Emerging Markets Quarterly - Credit Suisse | PLUS

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES AND

ANALYST CERTIFICATIONS.

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Emerging Markets Quarterly Emerging Markets Economics Global

Q2 2014 [Picture]

Global growth should accelerate moderately to 3.3% in 2014 from 2.9% in 2013.

This is lower than our previous forecast of 3.7%, as growth projections for EM in

2014 have been downgraded to 4.7% from 5.3%. We believe that EM growth

performance should remain unchanged from 2013 despite an acceleration of

activity in DM (2.1% in 2014 versus 1.2% in 2013). The spread between EM and

DM growth rates should therefore fall to 2.6pp, the lowest since 2001.

Stronger growth in DM should be fairly positive for EM as the outlook for global

trade improves moderately. In particular, in some EM countries, internal

imbalances (e.g., China) or external imbalances (e.g., Turkey) built as a

consequence of falling external demand since the Great Recession could be

unwound more smoothly in an environment of better growth elsewhere.

However, key structural reforms aimed at increasing the potential growth are

taking place in many countries. But fixing the road to accommodate faster traffic

for the future often entails disruption and delay in the present.

06 March 2014

Fixed Income Research

http://www.credit-suisse.com/researchandanalytics

Research Analysts

Neal Soss

+1 212 325 3335

[email protected]

Berna Bayazitoglu

+44 20 7883 3431

[email protected]

Alonso Cervera

+52 55 5283 3845

[email protected]

Robert Prior-Wandesforde

+65 6212 3707

[email protected]

Dong Tao

+852 2101 7469

[email protected]

Nilson Teixeira

+55 11 3701 6288

[email protected]

See inside cover for full list of analysts

06 March 2014

Emerging Markets Quarterly 2

06 March 2014


Table of Contents

Global Economy: Speeding up to average 5

IP growth momentum slows further in EM as it strengthens notably in DM 14

Core inflation on the rise in EEMEA and Latin America 21

Latin America 47

Latin America: Growing pains 47

Argentina: Bandaged, but not cured 51

Brazil: Some fiscal austerity might mitigate the risks of a downgrade 56

Chile: The slowdown is not over yet 61

Colombia: Timing the next hiking cycle 65

Mexico: A transition year 70

Peru: Marginal improvement thanks to mining 75

Venezuela: The heat is on 79

Europe, Middle East and Africa 85

Emerging Europe, Middle East and Africa: Diverging growth outlook 86

Czech Republic: A strong rebound 90

Hungary: Taking it easy in election year 95

Israel: Still in easing mode 100

Poland: A more balanced growth outlook 105

Russia: Ukraine tensions prompt monetary policy action 110

South Africa: Adjusting policies as pressure mounts 115

Turkey: No end in sight for the turf war 120

Ukraine: A chance for comprehensive policy adjustment 126

06 March 2014


Non-Japan Asia 131

Non-Japan Asia: Our high conviction calls 132

China: Embracing higher risks 134

Hong Kong: Looming long-term fiscal challenge 139

India: Inflation fighting, dismal growth & election issues 142

Indonesia: Re-balancing before rate cutting 146

Korea: Entering a soft patch 149

Malaysia: Changing the growth mix 154

Philippines: Against the consensus 158

Singapore: The consequences of stronger growth? 161

Taiwan: Developed markets' demand holds the key 164

Thailand: Political mess, economic stress 169

Long-term sovereign FX debt ratings 173

Key websites 175

Previous publications 181

Key dates 186

Gross financing needs for 2014 192

Balance of payments financing needs 193

Government funding needs 206

Quarterly and annual forecasts 216

Summary macroeconomic data for developed countries 217

Summary macroeconomic data for emerging countries 222

We would like to acknowledge the contribution made by Pawel Chmielniak, an employee of

CRISIL Global Research and Analytics, a business division of CRISIL Limited, a third-party

provider of research services to Credit Suisse, in compiling the information and data tables

presented at the end of this report.

06 March 2014


Global Economy: Speeding up to average We still forecast the global economy will pick up modestly in 2014, but at a slower pace than

previously expected. We revised down our 2014 GDP growth expectations to 3.3% from our

November 3.7% estimate, (Exhibit 1) bringing the forecast closer to the long-term growth

average. The downward revisions reflect lower estimates mainly in the emerging markets.

As we noted last year, (Global Economics Quarterly: A seemingly stable triangle) a

seemingly stable triangle of sluggish growth, low inflation, and subsiding potential GDP

hampers the global economy’s ability to sustain any long-lasting burst of strength. Since our

last update, these headwinds have garnered more attention, drawing our forecast lower.

Exhibit 1: Global growth forecast revisions

Annual average

2013 March14 Nov13 Change March14 Nov13 Change

Global 2.9 3.3 3.7 -0.4 3.8 3.9 -0.1

Developed markets 1.2 2.1 2.1 0.0 2.3 2.2 0.1

US 1.9 2.6 2.6 0.0 3.0 2.8 0.2

Euro area -0.4 1.3 1.3 0.0 1.7 1.7 0.0

Japan 1.6 1.3 2.2 -0.9 0.7 1.2 -0.5

UK 1.8 3.0 2.8 0.2 2.5 2.5 0.0

Emerging markets 4.7 4.7 5.3 -0.6 5.4 5.7 -0.3

Brazil 2.3 1.8 3.0 -1.2 2.5 3.0 -0.5

Russia 1.3 1.3 2.3 -1.0 3.1 2.5 0.6

India 4.8 6.0 6.6 -0.6 6.3 6.9 -0.6

China 7.7 7.3 7.7 -0.4 7.9 8.2 -0.3

2015 Growth Forecast2014 Growth Forecast

Source: Credit Suisse

Since global GDP rebounded from the Great Recession, global growth has been hovering

near 3.4%, its 40-year average growth rate. Note that this average encompasses periods

of growth and setback. The fact that global growth now achieves only that average is

consistent with and suggestive of a lower potential GDP. We expect this year to be no

exception. However, the difference this year – and what we find encouraging – is that

the acceleration of growth compared to last year is expected to be achieved in the

context of less intensely accommodative fiscal and monetary policy globally.

Neal Soss

+1 212 325 3335

[email protected]

Axel Lang

+44 20 7883 3738

[email protected]

Isaac Lebwohl

+1 212 538 1906

[email protected]

This is an exact excerpt

from the lead essay from the

Global Economics Quarterly:

Speeding up the average,

published

6 March 2014.

Exhibit 2: Real GDP growth hovering near its historical average

Global Real GDP

-3

-2

-1

0

1

2

3

4

5

6

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

YoY%

Long Run Average

Fcst


https://plus.credit-suisse.com/r/iJq8Sp

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x556614&serialid=zAolgUNXSN5whssHQ0zS1XBITrnp1U50oFr7ROTh1GQ%3d

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x556614&serialid=zAolgUNXSN5whssHQ0zS1XBITrnp1U50oFr7ROTh1GQ%3d

06 March 2014


Fiscal drag has lessened in Europe and the US, but only after substantial fiscal

contractions. The US federal budget, for example, is on course for about a $500 billion

deficit this year – just a bit less than last year’s but half its level as recently as 2012. Less

fiscal drag adds to the sequential performance of the economy, but it’s a far cry from fiscal

stimulus.

Several other major economies are moving to tighten fiscal policy. This looks to be

dramatic in the case of Japan where consumption taxes are scheduled to rise three

percentage points at the start of the fiscal year next month. China is moving to curtail

credit availability, which is tantamount to state and local government fiscal tightening in

other countries with different institutional arrangements. Still other countries, like Brazil,

are restraining their fiscal positions to present a better picture to a world reluctant to

finance fiscal policy excesses and current account deficits.

Exhibit 3: US: Fiscal drag abating Exhibit 4: Japan: Fiscal drag intensifying

% of potential GDP, Changes in general government structural balance % of potential GDP, Changes in general government structural balance

-4

-3

-2

-1

0

1

2

3

2007 2008 2009 2010 2011 2012 2013 2014F

-5

-4

-3

-2

-1

0

1

2

3

2007 2008 2009 2010 2011 2012 2013 2014F Source: Credit Suisse, IMF Source: Credit Suisse, IMF

Monetary policy, too, is in general no longer moving to sequential stimulus as was

the case, for example, as recently as a year ago at this time.

The Federal Reserve is still buying assets but at a reduced pace with every passing

meeting. Short-term interest rate hikes still seem a long way off, and financial markets

seem willing to accept Fed forward guidance that US assets will be anchored to very low

short-term interest rates for quite some time. Still, the incremental news is that QE is

winding down.

The Bank of England’s version of QE has long-since capped out. In the face of

considerable market skepticism, Governor Mark Carney insists that Bank rate hikes are

not imminent. But the performance of the UK economy suggests that further easing is

neither necessary nor likely forthcoming.

Facts on the ground in Japan and the Euro area pretty much assure continued anchoring

of financial valuations to very low short-term interest rates. Still, despite widespread

expectations of further monetary easing measures, both the Bank of Japan and the

European Central Bank now seem content to rest on their oars, prepared to take further

steps if conditions deteriorate but not adopting proactive policies to cement or turbocharge

(to mix metaphors) nascent improvements in economic performance.

China is deliberately moving to rebalance its economy toward a larger consumption share

and a correspondingly smaller investment share. A main instrument for pursuing this

06 March 2014


rebalancing is deregulation of the financial sector, which manifests itself in periodic spikes

in short-term interbank interest rates, episodic depreciations of the foreign exchange value

of its currency, and the seeking out of SETF (Small Enough To Fail) links in the financial

system. Among the hoped-for benefits are more efficient allocation of capital, reduced

corruption, and heightened sensitivity to environmental pollution concerns. However real

these long-term benefits turn out to be, the short-term effect is less policy stimulus to the

Chinese economy now.

Remarkably, with no new cyclical policy stimulus being applied, the global economy

seems to be stubbornly and grudgingly improving.

However, our expectations for close-to-average growth should not be confused with

growing at trend. Remember that average growth encompasses periods of expansion and

recession. Growth in periods of expansion should be higher than average growth, which

we are evidently not achieving.

Growth needs “escape velocity” to provide the necessary dynamism to promote a healthy

global economy. The fear is that such a continuous average state of global growth will

cause the world’s economic muscles to atrophy, embodied as lower potential GDP.

Exhibit 5: A declining trend: DM growth Exhibit 6: A declining trend: EM growth

YoY%, Ten-year moving average YoY%, Ten-year moving average

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Fcst.

4.0

4.5

5.0

5.5

6.0

6.5

7.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Fcst.

Source: Credit Suisse, Markit, Thomson Reuters Datastream, Haver Analytics® Source: Credit Suisse, Markit, Thomson Reuters Datastream, Haver Analytics®

We believe the Communique of the recent G-20 meeting in Sydney, Australia reflects the

recognition of a structurally impaired global economy (see: The CS Macro Playbook:

Growth: on the agenda, but off the menu). Without quite using the words, the most senior

economic policy-makers from the biggest countries in the world pledged themselves to

raising the potential growth rate of the global economy.

The specifics appear in point 3 of the Communique:

We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2 percent above the trajectory implied by current policies over the coming 5 years.

In the nature of a G-20 Communique, there are very few specifics, but the laundry list

topics read like the textbook description of growth accounting. Growth comes from people

presenting themselves for work, getting jobs, being equipped with productivity-enhancing

capital, in an institutional context that promotes economic activity. To quote from the

Communique again, point 3 continues.

https://www.g20.org/sites/default/files/g20_resources/library/Communique%20Meeting%20of%20G20%20Finance%20Ministers%20and%20Central%20Bank%20Governors%20Sydney%2022-23%20February%202014_0.pdf

https://plus.credit-suisse.com/r/iQC7Dy

https://plus.credit-suisse.com/r/iQC7Dy

06 March 2014


To achieve this we will take concrete actions across the G-20, including to increase investment, lift employment and participation, enhance trade and promote competition, in addition to macroeconomic policies.

And, point 7 elaborates:

We are committed to creating a climate that facilitates higher investment, particularly in infrastructure and small and medium enterprises. This is crucial for the global economy’s transition to stronger growth in the short and medium term. We will undertake reforms to remove constraints to private investment by establishing sound and predictable policy and regulatory frameworks and emphasising the role of market incentives and disciplines. These, along with other actions to promote long-term private sector investment, maximise the impact of public sector capital expenditure, and enhance the catalytic role of multilateral development banks will be an important part of our growth strategies and the Brisbane Action Plan.

We would not expect early implementation of specific policies to further the G-20

goal. We would, however, point to the G-20 emphasis. Labor force participation has

been sliding in many countries. Some of this reflects the demographics of aging

populations, and some reflects slack aggregate demand. Business fixed investment has

been poor in nearly all developed economies, and public infrastructure investment has

been weak in a few places.

Exhibit 7: US investment ratio Exhibit 8: Japan investment ratio

% of GDP % of GDP

13

14

15

16

17

18

19

20

50 55 60 65 70 75 80 85 90 95 00 05 10

20

22

24

26

28

30

32

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Source: Credit Suisse, Thomson Reuters Datastream Source: Credit Suisse, Thomson Reuters Datastream

Inasmuch as most of the world is allergic to explicit fiscal stimulus and the public sector

balance sheet leverage it implies, the burden of macroeconomic policy to spur greater

potential GDP falls on central banks. Although most central banks are refraining from

offering more stimulus, they still proclaim their eagerness to maintain accommodative

monetary stances. The G-20 puts a global umbrella over policies most central banks might

wish to follow for domestic reasons anyway.

However, the ability of central banks to raise potential GDP is uncertain. In a recent

speech by Yves Mersch, member of the executive board of the ECB, monetary policy is

presented as a means of preventing a decay of potential GDP. But the question that

remains is for how long central banks can provide this cushion. According to Mersch, “If

there is no prospect of higher growth in the future, we could fall victim to self-fulfilling

negative expectations”.

http://www.ecb.europa.eu/press/key/date/2014/html/sp140207.en.html

06 March 2014


Exhibit 9: Euro area investment ratio Exhibit 10: Euro area participation rate

% of GDP % of working age population

17

18

19

20

21

22

95 97 99 01 03 05 07 09 11 13

54.5

55.0

55.5

56.0

56.5

57.0

57.5

00 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: Credit Suisse, Thomson Reuters Datastream Source: Credit Suisse, Eurostat

Immediate cyclical risks in the global economy appear to have diminished; the

structural risks of slower potential GDP thus come into sharper focus. The

challenges of the future will be much easier to manage with more GDP and much

harder to manage with less. These are medium-and long-term considerations. We would

not necessarily expect to see any near-term specific policy actions.

DM is needed for the heavy lifting. Our expectation for the global economy to achieve close

to average growth in 2014 (3.3%) is supported by a rebound in developed markets. Specifically,

real GDP growth in the developed markets should almost double to 2.1% in 2014 from the

estimated 1.2% in 2013. At the same time, we revised down our emerging market GDP growth

forecast to 4.7% from 5.3%. We therefore expect EM to grow at the same speed as in 2013.

As a result, the spread between EM and DM growth rates is expected to narrow to 2.6pp in

2014, the smallest since 2001 (Exhibit 12). Excluding Chinese growth, the spread between EM

and DM growth follows a similar pattern, suggesting that the slowdown in EM is broad-based

and is not just a China story.

Exhibit 11: Global growth outlook Exhibit 12: Growth gap between EM and DM

YoY% Ppt.

2.6

3.6

4.8 4.55.0 5.2

2.4

-0.8

5.2

3.93.1 2.9 3.3 3.8

1.42.0

3.12.6 2.8

2.4

-0.1

-3.7

2.6

1.5 1.4 1.2

2.1 2.3

4.5

6.1

7.5 7.3

8.38.8

5.5

2.7

8.2

6.4

4.9 4.7 4.75.4

-6

-4

-2

0

2

4

6

8

10

02 04 06 08 10 12 14E

Global

Developed markets

Emerging markets

0

1

2

3

4

5

6

7

00 02 04 06 08 10 12 14E

EM - DM

EM ex. China - DM

Source: Credit Suisse Source: Credit Suisse

06 March 2014


Exhibit 13: Global PMI and real GDP growth Exhibit 14: Global inflation

CS forecasts y/y%, CS forecasts

-3.5

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

4.5

5.5

6.5

25

30

35

40

45

50

55

60

65

1998 2002 2006 2010 2014

Global manufacturingPMI: new orders

Real global GDP growth2q lag (y/y%, rhs)

Fcst

0

1

2

3

4

5

6

7

1998 2002 2006 2010 2014

Fcst

Source: Credit Suisse, Markit, Thomson Reuters Datastream, Haver Analytics® Source: Credit Suisse , Thomson Reuters Datastream, Haver Analytics®

The expected rebound in DM growth is broadly in line with our previous forecasts.

