The European Bank for Reconstruction and Development (EBRD) has announced a sharp increase of nearly 60% in 2009 investments in response to the impact of the world economic downturn.
The countries where the EBRD invests, from Eastern Europe to central Asia, have been the emerging economies hit hardest by the global recession.
After a sharp contraction across the EBRD region of a likely 6% in 2009, the EBRD is only expecting a fragile and patchy recovery this year and believes that some economies may continue to shrink in 2010.
According to EBRD president Thomas Mirow, the EBRD invested around €8.2bn in 2009, after €5.2bn a year earlier. Using its existing capital base, the EBRD could continue investing at the 2009 level this year.
In a meeting in London this week, Mirow outlined three key priorities for the EBRD as it moved to support economies into the recovery period. First among these was the need to help countries build up local capital markets and so promote domestic borrowing.
The need to reduce an overdependence on unhedged foreign currency debt was one of the most important lessons to be drawn from the crisis, he noted.
Also high on the EBRD’s agenda was the need to continue promoting investments to combat climate change and improve energy efficiency. This was a priority throughout the region, he said.
“If we help make progress in these three areas we will have done our job,” Mirow said.
He outlined a restructuring of the bank’s activities decided at the end of 2009 that would bring together all the EBRD’s corporate activities and so help focus the bank’s drive to support industrial sectors to emerge from the crisis and to prepare for the future.
Before the crisis erupted, the EBRD had been expected to wind down investments in 2010 in the countries that joined the EU in 2004.
Although the EBRD remained committed to the principle of “graduation” – the idea that it would no longer invest in economies when it was no longer needed – it was clear that it would have to remain engaged in this region for some time to come. International financial institutions, including the EBRD, had become more important since the crisis, Mirow noted.
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