Global Economic Outlook 2009-10_OCT09 Deutsche

8/8/2019 Global Economic Outlook 2009-10_OCT09 Deutsche

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October 2009

Global economic outlook 2009/10

Stefan SchneiderChief International [email protected]


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Agenda

11 Financial markets after the crisis

22 Regulatory changes

Global economy: Status quo

55

Exit strategies and inflation risks

66 Effects on long-term growth


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Agenda




55




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Lehman collapse sparked sell-off 4: More write-downs,1: Market seessub-prime

2 Spill- 3: Interim 5: Monoliners, 7: Collapse of IndyMac,6:Tentat 8: Risk adversity declines as

central bankaction over year-end

problem aslargelycontained

inter-bankmarkets

Fed startseasing

-and recessionfears hit markets

massive official intervention,coordinated rate cuts

stabili-sation

money markets stabilise,economy is bottoming out

2501400 Takeover of AIG &

2001000

1200

Fed announces TSLF(Term Securities

Fed approves take-over of BearStearns by JPMorgan Chase

,Brothers files for Ch.11

100

150

600800

US government

rescue plan forbig GSEs

0

50

0

200

Jun/ 07 Sep/ 07 Dec/ 07 Mar/ 08 Jun/ 08 Sep/ 08 Dec/ 08 Mar/ 09 Jun/ 09 Sep/ 09

iTraxx Europe Crossover S9, 5 Yr* (left) 3M Euribor - 3M EONIA swap rate, bp (right)

*iTraxx Europe Crossover, 5-year, series 9 (index of CDS credit derivatives on 50 companies rated at the threshold of investment and speculative grade; before March 08:series 8/7). Source: Bloomberg, DB Global Markets, DB Research

Stefan Schneider October 2009 page 4


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n genera : s appe e s s ow y re urn ng

EMU: Stock issues (net)EUR bn4005.0

Financial markets: More optimistic

8.0

10.0

12.0

.Non-financial

300

350

4.0

4.5

2.0

4.06.0

2503.5

-6.0

-4.0

-2.0

.

1502.5

.

n 0 8

r 0 8

y 0 8

l 0 8

p 0 8

c 0 8

b 0 9

r 0 9

n 0 9

g 0 9

03 04 05 06 07 08 09 J a

M M a J S

e D e

F e A J u A

u

10y Bund yield, % (left) DJSTOXX 600 (right)



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e nanc ng con ons: ar y mprov ng

USA: Commercial papersOutstanding volume, USD bnBasis points vs government bonds

EUR corporate bonds

1100

1200

1300 Asset-backed

600

700

800

Finanzinstitute

Nichtfinanzielle Unternehmen

Financial institutionsNon-financial companies

700

800

900Notasset-backed

300

400

500

400

500

600

0

100

2002 2003 2004 2005 2006 2007 2008 2009

Source: FedSource: iBoxx



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nanc a ns u ons wor w e ave so ar wr en oUSD 1 622 bn

Writedowns & credit lossesUSD bn

Writedowns of banksUSD bn

1136

1622World

5053

5670

102

HSBCUBS

Merrill LynchBank of America

Wachovia

628

503Europe

Americas

2325293333

45

Barcla sNational City Corp.

HBOSRoyal Bank of Scotland

Wells FargoWashington Mutual

41

42Asia

Total financial institutionsBanks

1818

19192023

BNP ParibasING

Deutsche BankCredit Suisse

Bayern LBMorgan Stanley

0 500 1000 1500 2000

Source: Bloomberg

16

0 20 40 60 80 100 120

Lehman

Source: Bloomberg



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g er re nanc ng cos s are passe on

Loans to the non-financial sector(yoy):

EMU: lending standardsNet percantage of banks tightening credit

une : .July 2009: 1.2%

Book credits to the non-financial50607080

Loans to small & medium firmsLoans to large firms

sector have been declining sinceFebruary.102030

The decline in lending to non-financial companies can well be explained by traditional influences, articularl b

