Mohammed Jaffal | Odai al-Haj Hussin | Mohammad Deeb Bazat
The Syrian economy has undergone deep transformations over the past decades, reshaping its structure from a state-led command economy, to an unbalanced economic opening, and then to the war economy imposed by the conflict, accompanied by the collapse of productive infrastructure and the expansion of the informal economy.
These shifts were not separate from accumulated distortions, including bureaucracy, corruption, and weakness in productive sectors. Instead, they deepened and reproduced them in more complex contexts.
Today, amid growing debates over the free economy and reconstruction, fundamental questions are emerging about the nature of the next economic model, the limits of the role of the state and the private sector, and the possibility of building a more stable and just economy in the postwar phase.
In this special report, Enab Baladi, together with analysts and experts, examines the transformations the Syrian economy has experienced, from the economy of the Baath Party and the phase of the social market economy, to the war economy.
From Centralized State to War Economy
The Syrian economy did not reach its current reality all at once, and the transformations it is experiencing today cannot be separated from a long path of political, economic, and social shifts that began long before the war years.
From a highly centralized economy led by the state for decades, to gradual economic opening, and then to a war economy based on informal networks and influence, the structure of the Syrian economy has changed deeply over recent decades.
Throughout the decades of Baath Party rule, the Syrian economy was tied to a model based on direct state intervention in managing the main sectors, from industry and agriculture to trade and services, with an expanded public sector and reliance on subsidy and government employment policies as tools to maintain social stability.
Although this model provided, at certain stages, acceptable levels of living stability and self-sufficiency in some sectors, it also faced accumulated problems, such as bureaucracy, weak productivity, increasing dependence on the state as the main employer, and limited competition and private investment.
At the start of the new millennium, Syria began gradually moving toward more open economic policies, especially after officially adopting the concept of the “social market economy” in the mid-2000s, in an attempt to combine the market economy with the state’s social role.
This shift was not reflected evenly across social groups, as that phase saw an expansion in the role of businesspeople and private investment, alongside a gradual retreat in some of the state’s economic and service roles, contributing to the concentration of economic influence within specific networks linked to authority and decision-making centers.
With the outbreak of protests in Syria in 2011, and their subsequent transformation into a prolonged conflict, the Syrian economy entered an entirely different phase. The repercussions were not limited to economic decline or the destruction of infrastructure, but included a broad change in the shape of the economy itself.
Informal economic activity expanded, with new networks emerging around smuggling, transfers, aid, and the conflict-linked economy, in parallel with the decline of traditional productive sectors such as industry and agriculture.
The war also fragmented Syria’s economic geography and created different models of administration and resources across regions, while the Syrian pound witnessed a sharp decline and inflation, unemployment, and poverty rose to unprecedented levels.
Today, the Syrian government faces an economy burdened by distortions accumulated over many years, including damaged infrastructure, a weak productive sector, declining purchasing power, fragility in the labor market, and the erosion of the middle class.
All of this opens the door to broader questions about the nature of the economic model that took shape in Syria over past decades, and whether the country is moving toward reproducing previous economic patterns or toward a different model imposed by the war years and their accompanying deep transformations.
Syrians walk through the old market in Damascus ahead of Eid al-Adha, May 26, 2026. (AFP)
A Command Economy and a State-Controlled Market
Abdul Rahman Mohammed, professor of finance and banking at the Faculty of Economics at Hama University, told Enab Baladi that the Syrian economy, for decades, represented a distinct case among Arab economies. It did not have enough rentier resources to buy social stability or redistribute wealth in a stable manner, making the relationship between the state, the market, and the private sector volatile and tense.
According to Mohammed, since the Baath Party came to power in 1963, the Syrian economy relied on a command economic model based on state control over the main sectors, from oil and heavy industries to banks and foreign trade.
He noted that the relationship between the state and the private sector was not based on competition or traditional economic regulation, but on control over licensing and access to the market, which left a large part of the private sector operating within a narrow margin linked to the approval of the authorities and influence networks.
Capitalism Tied to the State
At the same time, the state maintained an alliance with specific merchant groups, especially in Damascus and Aleppo, allowing them to benefit from market gaps created by the weakness of the public sector. This led to the emergence of an economic pattern described as state-linked capitalism.
