Outlook for 2011-12

• Despite some tensions within the regime, the president, Bashar al-Assad, is unlikely to face any significant threats to his rule and is expected to remain in power in 2011-12. Some limited domestic political reform is expected.
• Relations with the US and leading Arab states are expected to improve, albeit gradually, although rapprochement will be overshadowed by ongoing tension between the US and Iran, Syria's closest ally.
• The International Atomic Energy Agency will increase pressure on the government to respond to its repeated requests to allow inspectors to visit a suspected former nuclear research site.
• Syrian real GDP growth is estimated at 4% in 2010. We forecast that this will accelerate to 4.5% on average in 2011-12, driven mainly by private investment in industry, construction, transport and electricity generation.
• The liberalisation, privatisation and diversification of the centrally planned economy will continue, helping to offset the effects of falling oil production.
• The central government runs a persistent budget deficit, which is expected to average 2.6% of GDP in 2011-12, lower than previously forecast.
• Inflation will rise to 4.4% in 2011 as global commodity prices increase and value-added tax (VAT) is introduced, but will fall to 4.2% in 2012 with the deflationary effect on rental prices of Iraqis returning home.
• The current-account surplus will widen to an average of about US$660m (1% of GDP) in 2011-12, owing to a rise in the non-merchandise surplus (due to booming tourism), higher oil production in 2011 and slightly higher oil prices.

Monthly review

• Mr Assad has sought to limit the damage that could result from the Special Tribunal for Lebanon indictments.
• The media has speculated that the Baath party is preparing for its 11th regional conference; the previous conference was in 2005.
• The Ministry of Finance has issued its first Treasury bills. However, they have only been taken up by public banks at low rates.
• The finance ministry has published the fiscal outturn for 2009, showing a deficit of 2.8% of GDP, compared with a target of 9%. It has also released a fiscal forecast for the 2011-15 five-year plan, with deficits averaging 6% of GDP.
• The index of the Damascus Securities Exchange rose by 75% in 2010.
• Tamin Telecom (Iran) has been rejected from the mobile licensing contest.
• The government's 2010 oil bid round has received a strong response.