-30-20-10

03 04 05 06 07 08 09

weak economic growth. Bundesbank monthly report, September 2009

Source: ECB



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Agenda




55




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egu a on: a o expecCapital requirements

,risk provision, counter-cyclical buffers, higher capital requirements for system-

relevant firms.everage ra o

G20 plan to introduce ratios which are internationally comparable, still open whether strict definition or monitoring, ceilings? D

erivativesRegulation of the OTC market, suggestions: Standardisation, central data recording (number, volume, position), central counterparty for clearing and settlement

SecuritisationRetention disclosure hi her ca italisation

Alternative investments (hedge funds, private equity funds)Registration, reporting, supervision of systemic risk



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Whats ahead for banks and their clients?

Refinancing costs of banks permanently higher

More standardised , less complex complex financial productsLess liquidity in primary and secondary markets

Non-bank financial sector (investment firms, private equity) is shrinking

less capital available for trading books

fewer market participants

Government has greater influence on the financial sector



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Agenda




55




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33 Global economy: Status quo

In spring the global economy started to recover from theLehman shock

Stabilisation came first in the US,

swiftly followed by most emerging

ifo-climate of the global economy

& US PMIifo-climate of the global economy* (left),

Eastern Europe is somewhat behinddue to FX problems and - in the case60

65

6

7US PMI (Purchasing Manager Index, right)

o uss a - epresse commo yprices.

45

50

4

5

30

35

2

3

00 01 02 03 04 05 06 07 08 09

Latin America (left)Asia (left)USA (right)

Sources: ifo, ISM

*) values between 5 and 9 hint at a postitivetrend, values between 1 and 5 a negative trend.



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33 Global economy: Status quo

Lehman-Shock amplified inventory cycle

The US and the EMU economy weretanking as the industrial sector wasscared stiff and slashed inventories.1100.6

Industrial confidence & destocking

Destocking should have run itscourse as demand and confidence

80

90

100

-0.2

0.0

0.2

.

.

60

70

-0.8

-0.6

-0.4 USA*

EMU*

EMU**

USA**

Inventory assessmentNormalised, + = too high

50-1.02008 2009

* Destocking in % of GDP (left), ** Industrial confidence (right)

0.0

1.02.03.0

.

, ,

-3.0-2.0-1.0

95 97 99 01 03 05 07 09



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Global economy: Status quo33

ea ng n ca ors: ose o expans on eve

120

German ifo: Current assessment

improving60PMIs: Bottoming outPMIs: Bottoming out

105

110

115

50

55

85

9095

40

45

70

75

80

06 07 08 09

30

35

06 07 08 09

Current assessment ExpectationsChina USA EMU



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Global economy: Status quo33

reen s oo s even n ar a a

Industrial production

Jan 2006 = 100130.0

Incoming industrial ordersJan 2006 = 100

105.0

110.0

.

100.0

110.0

120.0

90.0

95.0

.

70.0

80.090.0

80.0

.

06 07 08 09

60.006 07 08 09

USA EMU GER



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Agenda



Global econom : Outlook b re ion


55 Exit strategies and inflation risks



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44 Global economy: Outlook by region

Forecasts in uncharted territory

Macroeconomic models cannot cope with- the degree of the recession- modelling the financial market crisis-



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USA: Housing market bottoming out

USA: House pricesCase/Shiller house price index

USA: Housing starts1 000, annual rate

15.020.025.0

210230250

,

% yoy (right) 2100

2600

-5.00.05.0

10.0

130150170

190

1100

1600

-25.0-20.0-15.0- .

507090

Index (left)

100

600

Source: S&P/Case-Shiller Source: US Census



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but new equilibrium will take a long time

USA: Housing startsm units, annual rate

USA: Housing vacanciesm units, annual rate

1.7

1.9

2.1

2.3

Trend

Housing starts

13.5

14.0

14.5

Vacant

0.9

1.1

1.3

1.5

11.5

12.012.5

.