“The shift toward what was called the social market economy during the first decade of the millennium was not a radical transformation in the structure of the economy, but rather a partial and distorted opening.”
Abdul Rahman Mohammed
Professor of Finance and Banking at the Faculty of Economics, Hama University
That stage witnessed steps such as introducing private banks and liberalizing some aspects of the market, alongside a gradual retreat in the state’s economic and service role, without a real competitive environment or effective social protection networks.
This shift had a harsh impact on the middle class and local productive sectors, as openness to imports led to the decline of part of small and medium-sized local industries, especially in Aleppo and Damascus.
According to Mohammed, that phase witnessed the rise of businesspeople close to the authorities and security agencies, who took control of vital economic sectors such as telecommunications, real estate, and trade, leading to the concentration of wealth within specific networks and the widening of the social gap.
According to Mohammed, the war after 2011 marked a radical turning point in the Syrian economy, as the matter was no longer limited to economic decline or destruction, but extended to a change in the shape of the economy itself.
He noted that broad productive sectors, especially industry and agriculture, suffered major decline, while the informal economy, smuggling networks, transfers, and the conflict-linked economy expanded.
The conflict led to the fragmentation of the Syrian market into multiple economic spaces, each with different administrative models, circulating currencies, and policies, weakening the idea of a unified national market.
A Legacy Burdened by Distortions
Dr. Abdul Rahman Mohammed believes the current Syrian government faces a complex economic legacy, including currency depreciation, weak production, and the dependence of a large part of the economy on imports and external transfers.
The Syrian economy also suffers from labor market fragility and the absence of stable jobs, alongside the expansion of informal and daily work and the declining role of productive institutions.
He considered that the current Syrian economy is not simply a continuation of the previous model, but has turned into a different model that emerged during the war years, while retaining some features of the past, such as monopoly, corruption, and favoritism.
He believes the key difference lies in the shift from state centralization to a state of fragmentation, where influence networks and armed power have come to play a larger role in managing resources and economic activity.
Contradictory Transformations
Economist and professor at the Faculty of Economics at Damascus University, Dr. Majdi al-Jamous, told Enab Baladi that the Syrian economy passed through contradictory transformations, moving from a highly centralized socialist model to attempts at partial economic opening, before entering after 2011 into a phase of “war economy” and economic chaos.
Al-Jamous explained that Syria built economic and political relations for decades with the Soviet Union and the Eastern Bloc, which was reflected in the adoption of a socialist model based on state control over the means of production under the slogan of “social justice.”
But according to al-Jamous, this model did not achieve real justice because of the dominance of bureaucracy and corruption, and the control of security and political decision-making over the economy, especially under Hafez al-Assad and the early years of Bashar al-Assad’s rule.
He noted that Bashar al-Assad’s phase witnessed an attempt to move toward what was called the “social market economy,” through expanding the role of the private sector, introducing private banks, and improving economic relations with neighboring countries, especially Turkey.
He added that this phase achieved noticeable economic growth in figures, as public budgets and gross domestic product rose significantly between 2005 and 2010, benefiting from trade and investment opening.
According to al-Jamous, the Syrian economy after 2011 entered an entirely different phase, as there was no longer a clear economic model, but rather institutions operating at the minimum level to preserve the survival of the state more than to manage an actual economy.
“Syria moved from a socialist system without social justice to a free economy without competitiveness, which made economic and living crises worsen further,”
Majdi al-Jamous,
professor at the Faculty of Economics at Damascus University.
Deep Distortions and a Heavy Legacy
Al-Jamous noted that the war left deep distortions across various sectors, from the financial and banking sector and insurance companies to agriculture, industry, and energy, as well as the decline of the legal environment and the overlap of security influence with state institutions.
He also pointed out that a large part of industrial infrastructure was destroyed, while investment and production declined sharply, in parallel with the widening technological gap and Syria’s distancing from regional and international economic development paths.
He added that the regional and international opening toward Syria in the current phase, alongside Gulf and Turkish support, has created a state of confusion, while economic institutions still suffer from weak competencies and an inability to absorb this transition.