In the US, recent softer readings in employment, industrial production, business surveys

and housing are probably a reflection of normal cyclicality plus a bit of bad weather (which

we detail in the US section). In response, we revised down Q1 to 1.6% and raised Q2 up

to 3.1% to account for possible “catch-up effects” due to the weather. Overall, the

underlying improvement in the US remains in place, in our view, and the risks remain

skewed to better growth later in the year. Diminished fiscal drag and a more healthy

consumer balance sheet, coupled with improving global growth, should support our call for

real GDP at 2.6% Q4/Q4 in 2014 (slightly lower than 2.8% previously expected).

In Japan, we have revised down our GDP forecasts for 2014 to 1.3% from 2.2% and for

2015 to 0.7% from 1.2%. In part, the reluctance of the BoJ to expand its QQE program

and the resulting adverse impact on corporate profit expectations suggest workers’ actual

and expected compensation are unlikely to grow enough to withstand the material 3pp

VAT hike shock in April. We have consequently downgraded our non-VAT inflation

forecasts and now believe that additional BoJ action will come later in the Autumn.

In the euro area, we have maintained our 2014 and 2015 growth projection of 1.3% and

1.7%, respectively. The stability, in past months, in our and consensus growth forecasts

reflects reduced uncertainty as to the future path of the economy. The recovery remains

modest but is becoming more sustainable and thus more resilient to adverse shocks. Yet,

the zone remains unbalanced. Inflation is very low and the ECB is unlikely to resort to major

innovation (e.g. QE) unless the economy finds itself on the verge of a triple-dip recession.

Across the Channel, the UK’s prospects look promising to the extent that the BoE’s

“quantitative” forward guidance has been dropped. While the policy rate should remain at

50bps throughout the remainder of year, the BoE is likely to use new macroprudential tools

to limit excessive debt accumulation.

The turmoil in Ukraine poses downside risks to our global growth forecasts, especially if the

situation escalates. Although our Russia economists believe the most likely scenario is one

of continued tensions, but no substantial escalation (over 50% probability), we will continue

to monitor the situation closely.

06 March 2014


Exhibit 15: Global trade growth picking up Exhibit 16: Euro area: Looser financial conditions

y/y% 5-year government bond yields

-20

-15

-10

-5

0

5

10

15

20

1996 2000 2004 2008 2012

Global trade growth (y/y%)

Long-term average

0%

1%

2%

3%

4%

5%

6%

7%

8%

2007 2008 2009 2010 2011 2012 2013 2014

Periphery

Core

Source: Credit Suisse, CPB Source: Credit Suisse, Thomson Reuters Datastream

Domestic demand growth in developed markets will continue to improve but not

surge. In particular, despite growing optimism at the end of the year, the likelihood of a

long-awaited meaningful pickup in business investment in developed markets has barely

increased. Given the high beta of investment relative to global GDP growth, another year

of disappointment would clearly keep a lid on global growth.

Inventories, another candidate for a noticeable pickup in activity, is unlikely to provide

much of a boost globally. In fact, an inventory buildup during the second half of 2013 in the

US appears to be behind the current soft patch (in addition to the severe weather

conditions).

Personal private consumption, the more stable part of GDP, should advance further in part

supported by limited employment gains, but the situation remains too uneven and

unsatisfactory. In particular, developed markets have lost what we call “potential

consumption.” Higher structural unemployment and a fundamental shift in credit standards

mean that the budget constraints of those who have the largest propensity to consume –

generally low-qualified workers, unemployed and young people – have increased. The rise

in inequality observed in many countries reflects and feeds back onto those structural

changes, we believe.

With the pressure on DM growth easing gradually – in particular in the euro area – the

outlook for international trade brightens moderately. Towards the end of 2013,

international trade delivered better growth rates compared with 2011 and 2012. If capex

begins to surprise on the upside, this should be observable in international trade data.

The resulting impact on developing economies should be fairly positive (Exhibit 18). In

particular, in some EM countries, internal imbalances (e.g., China) or external imbalances

(e.g., Turkey) built as a consequence of falling external demand since the Great

Recession could be unwound more smoothly in an environment of better growth

elsewhere.

06 March 2014


Exhibit 17: G3: Real domestic demand Exhibit 18: G3 demand vs. EM exports

4Q 2007=100 YoY%

94

96

98

100

102

104

4Q07 3Q08 2Q09 1Q10 4Q10 3Q11 2Q12 1Q13 4Q13

US

Japan

Euro area

-15

-10

-5

0

5

10

15

20

-5

-4

-3

-2

-1

0

1

2

3

4

5

'00 '02 '04 '06 '08 '10 '12 '14

G3 real demandgrowth (y/y%)

EM ex. China realexports, rhs

Fcst.

Source: Credit Suisse, Thomson Reuters DataStream, Haver Analytics® Source: Credit Suisse, Thomson Reuters DataStream, Haver Analytics®

In China, while the economy performed admirably well in the past, the government’s wide

array of reforms aims at transforming a growth model that is running out of steam (e.g.,

over-investment in production capacities made for a world growing at a faster pace, rising

debt accumulation by the private and public sectors or increasing pollution-related issues

to name a few). To put the economy on a more sustainable footing, the government

intends to further liberalize the economy and incentivize households consumption. In the

medium term, it’s possible that the loss of “potential consumption” mentioned above could

be recouped in China and other EM countries more generally (Exhibit 19).

But that’s not an immediate story. Instead, China’s growth rate is currently decelerating.

Risks of a more significant slowdown have increased, but the authorities may only

intervene in a measured way, favoring a continuation of the rebalancing of the economy.

Exhibit 19: Share of world consumption Exhibit 20: India’s stagflation needs to be addressed

% YoY%

20%

30%

40%

50%

60%

70%

80%

98 00 02 04 06 08 10 12 14E

DM

EM

2

4

6

8

10

12

14

06 07 08 09 10 11 12 13

Real GDP growth

Headline CPI inflation

Source: Credit Suisse, © 2014 Thomson Reuters Limited, Haver Analytics® Source: Credit Suisse, Haver Analytics®

06 March 2014


India is another country where the central bank is willing to introduce key changes to its

operating framework. There, the central bank desires to switch from a dual growth and

inflation mandate to a stricter inflation targeting regime. Given the nature of the inflation

process – food and energy make up around 60% of the total basket – and its stubborn

level – inflation has averaged 8.4% since 2005 – extremely conservative policies will have

to be enacted to bring inflation down to the target of 4% within two years. This should be

negative for economic activity in coming quarters.

In the meantime, commodity exporters, such as Australia and Canada, which benefitted

for several years from China’s and other EM countries’ growing role in the global

production process have lost competitiveness since the resulting financial resources found

their way back into the energy and (non-productive) residential sectors. This phenomenon

was exacerbated by overvalued currencies. This is why their central banks will be content

with cheaper ones.

Behind imbalances reside structural issues that need to be addressed. In the short

term, fundamental changes in the structure of an economy – in both emerging or

developed economies – can be damaging from an economic and social point of view.

Furthermore, modifying the growth model of an economy with the aim of increasing

potential GDP could nonetheless have negative effects that persist for quite some time as

the losing sectors must adjust promptly while the winning sectors can adjust at leisure.

The more dramatic the changes are, the more likely the economy will underperform for a

period of time and the lower the probabilities that an increase in potential GDP will quickly

materialize. This is why central bank policies need to remain exceptionally accommodative

to accompany these reforms. Our concern in 2014 is that major structural changes

continue to take place without the support of more policy stimulus.

06 March 2014


IP growth momentum slows further in EM as it strengthens notably in DM The pace of aggregate EM industrial output growth continued to slow in December,

moving further down from its recent peak in September. The momentum (3m/3m%,

annualized) of EM IP growth slowed to 4.4% in December from its eight-month peak of

5.3% in September (Exhibits 21 and 23). (December is the last month for which we have

data for all EM countries.) This diverges from DM IP growth which has steadily gained

momentum through 2H 2013 and reached its fastest pace in the past two years in January

2014 (Exhibits 24 and 26). IP growth momentum in DM is likely to have rolled over in

February, according to our economists' estimates.

The slowdown in EM's overall IP growth momentum in 4Q 2013 was primarily driven by

India and the LatAm region (Exhibit 25). The EEMEA region's IP growth momentum

rebounded modestly in 4Q 2013 from its recent trough in September and reached its strongest

pace in the past two years. This pick-up was led primarily by Turkey and South Africa

(Exhibits 38-39). Meanwhile, IP growth momentum in CE3 continued to slow for the fourth

consecutive month in December after accelerating rapidly between January and August 2013.

IP growth momentum in the NJA (excluding China) region was on a downtrend trajectory

during 4Q, driven by a notable weakness in India, while it strengthened in the rest of emerging

Asia in late 2013. China's IP growth momentum has also softened modestly since October

2013. LatAm's IP growth momentum slowed for the third consecutive quarter led by a broad-

based deceleration across the region. It is worth highlighting that Brazil's IP contracted in

sequential terms in 4Q for the second consecutive quarter (Exhibit 43). In 4Q 2013, IP growth

momentum improved in Turkey, South Africa, the Czech Republic, Russia, South Korea,

Singapore, Malaysia, and Taiwan (Exhibits 32-46).

The latest leading indicators suggest a further slowdown in EM IP growth

momentum coupled with some weakness in DM IP growth momentum in the coming

months (Exhibit 22). A deceleration in the run-rate (3m%, annualized) of EM IP in

December, which generally catches the turning points in IP growth momentum earlier, is

also suggesting that EM IP momentum should continue to slow in the near term (Exhibit

23). We note that the CSBMI – our leading indicator for global manufacturing activity –

declined (on 3mma basis) in January and December after a brief rebound in December,

pointing to weaker global IP growth momentum in the near term (Exhibit 22).

In NJA (excluding China) IP growth momentum weakened further in December. However,

we expect it to rebound in 1Q as also signaled by the latest three-month change in the

CRB metal price index which increased modestly between November and January before

coming off slightly in February (Exhibit 28). Our economists expect China’s IP growth

momentum to moderate further in 1Q before rebounding in 2Q, while India’s IP growth

momentum is expected to rebound sharply in 1Q.

According to our economists, IP growth momentum in EEMEA has eased during 1Q

despite stronger IP growth momentum in the CE3 countries and is set to bounce in 2Q. IP

growth momentum in CE3 has come down from its peak of 11% in August to about 4% in

December. It is expected to rebound in the near term and remain resilient at about 6.5%

throughout 2014, benefiting from the recovery in the euro area. We note that German Ifo

expectations index reached its multi-year high in January before easing slightly in

February. Russia’s IP growth momentum has been notably weak since late 2012 and this

weakness is likely to persist during 2014, according to our Russia economists.

IP growth momentum in LatAm fell sharply in December, driven mainly by a sharp drop in

Brazil's industrial output growth. However, our LatAm economists expect the region's IP

growth momentum to pick up gradually during 1H 2014, mainly driven by the rebound in

Brazil’s and Mexico's IP growth momentum.

Natig Mustafayev

+44 20 7888 1065

[email protected]

https://plus.credit-suisse.com/r/g5xG2A

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EM Regional IP and PMIs

Exhibit 21: IP momentum in DM and EM Exhibit 22: DM/EM Manufacturing PMIs and CSBMI

Annualized 3m/3m% change in industrial production (sa); the latest observations for EM and DM are Dec 2013 and Jan 2014 respectively

Index points; the latest observation is for February 2014

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014

Global IP momentum

EM IP* momentum

DM IP momentum

-5

-4

-3

-2

-1

0

1

2

30

35

40

45

50

55

60

2006 2007 2008 2009 2010 2011 2012 2013 2014

DM PMIEM PMI*CSBMI (3mma, right)

*IP data for India, Korea, Malaysia, Singapore, Taiwan, Argentina, Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Hungary, Poland, Romania, Russia, S. Africa, Turkey and Ukraine were aggregated by PPP GDP weights.

Source: Haver Analytics®, National Statistics Offices, Credit Suisse

*We aggregate the country PMIs by their PPP adjusted GDP weights. **The EM PMI includes readings for Brazil, Mexico, Czech Republic, Hungary, Poland, Russia, South Africa, Turkey, China, India, South Korea, Singapore and Taiwan.

Source: Haver Analytics®, Markit Economics, NBS, Credit Suisse

Exhibit 23: EM IP momentum and run-rate Exhibit 24: DM IP momentum and run-rate

Annualized % change in industrial production (sa) Annualized % change in industrial production (sa)

09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15

0

5

10

15

20

0

5

10

15

20

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

EM IP momentum, 3m/3m% ann.

EM IP run-rate, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

-8

-4

0

4

8

12

16

-8

-4

0

4

8

12

16

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

DM IP momentum, 3m/3m% ann.

DM IP run-rate, 3m% ann.

Source: Haver Analytics®, National Statistics Offices, Credit Suisse Source: Haver Analytics®, National Statistics Offices, Credit Suisse

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Exhibit 25: IP momentum in EM regions Exhibit 26: IP momentum in G3

Annualized 3m/3m% change in industrial production (sa) Annualized 3m/3m% change in industrial production (sa)

09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14

0

5

10

15

20

-10

-5

0

5

10

15

20

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13

LatAmEEMEANJA ex-ChinaChina (right)

-45

-30

-15

0

15

30

45

60

-15

-10

-5

0

5

10

15

20


US

Eurozone

Japan (right)

*LatAm IP includes series for Argentina, Brazil, Chile, Colombia, Mexico and Peru aggregated by their PPP adjusted GDP weights. EEMEA IP includes series for Czech Republic, Hungary, Poland, Romania, Russia, South Africa, Turkey, and Ukraine. NJA ex-China IP includes series for India, Korea, Malaysia, Singapore, and Taiwan.


Source: Haver Analytics®, the BLOOMBERG PROFESSIONAL™ service, National Statistics Offices, Credit Suisse

Exhibit 27: Manufacturing PMIs in EM regions Exhibit 28: NJA (ex-China) IP growth and CRB metals price index

Index points; the latest observation is for February 2014

12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

48

50

52

54

56

48

50

52

54

56

Feb-12 Aug-12 Feb-13 Aug-13 Feb-14

LatAm mfg PMIEEMEA mfg PMINJA ex-China mfg PMIChina mfg PMI

10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-20

-10

0

10

20

30

-20

-10

0

10

20

30

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14

NJA ex-China, 3m/3m % ann.

CRB Metal Price Index, 3m%

Source: Haver Analytics®, Markit Economics, NBS, Credit Suisse Source: Haver Analytics®, the BLOOMBERG PROFESSIONAL™ service, National Statistics Offices, Credit Suisse

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Exhibit 29: NJA ex-China IP momentum and mfg PMI Exhibit 30: EEMEA IP momentum and mfg PMI Exhibit 31: LatAm IP momentum and mfg PMI

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-3

0

3

6

9

12

15

48

50

52

54

56

58

60

2010 2011 2012 2013 2014

EEMEA mfg PMI** (lhs)

EEMEA IP, 3m/3m% ann.*

EEMEA IP, 3m% ann.*

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-3

0

3

6

9

12

15

48

50

52

54

56

58

60

2010 2011 2012 2013 2014

EEMEA mfg PMI** (lhs)

EEMEA IP, 3m/3m% ann.*

EEMEA IP, 3m% ann.*

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-8

-4

0

4

8

12

16

46

48

50

52

54

56

58

2010 2011 2012 2013 2014

LatAm mfg PMI** (lhs)

LatAm IP, 3m/3m% ann.*

LatAm IP, 3m% ann.*

Exhibit 32: China IP momentum and mfg PMI Exhibit 33: India IP momentum and mfg PMI Exhibit 34: Korea IP momentum and mfg PMI

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

6

9

12

15

18

21

24

48

50

52

54

56

58

2010 2011 2012 2013 2014

China mfg PMI** (lhs)

China IP, 3m/3m% ann.

China IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-20

-15

-10

-5

0

5

10

15

20

25

48

50

52

54

56

58

60

62

2010 2011 2012 2013 2014

India mfg PMI (lhs)

India IP, 3m/3m% ann.

India IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-18

-12

-6

0

6

12

18

24

30

44

46

48

50

52

54

56

58

60

2010 2011 2012 2013 2014

S. Korea mfg PMI (lhs)

S. Korea IP, 3m/3m% ann.

S. Korea IP, 3m% ann.

*LatAm IP includes series for Argentina, Brazil, Chile, Colombia, Mexico and Peru aggregated by their PPP adjusted GDP weights. EEMEA IP includes series for Czech Republic, Hungary, Poland, Romania, Russia, South Africa, Turkey, and Ukraine. NJA ex-China IP includes series for India, Korea, Malaysia, Singapore, and Taiwan. Country IP series are seasonally and workday-adjusted. The latest observation is for December 2013 or January 2014.

**LatAm PMI includes series for Brazil and Mexico aggregated by their PPP adjusted GDP weights. EEMEA PMI includes series for Czech Republic, Hungary, Poland, Russia, South Africa and Turkey. NJA ex-China PMI includes series for India, Korea, Singapore, and Taiwan. For China, we use the average of NBS and HSBC manufacturing PMIs. The latest observation is for February 2014.

Source: Haver Analytics®, Markit Economics, NBS, National Statistics Offices, Credit Suisse

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Exhibit 35: Taiwan IP momentum and mfg PMI Exhibit 36: Singapore IP momentum and mfg PMI Exhibit 37: Russia IP momentum and mfg PMI

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-20

-10

0

10

20

30

40

50

60

41

44

47

50

53

56

59

62

65

2010 2011 2012 2013 2014

Taiwan mfg PMI (lhs)

Taiwan, 3m/3m% ann.

Taiwan IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-60

-30

0

30

60

90

120

150

180

48

50

52

54

56

2010 2011 2012 2013 2014

Singapore mfg PMI (lhs)

Singapore, 3m/3m% ann.

Singapore IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-6

-3

0

3

6

9

12

46

48

50

52

54

56

58

2010 2011 2012 2013 2014

Russia mfg PMI (lhs)

Russia IP, 3m/3m% ann.

Russia IP, 3m% ann.

Exhibit 38: Turkey IP momentum and mfg PMI Exhibit 39: S. Africa IP momentum and mfg PMI Exhibit 40: Poland IP momentum and mfg PMI

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-6

0

6

12

18

24

30

36

48

50

52

54

56

58

60

62

2010 2011 2012 2013 2014

Turkey mfg PMI (lhs)

Turkey IP, 3m/3m% ann.

Turkey IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-21

-14

-7

0

7

14

21

28

44

46

48

50

52

54

56

58

2010 2011 2012 2013 2014

S. Africa mfg PMI (lhs)S. Africa IP, 3m/3m% ann.S. Africa IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-21

-14

-7

0

7

14

21

28

44

46

48

50

52

54

56

58

2010 2011 2012 2013 2014

Poland mfg PMI (lhs)Poland IP, 3m/3m% ann.Poland IP, 3m% ann.

Source: Haver Analytics®, Markit Economics, National Statistics Offices, Credit Suisse

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Exhibit 41: Hungary IP momentum and mfg PMI Exhibit 42: Czech IP momentum and mfg PMI Exhibit 43: Brazil IP momentum and mfg PMI

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-24

-16

-8

0

8

16

24

32

44

46

48

50

52

54

56

58

2010 2011 2012 2013 2014

Hungary mfg PMI (3mma, lhs)Hungary IP, 3m/3m% ann.Hungary IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-18

-12

-6

0

6

12

18

24

30

45

48

51

54

57

60

63

2010 2011 2012 2013 2014

Czech mfg PMI (lhs)Czech IP, 3m/3m% ann.Czech IP, 3m% ann.

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-14

-7

0

7

14

21

44

47

50

53

56

59

2010 2011 2012 2013 2014

Brazil mfg PMI (lhs)Brazil IP, 3m/3m% ann.Brazil IP, 3m% ann.

Exhibit 44: Mexico IP momentum and mfg PMI Exhibit 45: Chile IP momentum Exhibit 46: Colombia IP momentum

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-6

-3

0

3

6

9

45

48

51

54

57

60

2010 2011 2012 2013 2014

Mexico INEGI mfg PMI (lhs)Mexico IP, 3m/3m% ann.Mexico IP, 3m% ann.

-30

-20

-10

0

10

20

30

40

50

-30

-20

-10

0

10

20

30

40

50

2010 2011 2012 2013 2014

Chile IP, 3m/3m% ann.

Chile IP, 3m% ann.

-15

-10

-5

0

5

10

15

20

25

-15

-10

-5

0

5

10

15

20

25

2010 2011 2012 2013 2014

Colombia IP, 3m/3m% ann.

Colombia IP, 3m% ann.

Source: Haver Analytics®, Markit Economics, National Statistics Offices, HALPIM, Credit Suisse

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Exhibit 47: Industrial production by country

% year-on-year change

2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 Dec 13 Jan 14 1Q 14F 2Q 14F 3Q 14F 4Q 14F

Latin America* 2.9 2.3 1.7 0.9 -0.8 -0.1 -0.2 -1.4 2.1 0.6 0.3 -0.5 na 1.1 1.3 1.8 2.6

Argentina(1) 6.9 5.5 5.4 5.0 -2.9 -1.7 -2.8 -3.9 2.7 1.8 2.0 1.5 2.1 0.5 -2.5 -0.5 0.0

Brazil 0.6 0.2 -1.9 -3.2 -4.2 -2.3 -0.3 -0.2 4.2 0.8 -0.3 -2.3 na 0.6 1.5 1.8 2.5

Chile 3.1 -0.5 3.7 3.3 3.4 3.3 1.7 3.3 1.4 4.9 2.5 2.3 -1.7 3.5 3.5 3.5 3.0

Colombia 3.6 6.5 4.1 1.8 0.2 -0.9 -2.1 -6.4 0.0 -1.5 0.3 1.5 na 4.2 0.1 1.3 1.1

Mexico 3.3 2.8 3.8 4.0 3.4 2.3 0.8 -1.7 -0.3 -0.5 -0.4 -0.3 na 0.4 2.4 2.7 4.0

Peru 6.1 3.8 1.2 -0.7 0.1 3.7 2.3 -0.2 2.8 1.4 1.3 1.1 na 2.1 1.2 1.7 4.5

EEMEA* 6.4 5.7 4.6 3.4 2.2 1.8 0.9 -0.8 1.2 2.1 3.0 3.8 na 1.9 2.8 2.8 2.9

Czech Republic 8.2 2.3 2.7 2.6 -0.9 -0.9 -4.1 -5.4 -2.4 3.9 6.2 9.3 na 6.8 8.1 7.2 6.1

Hungary 4.1 3.2 3.2 0.4 -0.8 -1.1 -5.4 -3.7 0.7 3.2 5.4 6.8 6.1 3.2 2.6 1.3 2.2

Poland 5.2 5.5 7.3 4.4 2.6 -0.1 -1.7 -1.6 1.2 5.0 4.7 6.7 4.1 6.2 6.7 6.4 7.6

Romania 6.9 7.9 2.9 1.8 2.7 1.7 3.4 4.7 7.4 8.9 10.2 10.2 na na na na na

Russia 6.1 5.4 3.8 4.5 2.3 3.4 3.2 -1.1 0.8 0.6 1.4 0.4 na 0.0 0.4 0.8 1.2

South Africa 2.2 0.7 0.8 -0.5 1.2 1.8 0.7 0.5 1.9 0.9 3.6 4.4 na 4.9 3.7 6.1 4.7

Turkey 9.7 8.9 7.5 3.9 3.6 1.9 0.9 1.3 3.2 3.9 3.8 6.9 na 0.0 4.5 3.1 3.1

Ukraine 7.5 9.5 5.9 1.8 1.5 -1.5 -3.4 -4.4 -5.3 -4.6 -2.8 0.0 -5.0 -2.7 -4.6 -4.7 -6.3

Non-Japan Asia* 10.3 9.5 6.9 6.9 5.6 5.1 8.0 6.0 5.0 6.4 5.8 6.0 na 5.6 6.3 6.6 7.1

NJA ex-China 5.3 3.7 -1.2 0.3 0.2 -0.6 5.1 1.0 -0.7 1.2 -0.1 0.8 na 1.1 2.4 2.7 3.8

China 13.9 13.8 12.8 11.6 9.5 9.1 10.0 9.5 9.1 10.1 10.0 9.7 na 8.7 9.1 9.4 9.4

India(2) 7.0 3.2 1.2 0.6 -0.3 0.4 2.1 2.2 -1.0 1.9 -1.1 -0.6 -na 1.0 3.5 3.5 5.3

Korea 6.2 5.3 3.4 3.8 1.3 -0.3 0.8 -0.8 0.0 0.2 1.9 2.9 -3.8 1.5 1.8 2.2 2.3

Malaysia -1.7 2.1 2.2 4.1 5.3 2.5 5.8 -0.1 3.9 3.7 3.4 4.8 na 4.3 3.8 3.0 1.6

Singapore -3.8 8.9 9.3 -1.1 4.1 -1.4 -0.2 -6.3 0.8 5.3 7.0 6.3 3.9 7.0 0.8 2.7 -0.1

Taiwan 7.1 2.4 -4.6 -4.5 -1.6 1.3 4.0 1.0 -0.6 0.7 2.0 5.6 -1.8 2.2 2.4 1.9 1.4

Thailand -1.7 3.2 -34.1 -6.9 -2.1 -11.1 43.4 2.9 -4.9 -3.5 -7.1 -6.3 -7.4 -5.5 -4.2 -0.4 3.5

EM World* 8.2 7.4 5.5 5.1 3.8 3.5 5.2 3.4 3.8 4.6 4.3 4.4 na 4.1 4.8 5.1 5.5

EM ex-China* 4.9 3.9 1.3 1.3 0.5 0.3 2.4 -0.2 0.7 1.3 0.9 1.3 na 1.3 2.2 2.5 3.2

(1) Argentinean IP data are privately collected by FIEL. (2) We use the IP series for India with the base year FY2004 = 100.

*Regional aggregates are calculated by weighting each country’s IP series by their PPP adjusted GDP weights.

Source: Haver Analytics®, the BLOOMBERG PROFESSIONAL™ service, National Statistics Offices, Credit Suisse

06 March 2014


Core inflation on the rise in EEMEA and Latin America This section aims to present the latest inflation developments across the EM world.

In Exhibits 50-55 we provide an overview of headline and core inflation dynamics in EM,

the US and the euro area, and in Exhibits 58-60 and 83-91 we present regional inflation

charts along with medium-term inflation outlooks for EM countries.

Year-on-year aggregate headline inflation in EM fell to 4.2% in January from its

recent high of 4.6% in November 2013 (Exhibits 52-53). The decline in EM headline

inflation between November 2013 and January 2014 was primarily driven by the sharp fall

in China's and India's food price inflation rates. Overall, we note that EM headline inflation

has been broadly stable since early 2012, while it moderated notably in DM during the

same period (Exhibit 50).

Indonesia, Turkey, Mexico and Peru stand out as the EM countries whose latest year-

on-year headline inflation readings exceed the upper bound of their respective headline

inflation target ranges, while in Poland, Hungary, the Czech Republic and Korea

headline inflation currently remains below the lower bound of their respective headline

inflation target ranges (Exhibits 56 and 61-82). We expect year-on-year headline inflation to

exceed the upper bound of the target range only in Turkey by end-2014.

The run-rate (annualized three-month % change) of aggregate EM inflation declined

notably to 3.1% in January from a nine-month high of 5.1% in November, driven

mainly by the slowdown in the run-rate of food inflation in recent months in India

and China (Exhibits 54-55). The run-rate of headline inflation has been picking up in

LatAm since September, but it is set to ease modestly in 1Q 2014. The run-rate of the

EEMEA region's headline inflation, however, troughed in November and will continue to

increase in 1Q 2014, according to CS forecasts. In NJA (ex-China and India) the run-rate

of headline inflation has been almost stable since November 2013 and is set to remain soft

in the near term. The latest data for January and February are suggesting that the run-rate

of headline inflation has been picking up in Mexico, Chile, Peru, Turkey, South Africa,

Romania, and the Philippines, while it has been declining in China, India, Singapore,

Taiwan, South Korea, the Czech Republic, Hungary, Israel, Poland and Russia in

recent months (Exhibits 61-82).

EM core1 inflation picked up modestly to 2.8% yoy in January from a 34-month low

of 2.5% yoy in August 2013 (Exhibits 51-53). This deterioration in core inflation dynamics

was driven primarily by sharp depreciation in some EM currencies during the past nine

months. However, we note that most EM economies (with the exception of Indonesia,

Malaysia, Thailand and Turkey) have been operating with notable excess capacities and

we forecast that they will continue to operate below potential in 2014, thus keeping

demand-pull inflationary pressures low, in our view. It is worth highlighting that Turkey and

Peru are the only EM countries that have their latest core inflation prints above the central

banks' target ranges for headline inflation.

The run-rate of EM’s core inflation remained flat at 2.8% since November 2013 after

increasing from as low as 2.2% in May 2013, driven by the pick-up in LatAm and

EEMEA regions in 2H 2013 (Exhibits 83, 86 and 89). EMFX weakness in early 2014 has

yet to pass through to core inflation, in our view. EEMEA’s core inflation dynamics have

been deteriorating since July 2013 and the run-rate of core inflation reached a 17-month

high of 4.3% in January 2014 (Exhibit 86). In LatAm where the core inflation pressure is

most acute among EM regions, the run-rate of core inflation has been on the uptrend since

May 2013 and reached a 34-month high of 4.9% in January (Exhibit 89). Meanwhile, in the

1 CPI excluding food, energy, alcohol and tobacco for most EM countries. For exceptions, please see Exhibit 157 footnotes.

Natig Mustafayev

+44 20 7888 1065

[email protected]

06 March 2014


NJA region (excluding China and India), the run-rate of core inflation declined to 1.8% in

January from the recent high of 2.7% in September 2013 (Exhibit 83).

Overall, core inflation dynamics remain well-behaved in most EM countries, as the

run-rate of core inflation has remained within the respective central banks’ headline

inflation target ranges (Exhibits 92-153). The only exceptions are Turkey and Peru,

where the run-rate of core inflation has been above the target range for headline inflation

in recent months. We also note that the run-rate of core inflation remains elevated in

Brazil, Mexico and Russia as well.

EM’s year-on-year food price inflation has declined since November 2013 to a four-

year low of 5.0% in January (Exhibits 52-53). This was mainly driven by the sharp

decline in food price inflation in China and India while it remained broadly flat at record

low levels in the rest of NJA, EEMEA and LatAm in the past several months. However, the

recent sharp pick-up in agricultural commodities prices (Exhibit 48) (CRB food index has

increased by about 15% since late December to an eight-month high) poses upside risk to

EM food price inflation dynamics in the coming months (Exhibits 84, 87 and 90).

Exhibit 48: CRB food prices Exhibit 49: Brent oil price

% year-on-year % year-on-year

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14

-30

-20

-10

0

10

20

30

40

50

-30

-20

-10

0

10

20

30

40

50

Dec-08 Dec-10 Dec-12 Dec-14

stable prices+/-15% shock

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14

-60

-30

0

30

60

90

-60

-30

0

30

60

90


stable prices+/-15% shock

Note: We consider three different scenarios - global food prices remain at their March 2014 levels throughout 2014 and they are 15% higher/lower from their March 2014 levels throughout 2014.

Source: BLOOMBERG PROFESSIONAL™ service, Credit Suisse

Note: We consider three different scenarios - global oil prices remain at their March 2014 levels throughout 2014 and they are 15% higher/lower from their March 2014 levels throughout 2014.

Source: BLOOMBERG PROFESSIONAL™ service, Credit Suisse

If the current global oil price levels are sustained, this would support the benign

inflation dynamics in EM countries during the current year, in our view (Exhibits 85,

88 and 91). Global oil prices rose sharply in late summer 2013 before easing to about

$110/bbl (Brent oil) in early September 2013 and has been range-bound since then

(Exhibit 49). If the oil price remains at current levels, the contribution of energy prices to

EM year-on-year inflation might pick up slightly by mid-2014 due to unfavorable base

effects before coming off by the end of 2014, all else (such as EM nominal exchange rates

against USD and tax/subsidy levels) are unchanged. However, energy prices have a far

lower weight (about 10%) in the CPI baskets in EM countries than food (about 25%), and

the increase in energy prices would have to become very dramatic to generate an inflation

problem in EM countries on its own. We note that local energy inflation in most EEMEA

(South Africa, Poland, Romania, Israel and Turkey) and LatAm countries (Brazil, Chile,

Colombia and Peru), and in some NJA countries (South Korea, Singapore, Thailand

and Taiwan) have high correlation with global oil prices (Exhibits 94-155).