Trend

0.3

0.5

0.7

00 01 02 03 04 05 06 07 08 09

Actual a good 1 m units below trend

10.0

10.5

11.0

00 01 02 03 04 05 06 07 08 09

c ua a goo munits above trend

Sources: US Census, DB Research Sources: US Census, DB Research



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USA: Private consumption benefitting from fiscal stimuli

USA: Car salesm, annual rate

USA: Retail salesJanuary 2005 = 100

7.5

8.0

8.5

9.0

120.0

125.0excluding cars

6.0

6.5

7.0

110.0

115.0

4.0

4.5

5.0

.

100.0

105.0total

Source: BEASource: US Census



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USA: Labour income is declining

USA: Disposable incomeContribution to % yoy, %-points

USA: Income, outlays & savings% yoy, % disposable income

6.0

8.0

10.0Disposableincome, % yoy

5.06.07.08.0

-2.0

0.02.0

.

0.01.02.03.0

.

-4.02005 2006 2007 2008 2009 2010

Taxes Other income *) Wages & salaries

-2.0-1.0

2005 2006 2007 2008 2009 2010

Savin s rate Dis osable income* p us trans ers m nus soc a nsurance contr ut on

Sources: BEA, DB Research

Personal outlays

Sources: BEA, DB Research



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USA: Sub-potential growth due to further adjustmentsin 2010

USA: Real GDP% qoq annual rate (left), % yoy (right)

USA: Forecasts2007 2008 2009 2010

2

4

6

2.0

4.0

6.0% yoy (right)

Real GDP, % yoy 2.1 0.4 -2.6 1.9Private consumption 2.6 -0.2 -0.7 1.1Public expenditures 1.7 3.1 2.2 2.4Private Investment -2.1 -5.1 -19.2 -0.5

-4

-2

0

-4.0

-2.0

0.0 Nonresidential 6.2 1.6 -18.0 0.4

Residential -18.5 -22.9 -23.3 -4.1Exports 8.7 5.4 -11.8 2.5Imports 2.0 -3.2 -16.4 1.7

-8

-6

-8.0

-6.0

2004 2005 2006 2007 2008 2009 2010

% qoq annualrate (left)

, . . - . .Unemployment rate, % 4.6 5.8 9.2 10.0Budget balance, % GDP -2.9 -5.9 -11.8 -12.4Public debt, % GDP 65.6 74.1 87.3 97.3

- - - -Sources: BEA, DB Research

, . .

Quellen: BEA, BLS, DB Research



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apan: y e a -o n g o a ra e

Export and World Trade% yoy

Japan: Export & investment% yoy

25

50

20

30

20

30

-25

0

-10

0

-10

0

-5000 02 04 06 08

-30

-20

-30

-20

95 98 01 04 07 10

Japan World

Sources: IMF, MoF, DB Research

Investment in M&E(left) Exports (right)

Sources: Federal Statistical Office, DB Research



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apan s co apse an governmen respon e weven more fiscal stimulus

Fiscal Packages

Large fiscal stimulus package to

Real GDP growth%

rev ve economy wort - o .

Surprisingly, GDP growth of 0.6%qoq in Q2. Mainly driven by export1

2

2.0

4.0

.yoy (left)

6.4% qoq and private consumption0.7% qoq.

-

-1

0

-

-2.0

0.0qoq (right)

stimulus on the economy will unfoldin Q3 and Q4.

-4

-3

-8.0

-6.0

.

-5-10.02000 2002 2004 2006 2008 2010

Sources: MIC, DB Research



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apan: sca s ua on worsens an so u ons may edreadful

Fiscal packages and lower GDP

raise government debt ratio to

Fiscal situation% of GDP

years.

New DPJ-government wants to

160

200

2.0

2.5Net InterestPayment (left)

re rec was e u spen ng romstimulus package to social spending.No long term fiscal strategy yet.80

120

1.0

1.5

Hopes to reduce spending by cuttingback bureaucracy are overdone.

400.5

liabilities(right)

bode well for reform outlook.