He considered that talk of a free economy has not been reflected in living conditions, due to the absence of real competition and the persistence of old distortions, leading to wider poverty and class disparities.
Syrian workers weld a metal piece in a workshop in Ain Tarma (Rif Dimashq, southern Syria), November 4, 2025. (AFP)
The Economy Today, A Free Market or a Transitional Phase?
Between rapid liberalization measures, massive investment ambitions, and record poverty levels, the Syrian economy stands at a crossroads.
Amid the accelerating transformations the country is witnessing, questions are increasing about the nature of the economic model currently managing the economy, the limits of the role of the state and the private sector, and the extent to which current policies can achieve sustainable economic recovery.
What Economic Model Is Being Applied Today?
Economic analyst Mohammad Ali described the current Syrian economic landscape as closer to a “free market economy” than to a “social market economy.” He explained that the latter is based on liberalizing the economy while maintaining government intervention to protect vulnerable groups through social safety nets and policies that limit social inequality.
He said the Syrian government, since the “liberation” phase, has moved toward adopting more open economic policies, represented by a major reduction in subsidies and a broader margin of freedom in selling, buying, importing, and exporting, alongside an almost complete absence of social protection networks.
He noted that the social support allocation does not exceed 13% of the total 2026 budget, which amounts to $10.5 billion, according to government statements.
For his part, economist Zakwan Kreit, from the Faculty of Economics at Damascus University, believes the ongoing economic transformations are accompanied by the adoption of new legislation and the signing of broad investment agreements, as well as orientations toward restructuring the public sector, but they are moving in parallel with strict austerity policies that have directly affected living conditions.
“Today’s economy is not a social market economy. It is closer to a free market economy, which the Syrian government has pursued since the liberation phase,”
Mohammad Ali, a Syrian economic analyst.
Signs of the Economic Model on the Ground
The features of the current economic model are clearly visible in the details of daily life, from subsidies to import policies and the exchange market.
Analyst Mohammad Ali noted that the government significantly reduced subsidies, including on bread, fuel, and electricity, explaining that fuel is now sold “effectively at the global price,” while increases in energy and electricity prices have directly affected the prices of goods and services in the local market.
According to Ali, the exchange market has also become largely subject to supply and demand, while the Syrian pound continues to lose value under the influence of market factors and weak local production.
He said long-lived assets, such as real estate and cars, have become fully subject to market freedom after import restrictions were lifted and large numbers of imported cars flowed into the country.
In return, the public treasury relies heavily on customs duties and taxes. Customs duties accounted for about 41% of total 2025 budget revenues as a result of expanded imports, while 2026 budget revenues are estimated at about $8.7 billion, 28% of them from oil and gas, against expenditures of $10.5 billion and a deficit of $1.8 billion.
He noted that weak local production, in both the public and private sectors, damaged infrastructure, and financing difficulties have made the Syrian economy largely dependent on imports, limiting its ability to generate domestic added value.
The State and the Private Sector, Partnership or Unequal Competition?
Amid the government’s direction toward restructuring the public sector and reducing the number of its employees, the private sector is being counted on as the main driver of growth and job absorption, especially with estimates indicating that the public sector employs between 1.2 million and 1.4 million workers.
But Zakwan Kreit believes the relationship between the two sectors remains complicated, explaining that the private sector, despite the facilitation granted to it, “still moves within narrow margins” imposed by infrastructure challenges, economic sanctions, and weak purchasing power.
Kreit pointed to the absence of real competition in several sectors, while private sector activity is concentrated in specific fields, and strategic sectors remain under the direct or indirect influence of the state.
On investment, he noted that the government signed dozens of investment memoranda of understanding during the past two years, including 20 international memoranda worth $19 billion, in addition to 47 memoranda of understanding during the Syrian-Saudi Investment Forum in July 2025 worth $6.4 billion. However, most of these investments focused on real estate, infrastructure, and construction sectors.
Kreit believes this focus raises questions about the extent to which such projects will be reflected in the real economy, explaining that real estate and infrastructure projects may provide temporary jobs, but do not necessarily create sustainable productive value compared with investment in agriculture, industry, and other productive sectors.
