After 14 years of war and western sanctions, Syria’s economy is in a state of collapse. Around 90% of the population is below the poverty line, with over a quarter in extreme poverty. Syria’s income level remains far beneath the international low-income threshold, and reconstruction alone is estimated to cost between $250 billion and $400 billion.

Following the fall of the previous government in December 2024, there is cautious hope for the country’s economy, but the scale of destruction and institutional collapse makes recovery highly uncertain. According to the United Nations Development Programme (UNDP), even under optimistic scenarios, rebuilding Syria’s economy will take at least a decade, and progress is likely to be uneven and fragile. Since early 2025, the interim government has been proactive in conducting Syria’s economic reform, but progress has been constrained by entrenched cronyism, weak institutions, political instability, and an ongoing humanitarian crisis.

Interim government’s economic reforms

Following the fall of the Assad government, Hay’at Tahrir al-Sham (HTS), led by Ahmed al-Sharaa, assumed power and formed an interim government with an ambitious agenda to overhaul Syria’s economy. It has pledged to reopen market Infrastructure, strengthen the autonomy of the central bank, and dismantle decades of state control and cronyism by embracing liberal market reforms and opening the country to foreign investments. Authorities have committed to privatizing state-owned companies and to halve the size of the public sector, beginning with the dismissal of roughly one-third of state employees. In addition, Syria will issue new banknotes, removing two zeros from its currency in an attempt to restore public confidence in the severely devalued pound.

Sanction relief has become a key driver of renewed optimism. In early 2025, the United States eased restrictions on humanitarian assistance. The European Union followed with similar measures, suspending sanctions that affected the energy, transport, and financial sectors. In June, the United States formally dismantled much of its sanctions. These developments have enabled Syria to gradually re-enter global financial systems, including its first international bank transfer via SWIFT since 2011. However, full functional access to the SWIFT payments network is not yet confirmed.

Trade liberalization is a key focus of the government’s strategy. The heavily regulated customs system is being relaxed, with some fees cut by as much as 60% to encourage cross-border commerce and ease the flow of goods. HTS has also pledged to dismantle restrictive import policies, aiming to create a more competitive market environment. Turkey has agreed to reassess customs tariffs with Syria, and talks are ongoing to revive the 2005 Turkey–Syria Free Trade Agreement, suspended in 2011. In early 2025, Turkish exports to Syria rose by around 40% compared with the same period last year, and direct road transport between the two countries resumed. In Idlib, a region under HTS control for years, reduced taxes and customs duties have led to a revival of trade.

Efforts are also underway to attract foreign investment and development aid, with the leadership actively pursuing diplomatic engagement with neighboring states to secure investments. In August, Turkey began supplying Syrian markets with gas from Azerbaijan. In May, a Qatar-led consortium signed a $7 billion memorandum of understanding to rebuild Syria’s power sector. In March, international donors at the EU-led Brussels conference pledged €5.8 billion for Syria’s reconstruction and socio-economic recovery. On September 9, a UAE business delegation announced plans to develop a nationwide bus network comprising up to 3,000 vehicles. Saudi Arabia has also recently launched major relief and reconstruction initiatives in Syria, including investments in energy, infrastructure, and trade.

Challenges Ahead

Despite early optimism and ambitious reforms, Syria’s recovery faces serious challenges. Deep structural weaknesses, political instability, and the legacy of conflict threaten to undermine economic gains. The following concerns highlight key risks that could stall or even reverse progress if left unaddressed.

Regional inequality

Regional inequality poses a significant barrier to Syria’s equitable economic recovery. While Idlib, long under HTS control, is experiencing a revival with liberalized markets and increased trade, former regime strongholds like Damascus and Aleppo continue to face economic stagnation and reconstruction delays. Idlib’s liberalized markets have boosted local trade but also raised concerns over the influx of cheap imports from Turkey, which risk undercutting local producers. Merchants in former regime-held areas face  falling sales, unfair competition, and resentment over perceived favoritism. This disparity extends to the quality and speed of reconstruction efforts. While Idlib enjoys more reliable infrastructure and financial services, other regions continue to experience electricity shortages and limited access to cash and banking.

Elite Capture

Despite promises of reform, the interim government risks replicating Assad-era cronyism. A Reuters investigation revealed that economic authority has been quietly concentrated around President Ahmed al-Sharaa’s brother, Hazem, who heads a covert committee reshaping Syria’s economy through negotiated asset transfers from longstanding state-linked business networks. This committee has taken control of approximately $1.6 billion in assets. Recent mega-projects illustrate these risks. The port of Tartous concession to UAE-based DP World, the Latakia port deal with French shipping giant CMA CGM, and the Damascus International Airport expansion led by Qatar’s UCC Holding were all negotiated with limited transparency on terms or public benefit. Decision-making appears highly centralized and opaque, with restricted institutional checks and limited public oversight. Analysts warn that economic gains could once again be captured by a narrow elite, raising concerns about the exclusion of broader society.  Without a stronger mechanism for accountability, current reforms risk entrenching inequality and may struggle to deliver meaningful economic improvements.