.80 84 88 92 96 00 04 08

Source: OECD



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apan: a n econom c n ca ors

Reasons for a less gloomy short-term outlook

J a p a nEc o n o m i c f o r e c a s t% yoy 2007 2008 2009 2010

arge sca pac age - o .

Foreign trade seems to recover. Inparticular, China seems relatively

Real GDP 2.3 -0.7 -5.8 1.5Private consumption 0.7 0.6 -1.2 0.9Gov't expenditure 1.9 0.8 1.3 2.0Fixed investment 1.1 -4.9 -13.4 0.1

- -strong again.

Japans financial institutions are not

. . . .Construction -9.7 -7.6 -9.3 -2.0

Exports 8.4 1.8 -27.6 6.2Imports 1.5 0.9 -16.9 1.5

.onsumer pr ces . . - . - .Budget balance, % GDP -1.7 -0.6 -6.7 -4.8Unemployment rate, % 3.9 4.0 5.2 5.2

Sources: Statistisches Bundesamt, DB Research



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s: u en s op n pr va e cap a ows o erescue

Investors retreated massively fromEMs after Lehman episode

Capital flows to EMs slumpedUSD bn, net

xterna nanc ng r e out even orsolid countries

IMF and other multilaterals came500600

700

back into the game

Around USD 150 bn new loans sinceJune 2008100

200300

G-20 meeting in April marked aturning point

-300

-200

-100

r va e cap a ows now resum ng,including FDI

2003 2004 2005 2006 2007 2008 2009 2010

Private flows Official flows

Source: IMF WEO



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r s s e o urmo n nanc a mar e s

Currencies in some cases plungedmore than in full-blown crises in the

EM currencies depreciated sharplyDepreciation Mar 08 Mar 09, %*

Stocks and bonds were alsopummeled50

60

Some companies suffered due tolarge FX exposure30

40

unscathed

Since March/09 EM currencies have010

B L R ,medium-term trend

K R P

L R U B

R M X I D

* vs USD except PLN vs EURSource: IHS Global Insight



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EMs: Economic stimulation is effective

Unveiled stimulus packages% of GDP, 2008

Biggest packages in UAE, China,Russia, Kuwait and Hong Kongwhich were en o in ver

12

14

16 comfortable fiscal positions.

EM packages did not need

6

8

10.

Instead packages focused on theimpact of currency depreciation and

0

2

AE CN RU MY BR SA SG TR KR MX PL IN

e resu ng a ance s ee pro emsfor the public and the private sector.

Source: DB Research



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avoura e sca ou oo o s re a ve o s

Fiscal balance in G-20 countries% of GDP

Government debt in G-20 countries% of GDP

-2

0

100

120

-

-6

-4

40

60

80

-12

-10

0

20

Advanced Emerging

Source: IMF

2006 2007 2008 2009 2010 2014

Advanced Emerging

Source: IMF



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merg ng mar e s ave recovere or o ome ou

GDP growth, % qoq saarV-shaped recovery in Asia

GDP growth, % qoq saarEastern Europe and Mexico lagging

10

15

20

0

10

-10

-50

5

-20

-10

-25

-20

-15

2007 2 3 4 2008 2 3 4 2009 2-40

-30

Indonesia China Singapore Korea

Sources: IHS Global Insight, DB Research

Latvia Russia Mexico Romania

Sources: IHS Global Insight, DB Research



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grow se o e ro us over nex ew years

No going back to "boom" yearsReal GDP growth, % yoy

Asia remains fastest-growingregionReal GDP growth, % yoy

7

8

9

4

6

8

10

468

10

4

5

6average: 7.3%

-4

-20

2

-4-20

2

1

2

3

average: 5%

-6-62004 2006 2008 2010F 2012F

Emerging Asia

Central and Eastern Europe02004 2006 2008 2010F 2012F

Source: DB Research

Sub Saharan AfricaMiddle East / North AfricaLatin America

Source: DB Research



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s o er a muc mprove r s -re urn m x

EMs to grow 4-5 pp faster than DMsReal GDP growth % yoy, 3-year moving average

Similar GDP growth volatilitySTD of GDP growth, 3-year moving average

5678

2.0

2.5

.

