living conditions of the Syrian people. WFP data show that more than half of households surveyed (52 percent) reported inadequate food consumption in February 2022, double the early 2019 share.

Syria’s food insecurity has worsened further after the war in Ukraine. Economic conditions in Syria are projected to continue to be mired by prolonged armed conflict, turmoil in Lebanon and Turkey, COVID-19, and the war in Ukraine. Subject to extraordinarily high uncertainty, we project that Syria’s real GDP will contract by 2.6 percent in 2022 (to US$ 15.5 billion in
constant 2015 prices). Inflation is projected to remain elevated in the short term, due to the pass-through effects of currency depreciation, persistent food and fuel shortages, and reduced food and fuel rationing, which will stress the already struggling poor. Owing to its heavy reliance on food and fuel imports, Syria is particularly vulnerable to the disruptions in the commodity market and trade-policy interventions triggered by the war in Ukraine.