Syria is booming, and just in time. The authoritarian state is reaping the harvest of a slow but deliberate process of economic reform even as it grapples with a wartime refugee crisis and its diplomatic estrangement from the West. Private banks, which didn’t exist only a few years ago, are doing a brisk trade. High oil prices have translated into robust petroleum sales. Foreign investment is at record highs and the value of non-oil exports has tripled over the last two years. A Syrian stock exchange is expected to open this year and for the first time the government is issuing domestic bonds for local investors. Overall, economic growth is expected to reach 5.6 percent this year, up from 5.1 percent in 2006. “For the first time the Syrian economy is open,” says Jihad Yazigi, the editor in chief of The Syria Report, an online financial bulletin. “There is good growth, better than people think.” Perhaps most significant, a reformed tax code and new banking laws are casting light on Syria’s notoriously opaque commercial activity. Economists say the country’s gross domestic product could be as much as a third larger than the official $20 billion estimate because manufacturers, exporters, and lenders habitually understate revenues. One example: In 2005, the European Union said it bought $100 million in garments from Syria at the same time Damascus was reporting an equivalent amount from garment sales overall. Economic reform and revival may have saved the regime of President Bashar Al Assad, coming as it did after years of flat-to-negative growth rates throughout much of the 1990s. As late as early 2005, the World Bank circulated a confidential report that warned Syria was facing chronic budget deficits and possibly bankruptcy if it did not diversify from its dwindling oil reserves, revenue from which accounts for nearly a quarter of gross domestic product, two-thirds of exports, and half of government revenue. To make matters worse, the US government in late 2004 passed the Syrian Accountability Act, a web of financial sanctions on Damascus in retaliation for its occupation of Lebanon and support of militant groups like Hamas and Hezbollah. “The Syrians realized they were up against a wall,” says a US diplomat with long experience in the Middle East. “The sheer magnitude of their problems made real reform the only way out.” Troubled legacy. Problems persist, however. Wages are low and poverty is high. The economy needs to grow by about 7 percent to absorb a working-age population that is growing at 3.5 percent annually. The jobless rate is estimated at anywhere between 12 and 20 percent and though price supports on some food items have been lifted, the economy is still heavily subsidized. Add to that the arrival of more than a million war refugees from Iraq, which is placing a huge toll on Syria’s schools, hospitals, roads and electricity grids. Nearly half of the exiles are children, according to a United Nation’s report, and few working-age

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