Driving Prosperity in The Black Sea Region

The Black Sea region was one of the worst hit by the recent global financial crisis and has just started recovering after several years of recession. Only in 2016 did most of the Black Sea Trade and Development Bank’s (BSTDB) 11 member countries experience an upturn resulting in a collective regional growth reaching 1%. In 2017 the region is posting improved GDP output numbers, and we estimate a growth rate of around 3% in 2018.

The most recent “Doing Business Report” by the World Bank shows an improvement in the business climate in all our member countries. Overall, the Black Sea region has notably improved its standing and now is coming close to the OECD high income group of countries in terms of ease of doing business.

However, we must also note that the acceleration of growth in the region is not matched by domestic credit and we expect challenging credit market conditions to linger. The particularly high degree of volatility and underlying policy uncertainty in credit markets means that international lenders may still be reluctant to provide nancing for longer periods. Despite the current environment of extremely low interest rates, credit availability in the Black Sea region remains limited for most small to medium-sized enterprises (SMEs).

Through the ups and downs, BSTDB has always played a stabilising role in the region. Our strategic objective is to enhance support to our member countries in implementing their economic and investment policies in a climate of regional cooperation.

Having seen periods of political tension between some of our constituent countries in the past and facing such challenges at present, the bank has managed to keep political considerations and disputes away from its boardroom. We assess and decide on business proposals exclusively on their merits, without discrimination or prejudice against any country. is is BSTDB’s core institutional value and a cornerstone of our successful business development.

Approaching the end of the current Medium-Term Strategy and Business Plan approved by our shareholders for the period 2015–2018, I may say that we are comfortably in line with its higher end target for the outstanding portfolio to grow to 1.32bn euros by end 2018. Another key strategic objective is to achieve the annual portfolio growth of 7.5%. Currently, we expect the average annual growth to be closer to 9.5% over the period. In line with the Strategy, we have substantially increased the share of the real sector operations from under 47% of the bank’s portfolio at the start of the strategy period to over 63% today, mostly covering  core economic sectors of manufacturing, energy, transportation, telecommunications and agribusiness. Furthermore, BSTDB has achieved a much better balanced geographical coverage of member countries. We are enhancing involvement in major regional projects, capitalising on our well-established cooperation with major international financial institutions (IFIs). For example,we co-financed the development of Konya Karatay health campus in Turkey, the Fraport project supporting the modernisation of 14 regional airports in Greece, and the Shah-Deniz II gas pipeline project in Azerbaijan, to name just a few. BSTDB is increasing focus on supporting trade finance activities in our countries and striving to contribute to the recovery of intra-regional trade. We also expanded local currency lending activities with a pair of local currency bond issues to support the SME and local financial market development and brought in A/B loan structures, in which external financiers participated as B lenders.

BSTDB places a great emphasis on the maintenance of its long-term credit ratings, which are the highest in the region. The bank is rated at A2 by Moody’s and A- by Standard & Poor’s. These ratings were a rmed in 2017, which allows the bank to offer affordable financing to clients.

Expanding networks and partnerships

Attracting financing from outside the region for projects in our member countries is a critical objective of BSTDB as a regional development bank. Capitalising on our position as the best-rated financial institution in the Black Sea region, the
bank issued its first benchmark $500mbond and attracted hundreds of millions through long-term bilateral loans from non-regional development banks, such as KfW of Germany, Nordic Investment Bank, Development Bank of Austria, to support economic and social infrastructure, renewable energy and SME sector development in our countries. is additional funding helps our efforts to offer growing levels of external financial flows to our region.

Since its establishment, BSTDB has committed to promote its member-
countries and the Black Sea region. An essential parameter of the Bank’s activity involves partnership with all major financial institutions and coordination of activities for the benefit of the entire region. In recent years, BSTDB has expanded its networks of cooperation and partnerships, the importance of which has grown significantly for purposes of knowledge sharing, procedural harmonisation, strategy coordination and co-financing, among other things