Calculating the Economic Impacts of the Syrian Con ict What damage has the Syrian conflict inflicted on Syria's economic infrastructure? What are the implications of new infrastructure spending? The World Bank in collaboration with RAND has How to Use the Calculator developed an online calculator that allows the user to calculate and forecast the costs of the Syrian war. This This online calculator allows users to estimate the economic calculator combines data from the World Bank with impact of destruction and infrastructure spending in six war- insights from the economics literature to estimate the torn cities in Syria: Aleppo, Dar'a, Hama, Homs, Idlib, and economic impact of destruction and infrastructure Latakia. Analysis focuses on these cities — and seven spending in seven key sectors — agriculture, education, economic sectors — included in the World Bank’s Damage energy, health, housing, transportation, and water and Assessment, which relied on satellite imagery and social media sanitation — in six war-torn cities. It allows users to to estimate the extent of damage as of early 2016. For each vary key assumptions about the extent of destruction and intensity of infrastructure spending activity, and sector, the calculator relies on three types of assumptions, estimates the net economic impact on the gross which the user can vary to forecast the economic impacts of domestic product (GDP) of these six cities.1 future destruction and reconstruction activities: The online calculator supplements the 2017 World 1. The share of infrastructure damaged by the con ict: Bank's MENA Economic Monitor The Economics of The share of sector-speci c infrastructure in the six cities Post-Conflict Reconstruction in MENA report, which damaged by the con ict. provides estimates of the costs of the war — the human costs, the damage to infrastructure and physical capital, 2. The total dollar value of reconstruction spending: The and the macroeconomic and sectoral costs. It total dollar value of reconstruction spending in a sector. complements the Syria ESIA report “The Toll of War: Reconstruction impacts GDP in the short-term through The Economic and Social Consequences of Conflict in the overall spending multiplier and in the long-term Syria. through the sector-speci c output multiplier. The upper limit for the amount of reconstruction is the amount of resources that it would take to completely rehabilitate the damage to the sector. When reconstruction is set to the maximum, the net impact is often positive as a consequence of the direct economic bene t of reconstructing spending modeled through the spending multiplier. The e ectiveness of reconstruction spending and the impact on GDP are determined by three factors: spending multiplier, e ciency of reconstruction aid, and decreasing returns to spending. You can adjust each of these factors at the bottom of the calculator under "Advanced Options." 3. Output multiplier: The change in long-term GDP associated with a sector-speci c change in economic infrastructure. For example, a value of 0.5 indicates that overall long-term annual GDP increases by $0.50 for every $1.00 of investment in that sector. The default values provided for each multiplier rely on a variety of assumptions, often derived from research in other countries that examines the productivity impacts of only small changes in infrastructure. Use the information icons to learn more about the default values used for the share of infrastructure damaged and the output multipliers in each sector. After adjusting the sliders, selecting the next to Change in GDP from Damage, Change in GDP from reconstruction, and Net change in GDP will reset values to default. NOTES Changes in GDP resulting from reconstruction spending capture both the net indirect e ect—the overall long-term change in productive capacity after all reconstruction activities are complete—and the direct e ect, the short-term transitory impact of increased domestic spending associated with the reconstruction resources. For simplicity the reported GDP changes include 10% of the total direct e ect associated with the speci ed level of reconstruction spending. All amounts are in billions (U.S. dollars, 2017) and are relative to the estimated annual pre-con ict 2010 GDP of $34.2 billion for the six cities: Aleppo, $16.2 billion; Dar'a, $1.4 billion; Hama, $3.5 billion; Homs, $7.0 billion; Idlib, $1.3 billion; and Latakia, $4.8 billion. 2 These six cities accounted for an estimated 51% of Syria's aggregate GDP of $67.5 billion in 2010. SIX CITIES ALEPPO DAR'A HAMA HOMS IDLIB LATAKIA Share of Change in Infrastructure Change in Output Infrastructure GDP from GDP from Net change in damage Spending Infrastructure spending Sectors Multiplier Damaged (US $B, 2017) (US $B, 2017) (US $B, 2017) GDP (US $B, 2017) Agriculture Damage to agricultural storage facilities, equipment, $-1 $0 $-1 and irrigated land reduces 0.3 1 0% 40% 100% -2.9% GDP $0 $8.75 0% GDP -2.9% GDP total crop production. Education Damage to primary, secondary, and tertiary $-0.09 $0 $-0.09 $-0.09 educational facilities limits 0 0.4 1 12% 100% -0.3% GDP $0 $0.57 0% GDP educational opportunities of -0.3% GDP youth and reduces human capital. Energy Damage to power plants, substations, and towers $-4.09 $0 $-4.09 reduces access to electricity. 