Numerical grading of Syria’s overall economic freedom remains suspended because of the ongoing political turmoil that has led to civil unrest and a significant deterioration in the quality of publicly available economic statistics. Those 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.
Before grading was suspended, the fragility of the foundations of economic freedom in Syria had been documented in very low scores for property rights and freedom from corruption. The state has long dominated economic activity, and the repressive environment has marginalized the private sector and prevented any sustainable development.
The Bashar al-Assad regime’s brutal actions to maintain its hold on power have destroyed the rule of law and destabilized the region. Over 2 million refugees are registered by the United Nations, and it is estimated that 4 million people have been displaced internally. More than 100,000 people have been killed, and the degradation of health services has been highlighted by outbreaks of polio.
The Assad family’s iron grip on Syria, which it has ruled since Hafez al-Assad’s 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. Anti-government “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, the fighting had killed more than 90,000 by June 2013 and triggered a severe economic recession. Syria’s economy is also hobbled by a large state bureaucracy, falling oil production, rising budget deficits, and inflation.
Corruption is widespread and rarely carries serious punishment, and bribery is often necessary to navigate the bureaucracy. Regime officials and their families benefit from a range of illicit economic activities. Syria’s legal system is a mix of Ottoman and French civil law with Islamic law. The constitution requires that Islamic jurisprudence be a main source of legislation. The judiciary is neither transparent nor independent.
The top individual income tax rate is 22 percent, and the top corporate tax rate is 28 percent. Other taxes include an inheritance tax and a property transfer tax. Overall tax revenue equals 10.4 percent of the domestic economy. Public debt is 29 percent of GDP. The ongoing civil war continues to interfere with public administration and the implementation of fiscal policy.
Before the ongoing civil unrest, the business environment, lacking transparency and efficiency, had improved only marginally. The labor market, which had already suffered from state interference and control, has been severely affected by the devastating conflicts. Inflation surged substantially in 2013 due to shortages and wide-ranging subsidy reductions despite the introduction of ration cards.
Syria has a 6.1 percent average tariff rate, and foreign investment is subject to government screening. Civil unrest is a major barrier to 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.