Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax system
Basic data
Fiscal policy
As part of fiscal policy, a new budget for 2021 was presented in autumn 2020, which is calculated at 8.5 trillion Syrian pounds – SYP (billion USD[1]). Due to the sharp weakening of the Syrian pound, together with the significant weakening of economic activity over the last year, the planned budget for 2021 is not only a 27% decrease compared to 2020, in the context of massive inflation, it is the smallest budget since 2011 in USD terms. Severity of the economic crisis in the country, they confirm per-capita budget spending, which has fallen by 70% since 2010. Thus, the central government will spend three times less on its citizens in 2021 than in 2010, despite the fact that only about half of the people live under its control ( 1million/2020 vs. 2million/2010). The continuous decline in Syria’s budget is primarily due to shrinking revenues, in 2021 they will be 83% lower than in 2010. Due to the permanent decline in tax collection, the government is unable to finance all its expenditures, leading to significant and permanent deficits. Projected revenues for 2021 are currently around SYP 6 trillion (approx. USD billion), creating a budget deficit of SYP trillion (approx. USD 902 million). The government probably borrowed large sums from domestic and foreign actors during the years of the war, and an attempt to accurately assess budget deficits and debt is currently impossible due to the opaque financial transactions of the Syrian government. The availability of valid economic data is very low and the sources differ considerably in individual data, e.g. the EIU (Economist Intelligence Unit) brings a slightly different perspective on the Syrian fiscal policy, when it does not attach such importance to the inflation level (such as research from the Atlantic Council – AC and the Syria Report), which leads to the claim that the budget for 2021 is twice as much compared to 2020, but if inflation is included, it is the same as in 2020 (see the contradiction about 27% of the actual decrease according to AC). 82% of the budget will go to direct spending, reflecting higher demand for subsidized goods (wheat, flour, petroleum product subsidies), higher salaries for civil servants (million people = 1/3 of the total workforce), and higher health spending through the C-19 pandemic. If there is an increase in oil production in 2021, the budget deficit can be expected to decrease to 8.9% (from 11.5% of GDP in 2020). If this trend of a slight increase in budget revenue continues until 2022, the deficit will be reduced to 7.4% of GDP. Longer outlooks would be imprecise due to unpredictable factors in international politics at the moment viz (new united? GCC policy, Turkish and Russian presence, possible Chinese investments, agreement with AANES, etc.). [1] Converted to the black market exchange rate, which rather reflects the current real value of SYP.
2nd paragraph: Brief description of the structure of the economy (what is its main added value, what it produces, what it imports, etc.)
Table from MOP + additionally balance of payments, indebtedness/GDP.
| Pointer | 2018 | 2019 | 2020 | 2021 | 2022 |
| GDP growth (%) | 2.7 | 4.8 | -8.3 | -2.2 | 4.4 |
| GDP/population (USD/PPP) | 3720.0 | 4030.0 | 3750.0 | 3740.0 | 3,910.0 |
| Inflation (%) | 0.9 | 13.4 | 87.7 | 66.1 | 31.3 |
| Unemployment (%) | 48.0 | 50.0 | 59.0 | 60.0 | 57.0 |
| Export of goods (billion USD) | 2.0 | 2.0 | 1.8 | 1.8 | 1.9 |
| Import of goods (billion USD) | 7.1 | 7.3 | 6.1 | 6.1 | 6.5 |
| Trade Balance (Billion USD) | -5.1 | -5.3 | -4.3 | -4.3 | -4.5 |
| Industrial production (% change) | ON | ON | ON | ON | ON |
| Population (millions) | 16.9 | 16.7 | 16.5 | 16.3 | 16.6 |
| Competitiveness | ON | ON | ON | ON | ON |
| OECD export risk | 7/7 | 7/7 | 7/7 | 7/7 | ON |
Source: EIU, OECD, WEF
Public finance and state budget
| Public finance | |
| State budget balance (% of GDP) | -8.3 |
| Public debt (% of GDP) | 56.8 |
| Current account balance (billion USD) | -2.5 |
| Taxes | |
| AFTER | ON |
| F.O | ON |
| VAT | ON |
As part of fiscal policy, a new budget for 2021 was presented in the fall of 2020, which is calculated at 8.5 trillion Syrian pounds – SYP (billion USD). Due to the sharp weakening of the Syrian pound, together with the significant weakening of economic activity over the last year, the planned budget for 2021 is not only a 27% decrease compared to 2020, in the context of massive inflation, it is the smallest budget since 2011 in USD terms. Severity of the economic crisis in the country, they confirm per-capita budget spending, which has fallen by 70% since 2010. Thus, the central government will spend three times less on its citizens in 2021 than in 2010, despite the fact that only about half of the people live under its control ( 1million/2020 vs. 2million/2010). The continuous decline in Syria’s budget is primarily due to shrinking revenues, in 2021 they will be 83% lower than in 2010. Due to the permanent decline in tax collection, the government is unable to finance all its expenditures, leading to significant and permanent deficits. Projected revenues for 2021 are currently around SYP 6 trillion (approx. USD billion), creating a budget deficit of SYP trillion (approx. 902 million USD). The government likely borrowed large sums from domestic and foreign actors during the years of the war, and an attempt to accurately assess budget deficits and indebtedness is currently impossible due to the opaque financial transactions of the Syrian government.