123

4

1.0

1.5

-2-1

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

0.0

.

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

Developed markets Emerging markets

Sources: IMF WEO, DB Research

Developed markets Emerging markets

Sources: IMF WEO, DB Research



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s a: x erna nanc a power e pe wea er e s orm

Asias large external liquiditymitigated crisis effects

Asia: Large external surplusesUSD bn

u stant a sca an monetarystimulus kick-started economies

China has become Asias locomotive500600

700

2,500

3,000

3,500

,

Asian countries have good medium-term growth prospects100

200300

400

500

1,0001,500

2,000

a n c a enges are re uc ng growdependence on exports andachieving further productivity gains

002000 2002 2004 2006 2008 2010F

FX reserve stock (left)

FX reserve accum. (right)

Sources: IMF WEO, IHS Global Insight, DB Research

Note: Figures relate to Asia without Japan.


44


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s a: omes c eman - r ven grow a ea

x-axis: Private consumption, % of GDP (2008); y-axis: Real GDP growth, % (average 2009-14)Good potential for Asia's consumption but US difficult to match

ChinaIndia

8

10

HK

Indonesia

KoreaMalaysia Philippines

Sin a ore

Thailand

Vietnam

2

4

Japan

US-

-2

0

35 40 45 50 55 60 65 70 75 80

Sources: World Bank, IMF, IHS Global Insight, nat. sources, DB ResearchSize of bubbles reflects private consumption in USD (2008), relative to US.


44 Gl b l O l k b i


39/71


na grow cyc es: os ve u no s rongcorrelation

514

China & US quarterly GDP growth% yoy

234

12

13Decoupling hope? Decoupling

hope dashedWTO impact?

-2-10

1

910

-5-4-3

6

7

8

2001 2002 2003 2004 2005 2006 2007 2008 2009

China (left) US (right)Source: Bloomberg & WEFA


44 l b l l k b


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na: arp pu ac n ex erna eman exp a ns adrop in production, but stimulus and loans offer support.

Export, import & industrial

% yoyproduction

Retail sales have been moreresilient than industrial product% yoy

10152025

40

60

20

25

161820

--10-50

5

-200

10

15

68

1012

-25-20-

-60

-40

Jan 07 Jun 07 Nov 07 Apr 08 Sep 08 Feb 09 Jul 090

5

024

Feb 08 May 08 Aug 08 Nov 08 Feb 09 May 09 Aug 09 Export (left)Import (left)Industrial production (right)

Sources: CEIC data, Bloomberg

Industrial production (left)Retail sales consumer goods (right)

Source: CEIC data



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44 Global econom : O tlook b region


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na: s ower apprec a on an accumu a onof FX reserves be sustainable?

8.02,500

RMB uptrend & FX reserves accumulation slowing,but is it sustainable?

7.47.67.8

2,000

6.66.87.0

.

1,000

,

6.06.2

.

0

Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09

FX reserves, USD bn (left) RMB per USD (right)

Source: CEIC data




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India: Growth will rebound as domestic demand rises

9

10

Rebound in 2010 High frequency indicatorsrebounding

6

7

8, ,

Domestic consumption will rise Government spending on infrastructure &

2

34

5 Private consumption should grow as

economy & job losses stabilize

Forei n inflows are returnin

0

1

2007 2008F 2009F 2010F

Via equity markets, commercial

loans, and FDI

Source: DB Research

inflation (possibly requiring interestrate hikes in 2010) are growth risks




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Global economy: Outlook by region

India: Structural challenges to long-term growth persist

Fiscal deficit and public debt remain

persistently high and constrain885

Fiscal finances remain poor % of GDP

governmen ex y

Infrastructure investment is crucialRe ulator rocess remains onerous5

6

7

82

83

84

for many sectors and deters PPPsand foreign investors

Ine ualit a must be closed to23

4

79

80

81

Public debt (left)

ensure continued public support forreforms0

1

77

78

2007 2008 2009 2010

businessesSource: DB Research



45/71



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Global economy: Outlook by region

a n mer ca: ess cr s s-prone an n e pas

Big improvement in macrofundamentals over past few years

Exposure to to global slump varies% of GDP, 2008

Reduced external vulnerabilityNet external debt 13% of GDP*

Ne li ible ublic sector FX2025

30

mismatches

Sensible economic policies, i.e. fiscal510

15

,as a buffer (with some exceptions)

