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Agriculture and Economic Reform in Syria: Impacts on Poverty and Inequality
Benedetto Rocchi and Donato Romano Department of Agricultural and Resource Economics University of Florence
with the collaboration of the Rural Development Division at NAPC FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Objectives A
SAM of the Syrian economy:
- households accounts (rural vs. urban, income deciles) - activities accounts (agriculture, food processing) Policy
simulation assessment:
- policy reform (→ social market economy) impacts on poverty and inequality - changing environment: e.g. soaring food prices impacts on poverty and inequality FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Account classification
41 activities (from the NAPC Farming Systems Study + CBS data)
25 crops 3 livestock 13 non-agricultural activities (8 food processing + 5 other acts.)
51 commodities (from the NAPC Farming Systems Study + CBS data)
23 crops 8 animal products 13 agricultural processed products 7 other products
22 institutions (from the SPC-UNDP Poverty Study + CBS data)
10 rural households (per income deciles) 10 urban households (per income deciles) firms government
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Account classification
3 value added (from CBS + IMF data) hired labour other factors net fiscal revenue (taxes – subsidies)
2 capital formation (from CBS data) inventory change investment
3 rest of the world (from CBS data) goods and services (current account) financial flows (capital account) net lending (lending – borrowing)
TOTAL: 122 accounts
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
SAM structure 51
41
3
20
1
1
2
3
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Definition of policy reform scenarios
change in existing (sector) policies towards a less distorted environment: dropping subsidies to agriculture and food processing production reducing by 20% the price of strategic crops abolishing the Price Stabilization Fund (food consumption subsidy)
alternative use of budget saving: fiscal deficit reduction (= investment) public expenditure increase (proportional to the current composition) increase transfers to households
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts % impact on output incomes poverty elimination of subsidies to agriculture deficit reduction publ exp increse tranf to hhold increase
3.79 2.03 3.06
2.45 1.43 7.13
-0.24 -0.15 -0.92
price reduction for strategic crops deficit reduction publ exp increse tranf to hhold increase
0.55 0.33 0.46
0.47 0.34 1.07
-0.05 -0.04 -0.14
0.43 -0.40 0.09
-2.10 -2.58 0.10
0.51 0.55 0.19
elimination of PSF deficit reduction publ exp increse tranf to hhold increase
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts on output
% impact on output of
agriculture
food process.
other activities
total
A) elimination of subsidies to agriculture and food processing 1. deficit reduction
1.19
2.16
4.67
3.79
2. public expenditure increase
0.59
0.99
2.52
2.03
3. transfers to households increase
2.79
4.16
3.00
3.06
1. deficit reduction
0.21
0.37
0.67
0.55
2. public expenditure increase
0.14
0.22
0.39
0.33
3. transfers to households increase
0.42
0.63
0.45
0.46
1. deficit reduction
-0.80
-1.02
0.92
0.43
2. public expenditure increase
-1.57
-0.09
-1.87
-0.40
3. transfers to households increase
-0.04
-0.07
0.14
0.09
B) price reduction for strategic crops
C) elimination of Price Stabilization Fund
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts on income
% impact on incomes of
urban total
urban 1st urban 10th dec dec
rural total
rural 1st dec
rural 10th dec
A) elimination of subsidies to agriculture and food processing 1. deficit reduction
2.52
2.29
2.61
2.35
2.28
2.55
2. public expenditure increase
1.55
1.67
1.56
1.26
1.26
1.36
3. transfers to HHs increase
8.35
14.96
6.92
5.32
6.85
3.87
1. deficit reduction
0.46
0.47
0.45
0.48
0.52
0.45
2. public expenditure increase
0.34
0.39
0.31
0.34
0.38
0.29
3. transfers to HHs increase
1.22
2.11
1.01
0.86
1.11
0.62
1. deficit reduction
-1.41
-5.24
0.10
-3.12
-6.84
-0.39
2. public expenditure increase
-1.87
-5.54
-0.40
-3.64
-7.32
-0.95
1.34
0.74
2.13
-1.72
-4.68
0.23
B) price reduction for strategic crops
C) elimination of PSF
3. transfers to HHs increase
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts on poverty elimination of subsidies to agri-food
Urb dec 1 Urb dec 2 Urb dec 3 Urb dec 4 Rur dec 1 Rur dec 2 Rur dec 3 Rur dec 4 Total
price reduction for strategic crops
elimination of PSF
deficit red.
public transf public transf public transf deficit deficit xp to hhs. xp to hhs. xp to hhs. red. red. incr. incr. incr. incr. incr. incr.