Our economists expect year-on-year aggregate EM headline inflation to pick up

from 4.2% in January to 4.4% by March 2014 and remain broadly stable at that level

until 4Q 2014 before picking up to 4.7% by end-2014 (Exhibit 52). The projected

06 March 2014


gradual pick-up in EM inflation is mainly related to China where our economists expect the

year-on-year headline inflation to pick up from 2.5% in January to 3.5% by end-2014.

In NJA, we expect year-on-year headline inflation to increase from 4.0% in January to

4.4% by end-2014.

In LatAm, we expect year-on-year headline inflation to gradually increase from 4.6% in

January to 4.8% by 4Q 2014 after remaining stable through mid-2014.

In EEMEA, year-on-year headline inflation will increase modestly from 4.5% in January

to 5.5% by end-2014, according to our forecasts.

We expect the most notable increase in year-on-year headline inflation in 2014 to be

recorded in Kazakhstan, Hungary, Taiwan, South Korea and the Czech Republic, while

Indonesia’s and Hong Kong's headline inflation should decline modestly during the rest

of 2014, according to our forecasts (Exhibit 57).

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Exhibit 50: Headline inflation in EM, euro area and US Exhibit 51: Core inflation in EM, euro area and US


-2

0

2

4

6

8

10

-2

0

2

4

6

8

10

2004 2006 2008 2010 2012 2014

Euro area HICP inflationUS PCE inflationEM headline inflation

CS

fo

reca

st

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2004 2006 2008 2010 2012 2014

Euro area core HICP inflationUS core PCE inflationEM core inflation

CS

fore

cast

Source: Haver Analytics®, National Statistics Offices, Eurostat, Bureau of Economic Analysis, Credit Suisse Source: Haver Analytics®, National Statistics Offices, Eurostat, Bureau of Economic Analysis, Credit Suisse

Exhibit 52: EM CPI inflation Exhibit 53: EM (ex-China & India) CPI inflation


1

3

5

7

9

1

4

7

10

13

16

Jan-08 Jan-10 Jan-12 Jan-14

Food (left)

Core**

Headline CPI*

CS

fore

cast

1

4

7

10

1

4

7

10

13

16


Food (left)

Core**

Headline CPI*

CS

fore

cast

*CPI inflation for Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Hungary, Israel, Kazakhstan, Poland, Russia, S. Africa, Turkey, Ukraine, China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand were weighted by their PPP adjusted GDP weights. **Core CPI is defined as the CPI excluding food, energy, alcohol and tobacco.


*CPI inflation series for Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Hungary, Israel, Kazakhstan, Poland, Russia, S. Africa, Turkey, Ukraine, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand were weighted by their PPP adjusted GDP weights. **Core CPI is defined as the CPI excluding food, energy, alcohol and tobacco.


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Exhibit 54: The run-rate of EM CPI inflation Exhibit 55: The run-rate of EM (ex-China & India) CPI inflation

Annualized 3m % change (sa) Annualized 3m % change (sa)

0

4

8

12

16

0

4

8

12

16


Headline CPI*

Food

Core**

0

4

8

12

1610 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

4

8

12

16


Headline CPI*

Food

Core**

*CPI inflation for Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Hungary, Israel, Kazakhstan, Poland, Russia, S. Africa, Turkey, Ukraine, China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand were weighted by their PPP adjusted GDP weights. **Core CPI is defined as the CPI excluding food, energy, alcohol and tobacco.


*CPI inflation series for Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Hungary, Israel, Kazakhstan, Poland, Russia, S. Africa, Turkey, Ukraine, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand were weighted by their PPP adjusted GDP weights. **Core CPI is defined as the CPI excluding food, energy, alcohol and tobacco.


Exhibit 56: EM headline inflation relative to target Exhibit 57: Headline inflation in EM countries

pp; vertical bar refers to the size of the inflation target range % year-on-year

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Turk

ey

Bra

zil

S.

Afr

ica

Russia

Thaila

nd

Mexic

o

Pe

ru

Chile

Indonesia

Colo

mbia

Hungary

Chin

a

Ko

rea

Cze

ch R

ep.

India

Po

lan

d

Isra

el

Ph

ilippin

es

Gap between latest inflation and target

Gap between CS 2014 year-end forecast and target

-1

1

3

5

7

9

INR

TR

Y

IDR

RU

B

ZA

R

BR

L

KZ

T

HK

D

MX

N

PH

P

PE

N

MY

R

CL

P

CN

Y

CO

P

TH

B

SG

D

ILS

KR

W

PL

N

CZ

K

HU

F

TW

D

Latest

Dec 2014 (CS forecast)

Source: Haver Analytics®, National Statistics Offices, Central Banks, Credit Suisse Source: Haver Analytics®, National Statistics Offices, Credit Suisse

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Exhibit 58: NJA* (ex-Ch & In) headline inflation Exhibit 59: EEMEA* headline inflation Exhibit 60: LatAm* headline inflation

3m % change, annualized (sa) and % year-on-year 3m % change, annualized (sa) and % year-on-year 3m % change, annualized (sa) and % year-on-year

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

2

4

6

8

10

0

2

4

6

8

10

Jan-10 Jan-12 Jan-14

Headline CPI (%yoy)

Headline CPI (3m% ann.)

CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

2

4

6

8

10

0

2

4

6

8

10


Headline CPI (%yoy)


CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

2

4

6

8

10

0

2

4

6

8

10


Headline CPI (%yoy)


CS

fo

reca

st

Exhibit 61: China headline inflation Exhibit 62: India headline inflation Exhibit 63: Indonesia headline inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

3

6

9

12

0

3

6

9

12


Headline CPI (%yoy)


CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

5

10

15

20

25

0

5

10

15

20

25


Headline CPI (%yoy)


CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15

0

3

6

9

12

15

18

0

3

6

9

12

15

18

Feb-10 Feb-12 Feb-14

Headline CPI (%yoy)


CS

fo

reca

st

*LatAm CPI includes series for Brazil, Chile, Colombia, Mexico and Peru aggregated by their PPP adjusted GDP weights. EEMEA CPI includes series for Czech Republic, Hungary, Israel, Poland, Romania, Russia, South Africa, Turkey, and Ukraine. NJA CPI includes series for Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand.

Note: Bank Indonesia's headline inflation target for 2014 is 4.5% with a +/-1% permissible fluctuation band, illustrated by the shaded area in Exhibit 63.


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Exhibit 64: South Korea headline inflation Exhibit 65: Malaysia headline inflation Exhibit 66: The Philippines headline inflation


10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15

-1

2

5

8

-1

2

5

8


Headline CPI (%yoy)Headline CPI (3m% ann.)

CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

2

4

6

8

0

2

4

6

8


Headline CPI (%yoy)


CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15

0

2

4

6

8

10

0

2

4

6

8

10


Headline CPI (%yoy)


CS

fo

reca

st

Exhibit 67: Singapore headline inflation Exhibit 68: Taiwan headline inflation Exhibit 69: Thailand headline inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-8

-4

0

4

8

12

-8

-4

0

4

8

12


Headline CPI (%yoy)


CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-6

-4

-2

0

2

4

6

8

-6

-4

-2

0

2

4

6

8


Headline CPI (%yoy)


CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15

-2

0

2

4

6

8

-2

0

2

4

6

8


Headline CPI (%yoy)


CS

fo

reca

st

Note: 1. Bank of Korea's headline inflation target range for 2014 is 2.5-3.5%, illustrated by the shaded area in Exhibit 64. The Philippines Central Bank's headline inflation target for 2012-2014 is 4.0% with a +/-1% permissible fluctuation band, illustrated by the shaded area in Exhibit 66.


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Exhibit 70: Czech Republic headline inflation Exhibit 71: Hungary headline inflation Exhibit 72: Israel headline inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-4

-2

0

2

4

6

8

-4

-2

0

2

4

6

8



CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-2

1

4

7

10

13

-2

1

4

7

10

13



CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-3

0

3

6

9

-3

0

3

6

9



CS

fo

reca

st

Exhibit 73: Poland headline inflation Exhibit 74: Romania headline inflation Exhibit 75: Russia headline inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-3

0

3

6

9

-3

0

3

6

9



CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-4

0

4

8

12

16

-4

0

4

8

12

16



fore

ca

st

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15

0

3

6

9

12

15

0

3

6

9

12

15



CS

fo

reca

st

Note: Czech National Bank's headline inflation target for 2014 is 2% with a permissible fluctuation band of +/-1%, illustrated by the shaded area in Exhibit 70. Hungarian National Bank's medium-term target for headline inflation is 3%, as illustrated in Exhibit 71. Bank of Israel's headline inflation target for 2014 is 2.0% with a permissible fluctuation band of +/-1%, illustrated by the shaded area in Exhibit 72. The National Bank of Poland's headline inflation target has been 2.5% with a permissible fluctuation band of +/-1% since 2004, illustrated by the shaded area in Exhibit 73. The National Bank of Romania's headline inflation target for 2014 is 2.5% with a permissible fluctuation band of +/-1%, illustrated by the shaded area in Exhibit 74. Bank of Russia's headline inflation target for 2014 is 5% with a permissible fluctuation band of +/-1.5%, illustrated by the shaded area in Exhibit 75.

Source: Haver Analytics®, National Statistics Offices, Central Banks, Credit Suisse

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Exhibit 76: South Africa headline inflation Exhibit 77: Turkey headline inflation

3m % change, annualized (sa) and % year-on-year 3m % change, annualized (sa) and % year-on-year

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

3

6

9

12

0

3

6

9

12



CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15

0

4

8

12

16

20

0

4

8

12

16

20



CS

fo

reca

st

Exhibit 78: Brazil headline inflation Exhibit 79: Chile headline inflation Exhibit 80: Colombia headline inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

3

6

9

12

0

3

6

9

12



CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-2

0

2

4

6

8

10

-2

0

2

4

6

8

10



CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

-2

0

2

4

6

8

-2

0

2

4

6

8



CS

fo

reca

st

Note: The South African Reserve Bank's headline inflation target range for 2014 is 3-6%, illustrated by the shaded area in Exhibit 76. The Central Bank of Turkey's headline inflation target for 2014 is 5.0% with an uncertainty band of +/-2%, illustrated by the shaded area in Exhibit 77. The Central Bank of Brazil's headline inflation target for 2014 is 4.5% with a permissible fluctuation band of +/-2%, illustrated by the shaded area in Exhibit 78. The Central Bank of Chile's headline inflation target for 2014 is 3.0% with a permissible fluctuation band of +/-1%, illustrated by the shaded area in Exhibit 79. The Central Bank of Colombia's headline inflation target for 2014 is 3% with a permissible fluctuation band of +/-1%, illustrated by the shaded area in Exhibit 80.

Source: Haver Analytics®, National Statistics Offices, Central Banks, Credit Suisse

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Exhibit 81: Mexico headline inflation Exhibit 82: Peru headline inflation

3m % change, annualized (sa) and % year-on-year 3m % change, annualized (sa) and % year-on-year

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

0

3

6

9

12

0

3

6

9

12



CS

fo

reca

st

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15

0

2

4

6

8

0

2

4

6

8



CS

fo

reca

st

Note: Banco de Mexico's headline inflation target for 2014 is 3.0% with a permissible fluctuation band of +/-1%, illustrated by the shaded area in Exhibit 81. The Central Reserve Bank of Peru's headline inflation target for 2014 is 2.0% with a permissible fluctuation band of +/-1%, illustrated by the shaded area in Exhibit 82.


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Exhibit 83: NJA (ex-China & India) core inflation

Exhibit 84: NJA (ex-China & India) food price inflation

Exhibit 85: NJA (ex-China & India) energy inflation

% year-on-year and annualized 3m % change (sa) %year-on-year %year-on-year

10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

1

2

3

4

5

0

1

2

3

4

5

Jan-10 May-11 Sep-12 Jan-14

Core CPI (%yoy)

Core CPI (3m% ann.)

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15

0

3

6

9

12

15

-15

0

15

30


CRB food (lccy, %yoy, left)

NJA ex-Ch&In food CPI (%yoy)

Fcst*

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15

-20

-10

0

10

20

30

-40

-20

0

20

40

60


Brent oil (lccy, %yoy, left)

NJA (ex-Ch&In) energy CPI (%yoy)

Fcst*

Exhibit 86: EEMEA core inflation Exhibit 87: EEMEA food price inflation Exhibit 88: EEMEA energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

2

3

4

5

6

7

2

3

4

5

6

7


Core CPI (%yoy)

Core CPI (3m% ann.)

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15

0

4

8

12

16

20

24

-10

0

10

20

30

40

50


CRB food (lccy, %yoy)

EEMEA food CPI (%yoy, right)

Fcst*

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15

-5

0

5

10

15

20

25

-60

-30

0

30

60

90


Brent oil (lccy, %yoy)

EEMEA energy CPI (%yoy, right)

Fcst*

*Assuming unchanged CRB food, Brent oil prices and exchange rates for the rest of 2014


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Exhibit 89: LatAm core inflation Exhibit 90: LatAm food price inflation Exhibit 91: LatAm energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

2

3

4

5

6

7

2

3

4

5

6

7


Core CPI (%yoy)

Core CPI (3m% ann.)

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15

2

6

10

14

18

-15

0

15

30

45



LatAm food CPI (%yoy, right)

Fcst*

08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15

-4

0

4

8

12

-45

-30

-15

0

15

30

45

60

75



LatAm energy CPI (%yoy)

Fcst*

Exhibit 92: China core** inflation Exhibit 93: China food price inflation Exhibit 94: China energy*** inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

1

2

3

4

5

0

1

2

3

4

5


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-4

0

4

8

12

16

20

24

28

-40

-20

0

20

40

60

Mar-08 Mar-10 Mar-12 Mar-14


China food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-4

-2

0

2

4

6

-60

-40

-20

0

20

40

60

80

100



China energy CPI (%yoy, right)

*Assuming unchanged CRB food, Brent oil prices and exchange rates for the rest of 2014 **Index as calculated by Credit Suisse; excludes food and energy. ***Index estimated by Credit Suisse.


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Exhibit 95: India core* inflation Exhibit 96: India food price inflation Exhibit 97: India energy inflation


0

5

10

15

2010 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

5

10

15

20


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

2

6

10

14

18

22

26

-30

-15

0

15

30

45

60



India food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-5

0

5

10

15

20

-60

-40

-20

0

20

40

60

80

100



India energy CPI (%yoy, right)

Exhibit 98: South Korea core** inflation Exhibit 99: South Korea food price inflation Exhibit 100: South Korea energy inflation


10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

0

1

2

3

4

5

0

1

2

3

4

5

Feb-10 Jun-11 Oct-12 Feb-14

Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-4

0

4

8

12

16

-60

-40

-20

0

20

40

60



Korea food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-15

-10

-5

0

5

10

15

20

25

-60

-40

-20

0

20

40

60

80

100



Korea energy CPI (%yoy, right)

*Index calculated by Credit Suisse: based on the WPI excluding primary food articles, manufactured food products, fuel and power, beverages and tobacco. **Index as calculated by Credit Suisse: excludes food and non-alcoholic beverages, alcohol and tobacco, ‘electricity, gas and other fuels’ and fuels for transport equipment.


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Exhibit 101: Indonesia core* inflation Exhibit 102: Indonesia food price inflation

% year-on-year and annualized 3m % change (sa) %year-on-year

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

0

3

6

9

0

3

6

9


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

0

4

8

12

16

20

24

-30

-15

0

15

30

45

60



Indonesia food CPI (%yoy, right)

Exhibit 103: Malaysia core** inflation Exhibit 104: Malaysia food price inflation Exhibit 105: Malaysia energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

-1

0

1

2

3

4

-1

0

1

2

3

4


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-1

2

5

8

11

14

-30

-15

0

15

30

45

60



Malaysia food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-30

-20

-10

0

10

20

30

40

-60

-40

-20

0

20

40

60

80

100



Malaysia energy CPI (%yoy, right)

*Official core - CPI excluding food (volatile good) and energy, fuel, transportation and water supply (administered commodities). **Index as calculated by Credit Suisse: excludes food and non-alcoholic beverages, alcohol and tobacco, ‘electricity, gas and other fuels’ and fuels and lubricants for personal equipment.


