Price tag for Middle East chaos: $35 billion

The Policy Research Working Paper released in December analyzes the economic effects on Syria, Iraq, Turkey, Egypt, Jordan, and Lebanon, finding that Syria and Iraq have been hardest hit.

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December 21, 2014 18:17
2 minute read.
Raqqa

AN ISIS member rides on a rocket launcher in Raqqa in Syria two months ago. (photo credit: REUTERS)

 
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A World Bank report quantifies the effects of the Syrian war and the advance of the Islamic State terrorist group at a price tag of $35 billion for six states in the greater Levant.

The Policy Research Working Paper released in December analyzes the economic effects on Syria, Iraq, Turkey, Egypt, Jordan and Lebanon, finding that Syria and Iraq have been the hardest hit.

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These countries suffered a loss of $35b. in output, according to 2007 prices.

“In other words, the cumulative economic size of these economies, measured by their Gross Domestic Product, could have been $35b. larger had the war not occurred,” wrote the authors in a follow up article published on Thursday on the World Bank website.

The direct negative effects on Syria caused its economy to shrink “by almost a third due to the massive outflow of Syrian refugees and war casualties,” said the report.

Other effects on Syria included a drop in oil exports by 90 percent, a destruction of around 20% of physical capital, and a similar drop in the country’s labor force.

Moreover, the Syrian conflict resulted in almost a 50% decline in real rental rates and another 20% in wages.



The study took into account large refugee flows from Syria to neighboring countries, especially Jordan and Lebanon. These two countries economic losses are most significant in the areas of business services, communications, finance, insurance, real estate and transport.

Jordan’s business and communication services contracted by almost 30% and tourism and transportation services dropped by 15%. In Lebanon, business services dropped by 10% and communication by 14%.

An indirect effect, said the report, is the opportunity cost of lost trade and integration that could have been advanced through improved trade logistics and the liberalization of trade had the conflict not occurred.

In Iraq, Islamic State has caused a 5% decline in total productivity and per capita income “could have been nearly a third larger had the country managed to avoid conflict and liberalize its economy.”

Egypt has not lost directly from the war in Iraq and Syria, but its per capita loss from the loss of trade is 9%. Similarly, Turkey has not lost much directly either, but more in terms of lost trade, specifically in business services and construction.

Turkey’s trade losses are largest in terms of an overall amount, foregoing nearly $1.6b. in exports to other Levant countries.

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