Growth on paper

Many Syrians imagine economic recovery in simple, visible terms. They picture busy downtowns filled with recognisable brands and thriving shops, industrial zones alive with factories, workers, and trucks moving goods around the clock, and border crossings receiving tourists and sending exports to regional markets. That image draws on both memory - how Syria functioned before the war - and observation, shaped by life in Turkey and Europe or by what relatives abroad share through screens. Recovery, in that imagination, looks like movement, commerce, and normal economic life returning.

Syria today, however, is not moving in that direction - at least not yet. One way to see this more clearly is through the public budgets for 2025 and 2026. Actually public spending in 2025 was reported at about USD 3.447 Billion, while the 2026 Citizen’s Budget projects expenditure of about USD 10.516 Billion. Both have been criticized on many grounds, including credibility, transparency, and the realism of their assumptions. This article sets those debates aside and examines the 2026 budget from a narrower angle: what it suggests about the government's economic priorities, and what those priorities imply for business, investment and the private sector.

A central starting point is public investment – i.e. government spending on rebuilding infrastructure, public facilities and other capital projects. Beyond its importance for people’s access to services and for basic living conditions, it is also critical for business because it shapes the context in which firms operate, invest and grow. It helps provide the shared infrastructure and services businesses depend on, generates demand across supply chains and - ideally - reduces the costs and risks of private investment.

In 2025public investment remained extremely limited, at around 7% of the total budget, or approximately USD 250 million. For a country emerging from more than fourteen years of conflict, that was far too small to support meaningful recovery or significantly improve the business environment.

The 2026 budget appears to mark a shift. Public investment rises to around 27% of total spending, or approximately USD 2.8 billion, more than eleven times the 2025 level. On paper, this suggests a more serious recognition of the role public spending must play in recovery. Yet even this increase warrants caution. Relative to the scale of Syria’s reconstruction needs, it remains limited. This is particularly concerning given that around one-third of total expenditure is allocated to the security and military sector, effectively diverting resources away from critical development priorities. In many developing and post-conflict contexts, such spending tends to be associated with low transparency and weak accountability, raising further concerns about efficiency and the opportunity cost for the business sector and broader economic recovery.

There is also a credibility problem. Public investment can support business recovery only if it translates into actual projects, contracts and visible improvements in the operating environment. The lack of clarity on sectoral allocations and implementation mechanisms, together with the absence of visible major public investment projects several months into 2026, raise doubts about whether the planned spending will be fully realised.

The structure of public revenues has direct implications for the business sector. The government has announced a significant reduction in direct taxes on businesses in 2026, alongside tax exemptions for agriculture and production. In principle, this is a business-friendly signal. If effectively implemented, it could reduce the formal tax burden on firms, strengthen investment incentives, and support productive sectors. 

This shift, however, must be assessed within the broader revenue framework, and this suggests that the overall fiscal burden is not being reduced, but reallocated. The 2026 budget projects a sharp increase in revenues from taxes, fees and customs, reaching approximately USD 4.4 billion — nearly double the 2025 level. Given the reduction in direct taxation, this points to a heavier reliance on indirect taxes and fees. In practice, the burden shifts from profits to consumption and transactions.

For businesses, this creates a structural contradiction. Lower direct taxes are offset by rising costs through customs duties and administrative fees. These costs are then passed on to consumers, weakening purchasing power and demand. Businesses are therefore squeezed from both sides: higher operating costs and shrinking market. This particularly threatens micro, small, and medium enterprises (MSMEs) that form the majority of Syrian businesses and have limited capacity to absorb or pass on these pressures.

The reliance on customs revenues meanwhile reinforces a structural bias toward an import-driven economy. A significant share of revenues is tied to imports, with car imports alone estimated at around USD 5 billion in 2025. While this may support short-term fiscal needs, it also raises the cost of imported inputs and exposes local firms to external competition. Combined with weakening demand, this creates a self-undermining cycle: the fiscal system depends on imports and consumption, yet its own mechanisms gradually erode both. Ultimately, despite the positive signal of reduced direct taxation, the overall revenue structure continues to place pressure on the business sector and limits the prospects for sustainable recovery.

The budget also reflects a sharp reduction in subsidies, particularly on energy and essential goods, with direct consequences for production costs. With the liberalisation of electricity and fuel prices, subsidies have been effectively eliminated and replaced by a system that generates fiscal savings - and potentially revenue - amounting to an estimated 12% of the budget in 2025.

For producers, especially in energy-intensive sectors such as industry and agriculture, this has translated into a substantial increase in input costs. Higher fuel and electricity prices raise the cost of transportation, manufacturing and processing, reducing profit margins and competitiveness. This cost shock further limits the ability of Syrian firms - who already face financing constraints and weak infrastructure - to operate, expand, or invest. Smaller and less resilient firms are affected disproportionally.

The removal of subsidies has also eroded household purchasing power, with direct consequences for business demand. Price liberalisation, combined with weak social protection and declining real incomes, has increased inflationary pressures and reduced domestic demand. While the government has introduced salary increases in 2025 and 2026, these are likely to be offset by rising prices, limiting their real effect. The result is a difficult environment for firms: even as nominal incomes rise, real consumption remains weak, constraining sales across retail, services and local production.

If Syria’s budgets are to support business recovery in a way that benefits the wider economy, a larger share of spending needs to go to infrastructure and public investment that directly affects firms, especially in the areas of energy, transport, and industrial zones. That also requires clear, transparent, and accountable implementation so that businesses can respond to actual demand and actual improvements, not just announced allocations.

Maintaining reductions in direct taxes on businesses is a positive step, but it will have limited effect if the fiscal burden continues to shift through indirect taxes, fees, and customs. Easing these pressures, particularly on productive inputs, and providing targeted relief for MSMEs would help reduce costs and sustain domestic demand. Given the sharp increase in energy and input prices, temporary measures such as targeted energy subsidies, subsidised credit, or tax rebates linked to production, exports, and employment could help firms maintain operations during the transition.

Defense and security is clearly a priority, but successful outcomes cannot be achieved through spending on guns, police and soldiers alone. They also depend on addressing the economic and political conditions that drive instability. Growth and development can solve problems that spending on means of coercion cannot. A recovery strategy that prioritises security expenditure at the expense of infrastructure, production and livelihoods may ultimately reinforce the very pressures it seeks to contain.

This analysis was provided exclusively by Syrian Ventures Alliance, an investment and economic advisory platform.