But regions performance still closely A r g e n

t i n a

B r a z i

l

C h i l e

C o l o m

b i a

M e x

i c o

P e r u

V e n e z u e

l a

e o commo y cyc e

Little progress with structural reformsCommodity exports Exports to USSource: IMF

* Average of 6 largest countries




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y y g

LatAm: GDP overview

Recovery got underway in Q2.

Business climate has improved in Q2

L a t i n A m e r i c a -7Real GDP growth, % yoy

an .

Industrial production is growing again(Brazil) or the decline is abating.

2008 2009 2010

LatAm-7 4.1 -2.5 2.6

Argentina 7.0 -3.0 1.5

The recent rebound in commodityprices has helped.

Brazil 5.1 -0.6 3.2

Chile 3.2 -1.5 3.5

Colombia 2.5 -1.0 1.5,

leading (large domestic market andincreasing links to Asia). Mexico will

Mexico 1.3 -6.4 2.7

Peru 9.8 2.0 4.0

Venezuela 4.8 -1.5 1.0

manufacturing exports and the USmarket.

Source: DB Research




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y y g

e as r ca: oom over

Oil price slump in H2/08 reduceslarge surpluses in GCC

GCC: Sharp reduction in fiscaland external surpluses% GDP

Gulf countries large external assetsa key risk mitigating factor

Africa relativel resilient30

35Current account

Fiscal balance

Substantial macro improvements inrecent years (incl. debt reduction)15

20

25

markets (with exception of SouthAfrica)5

10

demand, commodity prices,remittances and FDI inflows

02005 2006 2007 2008 2009 2010

Source: DB Research




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Middle East / Africa: GDP overview

Sub-Saharan A f r ic aReal GDP growth, % yoy

MENAReal GDP growth, % yoy

2008 2009 2010Africa-10 5.4 0.8 4.1South Africa 3.1 -1.1 3.0

2008 2009 2010

MENA 5.2 1.2 3.2

Saudi Arabia 4.6 -0.5 3.0 . . .Sudan 6.6 3.3 4.8Angola 13.2 -2.3 6.4Kenya 2.0 1.5 2.5

Iran 4.5 3.2 3.0

UAE 7.4 -0.4 3.0

Israel 4.0 -0.5 1.5Cte d'Ivoire 2.9 3.0 4.0Cameroon 3.9 1.8 2.2Tanzania 7.1 5.7 6.1

Egypt 7.2 4.3 4.0

Algeria 3.3 2.1 4.0

Kuwait 5.4 -0.1 4.2 . . .Botswana 2.9 -12.0 3.2

Source: DB Research

Bahrain 6.1 2.6 3.5

Source: DB Research




50/71

as ern urope: r s s orces pa n u a us men

Private sector with large exposure toFX and external financing

Smaller economies affected b60

Real credit growth, % yoyCEE: Sharp fall in credit growth

recession in euro area; CIS hit bycommodity price slump40

50

boom and C/A deficitsRelative strong public sector10

20

nances or - e a a p us

To watch ahead:-10

2007 2008 2009

clean-up

Currency risks in the run up to euroaccession

Latvia Russia Romania

Ukraine Turkey

Sources: IMF, DB Research




51/71

as ern urope: an ng sec ors n genera res en uNPLs on the rise

EM banks have fairly good prudentialratios and generally low exposure to

Deteriorating asset quality in

NPLs in % of total loans (national definitions),

Eastern Europe

Balance sheets affected byeconomic slowdown

Bul ariaCzech Rep.