-0.01 -0.12 -0.28 -3.41 0.00 -0.14 -0.46 -3.19 -0.24
0.00 -0.04 0.00 -0.08 -0.52 -0.02 -0.18 -1.20 -0.06 -2.20 -14.62 -0.66 0.00 -0.01 0.00 -0.08 -0.43 -0.03 -0.26 -1.46 -0.10 -1.78 -9.32 -0.68 -0.15 -0.92 -0.05
0.00 -0.02 -0.04 -0.50 0.00 -0.02 -0.07 -0.50 -0.04
-0.01 -0.07 -0.17 -2.11 0.00 -0.07 -0.23 -1.48 -0.14
0.02 0.21 0.37 4.14 0.01 0.34 1.11 6.90 0.51
0.02 0.23 0.42 4.71 0.01 0.37 1.21 7.56 0.55
0.00 0.02 -0.06 -1.15 0.01 0.20 0.64 4.01 0.19
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Soaring cereal prices: redistributive effects elimination of subsidies to agri-food deficit red. Urb dec 1 Urb dec 2 Urb dec 3 Urb dec 4 Urb dec 5 Urb dec 6 Urb dec 7 Urb dec 8 Urb dec 9 Urb dec 10 Rur dec 1 Rur dec 2 Rur dec 3 Rur dec 4 Rur dec 5 Rur dec 6 Rur dec 7 Rur dec 8 Rur dec 9 Rur dec 10 Tot abs value
public xp incr.
price reduction for strategic crops
transf to deficit hhs. red. incr.
0.08 -2.93 -4.79 -3.75 -2.96 -1.05 2.79 6.26 16.63 74.24 -0.79 -4.51 -5.09 -6.57 -7.37 -13.27 -11.83 -15.70 -10.65 -8.76
5.59 0.45 -1.24 1.12 3.64 1.57 3.40 5.89 16.68 61.66 -0.67 -3.55 -3.43 -6.27 -7.64 -14.09 -12.44 -18.19 -13.82 -18.66
17.08 11.41 13.13 14.92 22.74 6.13 1.69 1.44 9.61 1.76 -0.36 0.02 0.08 -1.59 -5.72 -10.79 -10.30 -18.05 -19.02 -34.19
4.24 -4.28 -10.12 -5.54 -5.44 -0.75 1.77 3.16 12.80 70.05 4.67 0.90 2.41 -3.54 -2.27 -6.95 -7.34 -16.02 -10.88 -26.87
985
1 103
7 172
629
public xp incr. 5.42 -3.54 -9.32 -4.47 -3.96 -0.18 1.95 3.19 13.05 68.14 4.61 1.00 2.63 -3.59 -2.48 -7.37 -7.67 -16.76 -11.71 -28.96
elimination of PSF
transf to transf to deficit public hhs. hhs. red. xp incr. incr. incr. -6.01 -5.69 14.29 1.65 -7.40 -7.26 -2.17 6.38 -5.37 -5.22 4.95 0.80 -4.26 -3.99 8.36 2.70 -3.26 -2.85 13.94 7.25 4.13 1.08 1.26 3.97 1.80 1.79 1.87 2.43 1.95 6.92 7.01 7.34 11.47 18.45 18.76 22.22 28.01 54.27 54.48 51.65 2.09 -10.37 -10.47 -10.72 0.90 -11.44 -11.52 -11.41 1.73 -12.03 -12.07 -11.94 -2.21 -12.29 -12.44 -12.88 -4.47 -10.02 -10.20 -12.40 -9.80 -8.68 -8.92 -12.97 -9.78 -5.22 -5.41 -9.31 -19.17 -3.64 -3.97 -10.99 -17.87 -4.35 3.59 3.32 -36.69 13.91 13.30 -0.84
637 1 293 7 575 Workshop 7 501 - Damascus, 7 406 1-2 July 2008 FAO Project GCP/SYR/006/ITA
The impact on poverty of soaring cereal prices cereal price increase no yes elimination of subsidies to agriculture deficit reduction publ exp increse tranf to hhold increase
-0.24 -0.15 -0.92
0.25 0.35 -0.42
price reduction for strategic crops deficit reduction
-0.05
0.45
publ exp increse tranf to hhold increase
-0.04 -0.14
0.46 0.36
elimination of PSF deficit reduction publ exp increse tranf to hhold increase
0.51 0.55 0.19
1.00 1.05 0.68
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Conclusions
The estimated SAM for Syria is a suitable tool for policy impact simulations Policy lessons:
crucial role of Government budget strategies on the outcomes of a given sector policy (reform) importance of output growth for poverty reduction existence of structural asymmetries in income distribution (e.g. rural vs. urban)
Limitations:
static model: only short-run impacts the classification of household groups by deciles may change as a consequence of simulated policies
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Conclusions
Future developments:
analyze alternative policy mixes - less ‘extreme’ policy mixes - impact of debt service of production loans on HHs - decrease in oil production → foreign exchange → access to international food market alternative classification criteria for households sector (sector of occupation of the reference person, education level, composition of the household’s total income) regional disaggregation of the Syrian SAM CGE
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
The impact of an exogenous shock in d u s t r ie s
fa c t o r s
in te r in d u str y in d u s t r ie s flo w s fa c t o r s
househo
h o u se h o c o n su m p
in c o m e d istrib u tio n to fa c to r s
h o u s e h o ld s
in c o m e d istr ib u tio n to FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Benedetto Rocchi and Donato Romano Department of Agricultural and Resource Economics University of Florence
with the collaboration of the Rural Development Division at NAPC FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Objectives A
SAM of the Syrian economy:
- households accounts (rural vs. urban, income deciles) - activities accounts (agriculture, food processing) Policy
simulation assessment:
- policy reform (→ social market economy) impacts on poverty and inequality - changing environment: e.g. soaring food prices impacts on poverty and inequality FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Account classification
41 activities (from the NAPC Farming Systems Study + CBS data)
25 crops 3 livestock 13 non-agricultural activities (8 food processing + 5 other acts.)
51 commodities (from the NAPC Farming Systems Study + CBS data)
23 crops 8 animal products 13 agricultural processed products 7 other products
22 institutions (from the SPC-UNDP Poverty Study + CBS data)
10 rural households (per income deciles) 10 urban households (per income deciles) firms government
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Account classification
3 value added (from CBS + IMF data) hired labour other factors net fiscal revenue (taxes – subsidies)
2 capital formation (from CBS data) inventory change investment
3 rest of the world (from CBS data) goods and services (current account) financial flows (capital account) net lending (lending – borrowing)
TOTAL: 122 accounts
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
SAM structure 51
41
3
20
1
1
2
3
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Definition of policy reform scenarios
change in existing (sector) policies towards a less distorted environment: dropping subsidies to agriculture and food processing production reducing by 20% the price of strategic crops abolishing the Price Stabilization Fund (food consumption subsidy)
alternative use of budget saving: fiscal deficit reduction (= investment) public expenditure increase (proportional to the current composition) increase transfers to households
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts % impact on output incomes poverty elimination of subsidies to agriculture deficit reduction publ exp increse tranf to hhold increase
3.79 2.03 3.06
2.45 1.43 7.13
-0.24 -0.15 -0.92
price reduction for strategic crops deficit reduction publ exp increse tranf to hhold increase
0.55 0.33 0.46
0.47 0.34 1.07
-0.05 -0.04 -0.14
0.43 -0.40 0.09
-2.10 -2.58 0.10
0.51 0.55 0.19
elimination of PSF deficit reduction publ exp increse tranf to hhold increase
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts on output
% impact on output of
agriculture
food process.
