Transcript Economic and Market Outlook

CEE Overview
Attila Mizsér, Head of Corporate Treasury Sales
Budapest, 18.05.2012.
Topics
GDP growth in CEE
Industrial production
Capital flows on bond markets
Corporate sector and lending activity
Appendix: Data of individual countries
2
CEE: Regional growth to move in line with global trends (1)
Economic activity in Central and Eastern Europe will move in line with the developed world. But we cannot look on CEE
as a uniform region any longer. Instead there is large differentiaion across countries, with some having already seen
GDP recover to its pre-crisis peak but others lagging considerably. We forecast GDP growth in 2011, 2012 and 2013
at 4.7%, 3.3% and 3.9% respectively.
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-6.0
2001
-6.0
Source: CEE national statistics offices, UniCredit Research
3
KZT
-4.0
CEE 17 (rhs)
TRY
-4.0
PLN
-2.0
EMU
RUB
-2.0
SIT
0.0
Germany
SKK
0.0
GDP relative to peak end-2013
CZK
2.0
BGN
2.0
GDP relative to peak end-2012
HUF
4.0
pp
GDP relative to pre-crisis peak Q4-11
EEK
4.0
25.0
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
LTL
6.0
UAH
6.0
RON
8.0
HRK
%
8.0
Even by end-2013 GDP will not have recovered in full to its pre-crisis
peak in some countries
LVL
CEE real GDP holds it own
CEE: Regional growth to move in line with global trends (2)
Our forecast does not incorporate a shock to the region along the lines of the Russia default in 1998 or the global crisis of
2008 but does incorporate a longer period of sub-trend growth than we have seen at any stage over the past 15
years.
Real GDP growth from here
% QoQ
3
2
1
0
-1
CEE
Long term average
4q moving avg
-2
-3
-4
2012
2010
2008
2006
2004
2002
2000
1998
-5
Our aggregate includes Bulgaria, Czech, Estonia, Hungary, Latvia,
Lithuania, Poland, Russia, Slovakia, Slovenia & Turkey
Source: National statistical agencies, UniCredit Research
4
CEE: Some hold up better than others
Czech: GDP growth headed back towards zero
Czech suffers some, Hungary less, Poland,
Turkey and Russia resilient.
8.0
8.0
6.0
6.0
4.0
4.0
2.0
2.0
0.0
0.0
-2.0
% YoY
15.0
15.0
10.0
10.0
5.0
5.0
0.0
0.0
GDP
-5.0
-10.0
GDP = c + (0.64*IP),
R2 = 0.92
-15.0
-8.0
2001
-6.0
-8.0
2003
2005
2007
2009
2011
Hungary: Surprisingly resilient
6.0
6.0
3.0
3.0
0.0
0.0
-6.0
GDP = c + (0.23*IP) +
(0.02*constrct) + (0.33*retail),
R2 = 0.90
GDP % YoY
-9.0
2001
2003
-3.0
2010
2007
-20.0
2004
-20.0
2001
-4.0
GDP % YoY
-6.0
-5.0
-10.0
-15.0
-2.0
GDP = 0.6 + (0.13*ip) +
(0.43*retail)
-4.0
Turkey: GDP growth adjusting to a more sustainable level
Russia: GDP growth ticks up, not down
-3.0
-6.0
-9.0
12.0
2005
2007
2009
2011
Polish GDP just about edges lower
8.0
% YoY
9.0
4.0
6.0
GDP % YoY
0.0
3.0
0.0
GDP, % YoY
2011
2010
2009
2008
2007
2006
2005
2004
2003
GDP = c + (0.15*IP) + (0.15*retail) + (0.04*construct)
-3.0
2001
2009
2000
-12.0
2006
-8.0
2003
GDP = -0.06 + (0.06*agri) +
(0.09*construct) + (0.32*IP) +
(0.29*retail) + (0.14*trans)
2002
-4.0
Source: National statistical agencies, UniCredit Research
5
CEE: Industry has held up relatively well
Even into Q4, industrial production in the region has performed better than expected, leaving scope for upside surprise to
Q4 GDP data and some positive carryover into Q1 this year. That said December was weaker than October and
November, though Poland and Turkey continued to post gains.
IP has weakened but is not in freefall
20
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
10
0
-10
-20
% 3m/3m SA
ann
-30
% MoM (rhs)
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
-40
Source: National statistical agencies, UniCredit Research
6
Uptick in forward-looking business sentiment although short-term
indicators point to a still differentiated picture
7

Business confidence ticked up recently across the board but due to weaker external
demand industry growth in the region looks set to be a small negative in 1Q 2012

Important elements of differentiation remain in place with short-term indicators pointing
to a still fragile growth particularly in SEE
SOURCE: UniCredit CEE Strategic Analysis, EU Commission
After a strong recovery in 2010 and a robust dynamic last year,
cyclical sectors are generally losing strength in 2012
8
(1) Including Bulgaria, Czech R., Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia; IP index weighted by nominal GDP
SOURCE: UniCredit CEE Strategic Analysis, Eurostat
Capital flows remains supportive of the CEE region
EM BOND FUND FLOWS VERSUS REGIONAL ALLOCATION
EM bond fund flows
CEE remains underweight in EM bond funds
52W weekly flows (4W MA, USDmn)
Weight of the CEEMEA region in EM bond funds (%)
45.0
1,000
Hard currency EM bond
funds
Local currency EM bond
funds
40.0
500
35.0
0
30.0
-500
Blend
Hard currency
-1,000
25.0
Local currency
-1,500
Apr
May Jun
Jul
Aug
Se
Oct
Nov
De
Jan
Feb
Mar
Apr
20.0
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Source: EPFR, UniCredit Research
EM fixed income benchmarks had one of the strongest starts of the year gaining by close to 9% YTD. Moreover the
EMBI excess return over UST has reached a level last seen in 2009. History suggests that this positive return will likely
attract more inflows into EM bond funds which in turn should support asset prices. We think the global environment
remains supportive for ongoing bond and equity inflows in the coming quarter. The CEEMEA region will continue to
benefit significantly from this backdrop as the region remains underweight in EM fund allocations even after increasing
allocation YTD. At the end of February the average weight of the region was 27% versus the long term average
weight of the CEEMEA region at 35% (see chart). This implies that the region can continue to disproportionally benefit
from inflows into bond and equity funds.
9
Bond issuance is already well ahead of plan in several countries
EUROBOND ISSUANCE
Eurobond issuance: Hungary, Croatia and Ukraine lag
EEMEA remains the largest sovereign issuer (Eurobond supply YTD)
USDmn
USDbn
8000
25.0
Sovereign
Corporate
7000
2012 YTD
2011
6000
5000
20.0
15.0
4000
3000
10.0
2000
1000
5.0
Russia
Czech R.
Turkey
Romania
Poland
Slovakia
Lithuania
Latvia
Ukraine
Croatia
Hungary
0
0.0
EEMEA
Asia
Latam
Source: Bond Radar, UniCredit Research
EEMEA sovereigns issued USD23.5bn bonds YTD versus USD42.5bn in the whole of 2011. In terms of individual
countries we believe there are several countries practically finished their 2012 Eurobond issuance plans. We do not
expect Russia and Czech Republic to issue any more Eurobonds in 2012 while Romania and Lithuania might come with
one more issue in 3Q/4Q. Other countries also made significant progress. Turkey completed about 60%, Poland and
Latvia completed about 50% of our estimations for sovereign borrowing in 2012. There were three countries from the
CEEMEA region which did not tap the Eurobond markets YTD, namely Croatia, Hungary and Ukraine.
