Inflation and investment dominate Syria's economic debate

More than one year and seven months after the fall of the Baathist regime and the establishment of a new authority in Syria, economic and living conditions remain among the country's greatest challenges, drawing criticism from economists and observers.

Economists say the identity of Syria's economy has yet to take shape, arguing that the country is being managed without a clear economic vision or a publicly announced development plan. They consider inflation and exchange rate fluctuations to be the main challenges burdening Syrians during the current period.

They say the sharp rise in inflation has weakened purchasing power and created recurring crises involving liquidity, foreign currency, and fuel, in addition to the continued increase in the prices of goods and services, further driving poverty and hardship.

Economists also criticized the economic decisions made in recent months, saying they were improvised and not based on studies or long-term planning. They argued that these decisions were influenced by private interests and personal relationships.

They also pointed to the pricing of the wheat harvest, which they believe was set below market value, without coordination with neighboring countries or taking advantage of this year's abundant harvest to build a strategic reserve for future drought years. They said this reflects the absence of a clear economic strategy or a budget based on accurate data and indicators.

They further questioned the finance minister's statements about achieving a budget surplus at a time when living conditions continue to deteriorate, according to their assessment.

Announced Investments... Limited Implementation

Economic affairs observer Imad Salman said that most of the investments announced in recent months have so far remained media announcements, stressing that no funds from these projects have entered the state treasury, with the exception of some small hotel renovation projects.

He added that the seriousness of these investments can only be assessed by the beginning of next year, when it becomes clear whether the announced funds will actually be reflected in the state budget. He said the economy cannot be evaluated based on projects that, in his view, primarily serve the interests of certain regional countries without generating direct revenue for the Syrian treasury.

Salman considered the fragility of Syria's economy and the lack of a clear economic direction to be the biggest obstacles to restarting economic activity, especially as the gap between actual needs and available resources continues to widen.

He explained that current investments are concentrated mainly in the real estate and hospitality sectors in Damascus and its countryside, while other governorates—particularly the eastern regions and the city of Aleppo—remain outside reconstruction and investment plans. He called for distributing projects according to the economic advantages of each region and offering incentives to encourage investors to expand into eastern and central Syria.

Lack of a Clear Development Plan

Regarding the sovereign wealth fund, the economist described the initiative as still being in its early stages, stressing that no tangible results have yet emerged to serve as a basis for evaluating the fund's performance.

He added that the transfer of the Planning Authority to the Ministry of Foreign Affairs was accompanied, in his view, by the absence of any publicly announced development plan for the coming years. He noted that Syria's economic vision for the next phase remains unclear, both in terms of priorities and implementation programs.

Small Businesses Left Without Support

Speaking about small and medium-sized enterprises (SMEs), he explained that the sector is facing major challenges, most notably limited access to financing, weak production, and growing competition from imported goods.

He pointed out that the Ministry of Social Affairs has held several meetings with the International Labour Organization (ILO) to discuss the sector's needs. He noted that SMEs accounted for around 90% of all businesses in Syria and contributed nearly 60% of the country's gross domestic product (GDP) before 2011. Today, however, they are struggling due to liquidity shortages, weak markets, and the flooding of the local market with imported products, without effective development programs to support them.

Uncertainty Facing Investors

Legal expert Lama Hatem said investors seeking to enter the Syrian market face uncertainty over which authority is responsible for granting approvals, asking: "Should an investor approach the minister, the Investment Authority, or the sovereign wealth fund?"

She said overlapping responsibilities and a lack of transparency have become key reasons why many serious investors—particularly small investors—have refrained from launching projects in Syria.

Hatem added that investment contracts announced so far have yet to see tangible implementation. She cited the Damascus Financial Center project as an example, saying its administrative status was changed without construction beginning or any initial payments being deposited into the state treasury.

Inflation Erodes Incomes

Hatem stressed that current inflation rates are pushing thousands of families below the extreme poverty line every month. She noted that monthly rent, which previously stood at about 1 million Syrian pounds, has risen to at least 2 million Syrian pounds, while the price of one kilogram of sugar has increased from around 8,000 to 10,000 Syrian pounds. Prices of cooking oil and many other essential goods have also risen.

She said these price increases have wiped out any benefits from salary improvements and have worsened the hardship of families whose salaries have stopped or whose sources of income have disappeared.

She also said that electricity prices have increased by about twentyfold, driving up industrial production costs and weakening the competitiveness of Syrian products against imported goods, particularly those from Turkey, Saudi Arabia, and China. As a result, she said, store shelves now contain more foreign products than locally made ones.

Government: Reforms Continue

In contrast, Syria's interim government says the economy has entered a phase of gradual reform aimed at restoring economic activity and attracting investment following the easing of some sanctions.

Economy and Industry Minister Mohammad Nidal al-Shaar has repeatedly stated this year that the government is working to build a competitive market economy, improve the investment climate, and remove bureaucratic obstacles. He said attracting investment and reintegrating Syria's economy into regional and international markets are among the government's top priorities during the current phase.

Meanwhile, the finance minister said the budget surplus announced by the government was achieved through tighter control of public spending and better resource management. He said the government is directing spending toward rebuilding infrastructure, improving public services, and implementing gradual financial and administrative reforms, noting that these measures will require time before producing noticeable improvements in people's living conditions.

Government officials say the current phase focuses on "restoring confidence in Syria's economy, creating a suitable legal environment for investment, and launching development projects in the coming period." Critics, however, argue that these measures have yet to improve the daily lives of Syrians and that economic hardship remains the public's foremost concern.

a.k

ANHA