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Exhibit 106: The Philippines core* inflation Exhibit 107: The Philippines food price inflation

% year-on-year and annualized 3m % change (sa) %year-on-year

10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

0

2

4

6

8

0

2

4

6

8


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-3

0

3

6

9

12

15

18

21

-30

-15

0

15

30

45



Philippines food CPI (%yoy, right)

Exhibit 108: Singapore core** inflation Exhibit 109: Singapore food price inflation Exhibit 110: Singapore energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

-9

-6

-3

0

3

6

9

12

-9

-6

-3

0

3

6

9

12


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-2

0

2

4

6

8

10

-30

-20

-10

0

10

20

30

40



Singapore food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-30

-20

-10

0

10

20

30

40

-60

-40

-20

0

20

40

60

80

100



Singapore energy CPI (%yoy, right)

*CPI excluding food and energy. **Index as calculated by Credit Suisse: excludes food, electricity, natural gas, LPG and fuels, alcohol and tobacco.


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Exhibit 111: Taiwan core* inflation Exhibit 112: Taiwan food price inflation Exhibit 113: Taiwan energy inflation


10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-2

-1

0

1

2

3

-2

-1

0

1

2

3


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-8

-4

0

4

8

12

16

-30

-20

-10

0

10

20

30

40



Taiwan food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-15

-10

-5

0

5

10

15

20

25

-60

-40

-20

0

20

40

60

80

100



Taiwan energy CPI (%yoy, right)

Exhibit 114: Thailand core** inflation Exhibit 115: Thailand food price inflation Exhibit 116: Thailand energy inflation


10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

-2

0

2

4

-2

0

2

4


Core CPI (%yoy)Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-3

0

3

6

9

12

15

18

-30

-20

-10

0

10

20

30

40



Thailand food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-36

-27

-18

-9

0

9

18

27

36

45

54

-60

-45

-30

-15

0

15

30

45

60

75

90



Thailand energy CPI (%yoy, right)

*Index as calculated by Credit Suisse: excludes food and non-alcoholic beverages, gas, electricity and oils, alcohol and tobacco. **Index as calculated by Credit Suisse: excludes food and non-alcoholic beverages, energy, alcohol and tobacco.

Note: Bank of Thailand's core inflation target range for 2014 is 0.5%-3.0%, illustrated by the shaded area in Exhibit 114.


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Exhibit 117: Czech core* inflation Exhibit 118: Czech food price inflation Exhibit 119: Czech energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

-2

0

2

4

6

-2

0

2

4

6


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-9

-6

-3

0

3

6

9

12

15

-30

-15

0

15

30

45

60



Czech food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-6

-3

0

3

6

9

12

15

-60

-40

-20

0

20

40

60

80



Czech energy CPI (%yoy, right)

Exhibit 120: Hungary core* inflation Exhibit 121: Hungary food price inflation Exhibit 122: Hungary energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

3

6

9

0

3

6

9


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-4

0

4

8

12

16

20

-30

-15

0

15

30

45

60



Hungary food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-12

-9

-6

-3

0

3

6

9

12

15

18

-60

-30

0

30

60

90



Hungary energy CPI (%yoy, right)

*Index calculated by Eurostat: excludes food and non-alcoholic beverages, energy, alcohol and tobacco.


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Exhibit 123: Israel core* inflation Exhibit 124: Israel food price inflation Exhibit 125: Israel energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

-2

0

2

4

6

8

-2

0

2

4

6

8


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-6

-3

0

3

6

9

12

15

18

-30

-20

-10

0

10

20

30

40

50



Israel food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-15

-10

-5

0

5

10

15

20

25

-60

-40

-20

0

20

40

60

80

100



Israel energy CPI (%yoy, right)

Exhibit 126: Poland core** inflation Exhibit 127: Poland food price inflation Exhibit 128: Poland energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

-2

0

2

4

6

8

-2

0

2

4

6

8


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-6

-3

0

3

6

9

12

-30

-15

0

15

30

45

60



Poland food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-12

-8

-4

0

4

8

12

16

20

-60

-40

-20

0

20

40

60

80

100



Poland energy CPI (%yoy, right)

*Index as calculated by Credit Suisse: excludes food and non-alcoholic beverages, energy, alcohol and tobacco. **Index calculated by Eurostat: excludes food and non-alcoholic beverages, energy, alcohol and tobacco.


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Exhibit 129: Romania core* inflation Exhibit 130: Romania food price inflation Exhibit 131: Romania energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

2

4

6

8

10

0

2

4

6

8

10


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-5

0

5

10

15

-20

-10

0

10

20

30

40

50

60



Romania food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-2

1

4

7

10

13

16

-50

-25

0

25

50

75

100



Romania energy CPI (%yoy, right)

Exhibit 132: Russia core** inflation Exhibit 133: Russia food price inflation Exhibit 134: Russia energy inflation


10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

0

2

4

6

8

10

0

2

4

6

8

10


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-5

0

5

10

15

20

25

30

-20

-10

0

10

20

30

40

50



Russia food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-6

-2

2

6

10

14

18

22

26

-60

-40

-20

0

20

40

60

80

100



Russia energy CPI (%yoy, right)

*Index calculated by Eurostat: excludes food and non-alcoholic beverages, energy, alcohol and tobacco. **Index calculated by Credit Suisse: excludes food and non-alcoholic beverages, alcohol, tobacco, gasoline and utilities.


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Exhibit 135: S. Africa core* inflation Exhibit 136: S. Africa food price inflation Exhibit 137: S. Africa energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

3

6

9

0

3

6

9


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-5

0

5

10

15

20

-40

-20

0

20

40

60



S. Africa food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-20

-10

0

10

20

30

40

50

-60

-40

-20

0

20

40

60

80

100



S. Africa energy CPI (%yoy)

Exhibit 138: Turkey core** inflation Exhibit 139: Turkey food price inflation Exhibit 140: Turkey energy inflation


10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

0

3

6

9

12

0

3

6

9

12


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

0

5

10

15

20

25

-20

-10

0

10

20

30

40

50

60



Turkey food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-8

-2

4

10

16

22

28

34

40

-60

-40

-20

0

20

40

60

80

100



Turkey energy CPI (%yoy, right)

*Index calculated by Credit Suisse: excludes food and non-alcoholic beverages, electricity and other fuels, petrol, alcohol and tobacco. **CPI excluding food and non-alcoholic beverages, energy, alcohol, tobacco and gold.


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Exhibit 141: Brazil core* inflation Exhibit 142: Brazil food price inflation Exhibit 143: Brazil energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

2

4

6

8

10

12

0

2

4

6

8

10

12


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

0

3

6

9

12

15

18

-30

-20

-10

0

10

20

30

40



Brazil food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-10

-6

-2

2

6

10

14

-50

-30

-10

10

30

50

70



Brazil energy CPI (%yoy, right)

Exhibit 144: Chile core** inflation Exhibit 145: Chile food price inflation Exhibit 146: Chile energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

-2

0

2

4

6

8

-2

0

2

4

6

8


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-5

0

5

10

15

20

25

-30

-20

-10

0

10

20

30

40



Chile food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-15

-10

-5

0

5

10

15

20

-60

-40

-20

0

20

40

60

80



Chile energy CPI (%yoy, right)

* Index calculated by Credit Suisse: excludes food and beverages, fuels and energy and fuels for personal transport. ** CPI excluding fuels and fresh fruit & vegetables.


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Exhibit 147: Mexico core* inflation Exhibit 148: Mexico food price inflation Exhibit 149: Mexico energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

0

2

4

6

8

0

2

4

6

8


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

0

3

6

9

12

15

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-10

0

10

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50



Mexico food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-3

0

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9

12

-60

-40

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0

20

40

60

80

100



Mexico energy CPI (%yoy, right)

Exhibit 150: Peru core* inflation Exhibit 151: Peru food price inflation Exhibit 152: Peru energy inflation


10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

0

2

4

6

0

2

4

6


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

0

3

6

9

12

-30

-20

-10

0

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40

50



Peru food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-15

-10

-5

0

5

10

15

20

-60

-40

-20

0

20

40

60

80



Peru energy CPI (%yoy, right)

*Index calculated by Credit Suisse: excludes food and beverages, tobacco, electricity and fuels.


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Exhibit 153: Colombia core inflation Exhibit 154: Colombia food price inflation Exhibit 155: Colombia energy inflation


10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14

1

3

5

7

1

3

5

7


Core CPI (%yoy)

Core CPI (3m% ann.)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-6

-3

0

3

6

9

12

15

18

-30

-20

-10

0

10

20

30

40

50



Colombia food CPI (%yoy, right)

08 08 08 08 08 08 08 08 08 08 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14

-12

-8

-4

0

4

8

12

16

-60

-40

-20

0

20

40

60

80



Colombia energy CPI (%yoy, right)


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Exhibit 156: Emerging markets headline inflation

% year-on-year change in the CPI indices, end-period.

2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 Jan 14 Feb 14E 1Q 14F 2Q 14F 3Q 14F 4Q 14F

Latin America* 4.8 5.1 5.1 4.4 4.4 4.7 4.3 4.8 4.9 4.3 4.5 4.6 4.5 4.4 4.5 4.9 4.8

Argentina** 21.6 21.9 21.2 21.9 22.1 22.8 23.9 22.8 22.9 24.0 26.4 29.9 na na na na na

Brazil 6.7 7.3 6.5 5.2 4.9 5.3 5.8 6.6 6.7 5.9 5.9 5.6 5.6 5.6 5.7 6.4 6.2

Chile 3.4 3.3 4.4 3.8 2.6 2.8 1.5 1.5 1.9 2.0 3.0 2.8 3.2 3.4 3.6 3.7 3.5

Colombia 3.2 3.7 3.7 3.4 3.2 3.1 2.4 1.9 2.2 2.3 1.9 2.1 2.3 2.5 2.4 2.3 3.1

Mexico 3.3 3.1 3.8 3.7 4.3 4.8 3.6 4.3 4.1 3.4 4.0 4.5 4.2 3.8 3.9 4.2 4.0

Peru 2.9 3.7 4.7 4.2 4.0 3.7 2.6 2.6 2.8 2.8 2.9 3.1 3.8 3.4 3.0 2.6 2.9

Venezuela 23.6 26.5 27.6 24.6 21.3 18.0 20.1 25.1 39.6 49.4 56.2 51.5 53.5 54.4 50.5 47.4 43.5

EEMEA* 7.2 5.8 6.1 4.9 4.7 5.8 5.1 5.2 5.2 4.7 4.7 4.5 4.7 5.1 5.3 5.3 5.5

Czech Republic 1.8 1.8 2.4 3.8 3.5 3.4 2.4 1.7 1.6 1.0 1.4 0.2 0.3 0.4 0.8 1.6 1.7

Hungary 3.5 3.6 4.1 5.5 5.6 6.6 5.0 2.2 1.9 1.4 0.4 0.0 0.8 0.9 1.5 1.6 3.1

Israel 4.2 2.9 2.2 1.9 1.0 2.1 1.6 1.3 2.0 1.3 1.8 1.4 1.4 1.4 1.5 1.7 1.4

Kazakhstan 8.4 8.7 7.4 4.6 4.9 5.0 6.0 6.8 5.9 5.4 4.8 4.5 5.4 7.5 8.5 8.5 8.3

Poland 4.2 3.9 4.6 3.9 4.3 3.8 2.4 1.0 0.2 1.0 0.7 0.7 1.0 1.2 1.9 1.6 2.0

Romania*** 7.9 3.5 3.1 2.4 2.0 5.3 5.0 5.3 5.4 1.9 1.6 1.1 na 1.3 1.4 3.2 3.5

Russia 9.4 7.2 6.1 3.7 4.3 6.6 6.6 7.0 6.9 6.1 6.5 6.1 6.2 6.7 6.6 6.6 6.3

South Africa 5.0 5.7 6.1 6.0 5.5 5.4 5.7 5.9 5.5 6.0 5.4 5.8 6.0 5.9 6.5 5.5 5.9

Turkey 6.2 6.2 10.4 10.4 8.9 9.2 6.2 7.3 8.3 7.9 7.4 7.8 7.9 7.7 7.4 6.7 7.7

Ukraine 11.9 5.9 4.6 1.9 -1.2 0.0 -0.2 -0.8 -0.1 -0.5 0.5 0.5 1.2 3.2 5.1 6.8 7.2

EM Asia* 6.6 6.5 4.9 4.6 4.0 3.8 4.2 4.0 4.1 4.4 4.2 3.2 4.0 4.2 4.1 4.0 4.4

EM Asia ex-China and India* 4.3 3.8 3.8 3.0 2.9 3.0 2.5 2.7 2.4 2.9 3.1 3.2 3.0 3.3 3.5 2.9 3.2

China 6.4 6.1 4.1 3.6 2.2 1.9 2.5 2.1 2.7 3.1 2.5 2.5 na 2.9 3.1 2.9 3.5

Hong Kong 5.6 5.8 5.7 4.9 3.7 3.8 3.8 3.6 4.2 4.6 4.3 4.6 na 3.8 4.1 5.2 3.4

India 9.9 10.8 8.2 9.4 9.9 9.7 10.6 10.4 9.9 9.8 9.9 5.1 na 8.5 7.5 8.4 8.2

Indonesia 5.5 4.6 3.8 4.0 4.5 4.3 4.3 5.9 5.9 8.4 8.4 8.2 7.7 7.8 7.2 4.5 4.8

Korea 4.2 3.8 4.2 2.7 2.2 2.1 1.4 1.4 1.1 0.9 1.1 1.1 1.0 1.4 2.1 2.0 2.6

Malaysia 3.5 3.4 3.0 2.1 1.6 1.3 1.2 1.6 1.8 2.6 3.2 3.4 na 3.5 4.0 3.4 2.8

Philippines 5.2 4.7 4.2 2.6 2.9 3.7 3.0 3.2 2.7 2.7 4.1 4.2 4.1 4.2 4.0 3.7 3.2

Singapore 5.2 5.5 5.5 5.2 5.3 4.7 4.3 3.5 1.8 1.6 1.5 1.4 na 1.3 3.0 2.9 2.7

Taiwan 2.0 1.4 2.0 1.3 1.8 3.0 1.6 1.4 0.6 0.8 0.3 0.8 0.0 1.6 1.0 0.6 2.6

Thailand 4.1 4.0 3.5 3.4 2.6 3.4 3.6 2.7 2.3 1.4 1.7 1.9 2.0 2.3 3.0 3.3 2.8

EM World* 6.4 6.1 5.1 4.7 4.2 4.3 4.4 4.3 4.4 4.5 4.3 3.7 4.2 4.4 4.4 4.4 4.7

EM ex-China* 5.5 4.9 5.0 4.1 4.0 4.5 4.0 4.2 4.2 4.0 4.1 4.1 4.1 4.3 4.5 4.4 4.5

*The regional aggregates are calculated by weighting each country’s inflation data by their PPP based GDP weights. Latin America’s aggregate inflation excludes Argentina and Venezuela. **For Argentina we use unofficial headline CPI data supplied by Haver Analytics®. ***We use Bloomberg consensus forecasts for Romania.

Source: Haver Analytics®, Credit Suisse

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Exhibit 157: Emerging markets core inflation

% year-on-year change in the CPI indices (WPI for India) excluding food, energy, alcohol and tobacco; end-period.