10
Banks’ willingness to give sufficient financing
improved over 2011 in the context of still low demand
Scale ranging from 1 (worst) to 5 (best)
Scale ranging from 0 (no obstable) to 4 (severe obstacle)
■ Companies’ perception about banks’ willingness to provide sufficient financing improved
in 2011, after the initial decline in 2010…
■ … however, the majority of companies reported tightening of credit conditions in 2011
with cost of credit and collateral requirements as major obstacles to the availability of
credit
■ Demand-side factors are also playing a role with 44% of companies having reported ‘no
need’ among major reasons not to apply for a loan vs 25% of ‘self-financing’ and 15% ‘cost
of credit’
11
(1) Survey conducted over 12,000 companies per year in 16 CEE countries
(2) Survey conducted in Mar/Apr 2012 on 25 companies in 9 CEE countries
SOURCE: UniCredit CEE Strategic Analysis
Lending to the corporate sector is holding up well but a
diverging performance is likely to persist
12
SOURCE: ECB, UniCredit CEE Strategic Analysis
Business environment significantly improved over the past years but
regulation, judicial system, tax and political factors are still reported
as important obstacles to doing business in CEE
Scale ranging from 0 (no obstacle) to 4 (severe obstacle)
13
(1) Survey conducted in Mar/Apr 2012 on 25 companies in 9 CEE countries
(2) Licensing, permits, customs and trade regulations courts, corruption and crime
SOURCE: UniCredit CEE Strategic Analysis, World Bank
Appendix: Data of individual countries
■ Bulgaria
■ Czech Republic
■ Hungary
■ Latvia
■ Lithuania
■ Poland
■ Romania
■ Croatia
■ Kazakhstan
■ Russia
■ Serbia
■ Turkey
■ Ukraine
14
Bulgaria (Baa2 stable/BBB stable/BBB- positive)
Outlook: At 1.7% real GDP growth for 2011 came in somewhat weaker than
expected, on the back of downward revisions to private consumption and
investments in particular. In response, we now estimate 2012 GDP growth at
1.2% which is 0.3%pp lower than our mid-December forecast. We think
Bulgaria will remain a relative underperformer in the CEE region, due to the
continuing process of deleveraging in the banking and non-financial
corporate sector on top of still uncompleted labor and housing market
rebalancing. The growth outlook is further darkened by weak investments
and persistent cash hoarding, as households remain worried about their
jobs.
2009
2010
2011E
2012F
2013F
GDP (EUR bn)
34.9
36.0
38.3
39.5
41.3
Population (mn)
7.6
7.5
7.4
7.4
7.3
4,618
4,801
5,148
5,354
5,648
GDP per capita (EUR)
Real economy yoy (%)
GDP
-5.5
0.2
2.0
1.5
2.7
Private Consumption
-7.6
-0.6
1.5
1.2
2.0
-17.6
-16.5
1.1
1.8
4.7
-4.9
-5.0
-2.1
-1.6
-0.4
Exports
-11.2
16.2
9.3
-0.4
1.8
Imports
-21.0
4.5
6.8
-0.7
1.6
Monthly wage, nominal (EUR)
311
331
350
361
376
Unemployment rate (%)
8.4
11.3
12.3
12.2
11.7
Budget balance
-0.8
-3.9
-1.7
-1.3
-0.5
Primary balance
0.0
-3.3
-1.4
-0.5
0.4
15.5
16.7
17.2
19.8
18.7
Current account balance (EUR bn)
-3.5
-0.4
0.7
0.6
0.1
Current account balance/GDP (%)
-10.0
-1.2
1.9
1.6
0.3
-0.3
3.3
4.3
4.1
3.1
Net FDI (EUR bn)
3.4
1.6
0.9
1.0
1.2
Net FDI (% of GDP)
9.7
4.4
2.4
2.5
2.8
37.8
37.0
35.4
34.5
34.5
108.3
102.8
91.0
85.6
81.3
37.8
37.0
35.4
34.5
34.5
CPI (pavg)
2.8
2.4
4.2
1.6
1.9
CPI (eop)
0.6
4.5
2.8
1.7
2.2
BGN/USD (eop)
1.36
1.47
1.50
1.59
1.50
BGN/EUR (eop)
1.96
1.96
1.96
1.96
1.96
BGN/USD (pavg)
1.40
1.47
1.40
1.58
1.52
BGN/EUR (pavg)
1.96
1.96
1.96
1.96
1.96
Fixed Investment
Public Consumption
Key Events/Dates
Fiscal accounts (% of GDP)
11 May – Number of employees under labor contracts for 1Q12
15 May – Flash estimates for 1Q12 real swda GDP growth
2Q – privatization of minority stakes of the government in electricity
distributors CEZ and E.ON



Public debt
External accounts
Basic balance/GDP (%)
2009
15
2010
2011
2012F
2013F
Dec-13
Net Export
Dec-12
Fixed Investments
GDP, real growth
Dec-11
Public consumption
Dec-10
-20
Private consumption
Inflation/Monetary/FX
Dec-09
-10
FX reserves (EUR bn)
Dec-08
0
Gross foreign debt (EUR bn)
Gross foreign debt (% of GDP)
Dec-07
10
%, YoY
18
16
14
12
10
8
6
4
2
0
-2
Dec-06
%, YoY
20
INFLATION TO MODERATE
Dec-05
GDP GROWTH AND CONTRIBUTION TO GROWTH
Czech Republic (A1 stable / AA- stable / A+ positive)
Outlook: The economy formally registered a recession over H2-11, albeit
modest. Leading indicators point to some scope for improvement in exports
from here. From the domestic side, we will closely watch a likely peak in CPI
that should, with some delay, ease the drag on real consumer purchasing
power. The CNB is set to stay on hold with its monetary policy but will need
to consider an increase in its assumed CPI trajectory. This will likely remove
the repo rate cut option from their baseline scenario for the remainder of
2012.