Weak Institutions

Decades of mismanagement have left banking and regulatory structures fragmented, making it challenging to undertake large-scale reconstruction or attract foreign investment.Underdeveloped financial systems, compounded by a severe liquidity crisis marked by shortages of physical banknotes and restrictions on bank withdrawals, further constrain Syria’s economic outlook. Property rights are often contested, with destroyed registries and missing documentation, and laws like Law 10 (2018) eroding trust by enabling the state to confiscate land from displaced communities.

Humanitarian Crisis

Syria’s economic recovery efforts are overshadowed by an ongoing humanitarian emergency. Conflict has left more than 16.5 million Syrians in need of humanitarian assistance, with widespread displacement, food insecurity, and crumbling infrastructure. Minority communities remain especially vulnerable, as insecurity and political instability continue to threaten their safety and livelihoods. Agricultural production has been severely impacted by years of war and drought, and essential services, including water, electricity, and healthcare, remain significantly disrupted. Without large-scale humanitarian aid and investment in social protection systems, economic liberalization will struggle to translate into meaningful improvements for ordinary citizens.

Political Instability

Ongoing political instability undermines Syria’s recovery. The interim government, led by HTS, has introduced sweeping reforms, but its legitimacy is contested both domestically and internationally. Many Syrians remain skeptical of HTS’s governance, citing its history of authoritarian control, while opposition groups and minority communities fear further marginalization. Without political inclusivity and reconciliation efforts, economic reforms are unlikely to yield long-term stability, and investor confidence will remain fragile.

History of decline under Conflict

Before the conflict began in 2011, Syria’s economy was growing at an average annual rate of over 5% for five consecutive years, with GDP estimated at around $60 billion. By 2023, it had shrunk to just $17.5 billion. The central bank’s foreign exchange reserves have declined to approximately $200 million in cash, compared to $18.5 billion before the civil war.Unemployment has tripled, with roughly one in four Syrians now jobless.

Since 1979, Syria has faced sanctions from countries, including the United States, the United Kingdom, and the European Union, which have significantly harmed its economy. Since the civil war broke out in 2011, these measures expanded sharply, crippling key sectors. Since December last year, countries have begun lifting or easing restrictions. However, many limitations, including those related to international transactions, remain unsolved.

These sanctions, combined with the overall decline in economic activity, have led to a collapse of Syria’s financial system. Inflation in Syria surged to unprecedented levels, with an average annual rate exceeding 50%. By the end of 2024, the Syrian currency had depreciated by approximately 200-fold.

The Syrian pound had lost 99.7% of its value, with the exchange rate reaching SYP 14,000 per US dollar at the market rate. This has led to an increased use of foreign currencies in Syria, most notably the US dollar, as an alternative to the local currency. It resulted in a severe loss of correspondent banking connections, which in turn fuelled illicit financial activity.

Facing sanctions and diplomatic isolation, the trade in Captagon, an addictive amphetamine, is estimated to have generated over $9 billion annually at its peak, fueling Syria’s shadow economy.  Syria emerged as a regional hub for the production and smuggling of Captagon. Despite some crackdown on the trade, the multi-billion-dollar drug network is believed to remain active.

Cronyism was widespread under the previous government, with the majority of the economy monopolised by government members or their affiliates. It evolved into an entrenched form of crony capitalism, where a select group of businessmen was empowered by the state. As the war economy emerged after 2011, crony capitalism only deepened its hold.

Asset seizures have also been carried out on a large scale. Under the previous government, it is estimated that more than $1.5 billion worth of personal property has been seized from detainees. This campaign of seizures was reinforced by policies that systematically undermined Housing, Land, and Property (HLP) rights. Laws such as Decree 63 (2012) allowed authorities to seize assets from individuals accused of terrorism, and Law 10 (2018) empowers them to redevelop areas and confiscate property from owners unable to verify their ownership in person.

In addition to these challenges, Syria experienced its worst drought, which severely damaged its agriculture and economy, resulting in significant drops in harvest yields. Persistent security risks, liquidity shortages, and lack in foreign assistance continue to undermine Syria’s economic recovery.

Conclusion

Although ambitious reforms and foreign support have raised hopes, Syria’s recovery remains fragile. Enduring economic hardship, unstable politics, and the ongoing humanitarian emergency continue to overshadow prospects for lasting growth.