The civil war that began in Syria in 2011 has inflicted a horrific human cost and caused the near collapse of economic output. The ongoing devastation and chaos preclude ranking Syria in the 2018 Index. The rule of law has been ravaged by extrajudicial killings, kidnappings, and torture. The government has struggled to address the effects of international sanctions, widespread infrastructure damage, diminished domestic consumption and production, reduced subsidies, and high inflation, which have caused dwindling foreign exchange reserves, rising budget and trade deficits, a decreasing value of the Syrian pound, and falling household purchasing power.
The regime’s economic policy is focused on protecting its interests, including its myriad business operations, 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, and the regime remains reliant on Iranian financial support and Russian loans.
The Assad family has ruled Syria since Hafez al-Assad’s military coup in 1970. Bashar al-Assad succeeded his father in 2000 but failed to keep his 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 between the predominantly Sunni rebels and the Alawite-dominated regime. Assad’s regime is heavily supported by Iran, Russia, and Hezbollah; 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. Syria’s economy declined by more than 70 percent from 2010 to 2016.
Property rights are not adequately protected, and the rule of law is weak. All judges and prosecutors must belong to the Baath Party and are beholden to the political leadership. Government institutions have long been plagued by corruption. Pro-regime but largely autonomous militias freely exploit the population in regime-held areas, erecting arbitrary checkpoints and engaging in looting and extortion.
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 higher monthly salaries and pensions for all public-sector employees, exacerbating the already dismal fiscal situation.
The business environment is poisoned by civil war. Functioning labor markets are limited to certain parts of the country and are subject to heavy state interference and control. The government has fueled inflation by slashing subsidies for electricity, water, diesel, and heating oil to pay for its war against the Islamic State.
Syria’s average applied tariff rate is 14.2 percent. Nontariff barriers impede trade. Ongoing conflict deters international trade and investment. Political uncertainty and repression have severely weakened the financial system. The central bank has imposed restrictions on the sale of foreign currency by banks to individuals.