Hungary 20082009

in June*

7753

Credit in% of GDP

NPLs started to climb and expectedto rise further

UkraineRomania

Poland

Russia 43

5039

effects of the crisis due to past creditboom and FX exposureLatvia

EstoniaLithuania 63

10092

es ern uropean paren an shave supported CEE branches0 5 10 15 20

Sources: National central banks, DB Research* March for Hungary and April for Romania




52/71

Eastern Europe: GDP overview

EU members or countries with closeties to the EU are doing best.

Ea s t e r n Eu r o p eReal GDP growth, % yoy

Russia benefits from commodityprices and tries to attract FDI (energysector).

2008 2009 2010Eastern Europe 4.4 -5.5 2.0Bulgaria 6.0 -5.0 1.0Croatia 2.4 -3.0 1.8

Romania and Hungary as well asBaltics are suffering from IMFobli ations.

Czech Rep. 4.7 -4.3 1.3

Hungary 1.9 -6.0 -1.0Kazachstan 3.2 -2.0 1.5Poland 5.3 0.8 1.3

A more stable banking and itsincreasing role as a manufacturing

Romania 7.1 -7.8 -0.5Russia 5.6 -7.0 2.8Slovakia 6.7 -4.0 1.5

Slovenia 3.5 -3.4 0.7 support the Turkish recovery in 2010.

Turkey 1.1 -5.8 3.0Ukraine 2.1 -15.0 1.0

Source: DB Research



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UK: Massive policy intervention

U K Fo r e c a s t s

% yoy 2008 2009 2010-

Bank of England has expanded itsbalance sheet by 150% since the

. . .Private consumption 1.2 -3.1 0.1Govt. expenditure 2.8 2.3 1.5Fixed investment -0.4 -13.7 0.5

-

Under the asset purchase facility theBoE has bought government bonds

. . .Imports -0.6 -13.7 1.2

Consumer prices 3.6 2.0 1.6Unemployment rate, % 5.7 7.5 9.6

wort 151.8 n, p us 2 n

in commercial papers and corporatebonds

Budget balance, % GDP -5.1 -11.6 -13.0Public debt, % GDP 45.6 75.1 92.0

Sources: Eurostat, DB Research

The base rate has been slashedfrom 5% to 0.5%

roof




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EMU: Export is negatively affected by global recession

In the period Jan./April EMU exportsand imports dropped by 23% yoy.

15.010

Exports: Signs of stabilisationBalance, % % yoy

A factor behind this was the euroappreciation, which lasted untilmid-2008.0.0

5.0

10.0

-20

-10

0

Recently, there are signs that ordersand export expectations arebottoming out.-15.0

-10.0

-5.0

-50

-40

-30

-25.0

-20.0

-70

-60

05 06 07 08 09

xport or ers e t or tra e r g t

Sources: EU Commission, CPB



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58/71

EMU growth prospects

EMU: Forec as t s

% o 2008 2009 2010Real GDP 0.7 -3.9 0.7

Private consumption 0.2 -0.8 0.3Govt. expenditure 2.1 2.3 1.5Fixed investment -0.4 -9.8 0.2

Exports 0.9 -14.8 2.3Imports 0.9 -13.0 1.2. . .

Unemployment rate, % 7.5 9.9 11.5

Bud et balance, % GDP -1.9 -5.3 -6.5Public debt, % GDP 69.3 77.7 84.0

Sources: Eurostat, DB Research




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erman a our mar e : o sus a na e

Capacity utilisation at record lowManufacturing, %

An unusual labour market responsein Thsd.