According to cheeroutdoor.com, the availability of valid economic data is very low and the sources differ greatly in individual data, e.g. the EIU (Economist Intelligence Unit) brings a slightly different view of the Syrian fiscal policy, where it does not attach so much importance to the inflation level (such as research from the Atlantic Council – AC and Syria Report), which leads to the claim that the budget for 2021 is double that of 2020, but after accounting for inflation it is the same as in 2020 (see the discrepancy of 27% actual decrease according to AC).
Banking system
After 2011, several private banks left the Syrian market and temporarily closed their operations. There are currently 14 private banks operating in Syria. Their total assets as of the end of the first half of 2017 (more recent data are not available) amount to approximately USD billion. Some of the 14 private banks operating in Syria are unlikely to be able to provide financial loans for projects in the construction of Syrian infrastructure. Further developments do not indicate that the situation of the banks will improve in the near future. Banks backed by foreign shareholders from Lebanon, Jordan and the Persian Gulf countries are weakening their Syrian branches and limiting ties to Syrian partner entities. In 2018, a new institution was created in the banking sector – the Federation of Syrian Banks (FSB) – based in Damascus, which covers 20 Syrian banks, including state and Islamic banks. This new body defends the interests of all banking houses, proposes new solutions and measures, resolves disputes between banks and the state regulator. At the same time, the Banking Federation is supposed to provide advice to banking entities. The FSB does not have executive powers. The Federation may own movable and immovable property. Banks’ revenues and profits were largely generated from foreign exchange operations, which accounted for approximately 90%. Interest income, commissions and fees made up only a negligible part of the total income of Syrian private banks. The volume of reserves of the 3 Islamic private banks that operate on the principle of Sharia banking represents approximately half of all remaining private banks, with a share of 15% in 2010. Among the Islamic banks, Cham Bank reported the best results, increasing its assets by 87% in 2016. In terms of reserve volume, only 5 banks have assets higher than USD 350 million. This group includes Al-Baraka Bank, Banque Bemo Saudi Fransi, Syria International Islamic Bank, Bank of Syria and Overseas, and Cham Bank. Banks with less than $150 million in assets include Bank of Jordan Syria, Bank Al-Sharq, Syria Gulf Bank, Arab Bank Syria and Byblos Bank Syria.
Tax system
The not-so-transparent tax system in Syria forces us to state that there is no single and unified tax (on income), but rather several different types of taxes that are imposed by the government on different subjects for different services. Partial government decisions are then aimed at ensuring the income component of the budget by selecting higher funds or at the preference of various sectors in the form of investment incentives (e.g. reduction or elimination of tariffs in the case of new projects for a certain period). The Syrian tax system has built various other fees into the revenue component, e.g. fees related to the operation of diesel-powered passenger vehicles, license fees, etc. At the same time, the Syrian government is tightening customs procedures for imported goods. The purpose is to provide greater protection for domestic production and at the same time increase sanctions against illegal smuggling of goods.
Income tax: Includes taxes on the income of companies, self-employed persons and other self-employed taxpayers and also applies to non-residents operating in Syria according to local laws. It also applies to representatives of foreign companies, agencies representing national or foreign corporations, commercial and industrial enterprises owned by foreign entities, as well as to persons in an employment relationship with another entity. This group also includes tax on profits (23%) from securities trading, tax on granted loans, bank interest (7.5%), funds, insurance and lottery games. Tax rates 10% of gross income for the income category from 5,000 to 200,000 SYP, 15% of gross income for the income category from 200,000 to 500,000 SYP, 20% of gross income for the income category from 500,000 to 1,000,000 SYP, 24% of the gross income for the income category from 1,000,000 to 3,000,000 SYP, 28% of the gross income for the income category exceeding 3,000,000 SYP. The employer pays the state payroll tax in the range of 5% to 22% of the gross salary of each employee. The employee contributes 7% of his base salary to social insurance.
