* Inflation at 40 percent -Institute for International Finance
* Says official reserves could run out by end of 2013
BEIRUT, Dec 10 (Reuters) - 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 D.C.-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 the capital.
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 Africa and Middle East department of the IIF.
Syria has not yet released economic forecasts for 2012 but the finance ministry has said that GDP growth will be positive.
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