90

95

Avera e since1985 3800

4000

4200

1,200

1,400

1,600

1,800

853400

3600

600800

1,000

75

Capacity utilisation3000

3200

0

200

400

07 08 09

7085 88 91 94 97 00 03 06 09

Short-term workers Unemployed, right

Source: Bundesbank, BA




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Rising unemployment but no massive labour shedding

Growth & labour demand Unit labour costs industr

2

34

% yoy

Employment change in 1000550 -175 -750

25.0

30.0

%

--2-101

5.0

10.0

15.0

20.0

-6-5

-4-

2008 2009 2010 -10.0

-5.0

0.0

employment working timeproductivity GDP (real)

Source: DB Research

qoq yoy

Source: Deutsche Bundesbank

GDP = productivity + working time + employment2009: -5,3% = (-1,9%) + (-3%) + (-0,4%)

, = , , - ,




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Germany: Expansion in Q2 after miserable winter-half

Ge r m a n y : Fo r e c a s t s

% yoy 2007 2008 2009 2010Real GDP 2.5 1.3 -5.5 1.2

German growthReal GDP

Private consumption -0.4 0.1 0.5 -0.7Govt. expenditure 2.2 1.8 1.7 1.9Fixed investment 4.1 4.2 -11.4 1.2

M&E 6.9 5.9 -22.4 0.90.0

1.0

.

0.0

2.0

.

Construction 1.8 3.0 -3.8 1.2Exports 7.5 2.7 -16.4 3.3Imports 5.0 4.2 -9.3 1.0

Consumer prices 2.3 2.8 0.3 0.5-2.0

-1.0

-4.0

-2.0 % qoq(right)

Budget balance, % GDP -0.2 0.1 -4.5 -6.5Unemployment rate, % 9.0 7.8 9.1 10.7

Sources: Federal Statist ical Off ice, DB Research-4.0

-3.0

-8.0

-6.0

06 07 08 09 10

% yoy(left)




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Agenda





55



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65/71

Central banks balance sheets are ballooning

In the light of the massive de-leveraging of banks and otherbn

Central banks' balance sheets

,have expanded their balance sheetsnoticeably.1900

2100

2300

e as mass ve y s eppe up

refinancing and FX swap activities.The Fed could expand its balance1100

1300

1500

sheet total to some USD 4bn - orroughly one-third of US GDP - due toTALF (USD 1 bn) and the purchases

700

900

08 09

of government bonds, MBS, debts ofnational mortgage financers (USD1.15 bn) it announced in March.




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uge sca programmes wor w e: m e e ec ...

Fiscal packagesNet effect on fiscal balance in 2009/10,

% of 2008 GDP

Fiscal packagesEffect on level of GDP, %

-2

-11.2

1.4

.

2009 2010

-4

-3

0.4

0.6

0.8

.

-6

-5

USA GER FRA ESP Japan

0.0

0.2

USA GER FRA ESP Japan

Source: OECD Source: OECD



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Agenda



Global econom : Outlook b re ion


55




G h i l N i l i d b h fi i l


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Growth potential: Negatively impacted by the financialcrisis in the long-term?

Growth potential or trend growth =rate at which the Germany economy

8.0

Germany: Trend growth% yoy

inflation accelerating.

Possibly less potential due to2.04.0

6.0

strong decline in investment, leading

to lower capital stockLess productivity growth

-

-4.0

-2.0

0.0

rise in structural unemployment

loss of business models.

-8.0

.

1971 1990 2009

GDP growth Trend growth





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Growth losses due to the crisis and mid-term propectsChinaIndia

PanamaQatar

KazakhstanIndonesiaMalaysiaThailand

Korea

Mexico

Mid-termgrowth>= 5% p.a.

ngaporeRomania

Saudi ArabiaSlovakia

Hong KongChile

Bahrain

Real GDP,% yoy

ColombiaIsrael

UAESouth AfricaRussiaPoland

M/term 2011-2012Crisis vs boom*

Mid-term growth

Mid-term 2011-2012Crisis vs boom

TurkeyBrazil

HungaryBulgaria

Czech Rep.Argentina

USA

- p.a.

Mid-term growth

-15 -10 -5 0 5 10 15

EurolandJapan

Venezuela. .

Note: growth in MYS, THL, HUN, BUL should accelerate by 1 %-point in the period 2013-2014, and decelerate

* Average 2009-10 vs. average 2003-07by 3 %-ponts in QAT .Sources: IMF WEO, DB Research



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Global Economic Outlook 2009-10_OCT09 Deutsche