January 15, 2014 / 1:35 PM / 4 years ago

UPDATE 2-Russia hit hard as EBRD cut lending in 2013

* Loans to Russia plunged due to difficult conditions

* EBRD stepped up loans to central, SE Europe

* SE Europe still vulnerable after debt crisis

By Carolyn Cohn

LONDON, Jan 15 (Reuters) - The European Bank for Reconstruction and Development said on Wednesday that its lending to Russia fell sharply last year because of difficult economic and investment conditions there, but it was looking to build up investment again in 2014.

The bank cut lending to Russia to 1.8 billion euros ($2.46 billion) in 2013 from 2.6 billion a year earlier.

The EBRD invests mainly in the private sector in emerging Europe and the Middle East and the North African countries of Egypt, Jordan, Morocco and Tunisia.

Its overall investments fell to 8.5 billion euros from 8.9 billion, according to preliminary estimates, but it stepped up lending in central and southeast Europe as well as the Balkans.

In Russia, the global financial crisis and vast illegal outflows of cash, estimated by a former central bank chief at $50 billion a year, have caused a fragile recovery to stall.

The country has acknowledged that its economy will lag global growth over the next two decades, averaging annual growth of just 2.5 percent during that period - half the rate President Vladimir Putin targeted before his return to the Kremlin in 2012.

“Russia’s economic slowdown proved to be a challenge for EBRD investment in 2013,” said EBRD chief operating officer Phil Bennett.

“We are working hard to build up our activities across Russia as well as Russia’s share of the EBRD‘S overall investment.”

The EBRD said 2013 was not an easy one for financing in its regions of operation.

“These investments (we made) were achieved against a backdrop of general investor reluctance in the face of continued economic fragility,” it said in a statement.

The bank expects a net profit of 1 billion euros for 2013, in line with 2012, and said this “will largely be ploughed back into future financing”.

The EBRD increased investment in southeastern Europe to 1.65 billion euros in 2013 from 1.5 billion in 2012, saying this region “remained particularly vulnerable to the effects of problems in the euro zone”.

It also increased lending to central Europe and the Baltic states, to 1.6 billion euros in 2013 from 1.2 billion in 2012.

It invested 920 million euros last year in Turkey and 450 million euros in the four Middle East and North African countries, in the EBRD’s first full year of lending to them.

The number of individual projects the EBRD has financed stood at 392 in 2013, almost matching the record high of 393 in 2012.

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