Subsidy Removal and Prices, The Equation of Austerity and Ambition
The policy of lifting subsidies is one of the most prominent features of the current economic model, after the government moved to raise energy and electricity prices and reduce subsidies allocated to fuel and several basic goods.
Mohammad Ali believes the salary increases approved over the past two years, despite their importance, were not enough to preserve purchasing power, explaining that prices rose faster than wages.
He explained that higher electricity and energy prices lead to what is known as “cost-push inflation,” where increases in production costs gradually move into the prices of goods and services, multiplying pressure on consumers, especially amid heavy reliance on imported raw materials.
For his part, Zakwan Kreit noted that the announced decline in inflation does not necessarily reflect a real improvement in living conditions, explaining that the poverty rate reached 70%, including 40% living in extreme poverty, according to UN estimates.
He warned that lifting subsidies without providing real social safety nets could lead to further erosion of purchasing power and higher poverty and unemployment rates.
“The poverty rate reached 70%, with 40% in extreme poverty. Lifting subsidies without providing real safety nets leads to the erosion of purchasing power and increased poverty and unemployment,”
Zakwan Kreit, a Syrian economist.
Current Challenges, A Weak Treasury and Worsening Unemployment
Economic analyst Mohammad Ali said the public treasury has “weak resources,” explaining that the government relies on available revenues to cover current spending amid a clear fiscal deficit in the budget.
He believes that because the Syrian economy depends heavily on imports, it has become directly affected by external shocks and global price increases, making global economic crises quickly reflected inside Syria.
The most prominent challenge, however, is unemployment, which Zakwan Kreit estimates at between 47% and 50%, while unofficial estimates speak of even higher rates.
He noted that plans to restructure the public sector could lead to the dismissal of additional numbers of workers, while the private sector does not appear capable of absorbing these numbers, increasing social and economic pressure.
Kreit believes small and medium-sized enterprises may be the most capable of creating new job opportunities because of their low investment cost and flexibility, but he stressed the need to provide a supportive environment that includes facilitating financing, simplifying procedures, and training workers.
The Government’s Vision, Structural Reforms and Ambitious Plans
According to what the two experts observe, the government seeks to build a more stable fiscal policy through two main tracks. The first is the adoption of a new tax system that grants exemptions to low-income people and investors, alongside restructuring customs duties under the new customs law.
The second is issuing a new investment law aimed at attracting Arab and foreign capital, in addition to relying on expatriate remittances to strengthen foreign currency reserves.
But Mohammad Ali warns that fiscal stability is not always achieved by reducing spending, explaining that some economic theories consider a budget deficit positive if it results from increased investment spending.
He gives the example of directing the share allocated for investment in the 2026 budget toward infrastructure, energy, and electricity projects, which would contribute to improving the investment environment and creating future added value.
Impact of Current Policy, From Shock to Sustainable Recovery?
In the short term, the effects of current economic policies appear clear at the living level, amid what some experts describe as “shock therapy,” based on rapid liberalization and lifting subsidies.
Mohammad Ali warns that applying this kind of policy in a fragile and unstable economy could lead to higher poverty rates, the erosion of the middle class, greater reliance on the informal economy, higher unemployment, and the exit of some companies from the market.
Zakwan Kreit agrees, considering that austerity policies, if not accompanied by structural reforms that stimulate production and provide real social protection, could deepen economic recession and widen the social inequality gap.
He also noted that sectors such as information technology, renewable energy, and small manufacturing industries still need real support, while traditional sectors such as agriculture and textile industries suffer from the absence of strategic vision and structural obstacles.
In the medium and long term, the two experts agree on the need to adopt a gradual approach to economic transition, based on supporting productive sectors, especially agriculture, industry, and services, alongside designing more precise and effective social protection networks.
Kreit stressed that achieving “sustainable growth” does not depend only on ambitious budgets or major investment agreements, but on the ability of economic policies to deliver the fruits of growth to the most vulnerable groups.
Residents shop at a market in Raqqa city (northern Syria), February 19, 2026. (Reuters)
The Economy Syria Needs After the War
Syria today does not seem to face only the challenge of reconstruction, but a more complex question about the form of economy the country needs in the next phase, and the limits of the role of the state and the private sector in managing recovery.