other activities
total
A) elimination of subsidies to agriculture and food processing 1. deficit reduction
1.19
2.16
4.67
3.79
2. public expenditure increase
0.59
0.99
2.52
2.03
3. transfers to households increase
2.79
4.16
3.00
3.06
1. deficit reduction
0.21
0.37
0.67
0.55
2. public expenditure increase
0.14
0.22
0.39
0.33
3. transfers to households increase
0.42
0.63
0.45
0.46
1. deficit reduction
-0.80
-1.02
0.92
0.43
2. public expenditure increase
-1.57
-0.09
-1.87
-0.40
3. transfers to households increase
-0.04
-0.07
0.14
0.09
B) price reduction for strategic crops
C) elimination of Price Stabilization Fund
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts on income
% impact on incomes of
urban total
urban 1st urban 10th dec dec
rural total
rural 1st dec
rural 10th dec
A) elimination of subsidies to agriculture and food processing 1. deficit reduction
2.52
2.29
2.61
2.35
2.28
2.55
2. public expenditure increase
1.55
1.67
1.56
1.26
1.26
1.36
3. transfers to HHs increase
8.35
14.96
6.92
5.32
6.85
3.87
1. deficit reduction
0.46
0.47
0.45
0.48
0.52
0.45
2. public expenditure increase
0.34
0.39
0.31
0.34
0.38
0.29
3. transfers to HHs increase
1.22
2.11
1.01
0.86
1.11
0.62
1. deficit reduction
-1.41
-5.24
0.10
-3.12
-6.84
-0.39
2. public expenditure increase
-1.87
-5.54
-0.40
-3.64
-7.32
-0.95
1.34
0.74
2.13
-1.72
-4.68
0.23
B) price reduction for strategic crops
C) elimination of PSF
3. transfers to HHs increase
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Policy reform impacts on poverty elimination of subsidies to agri-food
Urb dec 1 Urb dec 2 Urb dec 3 Urb dec 4 Rur dec 1 Rur dec 2 Rur dec 3 Rur dec 4 Total
price reduction for strategic crops
elimination of PSF
deficit red.
public transf public transf public transf deficit deficit xp to hhs. xp to hhs. xp to hhs. red. red. incr. incr. incr. incr. incr. incr.
-0.01 -0.12 -0.28 -3.41 0.00 -0.14 -0.46 -3.19 -0.24
0.00 -0.04 0.00 -0.08 -0.52 -0.02 -0.18 -1.20 -0.06 -2.20 -14.62 -0.66 0.00 -0.01 0.00 -0.08 -0.43 -0.03 -0.26 -1.46 -0.10 -1.78 -9.32 -0.68 -0.15 -0.92 -0.05
0.00 -0.02 -0.04 -0.50 0.00 -0.02 -0.07 -0.50 -0.04
-0.01 -0.07 -0.17 -2.11 0.00 -0.07 -0.23 -1.48 -0.14
0.02 0.21 0.37 4.14 0.01 0.34 1.11 6.90 0.51
0.02 0.23 0.42 4.71 0.01 0.37 1.21 7.56 0.55
0.00 0.02 -0.06 -1.15 0.01 0.20 0.64 4.01 0.19
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Soaring cereal prices: redistributive effects elimination of subsidies to agri-food deficit red. Urb dec 1 Urb dec 2 Urb dec 3 Urb dec 4 Urb dec 5 Urb dec 6 Urb dec 7 Urb dec 8 Urb dec 9 Urb dec 10 Rur dec 1 Rur dec 2 Rur dec 3 Rur dec 4 Rur dec 5 Rur dec 6 Rur dec 7 Rur dec 8 Rur dec 9 Rur dec 10 Tot abs value
public xp incr.
price reduction for strategic crops
transf to deficit hhs. red. incr.
