The pros and cons for Turkey of a Syrian exodus

• 2m Syrians to return
• Potential inflationary impact
• Construction sector opportunity

The end of the civil war in Syria will, at least in time, offer strong economic opportunities for neighbouring Turkey, though there could also be a few unwanted costs coming as part of any peace dividend. 

On December 10 Turkish officials said they were developing plans to support up to 2 million of the 3.2 million or more Syrians currently living in Turkey to return to their homeland in the coming months.

This exodus is expected to scale up after winter, easing the cost of supporting one of the world’s largest refugee communities. 

However, 13 years of conflict means many may not have a home to go to or services to meet their basic needs. That situation will bring an expected cost to donor nations but an opportunity to Turkey’s construction sector.

Shares in many listed Turkish construction firms and materials suppliers jumped by as much as 10 percent after the fall of Damascus. This was on expectations of new projects in Syria to restore infrastructure and provide housing for the millions of people displaced in the civil war.  

The sector saw a similar share price hike after the twin earthquakes in southern Turkey in February 2023, though delays in rolling out housing and redevelopment projects blunted the initial spike. 

The end of the conflict in Syria, and the subsequent reconstruction efforts, could impact Turkey’s inflation outlook. Demand for building materials and equipment across the border could push up domestic construction costs. 

Economist Mustafa Sönmez says the market has bought into the optimism in the construction sector regarding the prospect of rebuilding the war-torn country. However, any positive flow-on for the sector, or a negative one regarding demand driven costs on inflation, will not be felt for some time. 

“It’s too early to say how Syria will shape up, when will there be stability, these are the major questions that have to be answered first,” Sönmez says.

• Syria after Assad: a long road to recovery
• Seismic events in Syria will not affect oil markets. Here’s why
• Turkish growth slows as anti-inflation measures bite

One area that could see some more immediate movement is in employment, Sönmez says, one that could have an inflationary impact on wages.

“Syrians worked in jobs that Turks did not want as cheap labour,” he says. “If they return home this vacuum will have to be filled by Turks, but this will push up labour costs. Salaries will increase and its effect will be felt.”

Rami Sharraq, a Syrian business and economic development expert with consultancy Tatwir, estimates around 1 million Syrians are active in the Turkish labour market.

The real estate effect

Any inflationary impact could be offset to some degree by a potential fall in rental costs, at least at the lower end of the housing market. 

Dr Ahmet Buyükduman, a real estate economist, believes the fall in rental demand caused by any departure of Syrians – be it small or large – from the market could cause some degree of what he described as negative demand shock, with a flow-on effect for rents and subsequently housing sales prices.

“Whatever the numbers of Syrians returning there will be an easing of the rental market,” he says.

“Even a small fall in demand of between 2 and 4 percent could have an impact on rental costs, with reductions of anywhere between 10 and 15 percent, with a lesser impact on property prices.”

This exodus will have another effect, impacting Syrian firms operating inside Turkey, with many of their core client base set to return home, Sharraq says, adding that many Syrian businesses in Turkey were also already planning to shift their base of operations. 

“They are thinking and preparing for the next stage. Many Syrian businessmen have begun to think and develop scenarios for their return to Syria.”