While economic policies are moving toward more openness to the market and investment, debate remains over whether the country can actually transition to a full market economy amid institutional fragility, weak infrastructure, and accumulated living crises.
“In principle, the liberal economy is the closest model to what Syria needs in the long term, but it cannot be applied immediately amid weak institutions, partial collapse in the banking system, and the absence of a stable legal environment,”
Hasan al-Marwan Harac,
a Syrian economic researcher.
Economic researcher Hasan al-Marwan Harac believes the liberal economy is, in principle, the closest model to what Syria needs in the long term, because it is based on freeing the market, stimulating growth, creating jobs, and reintegrating the Syrian economy regionally and internationally.
But he explains that applying economic liberalism fully and immediately is unrealistic in the current phase, amid weak institutions, the partial collapse of the banking system, and the absence of a stable legal environment, which could lead to economic chaos instead of building an effective market.
He added that the most suitable path for Syria is a gradual transition toward a market economy, beginning with building its basic rules, such as developing financial institutions, adopting clear laws that protect investors, and establishing regulatory frameworks that limit monopoly and regulate the informal economy, with the space for economic freedom later expanding gradually toward a more mature and stable model.
“What is required is a gradual transition toward a market economy built on clear rules and stable financial and legislative institutions.”
Hasan al-Marwan Harac
Syrian economic researcher
By contrast, academic and economic adviser Ziad Ayoub Arbache proposes a model based on a “mixed social economy” that balances a competitive market with strong social protection, along with a strategic role for the state in reconstruction, infrastructure, food security, and energy.
He believes this model allows the stimulation of the private sector and conditional foreign investment within governance mechanisms that ensure the fair direction of growth returns.
Despite their different approaches, the two experts agree that Syria does not currently have the requirements of a complete market economy, and that any economic transition needs a gradual phase during which financial and legal institutions are built, alongside reorganizing the relationship between the state and the market in a way that prevents monopoly and strengthens confidence in the economic environment.
Limits of the Role of the State and Private Sector
Despite the growing trend toward encouraging investment and economic openness, defining the role of the state and the private sector remains one of the most sensitive issues in the Syrian economic debate, amid the declining capacity of public institutions on one hand and the weakness and wartime damage of the private sector on the other.
Hasan al-Marwan Harac considered that the state is required to move from the role of “direct economic actor” to the role of “regulator and enabler,” by setting legal frameworks, ensuring stability, and rebuilding basic infrastructure, allowing the private sector to restore its activity and inject capital.
At the same time, he noted that the Syrian private sector remains weak and fragmented, and needs real legal protection, trust, and stability.
For his part, Ziad Ayoub Arbache believes the role of the state remains necessary, and even greater than usual during the transitional phase, not only as a regulator, but also as a financier and provider of basic services until the private sector regains its productive capacity.
He stressed the importance of the state’s role in achieving macroeconomic stability, providing social protection, and overseeing reconstruction away from favoritism and corruption.
Between the two approaches, there is an implicit agreement that the future Syrian economy will not be based on full state dominance as it was before, nor on the state’s complete withdrawal, but rather on a more balanced formula that redistributes roles between the public and private sectors within a clear legal and institutional framework.
Privatization and Public Sector Restructuring
Privatization and restructuring the public sector are among the most controversial economic files in Syria, amid the large losses suffered by public institutions in recent years and the decline in their ability to perform productive and service roles, against fears that privatization policies could increase the social gap and raise poverty and unemployment rates.
Hasan al-Marwan Harac believes restructuring the public sector has become necessary in the current Syrian context, amid what he described as the “financial bleeding” suffered by many loss-making institutions.
He considered that partial privatization could form part of the economic reform process if it is linked to directing resources toward more productive sectors, provided it is managed within a national framework that ensures monopoly prevention and preserves the state’s regulatory role.
By contrast, Ziad Ayoub Arbache links any privatization process to the need for clear controls that protect the most vulnerable groups and prevent the reproduction of economic influence networks.
