- GDP (PPP):
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In addition to its horrific death toll, Syria’s long civil war has caused the near collapse of economic output. It now appears that the al-Assad regime once again controls much of the country, largely due to support from Russia and Iran. The ongoing devastation and chaos, however, continue to preclude ranking Syria in the 2019 Index. Extrajudicial killings, kidnappings, and torture have ravaged the rule of law. Damage to infrastructure has been widespread, although the Syrian pound began to strengthen in late 2017 as inflows of remittances increased. Inflationary pressures have eased somewhat.
As fighting diminishes, the regime may launch some limited reconstruction efforts, but severely diminished resources and ongoing international sanctions will likely force the regime to continue to rely in part on Iranian financial support and Russian loans. Russian and Iranian businesses, in turn, will secure key infrastructure investment deals, particularly in the energy sector.
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 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 5.4 million refugees out of the country. Syria’s economy declined by more than 70 percent from 2010 to 2017.
Rule of law is weak, and the government occasionally has seized properties and businesses of political opponents. Leaders of the regime’s constitutionally protected Baath Party dominate all branches of government and act with impunity. Those who question or go against state policy face harassment, imprisonment, or death. Government institutions lacked public accountability and were plagued by corruption even before the armed conflict.
Economic policy has focused on protecting the regime and maintaining the military’s fighting capacity. Government spending has been driven by the regime’s political concerns and the need to protect its own interests. Budget revenue from oil and taxes has severely diminished. Faced with limited financial resources and ongoing international sanctions, the regime continues to rely partly on Iranian financial support and Russian loans.
Before the ongoing conflict, the business environment, lacking transparency and efficiency, had improved only marginally. Functioning labor markets are limited only to certain parts of the country, subject to heavy state interference and control. The government has slashed subsidies for electricity, water, diesel, and heating oil, angering Syrians who face rampant inflation.
Syria’s ongoing civil war deters international trade and investment. 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.