Inflation Accelerating Regime's Fall
BMI View: We forecast consumer price inflation in Syria to average 28.0% and 14.0% in 2013 and 2014, respectively, compared to our estimate of 38.0% in 2012. Food and housing prices will remain elevated as the conflict drags on, which will accelerate the fall of President Bashar al-Assad's regime.
Consumer price inflation (CPI) in Syria came in at 48.1% y-o-y in September 2012, according to official figures from the Central Bureau of Statistics. Food prices (making up 41.8% of the consumer price basket) increased 46.9%, while housing prices (comprising 22.0% of the basket) spiked 61.1%. Given our view that the civil war will drag on through 2013, we believe that the headline print will increase further, which will contribute to accelerating the fall of President Bashar al-Assad's regime. We project CPI averaging 28.0% in 2013 and 14.0% in 2014, from our estimate of 38.0% in 2012, with the deceleration largely resulting from base effects.
|Syria - Consumer Price Inflation By Component, % change y-o-y|
Food Shortages To Continue...
BMI's Agribusiness team expects grain supply in the Syrian market to tighten significantly beyond sustainable levels, as the 2012/13 harvest disappoints while stocks are being depleted ( see our online service, January 31, 'Food Shortages Could Accelerate Regime's Fall'). Moreover, the country's import needs of food staples will be met with increasing difficulty as traders find it hard to work around sanctions, while the government's current fiscal situation does not allow it to offer premiums to exporters in a tight global market. As a result, food shortages will continue, ensuring that prices remain elevated going forward.
...While Housing Prices Will Remain Elevated
Due to the ongoing conflict, large areas of the country have been abandoned, and a significant portion of the housing stock has been damaged. Indeed, according to the UN, the total number of registered Syrian refugees and individuals awaiting registration outside of the country was 821,829 on 12 February, while the government estimated that over three million Syrians were internally displaced in November 2012. Given our view that the civil war will drag on through 2013, housing prices will continue to increase apace.