Syria’s Fragile Recovery Falters Amid Sanctions, Corruption, and Investor Doubts

President Ahmed al-Sharaa’s new administration in Damascus has made economic revival its top priority since toppling Bashar al-Assad last December. Yet despite ambitious reconstruction plans and limited sanctions relief from the West, Syria’s path to recovery remains mired in red tape, weak investor confidence, and a lingering legacy of corruption.

Foreign Investors Still Hesitant

At a recent investment presentation at the Four Seasons Hotel in Damascus, a visiting German businessman summed up the mood bluntly:

“I expected talks about rubble clearing. Instead, they’re showing us metro lines and 20-year housing plans.”

Despite being “very impressed” by the vision, he told FT that it was still “too early to invest” given Syria’s legal uncertainty, enduring sanctions, and fragile security environment.

Since overthrowing Assad, President Ahmed al-Sharaa has sought to rebuild legitimacy through an aggressive economic and diplomatic charm offensive. Yet reversing the destruction of 14 years of civil war has proven far harder than planned.

Sharaa’s Market Reforms Meet Resistance

The new government has moved quickly to dismantle Assad-era socialism, promote free markets, and attract foreign capital. Western governments — including the EU and the US — have lifted many sanctions in recognition of the regime change.

Billions of dollars’ worth of memoranda of understanding (MOUs) have been signed with foreign partners, but few have materialized into concrete investment. Officials say Sharaa personally reviews economic proposals late into the night and often urges his ministers to “think bigger.”

But the international community’s confidence has been shaken by sporadic outbreaks of sectarian violence, while much of the old kleptocratic bureaucracy remains intact. The U.S. Congress has yet to fully repeal all sanctions, further slowing recovery.

Slow Growth, Deep Poverty

According to World Bank estimates, Syria’s economy will grow just 1% this year, with GDP still at half its 2010 level and two-thirds of Syrians living below the poverty line.

The private sector initially welcomed Assad’s fall, freed from state extortion and crony monopolies. Some firms that had relocated to Jordan or Turkey are returning home.
Mazen Derawan, head of Amana Foods, said he has doubled his local workforce to 400:

“The business environment is a million times better. We finally feel safer to invest and expand.”

Yet many manufacturers say the opening of the market to cheap Turkish and Chinese imports is making it impossible to compete. Some have lobbied for protectionist measures, though the government has avoided major restrictions on trade with key allies like Turkey.

Industry Shifts Toward Tourism and Reconstruction

Nazha Investment Group (NIG), one of Syria’s largest private conglomerates, plans to pivot away from manufacturing and focus on tourism and rebuilding projects.
“The hotel business fluctuates with security,” said NIG chairman Mounzer Nazha, “but we expect a big surge in tourism in the coming years.”

A Broken Financial System

Syria’s banking sector remains paralyzed by war, sanctions, and Lebanon’s financial collapse, which wiped out cross-border liquidity.

“Loans are nearly impossible to obtain,” said one Damascus banker. “It’s freezing trade and forcing companies to rely on informal money exchangers.”

Even in sectors exempt from sanctions, European banks refuse to process payments due to compliance fears. “We can’t even import food machinery,” said Derawan.

Old Habits Die Hard: Corruption Creeps Back

Business leaders complain that corruption — long the bane of Assad’s Syria — is again on the rise.

“In Assad’s time, inspectors came once a month,” said one industrialist. “Now it’s every week, and there are more of them.”

Many key investment decisions are reportedly being made by a shadow economic council led by Sharaa’s brother Hazem and an ex-Lebanese associate from his Hayat Tahrir al-Sham (HTS) days. Insiders allege that companies linked to HTS affiliates are winning public tenders and reconstruction contracts.

The Ministry of Information denied the accusations, saying all tenders follow “transparent legal procedures” and that only a few settlements have been made with “corrupt tycoons” from the Assad era.

Pragmatism and Power-Sharing in Damascus

At a recent Four Seasons dinner, former Assad-era businessmen sat side by side with ministers tied to HTS — an unthinkable sight a year ago. “Together, they represent over $12 billion in private capital,” said a banker at the event. “The government needs them now — but there’s new blood coming in fast.”

World Bank: Cautious Optimism Amid Uncertainty

The World Bank forecasts only modest growth in 2025, predicting continued hardship as population growth outpaces income.
Sanctions, frozen assets, and disrupted oil supplies remain major constraints, though returning refugees — nearly 800,000 so far — could help boost domestic demand in the medium term.

Source: Financial Times, World Bank Syria Report