Turkey is the big winner and Russia the big loser when it comes to investment by the European Bank for Reconstruction and Development (EBRD).
Investors who like to follow the flow of institutional capital would do well to take a look at the development bank’s latest statement regarding its investments in the region.
The bank, which was set up in the early 1990s to help former communist countries in Eastern Europe make the transition from centrally planned economies to market economies, said Turkey replaced Russia last year as the biggest recipient of investments.
The EBRD was forced to halt new investment in Russia as part of the European Union’s sanctions on the country in July last year, following the conflict with Ukraine.
The bank’s total investment in its region of operation increased to 8.9 billion euros ($10.5 billion) in 2014 from 8.5 billion euros in 2013.
Investment is likely to remain “roughly in line with 2014 levels” this year, the EBRD said in a statement.
Investment in Russia fell to 600 million euros last year, a third of the level in 2013, and accounted for just 7% of the EBRD’s total investment in its region.
Investment in Turkey jumped by 52% to 1.4 billion euros last year. The EBRD opened its third office in the country in the south-eastern city of Gaziantep, due to strong demand for its funding outside large cities.
The development bank has been active in Turkey for five years.
Russia weighed heavily on the EBRD’s results last year due to the negative effect of the rouble’s collapse on the bank’s holdings of various Russian stocks.
“However, the vast majority of the EBRD’s loan book is performing well, producing stable interest flows and the bank made another large realised profit in 2014. The EBRD has a very strong capital base and remains well placed to weather volatile markets,” it said in the statement.
The EBRD strengthened its presence in Ukraine, with new lending exceeding 1.2 billion euros in projects such as road transport and upgrading the gas transmission system. The bank opened a second office in Ukraine in Lviv, to help deliver services to smaller companies.
As part of the reforms, Ukraine also signed up to an Anti-Corruption Initiative last year in May, a step that is hoped will improve the investment climate in the country once the conflict with Russia de-escalates.