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Engagement with Syria has emerged as a top priority for US President Obama’s administration |
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Engagement with Syria has emerged as a top priority for US President Obama’s administration, as evidenced by the flurry of diplomatic activity since the new president took office in January. We expect these efforts to bear some fruit, not least because of the poor state of the Syrian economy. The prospect of improved trade ties and the likelihood of increased inward investment will act as a major incentive. Not that the path will be easy. Binyamin Netanyahu, Israel's prime minister-designate, has declared himself hostile to the return of the Golan Heights to Syria – one of Damascus' key demands. This will make any resumption of peace talks difficult. Furthermore, there are still plenty of questions hanging over Syria's commitment to the US vision: its support of Iran, Hamas and Hizbullah is popular at home, while recent reports have suggested that Syria has concealed the extent of its nuclear research facilities.
There is bad news on several fronts for the Syrian economy in 2009, and we are forecasting a slump in real GDP growth to just 1.4%, down from an estimated 4.1% in 2007. Conditions will remain tough in 2010, when we see growth rising only slightly to 1.8%, before recovering further to 2.6% in 2011. A poor growth outlook, twin deficits on the fiscal and current accounts, and a lack of inward investment, are likely to exert downside pressure on the currency during our forecast period.
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