2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 Jan 14 Feb 14

Latin America* 3.9 4.0 4.0 4.1 4.1 4.3 4.4 3.7 3.5 3.4 3.2 3.6 3.8 3.9 4.3 4.3 na

Brazil 4.8 4.9 4.9 5.8 5.7 6.3 6.4 4.9 4.5 4.2 4.5 4.9 5.4 5.6 6.0 5.7 na

Chile 0.1 1.5 2.5 2.4 2.4 2.2 3.3 3.1 2.5 2.2 1.3 1.3 1.3 1.7 2.3 2.4 na

Colombia 3.1 3.0 3.2 3.1 3.4 3.4 3.9 3.8 3.6 3.7 3.2 2.8 2.8 2.8 2.7 2.7 na

Mexico 4.1 4.0 3.9 2.7 2.7 2.5 2.4 2.4 2.6 2.6 2.0 2.7 2.8 2.7 3.3 3.5 na

Peru 1.2 1.3 1.6 2.0 2.3 2.7 2.7 2.7 2.6 2.1 1.7 2.4 2.1 2.5 3.1 3.1 3.1

EEMEA* 3.7 3.2 3.2 3.6 4.2 4.8 5.1 5.1 4.9 4.6 4.2 4.0 3.9 3.9 3.9 4.1 na

Czech Republic 0.0 0.2 0.1 -0.3 -0.3 -0.1 0.5 1.6 1.7 1.6 1.1 0.5 0.2 0.1 0.4 -0.1 na

Hungary 3.7 1.6 1.6 1.4 1.9 1.8 2.2 3.5 3.4 3.7 3.5 2.5 2.5 2.2 2.2 2.0 na

Israel 2.7 2.3 2.3 3.4 3.1 3.1 2.0 1.7 1.0 0.5 0.7 0.3 0.5 0.8 1.0 0.7 na

Kazakhstan 7.3 6.6 6.3 6.0 5.3 6.1 5.5 4.2 5.6 5.8 6.3 8.0 6.6 6.0 5.9 5.6 6.2

Poland 0.9 0.9 0.9 1.7 1.9 2.1 3.2 2.5 2.5 2.0 1.0 0.8 0.4 0.7 0.5 0.2 na

Romania 3.1 4.8 4.8 4.5 3.7 2.5 2.8 3.2 3.5 3.0 2.7 2.7 2.6 2.2 2.3 2.6 na

Russia 4.3 4.0 4.1 4.6 5.5 5.9 5.9 5.9 5.6 5.3 5.0 4.7 4.7 4.0 4.1 4.4 4.5

South Africa 3.7 3.0 3.2 3.1 3.6 4.1 4.0 4.6 4.6 4.5 4.9 5.2 5.2 5.2 5.2 5.2 na

Turkey** 4.9 3.7 3.0 3.8 5.3 7.0 8.1 7.9 7.4 6.7 5.8 5.8 5.6 7.0 7.1 7.6 8.4

EM Asia* 4.3 3.7 4.2 3.8 4.0 4.3 3.6 3.5 3.1 3.1 3.2 3.4 3.0 3.2 3.1 3.2 na

EM Asia ex-China and India* 2.1 2.2 2.3 2.7 3.0 3.0 2.9 2.5 2.3 2.3 2.4 2.3 2.0 2.0 2.0 2.1 na

China*** 1.0 1.1 1.7 2.3 2.5 2.4 1.6 1.4 1.3 1.6 1.6 1.9 1.7 1.7 1.8 2.0 na

Hong Kong 1.2 0.5 1.9 3.3 4.7 5.7 5.7 5.1 3.8 3.6 3.6 3.6 4.1 4.2 4.2 4.2 na

India 15.3 11.9 12.6 8.7 9.1 10.7 9.4 10.1 8.8 8.0 8.2 8.6 7.9 8.5 7.9 8.0 na

Indonesia**** 4.0 4.0 4.3 4.5 4.6 4.9 4.3 4.3 4.2 4.1 4.4 4.2 4.0 4.7 5.0 4.5 4.6

Korea 1.9 1.9 1.8 2.4 2.7 2.6 2.9 1.9 1.4 1.3 1.3 1.5 1.5 1.5 1.6 1.5 1.4

Malaysia 1.0 1.2 1.2 1.4 2.0 2.1 2.0 1.8 1.2 1.0 1.1 1.0 1.4 1.2 1.5 1.6 na

Philippines*** 3.8 3.8 3.4 3.5 4.0 3.7 3.2 2.7 3.2 3.8 3.7 3.2 2.3 2.1 2.0 2.1 2.3

Singapore 2.2 3.9 5.4 5.6 5.7 5.6 5.6 5.6 6.3 5.7 5.7 4.9 2.1 1.8 1.3 1.3 na

Taiwan 0.5 0.6 0.8 0.8 1.0 0.7 0.7 0.4 0.6 0.9 0.9 0.9 0.4 0.3 -0.3 0.7 -1.1

Thailand 1.7 1.6 1.5 1.3 1.2 1.3 1.4 1.2 1.2 1.3 1.3 1.0 0.4 0.2 0.2 0.4 0.5

EM World* 4.1 3.7 4.0 3.8 4.1 4.4 4.0 3.8 3.5 3.4 3.3 3.5 3.3 3.4 3.4 3.5 na

EM ex-China and India* 3.2 3.1 3.2 3.4 3.8 4.0 4.2 3.8 3.6 3.4 3.3 3.3 3.2 3.3 3.4 3.4 na

*The regional aggregates are calculated by weighting each country’s inflation data by their PPP based GDP weights. **Official core excluding energy, food, beverages, tobacco and gold. ***Core inflation measured by CPI exc. food and energy. ****Official core inflation measured by CPI exc. food (volatile good) and energy, fuel, transportation and water supply (administered commodities).


06 March 2014


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06 March 2014


Latin America

06 March 2014


Latin America: Growing pains Our regional growth forecast for 2014 stands at 2.2%, down from 3.4% last

November. We have lowered our growth forecasts for Argentina, Brazil, Mexico and

Venezuela in this period. Our regional growth forecast for 2015 is 3.1%, compared to 3.6%

in the previous quarterly. Our regional real GDP growth estimate for 2013 is 2.6% versus

2.5% in the previous quarterly. In our region, only Brazil, Mexico and Peru have reported

their official 2013 real GDP growth rates. Brazil grew 2.3% yoy in 2013, slightly below our

forecast of 2.4% last November. Meanwhile, Mexico grew 1.1% yoy in 2013, slightly above

our previous forecast of 1.0%, and Peru expanded 5.0%.

Exhibit 158. Latin America: Credit Suisse 2013-2014 real GDP growth and inflation forecasts

2013 real GDP growth 2014 real GDP growth 2013 inflation 2014 inflation

Nov-13 Mar-14 Nov-13 Mar-14 Nov-13 Mar-14 Nov-13 Mar-14

Argentina 4.2 4.7 2.8 -0.3 10.0 10.9 13.4 30.4

Brazil 2.4 2.3 3.0 1.8 5.8 5.9 5.8 6.2

Chile 4.3 4.0 3.6 3.8 2.1 3.0 3.5 3.5

Colombia 4.0 4.2 4.5 4.5 2.3 1.9 3.2 3.1

Mexico 1.0 1.1 3.7 2.8 3.3 4.0 3.8 4.0

Peru 5.1 5.0 5.5 5.5 3.1 2.9 2.6 2.9

Venezuela 1.7 1.6 1.6 -0.5 54.8 52.7 48.6 43.5

Latin America 2.5 2.6 3.4 2.2 8.1 8.2 8.3 10.1


We project that 12-month regional consumer price inflation will rise to 10.1% at

year-end 2014 from 8.2% at year-end 2013. This is above our forecast of 8.3% last

November as we expect higher inflation in Argentina, Brazil, Mexico and Peru. In

Argentina, the higher-than-expected first print from the new national CPI, combined with

fundamental economic factors, drove the upward revision to our year-end 2014 inflation

forecast to 30.4% yoy from 13.4% previously. Venezuela, meanwhile, is likely to remain

the country with the highest official inflation among all emerging market economies we

cover globally, even after we have lowered our year-end 2014 inflation forecast to 43.5%

from 48.6% previously. In the rest of the region, we project higher 12-month inflation

figures for Brazil and Peru for year-end 2014.

We expect modest external imbalances to persist in 2014. At the regional level, we

forecast that the current account deficit will widen slightly to 2.6% of GDP in 2014, from

2.5% projected for 2013. This is a result of larger current account deficit forecasts for

Argentina, Colombia and Mexico, along with an erosion of the surplus in Venezuela,

counterbalanced by the consolidation of current account deficits in the rest of the region.

On the fiscal front, we project that the regional fiscal deficit will widen in 2014 to

3.6% of GDP versus an estimated deficit of 3.1% of GDP in 2013. We expect Peru’s

fiscal surplus in 2014 to deteriorate to only 0.2% of GDP from our estimate of 0.7% in

2013. Fiscal deficits should remain modest in most of the other countries under our

coverage, with the exception of Venezuela, which will likely run a deficit equivalent to

8.2% of GDP in 2014 despite some expected consolidation from last year. Finally, we

project that the region’s government debt-to-GDP ratio will increase slightly to 47.9% in

2014 from an estimated 44.7% in 2013 mainly due to deteriorating debt dynamics in

Argentina and Venezuela.

Alonso Cervera

+52 55 5283 3845

[email protected]

Di Fu

+1 212 538 4125

[email protected]

Juan Lorenzo Maldonado

+1 212 325 4245

[email protected]

Casey Reckman

+1 212 325 5570

[email protected]

Nilson Teixeira

+55 11 3701 6288

[email protected]

06 March 2014


At the country level, we think that Argentina’s recent policy adjustments are important,

but there is more work to be done. January’s devaluation, tighter monetary policy, controls

on foreign exchange outflows and seasonal dollar inflows should help provide temporary

relief for the peso and international reserves during the second quarter of 2014. Preserving

reserves comes at the expense of economic activity and inflation, though; we project a 0.3%

reduction in real GDP this year, while inflation could rise to at least 35%-40%. We believe

that the benefits of the devaluation will be short-lived if the government does not implement a

more comprehensive anti-inflation strategy that involves reducing monetary financing of the

fiscal deficit. Our base case assumes only a modest curtailing of subsidies and renewed

currency pressures in the second half of this year.

In Brazil, we forecast 1.8% real GDP growth for 2014 down from 2.3% in 2013. This is

based on a scenario of decelerating domestic demand and a stronger external sector

contribution. Inflation is likely to remain well above the center of the inflation target range

(4.5%) despite the recent monetary policy tightening cycle and the economic slowdown. We

expect the Selic basic interest rate to remain unchanged at 10.75% for the remainder of

2014, although any fiscal disappointment and/or significant depreciation of the Brazilian real

would pose risks to our call. The newly adjusted primary surplus target of 1.9% appears

achievable, in our view. However, we still assume a primary surplus of 1.3% of GDP in 2014

due to the absence of substantial extraordinary revenues and potential reluctance to reduce

tax breaks in an election year. The overall fiscal deficit would increase to 4.3% of GDP in in

2014 from 3.3% last year. Some fiscal austerity could mitigate the risk of sovereign ratings

downgrades.

In Chile, clear signs of an economic slowdown have emerged in recent months. For

2014, we are projecting average annual real GDP growth of 3.8%, down from the estimated

4.0% average growth rate in 2013. Though fixed investment continues to be the main driver

of the slowdown, private consumption has also lost some strength, despite the still high

levels of consumer confidence. External risks are to growth from lower copper prices and

weaker growth in China; internally, the main risk is a weakening of the labor market We think

that the central bank will continue to address the slowdown by cutting the monetary policy

rate further in upcoming months, even if this leads to further weakening pressures on the

Chilean peso.

In Colombia, investor focus in upcoming months will likely be on the potential

monetary policy tightening cycle and on the 25 May presidential election. We think the

central bank will start increasing interest rates in July 2014. We anticipate 125bps of rate

hikes in 2014 and an additional 50bps in 2015. With regards to the presidential election, we

believe President Santos will be re-elected based on the polls, and do not expect political

noise to hamper macroeconomic performance in the country. Overall, we see a favorable

medium-term scenario for macroeconomic fundamentals in Colombia, which includes the

potential of a peace treaty with the FARCs, a higher potential output and rating upgrades.

Exhibit 159. Latin America: Credit Suisse 2014 current account, fiscal balance, government debt and foreign debt forecasts

% of GDP

2014 current account 2014 fiscal balance 2014 government debt 2014 foreign debt

Nov-13 Mar-14 Nov-13 Mar-14 Nov-13 Mar-14 Nov-13 Mar-14

Argentina -1.5 -1.0 -3.4 -3.7 47.2 55.3 34.1 41.8

Brazil -3.2 -3.4 -4.0 -4.3 60.0 60.0 22.5 24.0

Chile -4.1 -4.5 -0.9 -0.6 12.2 12.4 46.0 52.1

Colombia -3.4 -3.7 -1.0 -1.3 38.2 38.5 21.1 23.5

Mexico -1.8 -2.3 -3.4 -3.5 41.7 43.4 18.1 19.5

Peru -4.7 -4.6 0.2 0.2 17.8 17.9 30.3 29.4

Venezuela 0.9 1.7 -7.5 -8.2 40.6 47.5 30.5 41.4

Latin America -2.5 -2.6 -3.4 -3.6 46.0 47.9 24.6 27.5


06 March 2014


In Mexico, the economy is unlikely to reap in 2014 the full benefits of last year's

structural reforms, which are still being implemented. We view 2014 as a transition year.

We have lowered our annual average real GDP growth forecast to 2.8% from 3.7% to reflect

disappointing GDP figures in late 2013 and a slow start in 2014. The main risk to our growth

forecast for Mexico is that US imports remain stagnant. If this happens, domestic demand

strength in Mexico is unlikely to be enought to yield real GDP growth of 2.8%. Unfortunately,

we see no room for additional monetary or fiscal stimulus in 2014, even if growth were to

disappoint. This would likely leave the Mexican peso as the main adjustment variable to a

negative growth surprise.

In Peru, we maintain our forecast of 5.5% annual average real GDP growth for 2014

and 5.8% for 2015. We expect that as commodity prices continue to slip in 2014, the

recovery of the external balances will be only marginal and the fiscal surplus will continue to

shrink. With regards to monetary policy, the central bank will likely remain on hold during

2014 but hike its policy rate in 2015, as activity accelerates and headline inflation remains

high. We also expect continued intervention in the FX market if excessive depreciation

pressures on the currency resurface. Political noise will likely continue to be a risk in Peru to

the extent that it may hurt business confidence and deter investment decisions.

Finally, in Venezuela, anti-government demonstrations show no sign of abating.

President Nicolas Maduro’s government can probably weather the current storm, but the

situation highlights the risk that growing dissatisfaction could eventually become a

destabilizing force. On the economic front, the government is preparing to implement a more

flexible and transparent foreign exchange market in the near term. This could potentially help

reduce shortages, benefit fiscal accounts and bring inflation down later in the year, albeit

depending on still unknown factors including the exchange rate used and trading volumes.

We now expect real GDP to fall by 0.5% in 2014 as public and private consumption

decelerate further and investment continues to contract. We do not foresee an interruption in

foreign debt service in 2014, but the outlook for 2015 and beyond is riskier, in our view.

Exhibit 160: Summary macroeconomic data: GDP growth

1Q 13 2Q 13 3Q 13 4Q 13E 1Q 14F 2Q 14F 3Q 14F 4Q 14F 1Q 15F

Nominal GDP ($bn) Real GDP growth (% quarter on quarter, seasonally adjusted annual rate)

2013E 2014F 2015F

LATIN AMERICA 5,189.9 4,928.0 5,112.9 1.3 4.3 1.1 1.9 0.2 4.9 2.5 2.8 2.0

Argentina 482.4 363.1 323.3 8.5 9.0 -0.7 -5.2 0.3 0.3 2.3 -1.0 -3.5

Brazil 2,240 2,135 2,175 0.0 7.5 -2.1 2.8 0.3 5.7 -0.6 2.3 2.9

Chile 279.5 262.0 283.1 3.3 1.3 5.4 0.5 3.3 5.3 8.7 0.9 -0.6

Colombia 379.1 377.5 412.4 0.9 8.6 4.5 7.5 -1.9 9.5 5.1 2.0 1.6

Mexico 1,236 1,286 1,422 0.8 -2.7 3.9 0.7 0.8 6.0 4.3 5.2 3.1

Peru 206.6 213.5 232.7 5.4 4.0 4.9 6.4 4.4 6.1 8.4 8.1 5.6

Venezuela* 366.6 290.9 264.0 -5.5 6.8 0.0 7.1 -6.9 -2.3 0.0 0.9 1.4

*Forecasts based on a projected weighted average exchange rate across official FX markets (CENCOEX, SICAD 1 and SICAD 2)

IMF PPP weights are used to compute regional aggregate figures.

Source: the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, Credit Suisse

06 March 2014


Argentina: Bandaged, but not cured Recent policy measures have bought the Argentine authorities some time. Tighter

monetary policy, controls on foreign exchange outflows and seasonal dollar inflows

should provide some temporary relief for the peso and international reserves during the

second quarter of 2014. Still, we remain concerned that the benefits of January’s

devaluation will be short-lived if the government does not implement a more

comprehensive strategy to reduce the monetary financing of the fiscal deficit as well.

