The devastating civil war in Syria is arguably one of the major civil conflicts in recent times. The economic effects of the war extend beyond the country’s borders affecting also the neighbouring countries. In particular, trade is one of the main channels through which the effects of the crisis are transmitted to neighbouring countries. This report examines the effects of the Syrian war on the Lebanese economy. In doing so, it partly updates and extends the previous economic assessment of the Wold Bank (2013b) carried out last year.
It uses a variety of analytical instruments to find - perhaps surprisingly – that the Syrian war has so far had a mixed impact on Lebanese trade. It shows that the fall in Lebanese merchandise exports recorded in the period 2011-13 seems to have been caused by factors unrelated to the Syrian war, chiefly the fall in previous stones and jewellery exports particularly to South Africa and Switzerland. The war has reduced the Syrian demand for goods and services, including those of Lebanese origin. Using custom transaction data we found that, on average, an exporter of goods to Syria before the war lost US$ 90,000 in exports to Syria by 2012, around a quarter of the average pre-crisis export level to Syria. While this effect is significant, it is much smaller than the effect for Jordanian exporters. This is also confirmed by the gravity analysis, which reveals that the effect of the war on aggregate exports to Syria has been smaller for Lebanon than for Turkey and Jordan.
This effect of the Syrian conflict has been heterogeneous across exporters. It has mainly affected exporters highly exposed to the Syrian market, while it has not had a significant impact on relatively marginal exporters. The heterogeneity is also across sectors. Lebanese exports to Syria in the beverages and tobacco sector, and to some extent food, benefited from the war as they replaced some of the lost production in Syria. For example, exports of wheat to Syria increased 14-fold between 2011 and 2013. On the other hand the crisis had a particularly negative impact on exporters of manufactured goods, a result common to Jordanian exporters as well, and of mineral fuels.