The European Bank for Reconstruction and Development (EBRD) promised on Friday more funds for ex-Soviet countries, Central Europe, and Greece, but ruled out new investments in Russia due to Western economic sanctions over Ukraine.
“We have the potential to expand our investment levels beyond what we are currently doing and we should use this opportunity where there is real need and where there is real reform,” the EBRD’s President Suma Chakrabarti said during the bank’s annual meeting held in the Georgian capital Tbilisi.
He said the terms of EBRD’s investments pledged to Greece will depend on the outcome of Athens’ talks with its creditors.
“How much we can do, how many projects, what sectors we can operate in” would depend on the economic policy agreed to between the Prime Minister Alexis Tsipras’s radical leftist government and its creditors, Chakrabarti added.
“The need (for investments) is there and that is why Greece became a country of operations for the EBRD this year,” he said, adding that the bank has so far “started in a very small way.”
At Athens’ request, the London-based institution announced in March the launch of a five-year investment programme in Greece, without specifying the volume of funds pledged.
On Thursday, the EBRD issued its first ever economic forecast for Greece, warning the country of another “major recession” if talks fail with the International Monetary Fund and the European Union on a minimum set of reforms required to unlock the bailout loan’s last tranche of 7.2 billion euros ($8.2 billion).
It said that the Greek economy, which grew by 0.8 percent in 2014, would post zero growth this year and expand by two percent in 2016, provided the negotiations prove successful.
– Nothing for Russia –
Chakrabarti also said his bank was ready for more investments in the wide swathe of countries suffering the aftershocks of Russia’s economic and financial crisis.
“What has been happening in the Russian economy has affected the Caucasus, but also Central Asia quite deeply, so I’d expect us to invest more,” he said.
“I’d expect us to be investing more in Central Europe and the Baltics.”
On Thursday, the EBRD revised growth forecasts downwards for almost all ex-Soviet countries that have been hard hit by the Russian crisis.
A consequence of Western economic sanctions and falling oil prices, Russia’s economic dive “is having larger-than-expected negative spill-over effects on countries with which it has strong economic links,” the EBRD said.
Russia’s gross domestic product is due to contract by 4.5 percent this year and 1.8 percent in 2016, according to the EBRD.
In July 2014, the EBRD froze new investments in Russia as part of the Western sanctions imposed on Moscow over its alleged role in backing the pro-Russian rebels in the unfolding Ukraine crisis.
Russian Deputy Finance Minister Sergei Storchak on Thursday denounced the decision as politically motivated and breaching EBRD’s mandate.
“Mr. Storchak also said he did not expect EBRD returning to Russia with new projects this year and I think he is right,” Chakrabarti said.
“We will be ready (to resume investments in Russia) if the geopolitical situation changes,” he added.
Founded in 1991, the EBRD is an international financial institution owned by 64 countries, the European Union and the European Investment Bank.