SWAMPED WITH IRAQ REFUGEES, SYRIA FACES CRISIS

A joke circulating here has two Iraqis wandering the streets of the Syrian capital, angrily protesting the large number of Syrians taking over their city.

With up to 2,000 Iraqi refugees arriving each day, adding to the 1.5 million -- equivalent to around 8 percent of the Syrian population -- who have flooded into Syria since the start of the U.S.-led war on Iraq in 2003, economists and refugee experts warn of a looming social and economic crisis.

Tens of thousands of Iraqi families are now living in and around Damascus pushing up demand for already limited goods and services. Observers warn pressures will soon become unbearable as Iraqis use up their savings and become more reliant on the Syrian welfare system.

"When the Iraqis first came, Syrians were happy to help them but now that is no longer the case," said Ammar Qurabi of the National Organization for Human Rights (NOHR) which has monitored the effects of Iraqi refugees on Syria. "Now most people hate the refugees and are angry because food and houses are expensive and there is no work because Iraqis take the easy jobs."

According to government figures from the Central Bureau of Statistics, inflation will reach 8 percent in 2007, slightly down from 9.2 percent in 2006. However, with reliability of official figures on the economy a significant issue in Syria, some Damascus-based economists estimate the real figure for this year's inflation could be as high as 30 percent.

The highest inflation has been felt in the real estate market, with the tens of thousands of extra Iraqi families buying and renting properties across Damascus and raising prices by up to 300 percent. A study by NOHR estimated that the average monthly rent for a two-bedroom apartment on the outskirts of Damascus had risen from 8,000 Syrian pounds (US$160) in 2005 to 20,000 Syrian pounds (US$400) today.

In a country where an average state wage in the bloated public sector economy remains little more than $120, many Syrians are forced to do two jobs, and still struggle to pay rent.

"It's a big, big problem for us," said Rami, a middle class teacher from Damascus. "I want to buy a house but it's become far too expensive for me. Since the Iraqis arrived house prices have gone crazy."

The booming real estate market had raised cement prices to $200 a ton by March, a 300 percent increase on three years ago, stunting the country's building boom.

Figures from the Syrian Consulting Bureau for Development and Investment (SCB), compiled from the state-run press, found that since the Iraqi influx began in early 2005 the demand for bread in Damascus -- home to the majority of the refugees -- has increased by 35 percent, electricity by 27 percent, water by 20 percent and kerosene by 17 percent.

The state's social services are under intense strain.

"They are increasing the claims on all of the subsidized services, particularly our education and health systems which Iraqis have free access to," said economist Nabil Sukkar, head of the SCB.

There are an estimated 75,000 Iraqi children registered in Syrian schools, with many class sizes doubled to 60 students and schools working double shifts to cope.

Other than recent initiatives led by the UN High Commissioner for Refugees (UNHCR) to build three new schools and one hospital, there has been little infrastructure growth to meet the additional pressures.

"The added pressures the Iraqis are putting on the existing system are pushing it to its limits at the moment," said Sybella Wilkes, UNHCR spokesperson in Damascus.

However, while many Syrians now blame Iraqis for their long-term economic difficulties and up to 20 percent unemployment, the economic burden of Iraqi refugees has not yet impacted dramatically on the basic economy.

"[The price of] essential goods, which are mainly foods, went up a bit late last year but has re-stabilized again," said Damascus-based economist Jihad Yaziji. "So the inflation rate is not that indicative of how far the purchasing power of the average citizen has been reduced."

Many basic food goods, as well as electricity and transport, are subsidized by the government by up to 40 percent, meaning it is the state and not its population that is bearing the major burden of inflationary pressures.

Kerosene, for example, sells at a subsidized rate of seven Syrian pounds per litre ($0.14) but is bought by the government for around 30 Syrian pounds per litre ($0.60). With a 17 percent increase in consumption, "it is costing the government hundreds of millions of dollars per year," said Yaziji.

The effect of the refugees has not only been negative. The increase in demand for consumer goods and real estate spurred by the influx of Iraqis has boosted domestic consumption, contributing towards the increase in the government's expected GDP growth to seven percent from 5.6 percent in 2006.

According to Sukkar, the Iraqis have "brought in money, invested in real estate, and opened shops, something that -- on the positive side -- has increased spending in the economy."