BEIRUT: Political upheavals gripping many Arab countries had dire effects on the overall performance of most Middle East economies, including Lebanon, Central Bank Governor Riad Salameh said Wednesday.

Salameh, who was interviewed by Russia Today TV, admitted that the flows of investment and stock exchanges of Arab countries have been affected by current developments.

“Since Lebanon’s economy is so closely intertwined with that of neighboring Syria, the unrest across the border has taken a huge toll on the Lebanese economy,” he added.

Lebanon’s GDP grew 7.5 percent annually between 2007 and 2010. However, the latest growth forecast for the country has shrunk from a high of 7 percent to a low of 1.1 percent.

Salameh acknowledged that Lebanese banks with operations in Damascus have been impacted by the events in Syria.

This has resulted in a decline in banking activity and a drop in the total amount of financial transactions.

Economic experts agree with Salameh saying that the transition from autocracy to democracy in the Middle East is likely to be bumpy and unstable, at best.

“Political change and turmoil affect the performance of the Lebanese banking sector that have expanded regionally,” Salim Chahine, associate professor of finance at AUB told The Daily Star.

“Lebanon is directly exposed to these crises through its trading activity with neighboring countries and disruption to the flow investment into the country,” Chahine added.

But Salameh tried to play down the impact, saying that Lebanon was able to manage the repercussions through financial maneuvering and that the country has yet to experience decelerated growth.

“The negative impact has not reached a crisis stage as Lebanon is expected to record a growth of 2 percent in 2011,” he explained.

The governor also denied reports of illegal Syrian capital flow into Lebanon, adding that the Lebanon’s growth in deposits dropped this year when compared to 2010.

The latest data supports his claim. Deposits grew 5.4 percent in the first eight months of 2011, compared to growth of 7.3 percent in the first eight months of 2010, according to numbers by data provider, Economena Analytics.