Fiscal Consolidation Policies and Their Effectiveness in Improving Fiscal Performance in Syria

Abstract

The study aimed to assess the commitment of financial policymakers in Syria to the principles of fiscal Consolidation by analyzing government spending and revenue policies using the Cyclically Adjusted Primary Balance during the period 1990–2020, and to evaluate its effectiveness in measuring financial performance improvements. Additionally, the study sought to determine the nature of fiscal policies, whether countercyclical or procyclical.

The study employed the Hodrick-Prescott filter to separate cyclical trends from structural trends in (GDP), allowing for the estimation of potential output and the calculation of the CAPB. Subsequently, the CAPB metric was constructed to represent the difference between cyclically adjusted public revenues and cyclically adjusted primary expenditures. Based on established criteria from economic literature, fiscal consolidation episodes were identified.

The findings suggest that Syria’s fiscal policy was countercyclical, with the government reducing revenues during economic downturns to stimulate growth. The study identified eight fiscal consolidation episodes, with six driven by revenue adjustments and two by expenditure adjustments. During these periods, financial performance improved significantly, as indicated by positive CAPB-to-GDP ratios compared to other timeframes.