Syria’s economy

Indeed, with the Syrian Baath Party’s seizure of power, this sector had become a monopoly. The government also decided to liberalize trade through various agreements:

– In 2007, a free trade agreement was signed with Turkey. Syria joins the Great Arab Free Trade Area (GAFTA), the region’s free trade zone.

– The association agreement with the European Union is signed in 2009.

– In 2010, steps are taken to join the World Trade Organization. The private sector will benefit from this deregulation, enabling the tertiarization of the economy, with the development of services and, in particular, tourism.

Thanks to these reforms, economic recovery began in 2004, with non-oil growth rising by 5% between the start of the reforms and 2007.

However, difficulties remain. Oil’s positive contribution to growth has been on a downward slope, particularly since the early 2000s. Major oil discoveries were made between 1970 and 1990. These discoveries became a driving force behind the country’s growth, tax revenues and exports. Over time, however, these reserves dwindled, and Syria became the country with the fewest reserves compared with other exporters in the region, while domestic energy consumption grew. As a result, the country runs the risk of becoming complacent and having to import oil. And with oil prices on the rise, the cost of imports would be substantial.

Other weaknesses include tax revenues heavily based on hydrocarbons, an obsolete public industrial sector, an unproductive and overstaffed civil service, and state monopolies in various sectors (infrastructure, utilities). On a positive note, agriculture has become a private business, accounting for 35% of non-hydrocarbon GDP.

Syria must continue to develop its structural reforms in various fields. These reforms are essential to reinforce the transition to a market economy and away from a state-controlled economy. The country must succeed in improving the business climate by reducing bureaucracy, lowering entry and exit costs for companies, and improving public services.

Political tensions in the heart of the country

Syrian President Bashar el Assad was elected in 2000 and re-elected in 2007 for a 7-year term. Since March 2011, the president’s regime has become the target of numerous protests and is facing a popular uprising. These protests against the government have various origins. Firstly, the regime’s heavy-handed authoritarianism. This police state is reflected in the government’s unrestrained repression and arbitrariness. Another is the lack of professional prospects for young people. Increasingly well-educated young people are unable to find jobs commensurate with their qualifications. Finally, corruption on a massive scale. While most of the population lives in extreme poverty, a small circle around the president shares the country’s wealth.

Today, two armed forces are engaged in fierce fighting in the midst of the population: the regular, pro-regime force, and the Free Syrian Army (FSA), opposed to the regime and made up, among others, of former members of the country’s armed forces.

Effects of political tensions on economic activity

The war in Syria is having a dramatic impact on the economy:

– Flight of foreign companies and fall in tourism, a key growth sector

– Flight of deposits for fear of bank failure and out of necessity for some citizens

– Depreciation of the national currency, making imports far too expensive and therefore almost impossible. This also drastically reduces household purchasing power, leading to a fall in consumption;

– Rising inflation, mainly in foodstuffs;

– Economic sanctions: To protest against the repression of Bashar al-Assad’s government, various countries have introduced economic sanctions against Syria. The European Union has taken the first step, freezing the assets and banning the visas of 181 government officials or those close to the government involved in the repression, as well as 54 companies and administrations, while the European Investment Bank (EIB) has stopped financing Syrian infrastructure. Added to this are export restrictions, an embargo on arms supplies and Syrian imports, notably of oil. It is essential to remember that the European market accounts for 95% of Syrian oil exports.

The Arab League also adopted sanctions against the country back in 2011, with the end of air links with Syria, the freezing of Syrian bank accounts in various Arab countries and a freeze on commercial transactions, while certain Syrian officials are no longer authorized to travel to League countries.

The United States uses the same type of sanctions.

These sanctions, while effective in weakening the country’s economy, also have perverse effects. Certain products essential to vital needs are beginning to run out, leading to the emergence of a black market that is generally well controlled by the government. Faced with a weakened population, the Syrian government can blame the West for its decision to stop trading with Syria. Finally, although some countries have applied economic sanctions, this is not the case for all, and Syria may find other allies. Remember that China and Russia vetoed the Western draft resolution threatening Syria with sanctions at the UN Security Council in July 2012. This was the third veto by these two countries.