0 2.6 4 0% 38% 100% -12% GDP $0 $4.02 0% GDP -12% GDP Health Damage to health infrastructure reduces the $-1.21 $0 $-1.21 healthfulness of the Syrian 0 2.7 4 18% 100% -3.5% GDP $0 $1.13 0% GDP -3.5% GDP population — thus reducing labor productivity. Housing Damage to the housing stock attenuates housing services, $-0.26 $0 $-0.26 which are an estimated eight 0.05 0.2 9% 100% -0.8% GDP $0 $14.4 0% GDP -0.8% GDP percent of the Syrian economy. Transportation Damage to the transportation infrastructure disrupts trade $-0.1 $0 $-0.1 and other vital economic 0 0.5 1 2% 100% -0.3% GDP $0 $0.52 0% GDP -0.3% GDP activity. Water and Sanitation Damage to water, sanitation, and hygiene (WASH) $-0.04 $0 $-0.04 negatively impacts health 0 0.5 1 10% 100% -0.1% GDP $0 $0.19 0% GDP -0.1% GDP outcomes and reduces GDP. ADVANCED OPTIONS Spending Multiplier E ciency of Infrastruture Decreasing Returns Spending The scal multiplier for reconstruction spending Follows the intuition in Hansen and Tarp (2001): (i.e., the short-term impact on GDP of The e cacy of aid is decreasing quadratically in Share of reconstruction spending that is reconstruction spending.) aid as a share of GDP. productive 0 1 2 0.3 0.4 1 100% 250% 500% Total spending $0 Total change $-6.79 $0 $-6.79 -19.8% GDP 0% GDP -19.8% GDP By Shanta Devarajan and Lili Mottaghi (All World Bank); Daniel Egel, Joel Kline, Eric Robinson, and Chara Williams (All RAND Corporation). REFERENCES Bayar, Yılmaz and Hasan Alp Özel, "Electricity Consumption and Economic Growth in Emerging Economies," 2014, Journal of Knowledge Management, Economics and Information Technology. Bloom, David E., David Canning and Jaypee Sevilla. "The E ect of Health on Economic Growth: A Production Function Approach." World Development 32, 1 (2004): 1– 13. Btlas, "Population Pyramids of the World from 1950 to 2100: Syrian Arab Republic, 2015." Downloaded from http://www.populationpyramid.net/syrian-arab- republic/2015/ on April 17, 2017. Calderon, C., E. Moral-Benito, and L. Serven, 2011, “Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach,” World Bank Policy Research Working Paper No. 5682 (Washington: World Bank). Carlino, Gerald and Robert P. Inman, “Macro Fiscal Policy in Economic Unions: States as Agents,” 2013, National Bureau of Economic Research, Working Paper #19559. Congressional Budget O ce, "The Macroeconomic and Budgetary E ects of Hurricanes Katrina and Rita: An Update," September 29, 2005. Crafts, Nicholas, "Transport infrastructure investment: implications for growth and productivity," Oxford Review of Economic Policy, Volume 25, Number 3, 2009, Crafts, Nicholas, "Transport infrastructure investment: implications for growth and productivity," Oxford Review of Economic Policy, Volume 25, Number 3, 2009, pp.327–343. Department of Health and Human Services, "For a Healthy Nation: Returns on Investments in Public Health," 1994. Devarajan, S. and Mottaghi, L. 2017. “The Economics of Post-Con ict Reconstruction in MENA” MENA Economic Monitor, Washington, DC: World Bank, April. ETF, "Transition From Education To Work In Syria: Results Of The Youth Transition Survey 2009," 2012. Gobat, Jeanne and Kristina Kostial, “Syria’s Con ict Economy,” 2016, IMF Working Paper. Hansen, H. and F. Tarp, 2001, “Aid and Growth Regressions,” Journal of Development Economics, Vol. 64, pp. 547–70. Hurlin, C. and F. Aresto , 2010, “Are Public Investments E cient in Creating Capital Stocks in Developing Countries?” Economic Bulletin, Vol. 30, pp. 3177–87. Kiliçer, Sema, "A preliminary survey of the housing sector in OIC Countries," Journal of Economic Cooperation among Islamic Countries, 1996. Mokdad, Ali H et al., "Health in times of uncertainty in the eastern Mediterranean region, 1990–2013: a systematic analysis for the Global Burden of Disease Study 2013." The Lancet Global Health, October 2016, Volume 4, Issue 10 , e704-e713 Ou, Peng, Ruting Huang, and Xin Yao, "Economic Impacts of Power Shortage," 2016, Sustainability. Pereira, Alfredo M., "Is All Public Capital Created Equal," 2000, The Review of Economics and Statistics. Pritchett, L., 2000, “The Tyranny of Concepts: CUDIE (Cumulated, Depreciated, Investment E ort) Is not Capital,” Journal of Economic Growth, Vol. 5, pp. 361–84. Schreyer, C., Schneider, C., Maibach, M., Rothengatter, W., Doll, C., and Schmedding, D. (2004), External Costs of Transport: Update Study, Karlsruhe and Zurich, IWW and INFRAS. Syrian Observer, "What Has Syria Lost With the Destruction of Aleppo?" December 16th, 2016, http://syrianobserver.com/EN/Features/32111/What_Has_Syria_Lost_With_Destruction_Aleppo. UNHCR and UNDP, 2015, “Impact of Humanitarian Aid on the Lebanese Economy.” UNICEF, "Economic Loss from School Dropout due to the Syria Crisis A Cost-Bene t Analysis of the Impact of the Syria Crisis on the Education Sector," 2016. United Nations Food and Agriculture Organization, "Special Report: FAO/WFP Crop and Food Security Assessment Mission to the Syrian Arab Republic." November 14, 2016. United Nations Food and Agriculture Organization, "Counting the Cost: Agriculture in Syria after six years of crisis." April 3, 2017. World Bank, "World Development Indicators: GDP (current US$)," http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=SY. World Bank, "Agriculture, value added (% of GDP)," http://databank.worldbank.org/data/reports.aspx?source=2&country=SYR World Bank, "Syrian: Damage Assessment," mimeo, 2015. World Bank, "Syrian: Damage Assessment," Excel data from Damage Assessment, early 2016.