Key Events/Dates
BREAKDOWN OF GDP GROWTH
BY DEMAND COMPONENTS
CONSUMER PRICE INDEX –
HISTORY AND OUTLOOK (% YOY)
4.00
%, YoY
5.0
3.00
4.0
3.0
1.00
0.00
2.0
-1.00
1.0
CPI
0.0
CNB CPI target
16
Jul-13
Jul-12
Jan-13
Jul-11
Jan-12
2013F
Jul-10
2012F
Jan-11
2011F
Jul-09
2010
2013F
155.9
168.4
Population (mn)
10.5
10.5
10.6
10.6
10.6
13,491
14,185
14,720
14,740
15,882
GDP
-4.5
2.6
1.7
0.4
2.5
Private Consumption
-0.3
0.5
-0.5
-1.0
1.5
-11.4
0.0
-2.6
-0.5
3.6
3.8
0.6
-1.9
-1.0
0.0
Exports
-9.7
16.0
10.9
3.5
9.7
Imports
-11.4
15.7
7.7
2.5
10.0
Monthly wage, nominal (EUR)
883
941
990
999
1071
Unemployment rate (%)
8.1
9.0
8.6
8.5
7.9
Budget balance
-5.9
-4.8
-3.7
-3.4
-3.0
Primary balance
-4.5
-3.2
-2.4
-1.9
-1.5
Public debt
34.4
37.6
40.8
43.4
44.3
Current account balance (EUR bn)
-3.4
-4.6
-3.3
-0.6
-0.7
Current account balance/GDP (%)
-2.4
-3.1
-2.1
-0.4
-0.4
Basic balance/GDP (%)
-0.9
0.3
0.3
2.2
2.6
Net FDI (EUR bn)
2.1
5.1
3.7
4.0
5.1
Net FDI (% of GDP)
1.5
3.4
2.4
2.6
3.1
Gross foreign debt (EUR bn)
61.9
71.4
71.3
79.2
85.8
Gross foreign debt (% of GDP)
43.8
47.4
48.2
49.8
50.3
FX reserves (EUR bn)
28.9
31.8
30.0
30.0
30.0
CPI (pavg)
1.0
1.5
1.9
3.5
2.3
CPI (eop)
1.0
2.3
2.4
2.9
2.3
Central bank target
3.0
2.0
2.0
2.0
2.0
1.00
0.75
0.75
0.75
1.75
GDP per capita (EUR)
Real economy yoy (%)
Fixed Investment
Public Consumption
Central bank reference rate (eop)
3M money market rate
Jan-10
-5.00
-1.0
Jan-09
Net exports
Gross capital
Consumption
GDP
2009
2012F
155.3
Inflation/Monetary/FX
2.00
-4.00
2011E
149.2
External accounts
% , YoY
-3.00
2010
141.5
Fiscal accounts (% of GDP)
 CNB Board meetings – 29 Mar, 3 May
 Government deficit notification - April
 Manufacturing PMI – 2 Apr, 2 May, 1 Jun
-2.00
2009
GDP (EUR bn)
1.9
1.1
1.0
1.0
1.5
CZK/USD (eop)
18.4
18.8
19.8
19.9
18.5
CZK/EUR (eop)
26.5
25.1
25.8
24.5
24.0
CZK/USD (pavg)
19.0
19.1
17.7
20.2
18.9
CZK/EUR (pavg)
26.4
25.3
24.6
25.0
24.3
Hungary (Ba1 negative/BB+ negative/BB+ negative)
Outlook: The EC has proposed to suspend EUR 495.2mn of EU’s Cohesion
Fund’s allocations to Hungary from 2013 onward unless proper actions are
taken in the meantime. The government is in haste to present something
convincing on its side but officials expect delays. As markets were confident
in an IMF deal and already priced in the ECs proposal Hungary’s borrowing
costs dropped steadily and the forint recovered from its historical depths over
the past one month. The standstill in negotiations increases the risk of
another forint crisis. The real economy performed better than expected in the
4Q with GDP growing by 1.7% yoy, though growth prospects did not improve
over the past quarter. Monetary tightening should come on the agenda only
as a last resort in a severe market shock.
2009
2010E
2011F
2012F
2013F
GDP (EUR bn)
91.3
97.2
99.8
102.7
115.3
Population (mn)
10.0
10.0
10.0
10.0
10.0
9,096
9,696
9,966
10,264
11,527
GDP per capita (EUR)
Real economy yoy (%)
GDP
-6.8
1.3
1.7
0.0
1.9
Private Consumption
-5.7
-2.7
0.3
-2.2
0.4
-11.0
-9.7
-4.8
0.9
0.9
2.7
1.1
-0.4
-5.3
-0.5
Exports
-10.2
14.3
8.7
5.4
9.0
Imports
-14.8
12.8
5.7
4.1
8.4
Monthly wage, nominal (EUR)
712
736
763
775
876
Unemployment rate (%)
9.8
11.1
11.0
11.6
9.7
Budget balance
-3.9
-4.2
3.5
-2.5
-3.2
Primary balance
0.3
-0.4
7.0
1.3
0.8
79.7
82.1
80.3
79.9
81.1
Current account balance (EUR bn)
-0.2
1.1
1.3
1.5
1.6
Current account balance/GDP (%)
-0.2
1.1
1.3
1.5
1.4
Basic balance/GDP (%)
1.0
2.5
2.8
5.8
4.4
Net FDI (EUR bn)
1.1
1.4
1.5
4.4
3.5
Net FDI (% of GDP)
1.2
1.4
1.5
4.3
3.0
Fixed Investment
Public Consumption
Fiscal accounts (% of GDP)
Key Events/Dates
24 April 2012 – NBH MPC meeting
Aprils 2012 – NBH – Report on Financial Stability
29 May 2012 – NBH MPC meeting
26 June 2012 – NBH MPC meeting
28 June 2012 – NBH – Report on Inflation
GDP DRIVERS
External accounts
INFLATION TO STAY ABOVE TARGET
%, YoY
%, YoY
6.0
9.0
Headline inflation
Gross foreign debt (EUR bn)
136.9
137.6
127.6
143.0
135.2
4.0
8.0
Inflation target
Gross foreign debt (% of GDP)
144.7
143.4
142.5
131.9
115.7
FX reserves (EUR bn)
132.1
139.3
142.2
135.4
133.4
7.0
2.0
6.0
0.0
-2.0
Net Exports
Gross capital formation
Public consumption
Private consumption
GDP
5.4
3.1
4.1
4.7
3.3
1.0
Central bank target
3.0
3.0
3.0
3.0
3.0
0.0
Central bank reference rate (eop)
6.25
5.75
7.00
7.00
6.50
Jul-12
Jul-11
Jan-12
Jul-10
Jan-11
Jul-09
Jan-10
Jul-08
Jan-09
2013F
Jul-07
2012F
3.9
4.7
Jan-08
2011E
4.9
5.6
Jul-06
2010
4.2
CPI (eop)
2.0
-12.0
2009
CPI (pavg)
3.0
Jan-07
-10.0
4.0
Jul-05
-8.0
Inflation/Monetary/FX
Jan-06
-6.0
5.0
Jan-05
-4.0
17
Public debt
3M money market rate
8.7
5.5
6.1
7.3
6.8
HUF/USD (eop)
188
210
239
219
201
HUF/EUR (eop)
271
279
311
269
261
HUF/USD (pavg)
201
208
201
229
206
HUF/EUR (pavg)
281
275
279
284
264
Latvia (Baa3 positive/BB+ positive/BBB - stable)
Outlook: In terms of GDP, Latvia has played catch up with its Baltic peers in
2011, in line our forecast. Though not at its current pace, we believe that both
the domestic and external components of growth will continue to show
sustainable gains in 2012. A good signal in 1Q2012 came from the (alleged)
completion of the external borrowing programme when Govt placed USD 1bn
Eurobonds. We however do not rule out possibility of further borrowings in
2012, approximately of the same size. Another good signal came from the
results of the referendum on the status of Russia as a state language when
majority rejected this proposal. Though the decision will ultimately prove
political, Latvia continues to aim for EMU entry in 2014.
