Syria banking on new government to rebuild shattered economy

Transparency, accountability and simplification crucial for 'monumental challenge of reconstruction'

Workers at a tyre shop in Douma, on the outskirts of Damascus. Syria's economy has contracted sharply since the civil war began in 2011. AP

The formation of a new government in Syria is expected to bring changes to its economy but several challenges paint an unclear picture for the future of the war-torn nation, analysts say.

While the move offers a welcome change, a number of measures are needed to create a path for rebuilding and growth following Syria's years-long civil war and economic downturn.

"Openness, transparency, accountability and simplification of administrative procedures: these are important points at the current stage, as people want – after many years of conflict and marginalisation – someone to speak out, even if the truth is bitter," Khalid Al Terkawi, an economic consultant at the Jusoor Studies Centre in Istanbul, told The National.

Syrian President Ahmad Al Shara announced members of his new government on Saturday, appointing 23 ministers in a broadened cabinet. The move is seen as an important milestone in the transition from decades of Assad family rule and the improvement of ties with the West.

The new religiously and ethnically mixed cabinet is the first in the country’s five-year transitional period and replaces the interim government formed shortly after former president Bashar Al Assad was removed from power in early December.

That addresses a "profound lack of inclusivity", said PeaceRep, an international research consortium led by the Edinburgh Law School. The fall of the Assad regime created a "wave of hope for economic improvement" in Syria, it said.

However, Damascus still faces "enormous challenges", even if it adopts free-market economy principles and austerity measures, it added.

US State Department spokeswoman Tammy Bruce said the administration of President Donald Trump "hope[s] this announcement represents a positive step for an inclusive and representative Syria".

Focus on investment

After the announcement, official speeches focused on four main points: paying attention and caring for human resources; transparency and accountability; digital transformation and technological development; and encouraging private investment in vital industries such as media, transport, tourism and energy.

"It seems that their focus on investment and private enterprises, whether small or medium-sized, could drive the economy if it really takes place," Mr Al Terkawi said.

Syria announces new government

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After the downfall of Mr Al Assad, the EU, UK and Canada have eased certain sanctions, particularly in energy and transport, to support Syria's political transition and economic recovery.

However, boosting the energy sector could be tricky: western sanctions relief is not expected to bring an immediate return of major oil companies to Syria. The companies exited the country at the onset of the 2011 civil war and remain wary of US sanctions, low oil prices and continued political instability in the country, analysts say.

Ms Bruce acknowledged that "any adjustment" to US policy – and sanctions – towards Syria will be contingent on a number of conditions. These include steps to counter terrorists and exclude them from official roles, prevent Iran and its proxies from exploiting Syrian territory, destroy Mr Al Assad’s chemical weapons, assist in the recovery of US and other citizens who have disappeared in Syria, and ensure religious and ethnic freedom, she said.

"The US will continue to assess the interim’s authorities’ behaviour and determine our next step based on those actions," she added.

Economic struggle

The civil war in Syria began after the suppression of a peaceful protest movement calling for the removal of Mr Al Assad in 2011 and subsequent fighting against opportunistic extremist groups such as ISIS.

The national economy, which was maintaining a brisk pace of growth before the uprising, has struggled since, with real GDP forecast to contract by 1 per cent this year, from a 1.5 per cent decline in 2024 and 1.2 per cent the previous year, the World Bank estimates.

The Syrian economy has been devastated by the civil war, with the UN's Development Programme estimating cumulative losses – includes physical damage and economic losses – at more $923 billion at the end of last year.

"The scale of economic devastation is immense," the UNDP said. "When compared to Syria’s current GDP – estimated at approximately $29 billion – the figures illustrate the monumental challenge of reconstruction ahead."

The country's GDP peaked at $67.54 billion in 2011, but has since dived, data compiled by Macrotrends shows.

The Syrian pound has also suffered, having depreciated steadily since 2011 due to the conflict, sanctions and disruptive political developments. Several countries and international organisations had imposed sanctions on Damascus due to the civil war.

In addition, Syria is saddled by vast external debt, of a total that remains unknown. Estimates vary wildly, with some reports putting debt to Russia at $1 billion as of 2020 and to Iran at as much as $7.6 billion as of 2019. China has also reportedly Syria owes it a large sum.

"How Syria handles its debt obligations – whether by honouring them, renegotiating them, or disputing them as odious – will shape its ability to access external financing in the future," said Karam Shaar Advisory, a New Zealand-based firm specialising in the Syrian economy.

A key challenge for the country remains financing, specifically the ability to fund government programmes that each minister highlighted, Mr Al Terkawi said. With several pressing issues in each ministry, "the order of priorities and point number one is difficult to determine, because taking any step means an alternative cost to other steps", he said.

"[There are also] administrative challenges, related to the overlap of government institutions, and the intersection of business, which requires high co-ordination."