Cost of Syrian conflict

It is by no means easy in a country like Jordan to be in the minority in terms of opinion. This has been my experience with my view on the impact of the Syrian crisis on Jordan. Hence, it was an absolute pleasure to read a new study released by the World Bank that in one paragraph vindicated the view and ideas I voiced time and again.

The paper, “Economic effects of the Syrian war and the spread of the Islamic State on the Levant”, by Elena Ianchovichina and Maros Ivanic from the World Bank, utilised a global computable general-equilibrium framework on six countries (Egypt, Iraq, Jordan, Lebanon, Syria and Turkey) to quantify the direct and indirect economic effects of the Syrian war and the advance of the Islamic State on the Levant. 

The findings were that Syria and Iraq bore the burden of the direct economic costs; the other countries lost in per capita but not in aggregate terms.

The analysis covered the cost of the impact of both the Syrian crisis and of the group that calls itself Islamic State (IS).

The spread of IS undermined regional trade and added to the direct costs in all countries, with the most impact, of course, being in Syria and Iraq.

At the beginning of the conflict, I had warned that the effect of the Syrian crisis (not including the IS effect, as the organisation was not apparent then) on Lebanon is adverse, while on Jordan it may be neutral, even positive. Therefore, one should be wary of lumping the two countries together.

Indeed, the analysis in the above paper showed that to be true.

The paper went on to state: “All other Levant economies [Jordan included of course] lose in per capita terms, but not in aggregate terms because the inflows of refugees boost population numbers, and, therefore, aggregate consumption, investment, and labour supply. Lebanon’s per capita welfare losses are largest and reach close to 11 per cent, while those of Turkey, Egypt, and Jordan do not surpass 1.5 per cent.”

In fact, the paper found that the welfare effect on Jordan was positive, 0.1 per cent, because “the inflows of refugees boost population numbers, and, therefore, aggregate consumption, investment and labour supply”, something I have asserted time and again, to no effect because some wanted to blame others for their failures in managing the economy. 

The impact of trade disintegration, the paper shows, may be worse than the war itself and is negative, as Jordan stopped importing through Syrian ports like Tartous and recently lost the Turkey-Syria-Iraq land route, which made shipping expensive.

Of course, the paper did not go into the benefits received by the Aqaba Port from the shift in trade routes and the government gains from increased fees. 

Anyway, just when I was about to start changing my mind, finally emerges a credible analysis and from the UN (of which the World Bank is a member) itself, which helps me hold on to my view.

So, I still maintain that the government and other stakeholders and pundits (actual or aspiring) have exaggerated the cost of the Syrian crisis; moreover, the Syrian crisis positively impacted the Jordanian economy, thus countering some of the adverse impacts of government economic mismanagement.

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