By Liz Sly
BEIRUT — The dramatic decision by Arab states to turn against President Bashar al-Assad could further damage Syria’s economy at a time when it is already unraveling, posing perhaps a graver challenge to Assad’s survival than the country’s nearly-eight-month-old popular uprising, analysts say.
The broader loss of regional support represents an important psychological blow to a regime that has long prided itself as a champion of Arab nationalist causes. In one indicator of how far Assad’s fortunes have fallen, Jordan’s King Abdullah II suggested Monday that the Syrian president step down, though he hedged that call, telling the BBC that Assad needed to ensure an orderly transition.
It was, nonetheless, the most explicit rejection yet by an Arab leader of Assad’s rule ahead of an Arab League meeting Wednesday to discuss further measures against Syria, including economic sanctions.
They could have a more profound and immediate effect than the withdrawal of political support, given that Western powers are ruling out military intervention and anti-government demonstrations have seen neither the protest movement nor the Syrian security forces gain a decisive advantage. On Monday, the European Union announced that it would expand its sanctions, to include 18 more individuals associated with the Assad regime and denial of access to the European Investment Bank.
“The economy is a trigger of a lot of other issues on a broader level,” said Ayham Kamel, Middle East analyst with the Eurasia Group. The business community has supported Assad so far, he said, “but over a longer period of time, they’re going to reevaluate.”
The extent of the damage is difficult to measure, and Syrian government officials say they don’t have indicators. But they do not play down the gravity of the situation.
Syrian Economy Minister Mohammad Nidal al-Shaar said at a conference last month that the economy is in a “state of emergency,” according to comments quoted by the Damascus-based Syria Report. In a recent interview in Damascus, Adib Mayalah, governor of the Central Bank of Syria, described the situation as “very serious” and ticked off the problems the economy is facing.
“Unemployment is rising, imports are falling, and government income is reduced,” he said. “In areas where there are protests, there is no economic activity — so people aren’t paying tax. Because they aren’t working, they are not repaying their loans — so the banks are in difficulty. And all this is weakening the economy.”
Merchants interviewed recently on the streets of Damascus report a 40 to 50 percent fall in business as consumers hoard cash and cease spending on all but the most essential items. Tourism has skidded to a halt, representing a loss of $2 billion a month to an economy worth $59 billion last year, Mayalah said.
“The whole system has been shrinking — and very fast,” said Rateb Shallah, a prominent Damascus businessman. “The sanctions are squeezing us, and it is definitely affecting us quite a bit.