0.08 -2.93 -4.79 -3.75 -2.96 -1.05 2.79 6.26 16.63 74.24 -0.79 -4.51 -5.09 -6.57 -7.37 -13.27 -11.83 -15.70 -10.65 -8.76
5.59 0.45 -1.24 1.12 3.64 1.57 3.40 5.89 16.68 61.66 -0.67 -3.55 -3.43 -6.27 -7.64 -14.09 -12.44 -18.19 -13.82 -18.66
17.08 11.41 13.13 14.92 22.74 6.13 1.69 1.44 9.61 1.76 -0.36 0.02 0.08 -1.59 -5.72 -10.79 -10.30 -18.05 -19.02 -34.19
4.24 -4.28 -10.12 -5.54 -5.44 -0.75 1.77 3.16 12.80 70.05 4.67 0.90 2.41 -3.54 -2.27 -6.95 -7.34 -16.02 -10.88 -26.87
985
1 103
7 172
629
public xp incr. 5.42 -3.54 -9.32 -4.47 -3.96 -0.18 1.95 3.19 13.05 68.14 4.61 1.00 2.63 -3.59 -2.48 -7.37 -7.67 -16.76 -11.71 -28.96
elimination of PSF
transf to transf to deficit public hhs. hhs. red. xp incr. incr. incr. -6.01 -5.69 14.29 1.65 -7.40 -7.26 -2.17 6.38 -5.37 -5.22 4.95 0.80 -4.26 -3.99 8.36 2.70 -3.26 -2.85 13.94 7.25 4.13 1.08 1.26 3.97 1.80 1.79 1.87 2.43 1.95 6.92 7.01 7.34 11.47 18.45 18.76 22.22 28.01 54.27 54.48 51.65 2.09 -10.37 -10.47 -10.72 0.90 -11.44 -11.52 -11.41 1.73 -12.03 -12.07 -11.94 -2.21 -12.29 -12.44 -12.88 -4.47 -10.02 -10.20 -12.40 -9.80 -8.68 -8.92 -12.97 -9.78 -5.22 -5.41 -9.31 -19.17 -3.64 -3.97 -10.99 -17.87 -4.35 3.59 3.32 -36.69 13.91 13.30 -0.84
637 1 293 7 575 Workshop 7 501 - Damascus, 7 406 1-2 July 2008 FAO Project GCP/SYR/006/ITA
The impact on poverty of soaring cereal prices cereal price increase no yes elimination of subsidies to agriculture deficit reduction publ exp increse tranf to hhold increase
-0.24 -0.15 -0.92
0.25 0.35 -0.42
price reduction for strategic crops deficit reduction
-0.05
0.45
publ exp increse tranf to hhold increase
-0.04 -0.14
0.46 0.36
elimination of PSF deficit reduction publ exp increse tranf to hhold increase
0.51 0.55 0.19
1.00 1.05 0.68
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Conclusions
The estimated SAM for Syria is a suitable tool for policy impact simulations Policy lessons:
crucial role of Government budget strategies on the outcomes of a given sector policy (reform) importance of output growth for poverty reduction existence of structural asymmetries in income distribution (e.g. rural vs. urban)
Limitations:
static model: only short-run impacts the classification of household groups by deciles may change as a consequence of simulated policies
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
Conclusions
Future developments:
analyze alternative policy mixes - less ‘extreme’ policy mixes - impact of debt service of production loans on HHs - decrease in oil production → foreign exchange → access to international food market alternative classification criteria for households sector (sector of occupation of the reference person, education level, composition of the household’s total income) regional disaggregation of the Syrian SAM CGE
FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
The impact of an exogenous shock in d u s t r ie s
fa c t o r s
in te r in d u str y in d u s t r ie s flo w s fa c t o r s
househo
h o u se h o c o n su m p
in c o m e d istrib u tio n to fa c to r s
h o u s e h o ld s
in c o m e d istr ib u tio n to FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008
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