Key Events/Dates
CONSUMPTION TO DRIVE GROWTH
INFLATION TO STABILISE IN 2012-2013
18
2.3
2.3
2.2
2.2
2.2
8,184
7,989
8,781
9,300
9,753
GDP
-17.8
-0.6
5.2
2.5
2.8
Private Consumption
-23.7
-0.2
3.7
2.1
2.4
Fixed Investment
-36.1
-21.7
20.3
5.5
4.5
-8.9
-11.1
-0.2
1.2
0.8
Exports
-13.3
10.5
13.6
7.7
12.1
Imports
12.9
GDP per capita (EUR)
Real economy yoy (%)
Public Consumption
-32.9
7.1
12.6
8.0
Monthly wage, nominal (EUR)
651
629
660
684
695
Unemployment rate (%)
16.1
14.3
12.7
11.3
10.9
Budget balance (incl. bank costs)
-6.4
-7.8
-4.0
-2.6
-2.5
Primary balance
-6.2
-9.9
-1.9
-1.8
-1.6
Public debt
36.7
44.7
44.8
45.0
45.3
Current account balance (EUR bn)
1.6
0.6
-0.1
-0.1
-0.3
Current account balance/GDP (%)
8.6
3.6
-0.4
-0.7
-1.1
Basic balance/GDP (%)
9.2
5.0
5.1
0.8
0.7
Net FDI (EUR bn)
0.1
0.2
1.1
0.3
0.4
Net FDI (% of GDP)
0.6
1.4
5.5
1.5
1.8
28.9
29.8
30.9
30.7
32.2
156.3
165.3
156.6
147.1
146.8
28.9
29.8
30.9
30.7
32.2
Sep-13
Jan-13
May-13
Sep-12
Jan-12
May-12
Sep-11
Jan-11
May-11
2013F
Sep-10
2021F
Inflation/Monetary/FX
Jan-10
-40.0
2011E
21.9
Population (mn)
FX reserves (EUR bn)
May-10
Net export
Inventories
FCF
Consumption
GDP
2010
2013F
20.8
Gross foreign debt (% of GDP)
CPI
Sep-09
0.0
2009
2012F
19.7
Gross foreign debt (EUR bn)
Jan-09
10.0
%, YoY
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
May-09
20.0
-30.0
2011E
18.0
External accounts
%, YoY
-20.0
2010
18.5
Fiscal accounts (% of GDP)
10 May/8 Jun – 1Q GDP (prelim/final)
4 Jun – 1Q Current Account
23 May – 1Q Unemployment
-10.0
2009
GDP (EUR bn)
CPI (pavg)
-1.3
2.5
4.4
3.2
2.3
CPI (eop)
3.5
-1.1
4.2
3.0
2.3
RIGIBOR 3M
3.9
1.9
2.5
4.3
4.9
USD/LVL (eop)
0.49
0.53
0.54
0.57
0.54
EUR/LVL (eop)
0.70
0.70
0.70
0.70
0.70
USD/LVL (pavg)
0.50
0.53
0.50
0.57
0.55
EUR/LVL (pavg)
0.70
0.70
0.70
0.70
0.70
Lithuania (Baa1 stable/BBB stable/BBB stable)
Outlook: Despite external winds, Lithuania posted strong result in 2011, in line
with our expectations, successfully resolving banking sector issues (Snoras
case). Confirmation of positive investors' sentiment may be found in the results
of 2022 USD 1.5bn Eurobond placement in February. Going further into 2012
we expect the growth to moderate to a more sustainable rate, supported mostly
by internal demand. The macroeconomic forecast in the budget, approved by
Parliament in late December, implies GDP 2.5% yoy to bring the budget deficit
to 3.0% of GDP. We see scope for outperformance on this front while being
encouraged by the government's willingness to adjust the budget over the
course of Q4 to compensate for a weaker growth outlook.
Key Events/Dates
2009
2010
2011E
2012F
2013F
GDP (EUR bn)
26.5
27.4
30.2
31.8
33.6
Population (mn)
3.3
3.3
3.3
3.3
0.0
7,939
8,257
9,158
9,685
#DIV/0!
GDP per capita (EUR)
Real economy yoy (%)
GDP
-14.7
1.2
5.9
2.9
3.5
Private Consumption
-17.7
-4.1
4.4
3.4
3.4
Fixed Investment
-39.2
-0.3
12.7
10.7
9.5
-1.9
-3.0
0.9
0.1
0.3
Exports
-12.7
16.3
21.3
17.8
16.4
Imports
Public Consumption
-28.4
17.6
22.8
19.0
15.6
Monthly wage, nominal (EUR)
625
600
615
640
650
Unemployment rate (%)
9.5
14.5
12.5
9.0
8.5
Budget balance
-7.9
-7.5
-4.2
-3.8
-2.5
Primary balance
-6.7
-4.6
-3.1
-1.4
0.0
Public debt
29.5
35.0
35.9
38.0
38.4
Current account balance (EUR bn)
1.1
0.4
-0.5
-0.5
-0.7
Current account balance/GDP (%)
4.3
1.6
-1.7
-1.6
-2.0
Basic balance/GDP (%)
4.1
4.3
1.3
3.2
-2.0
Net FDI (EUR bn)
0.0
0.7
0.9
1.5
0.0
Net FDI (% of GDP)
-0.1
2.6
3.0
4.8
0.0
Gross foreign debt (EUR bn)
23.1
22.9
23.8
25.7
26.0
Gross foreign debt (% of GDP)
87.2
83.5
78.8
80.9
77.5
FX reserves (EUR bn)
23.1
22.9
23.8
25.7
26.0
Fiscal accounts (% of GDP)
23 Apr., 21 May, 21 Jun – Industrial production
18-22 Jun – 1Q Current Account
30 Apr / 30 May – 1Q GDP (prelim/final)
External accounts
CONSUPTION TO SUPPORT GROWTH IN 2012
INFLATION TO SLOW DOWN
%, YoY
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
-30.0
-35.0
10.0
CPI
8.0
6.0
4.0
4.1
2.2
2.2
3.6
3.4
2.4
2.0
VILIBOR 3M
7.1
1.6
1.7
3.1
3.8
USD/LTL (eop)
2.40
2.60
2.66
2.81
2.66
EUR/LTL (eop)
3.45
3.45
3.45
3.45
3.45
USD/LTL (pavg)
2.47
2.60
2.48
2.78
2.69
EUR/LTL (pavg)
3.45
3.45
3.45
3.45
3.45
Sep-13
Jan-13
May-13
Sep-12
Jan-12
May-12
Sep-11
Jan-11
May-11
-2.0
Sep-10
2013F
1.1
1.3
Jan-10
2012F
4.5
CPI (eop)
May-10
2011E
CPI (pavg)
0.0
Sep-09
2010
2.0
Jan-09
FCF
Consumption
GDP
Inflation/Monetary/FX
May-09
Net export
Inventories
2009
19
%, YoY
Poland (A2 stable/A- stable/A- stable)
Outlook: GDP grew by 4.3% in 2011. Main drivers of growth were individual
consumption and gross fixed capital formation. Economic growth is likely to
lower in 2012 mainly due to a slowdown in domestic demand. The Ministry of
Finance estimates that general government deficit amounted in 2011 to 5.7%
of GDP. The government aims to reduce the deficit below 3% of GDP this
year. Inflation in 2011 totaled 4.3% and the National Bank of Poland
estimates that inflation is likely to decline to about 3.7% in 2012. Falling
inflation, weak macroeconomic outlook and appreciation of the PLN will
prompt MPC to cut rates – we look for a 25 bps cut in November.
