* Inflation at 40 percent -Institute for International
* Says official reserves could run out by end of 2013
* Lebanon's economy affected by turmoil
BEIRUT, Dec 10 War-ravaged Syria's economy will
shrink by a fifth in 2012 and all its foreign reserves could be
spent by the end of next year, a global finance industry
association said on Monday.
Since a revolt that has since descended into civil war
started in March 2011, inflation has risen to 40 percent and the
Syrian pound's official exchange rate against the dollar fallen
by 51 percent, the Institute for International Finance said.
As well as financing the war, President Bashar al-Assad's
government has spent billions of dollars of hard currency
reserves on wages, fuel subsidies and propping up the pound,
bankers in Damascus say.
The Washington-based IIF said the reserves could be depleted
by the end of 2013.
Opposition activists estimate some 40,000 people have been
killed in Syria as fighting between rebels and the army has
raged in almost every city and has now reached the outskirts of
International measures to pressure Assad to step down have
also affected the economy.
"The sanctions by the Arab League introduced in late 2011
and the September 2011 U.S. and EU. sanctions have meant more
economic hardships for 2012 and 2013," said Garbis Iradian,
deputy director of the IIF's Africa and Middle East department.
Syria has not yet released economic forecasts for 2012 but
the finance ministry has said GDP growth will be positive.
Syria's war has affected the countries around it, with
hundreds of thousands of refugees fleeing to Turkey, Lebanon,
Jordan and Iraq. Trading routes have also been cut.
Lebanon, its smaller neighbour that is rebuilding after its
own 15-year civil war, has borne the brunt of the turmoil.
Lebanon's economy is due to grow by 0.6 percent this year, a
significant drop from 1.8 percent in 2011 and 7 percent in 2010,
the IIF said, after political bickering and sporadic sectarian
clashes linked to Syria's conflict have scared off investors.
"The deepening conflict in Syria continues to pose a threat
to Lebanon's political order and economic stability," Iradian
If Lebanese politicians were to reach a consensus on
effective government, improve domestic security and implement
fiscal and structural reforms then the 2013 GDP forecast could
reach 3.5 percent at best, he said.
"If this doesn't happen, it would likely be 1 percent."
Foreign direct investment dropped from 10 percent of GDP
before the Syrian crisis to hardly 2 percent of GDP, he said.
But the banking sector has remained resilient and the Lebanese
pound is stable.
Nassib Ghobril, chief economist at Byblos Bank, which hosted
the launch of the report, said Lebanon could have mitigated the
adverse impact of the Syria turmoil on the economy "if Lebanese
politicians and government officials made a concerted effort to
maintain political stability."