A Crisis Costing Billions

The Syrian civil war, coupled with the spread of ISIS, has so far cost countries in the region over $33 billion, according to a World Bank report.

The policy research working paper quantifies the direct and indirect economic impact of the conflict on six Levant countries: Egypt, Iraq, Jordan, Lebanon, Syrian, and Turkey.

The total accumulative losses for Jordan were approximately $834 million in 2007 prices, which is the equivalent of almost $1 billion in current prices. The Kingdom’s business and communication services were also found to have contracted by almost 30 percent, while tourism and transportation services were found to have dropped by 15 percent.

Unsurprisingly, the paper reveals that Syria and Iraq have borne the brunt of the economic impact of the war, seeing a decline in GDP per capita by 23 percent and 28 percent, respectively. Neighboring Levant economies have also lost to varying degrees, incurring per capita income loses of almost 11 percent in Lebanon and 1.4 percent in Jordan, with negligible losses in Turkey and Egypt.

the economic impact of war and trade disintegration in the Levant

Yet while all Levant economies lost in per capita terms, they didn’t all necessarily lose in aggregate terms because of the inflows of refugees, which in some cases boosted aggregate consumption, investment, and labor supply. However, aggregate incomes overall have increased less than population numbers so standards of living have fallen in general.

The economic losses taken into consideration in the paper include the disruption of the regional trade integration process, which the paper reveals had an enormous economic impact on the Levant. Previously, intra-Levant trade had grown seven-fold during the 2000s and the paper notes that on the eve of the Arab Spring, countries in the region were considering reforms that would have deepened their trade ties and accelerated economic growth, diversification, and job creation. Yet it states that these plans were disrupted by the political transitions and events that took place in the region beginning in 2011.

While the World Bank paper provides a comprehensive analysis of the cost of the conflict on countries in the Levant, it doesn’t include the cost of rebuilding depleted physical and human capital, the increased military spending to address the threat of Islamic State militants, or the fiscal costs of delivering basic services and building infrastructure to accommodate refugees in host countries. If these costs were factored in, it would likely put the figure of the economic impact much higher.