Our base case assumes that Argentina will face not only higher inflation and economic

contraction in 2014, but also pressures to adjust the currency again later this year. We

expect President Cristina Kirchner to continue keeping a lower profile in terms of

economic management, leaving her cabinet to bear the brunt of the associated costs.

The agricultural harvest should provide favorable tailwinds for international

reserves and the peso this quarter. Last year, nearly 40% of the $22.8bn in export

proceeds reported by grains and oilseeds farmers was sold in the second quarter and

net central bank dollar purchases were $1.5bn during this period. We expect similar, if

not somewhat higher, volumes this year. In addition, banks will keep adjusting their

foreign exchange exposure in accordance with regulatory changes through April,

resulting in a one-off increase in the supply of dollars and net reserves. The recent

easing of restrictions on purchasing dollars for savings purposes may also continue to

help alleviate pressure on the informal exchange rate, which currently remains

approximately 35% weaker than the offical rate.

Protecting reserves comes at the cost of economic activity. Consumer confidence

was already falling sharply before the devaluation and it is now at its lowest level since

September 2002. Private consumption will likely collapse further under real wage losses

and higher interest rates, while economic uncertainty weighs on investment. From the

supply side, tighter foreign exchange controls should amplify the downturn in economic

activity, as was the case in 2012. Our projection for official data is a 0.3% reduction in

real GDP, while private estimates could suggest a contraction of 1.5%-3.0%.2

Ongoing wage negotiations pose a key economic risk. The government aims to limit

average nominal wage increases to between 25% and 30% yoy this year, compared to

26% in 2013. Doing so is necessary to help contain inflation to 35%-40% yoy in 2014,

up from 28.4% last year according to private estimates. Even with 30% wage increases,

it could be difficult to anchor inflation expectations, prices could rise sharply and fiscal

pressures would grow. Although the discussions are likely to remain particularly tense

following the devaluation and due to increased competition between unions, concerns

that employment will fall as the economy contracts could work in the government’s favor.

More active monetary policy management is a positive development. The central

bank has played a larger role in economic policymaking under President Juan Carlos

Fabrega, who seems to enjoy solid government support at least for the time being.

Interest rates moved up sharply following the devaluation and sterilization efforts have

increased. Growth of the monetary base is decelerating towards 20% yoy, about half its

pace 12 months ago. Unless assistance to the Treasury slows, sterilization (and its

costs) could expand further in the near term given the need to absorb peso liquidity

resulting from central bank purchases of dollars from agricultural exporters. We believe

that Fabrega would also be willing to allow interest rates to rise higher and the currency

to weaken more if necessary to contain price pressures and reduce demand for dollars.

Significant fiscal tightening is also needed, but is less likely to materialize. The

government is reportedly preparing a subsidy reduction plan to roll out once the principal

wage negotiations are concluded. We continue to expect only modest progress on this

front, though, given the political costs associated with increased rates for public

2 We acknowledge elevated uncertainty around official GDP data given the end-March deadline for the government to present

“revised GDP estimates” to the IMF and because INDEC also plans to rebase the series to 2004 from 1993.

Casey Reckman

+1 212 325 5570

[email protected]

06 March 2014


services, transportation fares and utilities. Monetization of the deficit will likely remain a

fundamental underlying inflationary pressure. We project that the federal government’s

primary deficit will narrow slightly to 0.7% of GDP in 2014, from 0.9% last year. The

overall deficit would widen to 2.9% of GDP this year, compared to 2.4% in 2013,

assuming the government makes a GDP warrant payment worth 0.9% of GDP.

External pressures are likely to increase in the second half of 2014. Accelerating

inflation could erode the competitiveness gains from January’s devaluation in six

months’ time, according to our calculations. A weaker Brazilian Real and the end of the

harvest will probably also weigh on the peso and reserves. Our projections assume

another 30% currency devaluation in the fourth quarter and a year-end exchange rate of

11.5 pesos per dollar. If not accompanied by additional monetary tightening and

coordinated fiscal policy, this second adjustment could be an even riskier undertaking

from a credibility perspective, especially since reserves could easily have fallen below

$25.0bn by then.

We forecast that gross reserves will decline to $22.1bn by year-end. The

improvement in the trade surplus stemming from the devaluation and economic

slowdown will be limited by Argentina’s structural energy deficit. Meanwhile, we expect

the reduction in the services deficit associated with the easing of controls on dollar

purchases to be offset by increased capital flight. Another key component of our

projection is $7.8bn of dollar-denominated debt service to private creditors, including

GDP warrant payments. The main risks to our forecast are lower commodity prices and

a sharp depreciation of the Brazilian Real. On the other hand, larger-than-expected FDI

inflows following the deal to compensate Repsol could lend upside to our projections.

The debt service outlook is more complicated in 2015. We estimate that total foreign

currency debt service to private creditors, including sovereign, provincial and corporate

maturities, rises to $12.5bn next year. This is equivalent to 56.4% of our year-end 2014

projection for gross international reserves and 98.0% of our net reserves forecast. This

suggests increased pesification risks for local law debt unless the government is able to

regain market access or secure an alternative backstop.

We anticipate continued progress on the government’s international agenda. The

agreement with Repsol is the most recent affirmation of the government’s commitment

to normalizing relations with foreign investors. It should clear the way for increased

foreign participation in developing Argentina’s shale resources. The publication of the

new national consumer price index and a credible inflation print for January was another

positive signal. We would not be surprised to see Argentina agree to an Article IV

consultation with the IMF following the delivery of “revised GDP estimates” by the end of

March. Doing so could help advance prospects of a settlement with the Paris Club, albeit

after a lengthy negotiation process, and potentially increase the IMF’s support for

Argentina’s position before the US Supreme Court. Settling with holdout creditors

remains a thorny political and economic issue for the government, though, in our view.

Finally, we expect the Supreme Court to respond to Argentina’s second cert

petition by the end of June. Holdout creditors and amici have until 18 March to file

briefs, though this period could be extended by 30 days. Argentina would have another

two weeks to reply. Then it could take approximately 4 to 6 weeks for the justices to

discuss the appeal in conference. Thus, the case could easily be resolved before the

Court’s summer recess if it declines to hear the appeal. If the Court calls for the US

Solicitor General’s view and/or the New York Court of Appeals is asked to certify the pari

passu interpretation, we would expect the process to extend into 2015. Ultimately, we

continue to believe that the Supreme Court will not find Argentina’s arguments regarding

violations of the Foreign Sovereign Immunities Act compelling enough to overturn the

lower courts’ consistent rulings against the government.

06 March 2014


January’s devaluation was a

welcome adjustment from a

competitiveness

perspective.

Subsequent government

measures and an

agreement with agricultural

exporters to sell crops in

storage helped to stem the

decline in international

reserves in February.

Exhibit 161: Real effective exchange rate

Exhibit 162: Gross central bank foreign exchange reserves

Increase = appreciation $bn

0

50

100

150

200

250

Feb-00 Oct-04 Jun-09 Feb-14

REER using the privatelyestimated inflation data

REER using the officialinflation data

25

30

35

40

45

50

55

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14

Source: Credit Suisse Source: Central bank, Credit Suisse

The central bank moved

decisively to tighten

monetary policy, although

additional interest rate

increases and sterilization

operations may be needed

as inflation accelerates.

Seasonal agriculture-related

foreign exchange inflows

should temporarily reduce

pressure on Argentina’s

external accounts in the

second quarter.

Exhibit 163: Monetary aggregates and interest rates

Exhibit 164: Agricultural export proceeds vs. net dollar purchases

% change yoy, 20-day moving average for the monetary aggregates (lhs), % (rhs) data though 21 February 2014

$bn, 2013

10

15

20

25

30

20

25

30

35

40

45

50

Feb-11 Feb-12 Feb-13 Feb-14

M2 (lhs)Monetary base (lhs)Private Badlar (rhs)

-3

-2

-1

0

1

2

3

4

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Jul

Aug

Se

p

Oct

No

v

Dec

Grains and oilseeds export proceedsNet central bank dollar purchases

Source: Central bank, Credit Suisse Source: CIARA-CEC, central bank, Credit Suisse

Import controls will hamper

economic activity, but are

unlikely to curb growing

energy-related outflows.

Meanwhile, monetization of

the fiscal deficit should keep

pressure on inflation as we

expect only a modest

reduction in primary

expenditure this year.

Exhibit 165: Energy deficit and imports

Exhibit 166: Federal government fiscal balance

$bn % of GDP

-8

-6

-4

-2

0

2

4

6

8

10

12

14

03 04 05 06 07 08 09 10 11 12 13

Energy trade deficit

Energy imports

-3

-2

-1

0

1

2

3

4

05 06 07 08 09 10 11 12 13 14F

Primary fiscal balance

Overall fiscal balance

Source: Central bank, Credit Suisse Source: Ministry of Economy, Credit Suisse

06 March 2014


Difficult wage negotiations

with trade unions pose a

key near-term risk just as

inflation expectations have

risen sharply following the

devaluation.

Exhibit 167: Average wage growth Exhibit 168: Inflation expectations

% yoy % yoy

-10

-5

0

5

10

15

20

25

30

35


RealNominal

0

5

10

15

20

25

30

35

40

45


Median

Average

Source: Ministry of Economy, central bank, Credit Suisse Source: Di Tella University, Credit Suisse

Weaker domestic

confidence, as well as

higher interest rates and

inflation, will take a toll on

Argentina’s economy in

2014.

We expect a collapse in

private consumption and

investment to drive a

contraction in real GDP this

year.

Exhibit 169: Consumer confidence Exhibit 170: Confidence in government

Headline index Headline index

25

30

35

40

45

50

55

60

65


0

1

2

3

4

5


Nestor Kirchner

administration

Cristina Kirchner

administration

Source: Di Tella University, Credit Suisse Source: Di Tella University, Credit Suisse

Risks to dollar-denominated

debt service rise in 2015, as

the total amount due to

private creditors is

equivalent to 98% of our net

foreign exchange reserves

forecast for year-end 2014.

In the absence of a private

settlement, an adverse

Supreme Court ruling could

lead to a credit event as

soon as 2Q 2014.

Exhibit 171: Foreign currency debt service to private creditors

Exhibit 172: Upcoming foreign law debt payments and CDS expiration dates

$bn, interest and amortization $mn

0

2

4

6

8

10

12

14

16

18

2014* 2015 2016 2017 2018

Corporate Provincial

Sov. External Sov. Local

Payment Date Instrument Amount($mn)

3/20/2014 CDS -

3/31/2014 Par 164

6/2/2014 Global 17 42

6/20/2014 CDS -

6/30/2014 Discount 521

9/20/2014 CDS -

9/30/2014 Par 164

12/2/2014 Global 17 42

12/15/2014 GDP warrant 2568

12/20/2014 CDS -

12/31/2014 Discount 521

Source: the BLOOMBERG PROFESSIONAL™ service, Credit Suisse Source: the BLOOMBERG PROFESSIONAL™ service, Credit Suisse

06 March 2014


Argentina: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

National accounts, population and unemployment

Real GDP growth (%) 8.7 6.8 0.9 9.2 8.9 1.9 4.7 -0.3 -0.5

Growth in real private consumption (%) 9.0 6.5 0.5 9.0 10.7 4.4 7.1 -2.6 -1.5

Growth in real fixed investment (%) 13.6 9.1 -10.2 21.2 16.6 -4.9 5.4 -2.2 -2.0

Fixed investment (% of GDP) 22.6 23.1 20.6 22.8 24.5 22.8 23.0 22.5 22.2

Nominal GDP ($bn) 260.8 326.5 307.1 368.7 446.0 475.5 482.4 363.1 323.3

Population (mn) 39.4 39.7 40.1 40.5 40.9 41.3 41.7 42.1 42.5

GDP per capita, $ 6,626 8,216 7,653 9,100 10,905 11,514 11,568 8,625 7,608

Unemployment (% of labor force, end-year) (1) 7.5 7.3 8.4 7.3 6.7 6.9 6.4 7.0 7.3

Prices, interest rates and exchange rates

CPI inflation (%, December to December) 8.5 7.2 7.7 10.9 9.5 10.8 10.9 30.4 24.9

CPI inflation (%, average) 8.8 8.6 6.3 10.4 9.8 10.0 10.6 22.5 26.8

Exchange rate (ARS per USD, end-year) 3.15 3.45 3.80 3.98 4.30 4.92 6.52 11.45 13.75

Exchange rate (ARS per USD, average) 3.12 3.16 3.73 3.91 4.13 4.55 5.48 8.87 12.54

REER (% change, December to December) (2) -8.6 8.6 -18.3 0.3 0.7 -4.3 -1.6 12.5 30.0

Nominal wage growth (% year-on-year change, average) (3) 20.6 22.3 19.7 19.7 27.7 26.9 26.5 30.0 25.0

Central bank's 7 day repo rate (%, end-year) 10.30 13.00 11.50 11.50 11.50 11.50 11.50 11.50 11.50

Fiscal data

General government fiscal balance (% of GDP) 1.1 0.8 -1.6 0.2 -2.3 -3.5 -3.3 -3.7 -3.4

General government primary fiscal balance (% of GDP) 3.4 2.8 0.8 2.1 0.1 -0.7 -1.3 -1.1 -1.4

General government expenditure (% of GDP) 31.4 32.8 36.6 37.9 40.4 43.6 44.9 46.8 46.5

Federal government fiscal balance (% of GDP) 1.1 1.4 -0.6 0.2 -1.7 -2.6 -2.4 -2.9 -2.5

Federal government primary fiscal balance (% of GDP) 3.2 3.2 1.5 1.7 0.3 -0.2 -0.9 -0.7 -1.0

Gross general government debt (% of GDP, end-year) (4) 71.1 57.4 61.7 53.7 47.5 46.6 42.8 55.3 60.7

Net general government debt (% of GDP, end-year) (4) (5) 63.6 51.1 47.9 39.8 33.6 31.8 26.7 31.2 30.0

Money supply and credit

Broad money supply (M2, % of GDP) 20.7 19.0 20.0 22.0 21.3 24.5 25.1 24.4 22.3

Broad money supply (M2, % year-on-year change) 26.1 16.5 16.7 38.7 23.5 35.1 25.0 18.5 15.0

Domestic credit (% of GDP) 28.5 24.4 28.0 29.2 31.3 37.3 42.8 42.1 39.3

Domestic credit (% year-on-year) 14.9 9.0 26.8 31.4 37.0 40.0 40.0 20.0 17.5

Domestic credit to private sector (% of GDP) 14.5 13.7 13.5 14.6 16.6 18.5 20.1 19.0 17.3

Domestic credit to private sector (% year-on-year) 37.8 20.5 9.4 36.1 44.8 31.5 32.5 15.0 15.0

Balance of payments

Exports (goods and non-factor services, % of GDP) 25.4 25.2 21.7 22.2 22.4 20.2 20.2 27.2 30.7

Imports (goods and non-factor services, % of GDP) 20.5 20.8 16.1 18.6 19.9 17.7 19.1 25.3 27.9

Exports (goods and non-factor services, % change in $ value) 21.6 23.9 -18.9 22.7 21.9 -3.7 1.6 1.4 0.5

Imports (goods and non-factor services, % change in $ value) 29.9 27.4 -27.4 39.0 29.5 -5.5 9.4 -0.1 -1.9

Net balance of factor income ($bn) -5.9 -7.6 -9.0 -11.3 -12.6 -11.5 -10.6 -10.9 -12.0

Current account balance ($bn) 7.4 6.8 11.0 1.4 -2.4 0.0 -4.5 -3.8 -2.6

Current account (% of GDP) 2.8 2.1 3.6 0.4 -0.5 0.0 -0.9 -1.0 -0.8

Net FDI ($bn) 5.0 8.3 3.3 6.1 8.4 10.2 9.2 8.9 9.0

Scheduled debt amortization ($bn) 6.3 6.6 4.3 5.4 9.0 5.8 6.2 5.7 8.3

Foreign debt and reserves

Foreign debt ($bn, end-year) (4) 141.3 142.2 133.4 136.0 147.4 148.1 146.8 151.7 144.4

Public ($bn) 87.6 81.8 79.6 76.2 79.9 78.3 78.0 83.9 77.6

Private ($bn) 53.7 60.5 53.8 59.8 67.4 69.8 68.8 67.8 66.8

Foreign debt (% of GDP, end-year) 54.2 43.6 43.4 36.9 33.0 31.1 30.4 41.8 44.7

Foreign debt (% of exports of goods and services) 213.0 173.1 200.2 166.4 147.8 154.2 150.5 153.3 145.3

Central bank gross FX reserves ($bn) 46.2 46.4 48.0 52.2 46.4 43.3 30.6 22.1 15.1

Central bank net FX reserves ($bn) (6) 41.9 35.8 36.4 41.1 35.3 30.5 17.7 12.7 5.7

Central bank gross non-gold FX reserves ($bn) 44.7 44.8 46.0 49.7 43.2 40.0 28.2 20.3 13.4

(1) Starting in 2003, people participating in the “Jefes de Hogar” subsidy program are counted as employed; adjusting the data by Jefes de Hogar, the unemployment rate is 2-4 points higher. (2) Increase indicates appreciation. REER estimate use the official inflation series. (3) Weighted average of wages in the formal and informal private sector, and the public sector. (4) Debt data assume that Paris Club debt remains in arrears. (5) Net of Brady guarantees (through 2003), the Bogar bond, government bonds held by Central Bank and by the social security agency (ANSES), and estimated government cash holdings. (6) Debt data assume that Paris Club debt remains in arrears.