2009
2010
2011E
2012F
2013F
GDP (EUR bn)
310.4
354.4
339.3
396.4
435.9
Population (mn)
38.2
38.2
38.1
38.1
38.1
8,134
9,277
8,910
10,414
11,453
GDP
1.6
3.9
4.3
3.1
3.5
Private Consumption
2.1
3.2
3.1
3.0
3.4
-1.2
-1.0
8.7
3.4
3.9
2.0
4.0
0.7
0.7
2.1
Exports
-6.8
10.1
5.5
4.9
4.8
Imports
-12.4
11.6
5.0
2.8
5.0
Monthly wage, nominal (EUR)
767
860
805
925
991
Unemployment rate (%)
11.0
12.1
12.4
12.7
13.1
Budget balance
-7.3
-7.8
-5.6
-3.7
-2.9
Primary balance
0.6
-0.7
0.9
0.5
0.7
50.9
54.9
56.6
54.2
53.9
Current account balance (EUR bn)
-12.1
-16.5
-14.0
-12.7
-17.0
Current account balance/GDP (%)
-3.9
-4.6
-4.1
-3.2
-3.9
Basic balance/GDP (%)
-0.9
-2.8
-1.4
-0.8
-1.6
9.3
6.7
9.2
9.5
10.0
GDP per capita (EUR)
Real economy yoy (%)
Fixed Investment
Public Consumption
Fiscal accounts (% of GDP)
Key Events/Dates
MPC rate decisions 4 Apr, 9 May, 6 Jun
Negotiations and project of pensions system reform
Introduction of tax on mineral exploitation
Public debt
External accounts
Net FDI (EUR bn)
20
Mar-13
Mar-12
Sep-12
2011E 2012F 2013F
Mar-11
2010
Sep-11
2009
Mar-10
2008
Sep-10
2007
2.7
2.4
2.3
234.0
288.6
291.4
59.4
66.0
68.0
72.4
66.0
234.0
230.8
287.1
287.8
CPI (pavg)
3.5
2.6
4.3
3.1
3.0
CPI (eop)
3.5
3.1
4.6
3.0
2.9
Central bank target
2.5
2.5
2.5
2.5
2.5
3.50
3.50
4.50
4.25
4.00
3M money market rate
Mar-09
-4.0
Sep-09
-2.0
1.9
236.0
184.6
Central bank reference rate (eop)
Mar-08
0.0
3.0
194.4
Inflation/Monetary/FX
Sep-08
2.0
Gross foreign debt (% of GDP)
FX reserves (EUR bn)
CPI
Mar-07
GDP
4.0
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Sep-07
6.0
%, YoY
%, YoY
Mar-06
8.0
Net FDI (% of GDP)
Gross foreign debt (EUR bn)
Sep-06
Net exports
Inventory change
Investments
Private consumption
10.0
CPI TO REMAIN WITHIN TARGET BAND
FOR 2012-2013
Sep-13
PRIVATE CONSUMPTION TO DOMINATE IN 2012
4.4
3.9
4.5
4.8
4.4
PLN/USD (eop)
2.86
2.98
3.40
3.29
3.00
PLN/EUR (eop)
4.11
3.96
4.42
4.05
3.90
PLN/USD (pavg)
3.10
3.01
3.21
3.28
3.08
PLN/EUR (pavg)
4.33
3.99
4.48
4.07
3.95
Romania (Baa3 stable/BB+ stable/BBB- stable)
Outlook: Expected GDP growth for 2012 has been downgraded to 1.4%
on the back of a negative base effect from agriculture, weaker foreign
demand and a more feeble fiscal impulse. The risks are skewed to the
downside. The budget deficit target of 1.9% - 2.1% of GDP (cash) is likely
to be missed because of pre-electoral spending (our forecast is 2.5% of
GDP). We expect deficit financing to improve in 2012 in terms of cost (for
RON resources) and availability (for FX resources). The main concern for
the Romanian economy in 2012 will be external financing for the private
sector. Banking sector risks are manageable, total foreign liabilities being
covered 140% by the FX reserves of the central bank.
Key Events/Dates
10 April, 11 May, 11 June – Industrial production
Late April – early May 2012 – IMF evaluation
2 May 2012 – NBR rate decision
15 May 2012 – Q1 2012 GDP (flash estimate)
6 June 2012 – Q1 2012 GDP and structure
27 June 2012 – NBR rate decision
GDP GROWTH TO FLATTEN
Net export
Inventories
Investment
Public consumption
Private consumption
GDP
15.0
10.0
5.0
%, YoY
Target interval
Jul-12
2013F
Jan-12
2012F
Jul-11
2011E
Jul-10
2010
Jan-11
2009
Jan-10
2008
Jul-09
-15.0
Jul-08
0.0
Jan-09
-10.0
Jan-08
4.0
2.0
2012F
2013F
136.5
140.5
148.7
Population (mn)
21.5
21.5
19.0
19.0
19.0
5,501
5,774
7,169
7,393
7,828
GDP
-6.6
-1.7
2.5
-9.2
-2.0
0.7
1.4
1.4
2.5
Private Consumption
-25.3
-13.1
6.3
1.3
3.0
1.2
-3.2
-3.4
1.8
3.0
Exports
-5.5
13.1
9.9
8.7
9.9
Imports
-20.6
11.6
10.5
7.3
8.3
Monthly wage, nominal (EUR)
326
334
346
380
404
Unemployment rate (%)
6.9
7.3
7.4
7.3
7.0
Budget balance
-7.3
-6.4
-4.4
-2.5
-2.5
Primary balance
-6.1
-5.0
-2.6
-1.1
-1.2
Public debt
27.2
35.0
36.3
35.3
32.3
Current account balance (EUR bn)
-4.9
-5.5
-5.7
-5.8
-5.1
Current account balance/GDP (%)
-4.2
-4.4
-4.2
-4.1
-3.4
Basic balance/GDP (%)
-1.2
-2.6
-2.8
-3.0
-2.1
Net FDI (EUR bn)
3.6
2.2
1.9
1.5
2.0
Net FDI (% of GDP)
3.0
1.8
1.4
1.1
1.3
Gross foreign debt (EUR bn)
81.0
92.5
98.6
97.6
98.0
Gross foreign debt (% of GDP)
68.5
74.5
72.2
69.5
65.9
FX reserves (EUR bn)
28.3
32.4
33.2
28.5
23.3
CPI (pavg)
5.6
6.1
5.8
3.1
4.1
CPI (eop)
4.7
8.0
3.1
4.1
4.0
Central bank target
8.0
6.3
6.0
5.5
5.0
Central bank reference rate (eop)
8.00
6.25
6.00
5.00
5.00
3M money market rate
11.7
5.9
5.3
4.2
4.2
RON/USD (eop)
2.94
3.22
3.32
3.50
3.29
RON/EUR (eop)
4.23
4.28
4.32
4.30
4.28
RON/USD (pavg)
3.04
3.17
3.04
3.48
3.35
RON/EUR (pavg)
4.24
4.21
4.24
4.31
4.30
GDP per capita (EUR)
Real economy yoy (%)
Fixed Investment
Public Consumption
2.9
Inflation/Monetary/FX
6.0
-5.0
2011F
124.1
External accounts
CPI
8.0
0.0
21
10.0
2010
118.3
Fiscal accounts (% of GDP)
SHARP DISINFLATION
%, YoY
2009
GDP (EUR bn)
Croatia (Baa3 stable/BBB- negative/BBB - negative)
Outlook: The weaker global outlook in 1H12 combined with the expected
fiscal tightening post-elections is likely to push the economy back into
recession in 2012. The main focus in the near-term will be the economic
policy initiatives the new government announces given Croatia’s sovereign
credit rating is on the bottom investment grade rung with two of three
agencies maintaining a negative outlook
2009
2010
2011E
2012F
2013F
GDP (EUR bn)
45.7
45.9
46.0
47.0
49.3
Population (mn)
4.4
4.4
4.4
4.4
4.4
10,310
10,388
10,409
10,630
11,166
GDP
-6.0
-1.2
0.0
-0.5
2.0
Private Consumption
-8.5
-0.9
0.2
-0.1
2.0
-11.8
-11.3
-7.0
-0.3
6.5
0.2
-0.8
0.5
-0.4
0.0
Exports
-17.3
6.0
-3.5
1.3
4.5
Imports
-20.4
-1.3
-5.8
1.7
5.2
Monthly wage, nominal (EUR)
1,051
1,053
1,048
1,072
1,125
9.1
11.8
13.3
13.1
12.5
Budget balance
-3.9
-4.8
-6.0
-5.0
-4.0
Primary balance
-2.4
-2.9
-2.9
-2.4
-1.8
Public debt
35.2
41.2
49.6
53.4
55.3
Current account balance (EUR bn)
-2.4
-0.5
-0.2
0
-0.6
Current account balance/GDP (%)
-5.2
-1.1
-0.4
0
-1.1
Basic balance/GDP (%)
-2.6
-0.4
1.3
2.5
2.4
Net FDI (EUR bn)
1.2
0.3
0.8
1.2
1.8
Net FDI (% of GDP)
2.6
0.7
1.6
2.6
3.5
Gross foreign debt (EUR bn)
45.2
46.5
46.8
47.3
50.0
Gross foreign debt (% of GDP)
99.0
101.2
101.5
100.6
101.2
FX reserves (EUR bn)
10.4
10.7
11.0
11.5
12.0
CPI (pavg)
2.4
1.1
2.3
2.9
2.2
CPI (eop)
1.9
1.8
2.1
2.4
2.4
Central bank reference rate (eop)
6.0
6.0
6.0
6.0
6.0
3M money market rate
8.6
1.2
1.3
2.0
2.1
HRK/USD (eop)
5.09
5.55
5.77
6.10
5.68
HRK /EUR (eop)
7.31
7.38
7.50
7.50
7.38
HRK /USD (pavg)
5.26
5.50
5.34
6.02
5.77
HRK /EUR (pavg)
7.34
7.29
7.44
7.46
7.40
GDP per capita (EUR)
Real economy yoy (%)
Fixed Investment
Public Consumption
Unemployment rate (%)
Fiscal accounts (% of GDP)
External accounts
GDP GROWTH DRIVERS
INFLATION OUTLOOK
%, YoY
6.0
4.0
2.0
0.0
-2.0
-6.0
-8.0
Inflation/Monetary/FX
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
2013F
Jan-10
2012F
Jul-09
2011E
Jan-09
22
2010
Jul-08
2009
Jan-08
-12.0
Jul-07
-10.0
CPI
Jan-07
Net Exports
Inventories
Investments
Government Consumption
Household Consumption
GDP
-4.0
%, YoY
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Kazakhstan (Baa2 stable/BBB+ stable/BBB positive)
Outlook: Real GDP grew by an impressive 7.5% yoy in 2011, supported by
consumption. However, growth slowed to 3.8% yoy in January 2012,
according to the short-term economic indicator compiled by the StatAgency.
