sector. Three, with a greater certainty of the end of conflict, we focus on growth scenarios in the aftermath of war, rather than mostly assessing conflict impact based on different end‐time scenarios. Four, we also attempt to provide a more up‐to‐date assessment of the impact from the conflict, that is until the end of 2018.

Under the counterfactual simulation (that is, if war had not occurred), our baseline projection shows average real GDP growth of 5.3 percent per annum over 2011‐2018 which would have led to real GDP rising from USD 60 billion in 2010 to USD 91 billion and real GDP per capita rising from USD 2,857 to USD 3,774 by 2018. In contrast, our simulations of the impact of conflict point to negative annual GDP growth of ‐12 percent on average over 2011‐2018, resulting in a GDP level of USD 23.2 billion in 2018. Comparing the conflict versus no conflict simulations suggest a cumulative loss in GDP potential of about USD 300 billion over 2011‐2018. The depletion of factors of production alone may account for about 87 percent of the negative GDP growth on average, and further, about 64 percent of the average negative growth is due to physical capital destruction. Physical capital destruction reflects the compounded effects of large outright damages, low new investments, and a falling output base, that is adversely affected by all growth drivers. Demographics and labor account for about 15 percent, human capital 7 percent, and total factor productivity 13 percent of negative GDP growth on average over the conflict years.

In our post‐conflict simulations, we assume that the three political settlement scenarios are associated with different levels of reconstruction assistance and different degrees of voluntary mobility of refugees. These in turn affect key drivers of growth: public and private investment, and the labor force. We also make different assumptions for human capital growth and TFP growth across the three scenarios. Depending on the scenarios, our simulation results suggest that it would take between 10 and 20 years for Syria to reach its pre‐conflict GDP level and between 10 and 30 years to reach its GDP per capita level (both at 2010 constant prices). If there were to be an unsanctioned and misguided “forced” repatriation of refugees, this would result in significantly lower GDP per capita compared to the voluntary mobility case. Under voluntary return, labor would adjust gradually to capital reconstruction, thus keeping labor productivity from falling.

# **2. Syria Pre‐Conflict Developments and Projections**

This section focuses on building a calibration using the LTGM‐PC for a no‐conflict scenario based on developments and projections prior to the conflict. Recent data indicate that average real GDP growth in Syria was around 4.7% over 2001‐2010 (Graph 1(a)). World Bank’s World Development Indicators (WDI)<sup>1</sup> data suggest an average growth of 4.9% over 2001‐2010, while IMF World Economic Outlook (WEO), points to 4.5%, over the same period.<sup>2</sup> Just prior to the conflict, projections for near‐ term growth were still robust: an average of 5.6% over 2011‐2012 in the World Bank Global Economic Prospects (GEP), January 2011<sup>3</sup> ; and an average of 5.0% over 2011‐2016 in the IMF WEO, April 2011 edition<sup>4</sup> ‐ see Graph 1(b). In the following subsection we look at pre‐conflict trends and projections

> 1 WDI data for Syria are publicly available only up to 2007. We supplement these data for the last three years up to 2010 with data on GDP growth from the World Bank’s internal macroeconomic model (MFMod), November 2017 vintage, which is consistent with the IMF WEO October 2018 data.

> 2 WDI: GDP is at market prices, 2010 USD. IMF WEO: GDP is at market prices, 2000 local currency.

> 3 Source: http://documents.worldbank.org/curated/en/293851468162862428/Global‐economic‐prospects‐January‐2011‐ <u>navigating‐strong‐currents. GDP growth of 5.0% for 2010 is an estimate. No GEP projections for Syria are available beyond</u> the January 2011 publication. GDP is at market prices, 2005 USD.

> 4 Source: https://www.imf.org/external/pubs/ft/weo/2011/01/weodata/index.aspx.

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