Syria - Growth and Structure of the Economy

Growth and structure of the economy

At independence Syria had a relatively well developed economic base. Rapid economic growth began in the 1930s, accelerated in the 1940s, and lasted until the late 1950s. Growth was based primarily on the opening of new land to cultivation and financed largely by wealthy urban merchants, particularly from Aleppo. The new farms, which grew wheat, barley, and cotton as main crops, were large, using mechanization and irrigation as much as possible. Industry also expanded rapidly, stimulated by the needs of Allied Forces in the area during World War II and domestic shortages of goods. Most industries were small, consisting of powered flour mills, bakeries, laundries, and repair shops, but also including larger facilities, in particular textile mills.

In the mid-1950s, a group of economists from the World Bank concluded that the period of rapid growth based on private sector investment was ending. The slowdown occurred partly because the supply of new land that could easily be cultivated was nearly exhausted. Further expansion of arable land would require large public sector investments in irrigation, drainage, and reclamation. Large public sector investments were also needed in electric power, ports, and the transportation system. Thus, economic conditions required an expanded role for government at about the same time that socialist-oriented political leaders became more influential.

Only the waning portion of this period of rapid growth is reflected in contemporary official statistics because statistical services developed late and reliability of data was uncertain. Although statistics improved slowly over the years, problems remained in the late 1980s. Many economic measurements were best viewed as indicative rather than precise. Moreover, sharp yearly fluctuations in agricultural output caused by variations in rainfall further compounded economic analysis. Although agriculture's share in the economy had declined over the years, even in the late 1980s the wide swings in annual harvests had pronounced effects on such sectors as trade, transportation, finance, and industry.

Specific data concerning the growth of the economy extend back to 1953. Such data, measured by GDP at market prices in terms of constant 1963 prices, indicates that growth averaged 6.3 percent a year between 1953 and 1976. The period of rapid growth led by the agricultural and industrial sectors ended in 1957 because of a prolonged, 4-year drought that severely curtailed agricultural output. In the 1960s, land reform, nationalization of key industries, and the socialist transformation of the economy affected the pace and scope of economic development. Growth of the economy, measured by GDP at market prices in terms of constant 1980 prices, averaged 9.7 percent a year during the 1970s. Real growth peaked at 10.2 percent in 1981 but steadily declined from 3.2 percent in 1982 to -2.1 percent in 1984.

The pattern of growth by sectors was uneven. Between 1953 and 1976, the value of agricultural output (in constant 1963 prices) increased by only 3.2 percent a year, slower growth than in other sectors of the economy. In the late 1970s, the value of agricultural output (in constant 1980 prices) increased by an average of 9.3 percent a year, despite large weather-induced fluctuations in output. From 1981 to 1984, output fell each year, although 1985 levels surged to approximate 1983 yields.

Although agricultural output remained relatively fixed, industry and construction rapidly increased in the mid-1970s, stimulated in large part by the oil boom in the Persian Gulf states. Construction grew 16.3 percent a year during the 1970s, while output of the mining and manufacturing sectors increased 7.1 percent a year. In the early 1980s, average yearly growth in these sectors was 5.6 percent and 7.9 percent, respectively. The growth of electric power and the extractive industries, particularly crude oil and phosphates, aided industrial expansion.

The expansion of government services in the 1970s and 1980s helped sustain economic growth. In the 1970s, government services grew at an average of 12.4 percent, contributing 14.1 percent to GDP in 1976 and rising to 19.6 percent in 1984. State commitment to expanding the educational system, health care, and social services, to extending public sector enterprises as part of the nationalization program, to constructing new commercial, industrial, and residential facilities, and increasing defense expenditures contributed to this high rate of government service growth.

As a result of the varying sectoral growth rates, the economy gradually shifted from an agrarian-based structure prior to 1970 to an economy based on services and the commercial sector in the 1980s (See figure 1, Growth and Structure of GDP, 1980-85). In 1953, agriculture contributed nearly 40 percent of GDP compared to 30 percent in 1963 and approximately 20 percent in 1984 (at constant 1980 prices), according the World Bank figures. Official Syrian government sources placed agriculture's share of GDP at 16.5 percent in 1984. From 1953 to 1976, industry, including extractive industries and electric power, increased from about 10 to 22 percent of GDP. In 1984, industry contributed 15.1 percent of GDP. Construction, trade, and transportation retained approximately the same relative importance as they had had in the mid- 1970s. By 1976, government services contributed over onehalf of GDP. In 1984, the GDP share from government services increased to 61 percent, according to official Syrian statistics, while the World Bank ranked that sector's 1984 constribution at 57 percent.

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