The Syrian Government plans to finance its expenses by increasing its deficit and to review free trade agreements signed with partner countries, according to the Syrian President, who gave the first hints of what Syria’s future economic policy will be during a meeting with business representatives.

In a talk with a business delegation from Damascus on Tuesday 3 May, Mr Al-Assad reportedly said that “during the coming period we will protect the local industry and review trade agreements that have helped dumping practices” from other countries. The Syrian President’s words were published by Al-Watan, a local daily.
 
He also told the delegation, whom he met for some 3 hours, that the budget deficit could be financed by increasing the budget deficit and that this would not impact the economy “because Syria has among the lowest budget deficits in the world and has no foreign debt.”
 
Syria’s trade liberalisation policies have seen it sign two major free trade area agreements in the last decade: one involving almost all member states of the Arab League, under the Greater Arab Free Trade Area (GAFTA), which entered fully in force in 2005, and the other with Turkey, starting 2007.
 
Both involved the scrapping of almost all customs tariffs barriers, although in the case of Turkey, customs tariffs continue to be applied on Turkish imports albeit on a gradually declining scale until they are fully lifted in 2019.
 
An association agreement to be signed with the European Union and that encompasses a bilateral free trade area has also been initialled although it has not yet been signed.
 
The liberalization of the country’s foreign trade has often been decried by manufacturers and analysts for having been conducted too swiftly and with little regards for the interests of local producers.
 
Mr Al-Assad did not say how his Government planned to apply any change it may want to impose on its bilateral and multilateral trade agreements.
 
The statement by the Syrian President is the first clear policy direction in the economic field given by the Syrian authorities since the beginning of the unrest in the country in mid-March. State officials have said at various occasions that they would be reviewing existing policies but little had been said of what new direction the economy would be taking.
 
Syria conducted in the last decade a policy of limited economic liberalisation with the opening of an increasing number of business sectors, previously monopolised by the state, to private investment; a rewriting of many laws and texts regulating business activity with the aim of providing a more business-friendly environment; a liberalisation of foreign trade; a reduction in state subsidies to households, farmers and businesses; and a reduction of taxes and fees imposed on individuals and corporations.
 
These various measures helped attracted investment and spur growth with an average annual increase in GDP of more than 5 percent in the last five years.
 
However, the growing importance the Government gave to services and trade in the last years had one major victim, the agricultural sector.
 
Poor water levels, the end of subsidies on agricultural inputs, little investment by the State and endemic corruption all combined to reduce dramatically output and the well being of farmers, impoverishing and displacing hundreds of thousands of them to the suburbs of the country’s main city centres.
 
In its 5-year plan that began this year, and that was drafted last year – well before the unrest - the Government had actually announced it would be giving more importance to infrastructure projects, to manufacturing and to social services, including health and education.  This came, however, much too late and as a consequence the Government appears now forced to make a much more significant shift.