Civil war has left Syria’s economy in ruins and precludes ranking it in the 2017 Index. The devastation and chaos have inflicted a horrific human cost and caused enormous damage to the economy. The rule of law is ravaged by extrajudicial killings, kidnappings, and torture. Inflation has grown as the Syrian pound has become an unreliable medium of exchange.
Economic policy has focused on protecting the regime and maintaining the military’s fighting capacity. With the escalating cost of the war compounded by a collapse in oil prices, the fiscal situation is dire. The regime continues to prioritize spending on the military.
The Assad family has ruled Syria since Hafez al-Assad’s military coup in 1970. Bashar al-Assad, who succeeded his father in 2000, failed to deliver on promises to open the socialist economy and ease political repression. A brutal crackdown after 2011’s Arab Spring protests sparked an armed uprising against Assad that by 2012 had become a sectarian civil war with the predominantly Sunni rebels pitted against the Alawite-dominated regime. Assad’s regime is heavily supported by Iran, Russia, and Hezbollah, while the U.S. and several of its allies back various Syrian rebel groups. The conflict has killed more than 400,000 Syrians and driven more than 4.5 million refugees out of the country.
Rule of law is weak, and the government on occasion has seized political opponents’ properties and businesses. All judges and prosecutors must belong to the Ba’ath Party and are beholden to the political leadership. Government institutions lacked public accountability and were plagued by corruption even before the civil war. Those who question state policies or use of public funds face harassment, imprisonment, or death.
The civil conflict has rendered fiscal policy and tax administration (if any) opaque. The overall budgetary situation remains dire in the near absence of a consistent flow of oil and tax revenues. In 2015, despite severe budget shortfalls, the Assad government issued a decree providing for an increase in the monthly salaries and pensions of all public-sector employees, exacerbating the already dismal fiscal situation.
Before the ongoing civil unrest, the business environment, lacking transparency and efficiency, had improved only marginally. Functioning labor markets are limited to certain parts of the country, subject to heavy state interference and control. To conserve resources for its fight against ISIS insurgents, the government has slashed electricity, water, diesel, and heating oil subsidies, angering Syrians who are already facing rampant inflation.
Syria’s ongoing civil war deters international trade and investment. The average applied tariff rate is 14.2 percent. Political instability and repression have severely weakened the financial system, and foreign reserves have been almost exhausted. Despite the war, a number of foreign banks are in operation. In 2016, the Bahrain-based Islamic banking group Al Baraka became the largest privately owned bank in the country.