Investment outlays fell 3.3% yoy in real terms in January after a meager
increase of 2.4% in 2011. Inflation eased to 5.9% yoy in January from a peak
of 9.0% in August 2011. The central bank cut its 1W-refinancing rate from
7.5% to 7.0% as of 14 February 2012 as a response. We expect further
monetary easing and measures to address the banks’ bad debt problems
later this year along with an acceleration of the industrialization program with
the help of funding from the Oil Fund. We nevertheless cut our 2012 real
GDP forecast to 5.5% from 6.8% previously because of the early 2012
weakness brought about by delays in oil investment.
2009
2010
2011E
2012F
2013F
GDP (EUR bn)
77.3
111.5
136.4
162.3
190.3
Population (mn)
16.2
16.4
16.6
16.7
16.9
4,772
6,781
8,219
9,698
11,265
GDP per capita (EUR)
Real economy yoy (%)
GDP
1.2
7.3
7.5
5.5
5.8
-2.8
10.9
8.1
7.0
6.9
Fixed Investment
1.9
3.8
4.6
5.6
9.8
Public Consumption
1.1
2.7
16.3
12.9
6.1
Exports
-6.2
1.9
3.6
0.7
4.8
Imports
-15.9
0.9
13.3
4.9
9.3
Monthly wage, nominal (EUR)
329
397
441
538
624
Unemployment rate (%)
6.6
5.8
5.4
5.3
5.1
Budget balance
-4.3
3.0
6.0
4.9
5.1
Primary balance
-3.9
3.5
6.7
5.7
5.9
Public debt
13.9
14.8
12.1
13.4
14.1
Current account balance (EUR bn)
-2.4
3.3
9.8
9.2
8.8
Current account balance/GDP (%)
-3.2
2.9
7.2
5.7
4.6
Basic balance/GDP (%)
8.5
9.5
14.1
10.0
8.6
Net FDI (EUR bn)
9.0
7.4
9.4
7.0
7.7
Net FDI (% of GDP)
11.7
6.6
6.9
4.3
4.0
Gross foreign debt (EUR bn)
75.5
86.9
86.0
87.1
90.1
Gross foreign debt (% of GDP)
97.7
77.9
63.1
53.7
47.3
FX reserves (EUR bn)
75.5
86.9
86.0
87.1
90.1
Private Consumption
Fiscal accounts (% of GDP)
Key Events/Dates
 Review of the central bank’s inflation forecast, policy in April
 Final concepts for distressed asset fund, BTA, peoples IPO to be
published in 1H2011
2011 GROWTH CONSUMPTION-DRIVEN; WE HOPE
INVESTMENT REGAINS SOME MOMENTUM
INFLATION BACK WITHIN TARGET
%, YoY
21.0
19.0
Inflation/Monetary/FX
Inflation
Target inflation band
17.0
CPI (pavg)
7.3
7.1
8.4
5.8
7.1
13.0
CPI (eop)
6.2
7.8
7.4
6.8
7.1
11.0
Central bank target
7.0
7.0
7.0
7.0
7.0
7.00
7.00
7.50
6.00
7.00
15.0
9.0
Central bank reference rate (eop)
7.0
Jul-13
Jul-12
Jan-13
Jul-11
Jan-12
Jul-10
Jan-11
Jul-09
Jan-10
Jul-08
2013F
Jan-09
2012F
Jul-07
2011E
Jan-08
2010
Jan-07
5.0
2009
23
%, YoY
Exports
Fixed Investment
Public Consumption
Private Consumption
Imports
GDP
15.0
13.0
11.0
9.0
7.0
5.0
3.0
1.0
-1.0
-3.0
-5.0
-7.0
External accounts
3M money market rate
9.6
2.0
1.8
3.7
5.9
KZT/USD (eop)
148
147
147
148
148
KZT /EUR (eop)
213
195
192
182
192
KZT /USD (pavg)
147
148
147
154
143
KZT /EUR (pavg)
206
196
204
191
184
Russia (Baa1 stable/BBB stable/BBB stable)
Outlook: Russia’s economic development in 2012 would be contained by
high results of 2011 at 4.3% yoy real GDP growth, exchange rate volatility
and stagnating external demand. However, our expectations of growth at
3.9% yoy are very bullish not only on the basis of new government and
reforms promised, but also on the basis of continuing development in
domestic demand. Although current inflation dynamics is within CBR’s
target of 5%-6%, in 2H12 it is likely to leave the range for acceleration in
food prices and regulated tariffs. High oil prices support positive trade
balance and temporary RUB appreciation, but large negative capital flows
trend is still prevailing, and RUB risks remain high.
