Grading of Syria’s overall economic freedom remains suspended in the 2015 Index due to the political turmoil that has led to civil war and a significant deterioration in the quality of publicly available economic statistics. Facets of economic freedom for which data are still available have been individually scored. As a “mostly unfree” economy with a score of 51.2, Syria was ranked fourth lowest in the Middle East/North Africa region when it was last graded in the 2012 Index.
Civil war has left Syria’s economy in ruins. The government does not control portions of the major cities, and the war has killed nearly 200,000 people and displaced millions. The rule of law has been ravaged by extrajudicial killings, kidnappings, and torture. Inflation has grown as the Syrian pound has become an unreliable medium of exchange.
The little formal economic activity that continues is impeded by weak structural and institutional foundations. The president, his cabinet, and close family members dominate many of the major economic sectors. Rampant corruption has destroyed any entrepreneurial dynamism. Continuing conflict limits trade and investment, and currency controls limit the free flow of capital.
The Assad family’s iron grip on Syria, which it has ruled since Hafez al-Assad’s military coup in 1970, faces serious challenges. Bashar al-Assad, who succeeded his father in 2000, has failed to deliver on promises to reform Syria’s socialist economy and ease political repression. Arab Spring protests in 2011 were met with brutal crackdowns. By 2012, the uprising against Assad had spiraled into a sectarian civil war with Sunni-dominated rebels pitted against the Alawite-dominated regime. By mid-2014, the terrorist group Islamic State of Iraq and Syria (ISIS) had gained control of much of the northern half of the country. The conflict has triggered a severe economic recession. Before the conflict, Syria’s economy was hobbled by a large state bureaucracy, falling oil production, rising budget deficits, and inflation.
Even before the armed conflict and ongoing disintegration of Syria, government institutions lacked public accountability and were plagued by corruption. Members of the ruling family and their inner circle are said to own and control a major portion of the economy. Corruption is also present in rebel-held areas on a smaller scale. The judiciary is neither transparent nor independent.
Syria’s top individual income tax rate is 22 percent, and its top corporate tax rate is 28 percent. Other taxes include a tax on inheritance and a property tax. Ongoing civil conflict has rendered fiscal policy and tax administration (if any) opaque. It has been reported that budget deficits have been on the rise.
The repressive business environment, severely impaired by the ongoing civil war and uncertainty, suppresses entrepreneurial activity and prolongs economic stagnation. The labor market is heavily state-controlled and undermined by instability. The Assad regime spent 45 percent of its 2014 budget on subsidies and attempted to “suppress” the inflation rate, which is one of the world’s highest, with price controls.
Syria has a 6.1 percent average tariff rate, and foreign investment is subject to government screening. The ongoing political turmoil is a major deterrent to international trade and investment, and the financial system has been under significant strain. The stock market has been running out of monetary resources, and bank deposits have dwindled, especially with capital fleeing the country.