He stressed that encouraging investment must be accompanied by standards of transparency, local employment requirements, and social investment, ensuring that economic growth is reflected in living standards and public services.
The debate over privatization appears to go beyond the purely economic dimension, reflecting at its core a broader question about the nature and role of the state in the next phase, amid the need for massive funding for reconstruction and rising social pressure to improve living conditions.
Sectors Capable of Reviving the Syrian Economy
Amid the sharp decline suffered by the Syrian economy during the war years, attention is turning to the sectors capable of leading recovery, whether through stimulating production, creating jobs, or improving public revenues, amid consensus that reconstruction alone is not enough to achieve sustainable economic revival.
Hasan al-Marwan Harac believes recovery is not limited to traditional productive sectors, but also includes reform sectors within the state structure, such as telecommunications, administrative development, and planning and statistics bodies, as improving the efficiency of these institutions is directly reflected in the quality of economic decision-making.
Harac considered that agriculture, energy, livestock, and the transit economy represent basic pillars for rapid recovery because of their direct connection to people’s lives.
For his part, Ziad Ayoub Arbache focused on the priority of infrastructure sectors, including energy, water, and transport, along with construction and reconstruction, agriculture and manufacturing industries, health and education, considering them essential elements for rebuilding human capital. He also stressed the importance of supporting export industries and the technology sector as a driver of future growth.
Despite their different priorities, the two experts agree that economic recovery in Syria needs to focus on productive rather than rentier sectors, and to link investment with rebuilding infrastructure and improving public services.
A vegetable market on al-Amin Street in Damascus, December 4, 2025. (SANA)
Economic Recovery Depends on Reform and Fighting Corruption
Economic recovery in Syria does not appear to be linked only to providing funding or attracting investment, but also to the state’s ability to build more efficient and transparent institutions, with corruption and weak administration considered among the most prominent causes of the economy’s deterioration before and during the war.
“Fighting corruption and reforming institutions are a basic condition for the success of any economic strategy, because corruption does not only consume resources, it also undermines investor confidence and weakens the efficiency of public spending and the fairness of returns distribution,”
Ziad Ayoub Arbache,
a Syrian academic and economic adviser.
Hasan al-Marwan Harac stressed that building a sustainable economy requires unifying the country’s economic policy authority, alongside reforming the banking system to restore confidence in the financial sector and revive economic activity, warning that continued economic division obstructs any real recovery process.
By contrast, Ziad Ayoub Arbache stressed that fighting corruption and reforming institutions are prerequisites for any future economic project, pointing to the importance of reforming the judiciary, the tax system, and public procurement systems, and enhancing transparency in reconstruction contracts to ensure investment attraction and fairness in the distribution of returns.
The two approaches agree that the success of any future economic model will not depend only on policies, but on the ability of institutions to apply them within a transparent and stable environment.
What Future Awaits the Syrian Economy?
Despite the many visions for the future of the Syrian economy, the scene remains surrounded by considerable ambiguity, amid political, security, and financial challenges and the wide economic and structural disparities among Syrian regions.
Hasan al-Marwan Harac believes the most likely scenario over the next five years is an unstable “mixed transitional economy,” with continued geographic and economic disparities and a gradual shift toward the market along a slow path.
By contrast, Ziad Ayoub Arbache warned that the continuation of political and financial crises and the migration of skilled workers could slow recovery for decades unless a clear economic roadmap is adopted, accompanied by deep institutional reforms and effective risk management.
Ultimately, the Syrian economy today does not appear to be merely a state of transition between two models, but a complex system where the legacy of the centralized state intersects with the distortions of the war economy and current attempts at openness.
Amid this complex overlap, questions come before answers: What role for the state? What space for the market? And what model can turn recovery from slogans into tangible reality?
What the transformations extending over decades reveal, what current challenges reflect, and what visions for the future propose, all point to one reality, which is that any coming economic path will not be a simple extension of the past, nor a complete break from it, but a deep reformulation of the relationship between production, justice, institutions, and trust.
In a country exhausted by war and burdened by accumulations, the real test for the Syrian economy remains its ability to move from managing scarcity and crisis to building a sustainable model that restores value to growth, production, and the middle class, without reproducing the same imbalances in new forms.
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