2009
2010
2011E
2012F
2013F
GDP (EUR bn)
871.0
1102.0
1330.2
1544.3
1666.6
Population (mn)
141.9
141.7
141.5
141.3
141.0
GDP per capita (EUR)
6,138
7,779
9,399
10,930
11,816
GDP
-7.8
4.3
4.3
3.9
4.2
Private Consumption
-4.8
5.1
4.8
5.0
5.2
-16.2
6.2
5.2
4.8
4.3
Public Consumption
-0.5
0.7
-0.1
-2.2
0.8
Exports
-4.7
11.1
2.2
4.8
4.7
Imports
-30.4
25.4
7.5
5.9
5.1
Monthly wage, nominal (EUR)
422
518
580
650
692
Unemployment rate (%)
8.3
7.5
6.6
6.2
6.0
Budget balance
-12.4
-6.6
0.8
-0.3
-1.5
Primary balance
-11.6
-5.8
1.3
0.2
-1.0
7.8
8.3
9.8
10.0
11.2
Current account balance (EUR bn)
35.7
56.2
106.4
60.2
41.7
Current account balance/GDP (%)
4.1
5.1
8.0
3.9
2.5
Basic balance/GDP (%)
3.5
4.2
6.8
3.8
3.0
Net FDI (EUR bn)
-5.2
-9.9
-16.3
-1.9
8.3
Net FDI (% of GDP)
-0.6
-0.9
-1.2
-0.1
0.5
329.8
356.3
424.3
466.4
533.3
Real economy yoy (%)
Fixed Investment
Key Events/Dates
Fiscal accounts (% of GDP)
7th of May – inauguration of the President of the Russian Federation
May – official appointment of the new government
18-22 of each month – Monthly indicators
Last Fri of each month – CBR rate decision
DOMESTIC AND INVESTMENT DEMAND SHOULD
OVERTAKE EXPORTS AS KEY GROWTH DRIVER
YoY, %
Public debt
External accounts
INFLATION IS LIKELY TO REMAIN BELOW
REFINANCE YEAR RATE
Gross foreign debt (EUR bn)
%, YoY
10.0
Gross foreign debt (% of GDP)
10.0
34.7
31.9
30.2
32.0
382.4
424.3
466.4
533.3
CPI (pavg)
11.7
6.9
8.6
6.2
5.8
CPI (eop)
8.8
8.8
6.1
6.5
5.6
8.5
8.25
7.5
7.0
5.0
FX reserves (EUR bn)
5.0
8.0
Inflation/Monetary/FX
0.0
7.0
-5.0
-10.0
Central bank target
Headline CPI
Central bank targets
5.0
4.0
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
2010
6.0
Apr-10
2009
Net export
Inventories
Gross Fixed Capital Formation
Public Consumption
Personal Consumption
Gross Domestic Product
2011E
2012F
2013F
Jan-10
-15.0
24
34.7
302.2
9.0
Central bank reference rate (eop)
6.0
5.0
5.3
5.3
3M money market rate
7.5
4.0
6.6
6.0
5.8
RUB/USD (eop)
30.0
30.7
32.1
32.6
32.1
RUB /EUR (eop)
43.1
40.8
41.7
40.1
41.7
RUB /USD (pavg)
31.9
30.4
29.4
32.4
32.0
RUB /EUR (pavg)
44.5
40.4
40.9
40.1
41.0
Serbia (not rated / BB stable/BB- stable)
Outlook: We expect GDP growth to slow to 1% in 2012 as the international
environment impacts export growth and domestic demand remains weak.
1H12 should see continued monetary easing as inflation moderates. The
delay in Serbia’s bid for EU candidate country status to March 2012 is also a
blow for the government ahead of elections by May 2012. While we see
banks increasing long-term exposure to Serbia, heading into 2012 the
outlook for the financing of the current account deficit has deteriorated.
2009
2010
2011E
2012F
2013F
GDP (EUR bn)
28.9
28.6
32.5
34.3
37.2
Population (mn)
7.3
7.3
7.3
7.2
7.2
3,943
3,917
4,471
4,741
5,141
GDP per capita (EUR)
Real economy yoy (%)
GDP
-3.5
1.8
1.7
1.0
3.0
Monthly wage, nominal (EUR)
470
462
518
555
588
Unemployment rate (%)
16.1
20.0
23.0
22.5
21.5
Budget balance
-4.5
-4.7
-4.6
-4.5
-4.3
Primary balance
-3.6
-3.5
-3.1
-3.0
-3.0
Public debt
34.1
42.6
42.3
44.8
46.1
Current account balance (EUR bn)
-2.1
-2.1
-2.3
-2.6
-3.0
Current account balance/GDP (%)
-7.2
-7.3
-7.2
-7.6
-7.9
Basic balance/GDP (%)
-2.5
-4.3
-2.5
-4.7
-3.9
Net FDI (EUR bn)
1.4
0.9
1.5
1.0
1.5
Net FDI (% of GDP)
4.8
3.0
4.6
2.9
4.0
Gross foreign debt (EUR bn)
22.8
23.8
24.5
25.5
28.0
Gross foreign debt (% of GDP)
78.9
83.3
75.5
74.3
75.3
FX reserves (EUR bn)
10.6
10.0
11.0
11.0
11.5
6.8
Fiscal accounts (% of GDP)
External accounts
Inflation/Monetary/FX
GDP FORECAST
MONETARY POLICY
%, YoY
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
14.0
CPI
10.0
Upper
end of
band
Lower
end of
band
8.0
6.0
4.0
0.0
Sep-13
Apr-13
Nov-12
Jun-12
Jan-12
Aug-11
Mar-11
Oct-10
May-10
Dec-09
Jul-09
Feb-09
2013F
Sep-08
2012F
Apr-08
2011E
N ov-07
Jun-07
2010
Jan-07
2009
6.3
11.2
5.4
6.6
10.5
7.8
7.0
5.6
8.0±2.0%
6.0±2.0%
4.5±1.5%
4.0±1.5%
4.0±1.5%
8.5
Central bank target
9.5
11.5
9.5
9.0
3M money market rate
14.5
10.0
12.3
10.1
9.5
RSD/USD (eop)
66.8
79.3
80.0
83.7
80.8
96
106
104
103
105
RSD /USD (pavg)
67.4
77.4
73.2
82.8
81.0
RSD /EUR (pavg)
94
103
102
103
104
RSD /EUR (eop)
2.0
2008
8.4
CPI (eop)
Central bank reference rate (eop)
12.0
2007
25
%, YoY
16.0
CPI (pavg)
Turkey (Ba2 positive/ BB positive/BB+ stable)
Outlook: Turkey’s 4Q11 GDP growth is set to be ca. 5.5% carrying the 2011
GDP growth to 8.5%. We have recently revised our 2012 GDP growth
estimation to 4.8% from 2.8% on the back of better than expected fixed
investment growth for 2012 amidst better external financing prospects.
Turkey’s problematic external imbalance will remain as so following a limited
recovery at its CAD from at 10% of GDP at YE 2011 to ca. 8.0%-8.5% of its
GDP this year. Turkey's double-digit CPI inflation is to ease back to single
digits by mid-2Q12; though the base year factors will keep headline inflation
volatile until 4Q12 when we expect it to slide down to 7.3%. Fiscal side is not
the main worry with the budget deficit to GDP ratio to float at around 2.0% of
GDP by end 2012. Though with a still very high external deficit and funding
mostly dependent on short-term flows, upgrade to investments grade from
rating agencies is unlikely.
