The Ripple Effects of the Syrian Conflict in the Mashreq Region

New World Bank report calls for a renewed commitment to reforms for prosperity across the Mashreq region

WASHINGTON, June 18, 2020— A decade of conflict in Syria led to region-wide economic and social fallout across Iraq, Jordan, and Lebanon, adding urgency to the call for a region-wide response strategy, according to a new World Bank Report. The ripple effects of the Syrian conflict include increased poverty rates, higher debt burdens, deteriorating labor markets, especially for youth and women, and more restricted access to public services such as health care and electricity.

The Fallout of the War: The Regional Consequences of the Conflict in Syria[1] estimates that the conflict in Syria has been solely responsible for annual reductions in economic growth of 1.2 percentage points (pp) in Iraq, 1.6 pp in Jordan, and 1.7 pp in Lebanon in the last decade. The conflict also drove up poverty rates by 6.0 pp in Iraq, 3.9 pp in Jordan, and 7.1 pp in Lebanon, while simultaneously precipitating the largest refugee crisis since World War II. At the peak, refugees exceeded a quarter of the local populations in Jordan, Lebanon, and the Kurdistan Region of Iraq, the highest refugee concentration in the world.

The fallout of the conflict was transmitted through multiple channels. With decreasing transit trade through Syria and stalling service exports like tourism, the marginal effect of the trade shock on GDP reached –3.1 pp in Jordan and –2.9 pp in Lebanon. In comparison, the demographic shock (refugee arrivals) boosted GDP by 0.9 pp in both countries by increasing aggregate demand and labor supply. However, these GDP effects are only a relatively small share of the overall impact.

Despite governments’ best efforts and support from the international community and humanitarian organizations, conditions on the ground remain difficult in the Mashreq. With weak social safety nets, Iraqi, Jordanian, and Lebanese citizens are largely unprotected against economic shocks. Host communities and refugees alike suffer from inadequate services, often leading to short-term alternatives like diesel generators and water transported by truck, which can be both unhealthy and up to three times costlier than grid options. Refugee children receive 5.4 fewer years of education than their host country peers in Lebanon, and 3.7 fewer years in Jordan, which is largely driven by low enrollment in secondary and tertiary levels. According to the report’s estimates, the human capital gain from closing these gaps could add to GDP growth by 1.1 % in Lebanon and 0.4% in Jordan.

The overall economic impact of the Syrian conflict on Iraq, Jordan, and Lebanon has been disproportionately high compared to similar situations elsewhere in the world in the last few decades” said Saroj Kumar Jha, World Bank Regional Director for the Mashreq. “Looking forward, the international community can support the stability and prosperity of the Mashreq much more effectively through a strategy that combines a medium-term perspective, instead of quick fixes, and a regional focus that builds on cross-border linkages and coordinates a response across borders.”

According to the report, the complex political economy dynamics in the region have, so far, limited building better institutional resilience, which could help mitigate the fallout from the Syrian crisis more effectively. A persistent short-termism has led to costly and ineffective service provision, lost economic opportunities, and underfunded programs.

“This report harnesses numerous data sources, statistical techniques, and a suite of economic models to produce the most systematic analysis to date of the regional ramifications from the conflict in Syria,” said Harun Onder, the lead author of the report. “This approach helped us to isolate the specific role played by the Syrian war in a region where overlapping shocks, more recently the oil price collapse and the COVID-19 pandemic, have been the norm, rather than exceptions.”

Going forward, the report argues that a medium-term strategy is needed to address structural problems and mitigate the adverse effects of the conflict through enhancing social safety nets; improving service access for all, and investing in state capacity. The report also argues that adopting a regional focus, one that focuses on building on cross-border connectivity, can deliver better outcomes, as both problems and opportunities cross borders in the Mashreq. However, this approach requires a concerted effort and supra-national commitment to stability and prosperity at the regional level.

The Fallout of War is the third report in the World Bank’s innovative series[2] examining the human, physical, social, and economic destruction from the conflict in Syria. It builds on The Toll of War[3], issued in 2017, which documented the economic and social impact of the conflict inside Syria, and The Mobility of Displaced Syrians[4], issued in 2019, which analyzed the spontaneous returns of Syrian refugees to determine the key factors that influenced their decisions.

The Fallout of War will be officially launched on June 24, 2020 as part of the upcoming “Fourth Brussels Conference on Supporting the Future of Syria and the Region.”[5]

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