Outlook for 2011-12

• Despite the threat of contagion from Tunisia and Egypt, the president, Bashar al-Assad, is expected to remain in power in 2011-12. Some limited domestic political reform is expected.
• Syria's domestic economic and political profile is similar to that of Tunisia and Egypt, but there are also major differences. Syria's posture of resistance lends the regime some legitimacy, and fears of sectarian conflict will deter dissent.
• The rapprochement with the US and leading Arab states will be tested by the collapse of the Saudi-Syrian deal to shore up political stability in Lebanon and US reassessment of its Middle East policy following regional popular unrest.
• The Economist Intelligence Unit has revised its estimate for Syrian real GDP growth in 2010 upwards to 4.5%, in line with new Central Bank of Syria data. We forecast an average rate of growth of 4.7% in 2011-12.
• The liberalisation, privatisation and diversification of the centrally planned economy will continue, despite opposition from within the regime.
• Following the release of new Central Bank figures, we have revised up our forecast for the budget deficit, to an average of 3.5% of GDP in 2011-12.
• We forecast that inflation will rise to 7.1% in 2011 as global commodity prices increase, but fall to 2.4% in 2012 owing to the deflationary effect on rents of Iraqis returning home and a helpful base effect.

Monthly review

• Despite popular anti-government unrest in neighbouring states, Mr Assad has claimed his regime is secure because of its "popular" foreign policy. He has nevertheless offered a few cosmetic concessions such as legalising Facebook.
• Syria witnessed one public demonstration on February 17th, sparked by a specific incident of police brutality in central Damascus, the capital.
• Tal al-Mallouhi, a 19-year-old blogger arrested in 2009, was sentenced to five years in jail on charges of spying for the US.
• Mr Assad has passed three decrees with the apparent aim of combating inflation, in reaction to rising global commodities prices.
• The Ministry of Finance issued its first government securities of the year on February 14th and published a schedule for issuing Treasury bills for 2011. The total value of the issuance was S£30bn (US$650m).
• Trade figures issued by Turkstat, the Turkish statistics agency, have shown that exports to Syria rose by 30% year on year in 2010 to US$1.85bn, making Syria the seventh-largest market for Turkish goods in the Middle East.