Key Events/Dates
 2Q12: New incentive scheme and labor law to be announced
18 Apr; 29 May; 21 Jun- MPC meetings
 2 Apr: 4Q11 GDP data to be released
2010
2011E
2012F
2013F
444.1
552.6
532.1
551.6
710.2
Population (mn)
71.6
72.8
74.7
75.8
76.8
6,201
7,590
7,125
7,280
9,249
GDP
-4.7
9.0
8.5
4.8
4.3
Private Consumption
-2.3
6.7
8.1
3.9
3.9
-19.1
29.9
21.8
8.9
6.2
7.8
2.0
8.8
2.5
2.5
Exports
-5.0
3.4
6.5
10.0
10.0
Imports
GDP per capita (EUR)
Real economy yoy (%)
Fixed Investment
Public Consumption
-14.3
20.7
15.2
9.8
9.0
Monthly wage, nominal (EUR)
249
295
276
305
334
Unemployment rate (%)
14.0
11.9
9.8
10.2
10.5
Budget balance
-5.5
-3.6
-1.3
-1.8
-1.5
Primary balance
0.1
0.9
1.5
1.1
0.9
46.1
42.2
41.0
41.5
40.0
Current account balance (EUR bn)
-10.2
-35.1
-52.6
-45.5
-57.5
Current account balance/GDP (%)
-2.3
-6.4
-9.9
-8.2
-8.1
Basic balance/GDP (%)
-1.4
-5.3
-8.7
-7.0
-8.1
Net FDI (EUR bn)
4.1
6.0
6.4
6.9
0.0
Net FDI (% of GDP)
0.9
1.1
1.2
1.2
0.0
124.2
144.7
136.9
144.8
154.8
Fiscal accounts (% of GDP)
Public debt
External accounts
HEADLINE INFLATION TO FLOAT IN
DOUBLE-DIGITS DURING MOST OF 1H12
INVESTMENT GROWTH OUT
OF THE PICTURE NEXT YEAR
2009
GDP (EUR bn)
Gross foreign debt (EUR bn)
Gross foreign debt (% of GDP)
Net Exports
15
Change in Stocks
14.0
12.0
10
Investments
Government Consumption
Private Consumption
10.0
GDP
0
-5
2011E%
2012F
2013F
41.0
41.1
41.3
218.1
226.7
293.1
CPI (pavg)
6.5
6.4
10.4
7.3
6.8
CPI (eop)
6.3
8.6
6.5
9.6
7.2
6.0
Central bank target
7.5
6.5
5.5
5.0
5.0
4.0
Central bank reference rate (eop)
6.50
6.50
5.75
5.75
6.00
2.0
3M money market rate
11.7
8.5
8.8
9.2
9.1
0.0
TRY/USD (eop)
1.50
1.55
1.88
1.91
1.87
TRY /EUR (eop)
2.15
2.06
2.45
2.35
2.43
TRY /USD (pavg)
1.55
1.51
1.68
1.89
1.83
TRY /EUR (pavg)
2.16
2.00
2.33
2.34
2.35
Jul-13
Jan-13
2010
39.4
217.9
Inflation/Monetary/FX
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
2009
43.7
194.0
Target CPI Inflation
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
-10
FX reserves (EUR bn)
CPI, yoy
8.0
5
26
%, YoY
%, YoY
Ukraine (B2 negative / B+ stable / B stable)
Outlook: Ukraine continues to adopt the 'fingers crossed' strategy as FX
reserves dwindle but at a rate which does not force them towards
international support immediately (avg of USD1bn per month over past 6
months, USD0.5bn per month over past 3 months). Economic activity is
suffering from a decline in steel prices, lower agricultural exports and
negative new credit extension. The C/A deficit stood at almost 6% of GDP
last year – while FDI reached almost 5.0% of GDP, rollover ratios on bank
external debt stood at only 0.11 in January. Meanwhile President
Yanukovych is turning increasing populist ahead of October elections while
government revenue growth is easing and its cash pile stands at approx
10% of the full year deficit. While the authorities are clearly in need of hard
currency, they prefer to wait for market access than draw off IMF or
Russian funds.
2009
2010
2011E
2012F
2013F
84.2
86.6
98.4
126.6
127.0
46
45.8
45.5
45.3
44.8
1,831
1,891
2,164
2,794
2,835
GDP
-14.8
4.2
5.1
2.0
3.9
Private Consumption
-14.9
7
9.5
2.5
3.5
Fixed Investment
-50.5
4.9
10.5
4.5
8.5
Public Consumption
-2.4
2.7
-1.5
0
0.3
Exports
-22
4.5
6
8
10
Imports
-38.9
11.1
10.5
8.2
9.5
170
213
228
268
322
9
8.4
7.5
6.9
6.5
Budget balance
-6.2
-5.7
-4.5
-3.7
-3.2
Primary balance
-5.1
-4.2
-2.6
-1.7
-1.2
35
42.2
41.1
41.2
38.5
Current account balance (EUR bn)
-1.2
-2.3
-5.8
-6.1
-5.1
Current account balance/GDP (%)
-1.5
-2.6
-5.9
-4.8
-4.0
Basic balance/GDP (%)
2.3
2.6
0.9
-0.8
-0.5
Net FDI (EUR bn)
3.2
4.5
6.6
5.0
4.5
Net FDI (% of GDP)
3.8
5.2
6.7
4.0
3.5
Gross foreign debt (EUR bn)
72.6
88.2
95.5
94.7
92.0
Gross foreign debt (% of GDP)
86.2
101.9
97.0
74.8
72.4
FX reserves (EUR bn)
17.7
25.1
23.3
21.6
21.7
16
9.4
8.0
6.6
11.5
12.3
9.1
5.1
9.5
11.8
GDP (EUR bn)
Population (mn)
GDP per capita (EUR)
Real economy yoy (%)
Monthly wage, nominal (EUR)
Unemployment rate (%)
Fiscal accounts (% of GDP)
Key Events/Dates
Public debt
29-30 Apr: Q1 preliminary GDP
5-10 of each month: FX reserve data
Oct 28th: Parliamentary elections
WITNESSING DOMESTIC DEMAND LED GROWTH
External accounts
NOT ONLY FOOD RISING IN PRICE
%, YoY
35.0
10.0
30.0
5.0
CPI
25.0
0.0
-5.0
Net exports
GFCF
Inventories
Public consumption
Private consumption
GDP
Jul-13
Jul-12
Jan-13
Jul-11
Jan-12
2013F
Jul-10
2012F
Jan-11
2011E
tentative target of 5% by 2014
10.25
7.75
7.75
7.75
7.75
UAH/USD (eop)
8.00
7.97
8.04
8.44
9.29
UAH /EUR (eop)
11.5
10.6
10.4
10.4
12.1
UAH /USD (pavg)
8.07
7.95
7.99
8.24
8.86
UAH /EUR (pavg)
11.3
10.5
11.1
10.4
11.2
Central bank reference rate (eop)
0.0
Jul-09
2010
Central bank target
5.0
-30.0
2009
10.0
Jan-10
-25.0
CPI (eop)
Jul-08
-20.0
CPI (pavg)
15.0
Jan-09
-15.0
Inflation/Monetary/FX
20.0
Jan-08
-10.0
27
%, YoY
15.0
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All information contained herein is based on carefully selected sources believed to be reliable, but HVB makes no representations as to its accuracy or completeness. Any opinions contained herein reflect HVB's judgement as of the original
date of publication, without regard to the date on which you may receive such information, and are subject to change without notice.
HVB may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in any report provided herein. Those reports reflect the different assumptions, views and analytical methods of the
analysts who prepared them. Past performance should not be taken as an indication or guarantee of further performance, and no representation or warranty, express or implied, is made regarding future performance.
HVB and/or any other entity of UniCredit Corporate & Investment Banking may from time to time, with respect to any securities discussed herein: (i) take a long or short position and buy or sell such securities; (ii) act as investment and/or
commercial bankers for issuers of such securities; (iii) be represented on the board of such issuers; (iv) engage in "market-making" of such securities; and (v) act as a paid consultant or adviser to any issuer.
The information contained in any report provided herein may include forward-looking statements within the meaning of US federal securities laws that are subject to risks and uncertainties. Factors that could cause a company's actual results
and financial condition to differ from its expectations include, without limitation: Political uncertainty, changes in economic conditions that adversely affect the level of demand for the company‘s products or services, changes in foreign
exchange markets, changes in international and domestic financial markets, competitive environments and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this
cautionary statement.
UniCredit Corporate & Investment Banking
as of 07 July 2015
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