Source: INDEC, Central Bank, Ministry of Economy, Credit Suisse

06 March 2014


Brazil: Some fiscal austerity might mitigate the risks of a downgrade We forecast GDP growth of 1.8% in 2014, slightly lower than the 2.3% growth of

2013. Our scenario is compatible with growth remaining close to 0.4% qoq on average in

2014, similar to the average from 2011 to 2013. Domestic demand should decelerate in

2014, while the contribution from the external sector is likely to increase.

Investments expected to decelerate in 2014. Uncertainty regarding the outlook for

growth in the coming quarters increased substantially in the first two months of 2014.

We believe this was a result of heightened doubts regarding: (i) a greater likelihood of

electricity rationing, and (ii) diminishing growth prospects for a few key trade partners of

Brazil (e.g., Argentina and China). This more unfavorable scenario has been reinforced

by the continuous decline in business confidence in the country. Other factors such as

the longer-than-expected monetary tightening cycle and the reduction in BNDES funding

for capital goods should also hinder an expansion in investments in 2014. We forecast a

decline in investment growth, from 6.3% in 2013 to 1.1% in 2014, which will likely

decelerate domestic demand in 2014.

External sector to contribute positively to growth. The higher growth expected for

developed countries, e.g., the US and Europe, in a scenario of a more depreciated local

currency, should boost export growth in 2014. In the short term, however, Brazil’s dismal

trade balance figures for January and February and the decline in expected GDP

expansion for Argentina and China might partially offset some of the impact of the more

favorable scenario for the developed world on the Brazilian economy.

We expect household consumption growth to remain low in 2014. We expect growth

in household consumption to decline from 2.3% in 2013 to 1.9% in 2014, well below the

5.0% average expansion from 2008 to 2012. This scenario is compatible with a slight

increase in the unemployment rate, from 5.4% in 2013 to 5.7% in 2014. Hence, we expect

some deterioration in job market conditions in the year, with a deceleration in job creation

along with slower growth in the labor force and in real wages in comparison to last year.

The smaller increase in the minimum wage and still-high inflation, as we expect, should

contribute to reduce real wage growth even further in the coming years.

Risk of downgrade by rating agencies led government to announce budget cuts of

BRL 44bn for 2014. In June 2013, S&P lowered its outlook for Brazil’s sovereign rating to

negative, and Moody’s reduced its outlook from positive to stable in October of the same

year. Both moves were motivated by the significant deterioration in fiscal accounts seen

since early 2012 and the risk of lower GDP expansion in the next few years. In response, in

late February the federal government announced a few measures to increase budget

transparency as well as budget cuts of BRL 44bn. If the federal government is able to deliver

these cuts, the public-sector primary surplus could reach 1.9% of GDP in 2014, stable

versus 2013. Hence, in theory, the slightly higher fiscal discipline could prevent further

deterioration in important fiscal indicators. Overall, the announcements were taken as

positive by the market, but questions concerning the need to increase spending on subsidies

of electricity costs still remain. For the short term, the government was given the benefit of

the doubt, but the public sector is likely to struggle to deliver monthly fiscal results decent

enough to keep its BBB (Baa2) rating unchanged throughout the year.

We have not changed our forecasts for the public sector’s results in 2014.

Although we think the newly adjusted primary surplus target of 1.9% of GDP is doable,

we also believe an election year brings additional challenges for fiscal austerity. The

government usually spends more in election years than it does in other years. In

addition, the absence of substantial extraordinary revenues for the year and the

government’s reluctance to reduce tax breaks in place since 2012 further increase fiscal

uncertainty. We still assume a primary surplus of 1.3% of GDP in 2014 and an increase

in the fiscal deficit from 3.3% of GDP in 2013 to 4.3% in 2014.

Nilson Teixeira

+1 55 11 3701 6288

[email protected]

Paulo Coutinho

+55 11 3701 6353

[email protected]

Iana Ferrao

+1 55 11 3701 6345

[email protected]

Leonardo Fonseca

+1 55 11 3701 6348

[email protected]

Daniel Lavarda

+1 55 11 3701 6352

[email protected]

06 March 2014


We expect the Selic basic interest rate to remain unchanged at 10.75% in 2014.

The current monetary tightening cycle has totaled 350 basis points in February, after the

25bps hike at the February 26 meeting of the Monetary Policy Committee. We think the

announcement of fiscal cuts in February, the appreciation of the local currency at the

end of that month, and the lower-than-expected inflation in January and February

suggest that the current monetary tightening cycle is almost over. Any disappointment in

fiscal results over the next few months or significant depreciation of the local currency

would pose a risk to our scenario of stable interest rates for the next few months.

IPCA inflation to increase to 6.2% in 2014. We expect consumer inflation to remain

well above the center of the inflation target (4.5%) for the fifth year in a row, despite the

recent monetary tightening cycle. This would mean average inflation of 6.1% from 2010

to 2014. The deceleration in real wages should bring down services inflation from 8.7%

in 2013 to 7.9% this year. However, the likely increase in administered prices in 2014,

after the 20% cut in residential electricity prices in February 2013 and the pass-through

of local currency depreciation to food and industrial prices, should more than offset the

more benign scenario for services inflation in 2014. The wider gap between international

and domestic fuel prices and the sharp increase in electricity costs are the main risks for

consumer inflation in the short term.

Disappointing trade balance figures at the beginning of this year increase the

probability of a trade surplus in 2014 lower than our forecast of USD 13 billion.

The increase in the trade deficit in the first two months of the year, from USD 5.3 billion

in 2013 to USD 7.2 billion, was due to the decline in commodity prices and the reduction

in exports of manufactured goods and commodities as a result of this year’s dry spell in

Brazil. The prospects of lower growth in Argentina and China than we previously

expected may contribute to a lower trade surplus. Therefore, there is a significant risk

that the current account in 2014 will post a deficit higher than our current forecast of

USD 72 billion (3.4% of GDP).

We expect further depreciation of local currency to a level closer to BRLUSD 2.60

at year-end 2014. The prospects of low GDP growth and high inflation lead us to expect

foreign direct investments to decline from USD 64 billion in 2013 to USD 55 billion in

2014. We also expect Brazilian investments abroad to increase for the same reasons.

Thus, our forecast of depreciation of the local currency from current levels is compatible

with an increase in the balance-of-payments deficit from USD 6 billion in 2013 to USD

15 billion in 2014.

President Dilma Rousseff maintains her lead in polls for 2014 election. Brazil will

hold general elections on October 3, 2014 (for president, governors, state and federal

deputies, and some senators). Currently, all polls suggest that President Rousseff will be

reelected, as she remains far ahead of the other candidates in voter intention polls.

However, we believe that uncertainty surrounding these results is very high, as the

percentage of respondents who said they would cast null or blank votes is still significant

(generally over 20%), and opposition candidates are still not well known to the general

public. We believe the percentage of respondents who say they will vote for opposition

candidates is likely to increase as the electoral campaign progresses. This would make

the election results a closer call than current polls suggest at first glance.

06 March 2014


GDP growth was 2.3% in

2013. The sharp increase in

investments more than

offset the deceleration in

consumption in the period.

We expect investments to

decelerate substantially in

2014. This would explain

the slow pace of economic

activity in the period.

Exhibit 173: Contribution to GDP growth

Exhibit 174: GDP growth on supply and demand sides

%, annual %

12

2006 2007 2008 2009 2010 2011 2012 2013 2014e-4

-2

0

2

4

6

8

10

4.0

6.15.2

-0.3

7.5

2.7

1.0

2.31.8

External sector

Investments (Gross

fixed capital formation

plus inventories)

Consumption GDP

GDP

Agriculture

Industry

Governmentconsumption

Investments

Exports

Imports

Weight (%)

Services

Householdconsumption

7.5

10-0.3

09

11

2.7

12

1.0

13

2.3

14e

1.8

6.3-3.1 3.9 -2.1 7.0 1.1 3.5

10.4-5.6 1.6 -0.8 1.3 1.6 2.5

4.23.1 1.9 3.3 1.9 3.0 2.2

21.3-6.7 4.7 -4.0 6.3 1.1 3.5

11.5-9.1 4.5 0.5 2.5 1.5 4.5

35.8-7.6 9.7 0.2 8.4 -1.0 3.5

15e

2.5

5.52.1 2.7 1.9 2.0 1.7 2.0

6.94.4 4.1 3.2 2.3 1.9 1.9

5,7

24.9

62.5

22.0

18.0

12.6

15.1

69.4

100

Su

pp

lyD

eman

d

Source: Brazil Statistics Bureau (IBGE), Credit Suisse Source: Brazil Statistics Bureau (IBGE), Credit Suisse

Unemployment rate

declined from 5.5% in 2012

to 5.4% in 2013. This was

its lowest level since the

beginning of the data series.

We expect an increase in

unemployment rate to 5.7%

in 2014, as a result of the

deceleration in economic

activity. This scenario is

compatible with our

expectation of lower growth

in the real wage bill in 2014

compared to last year.

Exhibit 175: Unemployment rate Exhibit 176: Real wage bill

% %, annual

4

5

6

7

8

9

10

11

12

13

14


2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014e

3.0

2.7

1.6

1.7

3.7

1.1

3.6

2.1

2.0

1.0

0.7

-1.5

1.7

4.0

3.2

3.6

2.9

3.7

2.7

4.1

1.6

2.0

Remunerated population (%)

Average real wage (%)

Source: Brazil Statistics Bureau (IBGE), Credit Suisse Source: Brazil Statistics Bureau (IBGE), Credit Suisse

We expect IPCA inflation to

increase slightly from 5.9%

in 2013 to 6.2% in 2014.

The main short-term risks

for inflation are the

dynamics of the foreign

exchange rate and the gap

between local and

international fuel prices,

which has been quite

significant since the middle

of last year.

Exhibit 177: Breakdown of IPCA inflation

Exhibit 178: Gap between international and local fuel prices

%, yoy %

Market Prices Administered Prices IPCA

6.9

4.2

7.0 6.86.5

7.3

6.7

3.5

4.5

3.2

5.6

3.7

1.5

4.3

5.9

4.3

5.9

6.5

5.8 5.96.2

2008 2009 2010 2011 2012 2013 2014e

21.6

13.2

0

5

10

15

20

25

30

35

40

45

Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Feb-14

Diesel

Gasoline

Source: Brazil Statistics Bureau (IBGE), Credit Suisse Source: The BLOOMBERG PROFESSIONAL™ Service, Credit Suisse

06 March 2014


We expected the fiscal

deficit to increase from 3.3%

of GDP in 2013 to 4.3% of

GDP in 2014, the highest

level since 2003.

The recent increase in the

probability of a downgrade

in Brazil’s sovereign credit

rating led the government to

announce budget cuts of

BRL 44 billion.

Exhibit 179: Primary surplus of the public sector and nominal balance

Exhibit 180: Budget cuts and expected primary surplus

% of GDP BRL billion, % of GDP

Central

gov't

Gov’t

owned corps.

States and

municipalities

Nominal

deficit

2015e2003 2005 2007 2009 2011 2013

-5.2

3.7

-2.9

3.8

-3.6

3.2

-3.6

3.3

-2.8

3.4

-2.0

2.0

-3.3-2.5

3.1

-2.6

2.4

-2.5

1.3

-4.3

2.3

-3.7

Highest nominal deficit since 2003

-3,3

1.9

2.73.3

1,110

1088

1052

1008

51

58

81

109

99

Net revenues Expenditures Primary surplus

Central

government

Regional

governments

Annual Budget Act (LOA)

Adjusted budget Directive

44

Budget cuts

18

Source: Central Bank of Brazil, Credit Suisse Source: Ministry of Planning, Budgeting, and Management (MPOG), Credit Suisse

The presidential election is

likely to have three main

candidates.

The outlook for the

presidential race remains

unchanged, showing

President Dilma Rousseff

ahead by a wide margin.

Exhibit 181: Possible candidates for the presidential race in 2014

Exhibit 182: Voter intentions for 2014 presidential race

%, average polling results from October to February

Dilma Rousseff

Voter intention polls suggest the current

president is the favorite. She is the most

widely known candidate.

Eduardo Campos

The governor of Pernambuco (PE) is president of the PSB and the party’s probable candidate. He is still little known in the rest of the country.

Aécio Neves

Senator and former governor of Minas

Gerais, whose electoral college has been

decisive in presidential elections.

DilmaRousseff

AécioNeves

EduardoCampos

Did notrespond

BlankOr null

Average

of polls

Maximum

and minimum

Last

poll

43

1819

1010

Source: Credit Suisse Source: Datafolha, CNT/MDA, CNI/Ibope, Estadão/Ibope, Credit Suisse

The balance-of-payments

deficit should increase from

USD 6bn in 2013 to USD

15bn in 2014. The recent

deterioration in trade figures

and the risk of lower

financial flows to the country

increase the probability of a

higher balance-of-payments

deficit in 2014.

Exhibit 183: Balance of payments

USD billion

2007 2008 2009 2010 2011 2012 2013 2014e 2015e

Current account 2 -28 -24 -47 -52 -54 -81 -72 -79

Trade balance 40 25 25 20 30 19 3 13 20

Travel and transportation -8 -10 -10 -17 -23 -24 -29 -28 -34

Equipment rental -6 -8 -9 -14 -17 -19 -19 -21 -23

Profits and dividends -22 -34 -25 -30 -38 -24 -26 -26 -30

Interest -7 -7 -9 -10 -10 -12 -14 -16 -17

Other 5 6 4 3 5 5 4 6 5

Capital and financial account 89 29 71 100 112 70 74 56 83

Foreign investments in Brazil 97 49 77 158 117 90 101 91 108

FDI 35 45 26 49 67 65 64 55 60

Total investments in equities 26 -8 37 38 7 6 12 6 8

Securities in Brazil 20 15 10 15 0 5 25 24 30

Medium- and long-term loans abroad -2 9 7 29 47 19 -1 5 9

Short-term loans and securities abroad 17 -12 -3 28 -4 -4 0 1 1

Brazilian investments abroad -25 -24 -16 -59 -21 -29 -46 -58 -46

BDI -7 -20 10 -12 1 3 3 -8 -2

Other Brazilian assets (including banks) -18 -3 -26 -47 -22 -32 -49 -50 -44

Other 18 4 10 1 17 9 19 23 21

Balance of payments1 87 3 47 49 59 17 -6 -15 51 Includes errors and omissions.

Source: Central Bank of Brazil, Credit Suisse

06 March 2014


Brazil: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013 2014F 2015F


Real GDP growth (%) 6.1 5.2 -0.3 7.5 2.7 1.0 2.3 1.8 2.5

Growth in real private consumption (%) 6.1 5.7 4.4 6.9 4.1 3.2 2.3 1.9 1.9

Growth in real fixed investment (%) 13.9 13.6 -6.7 21.3 4.7 -4.0 6.3 1.1 3.5


Nominal GDP ($bn) 1,367 1,651 1,626 2,144 2,475 2,255 2,240 2,135 2,175

Population (mn) 189.5 191.5 193.5 195.5 197.4 199.2 201.0 202.8 204.4

GDP per capita, $ 7,211 8,621 8,401 10,966 12,538 11,320 11,143 10,330 10,445

Unemployment (% of labor force, end-year) 9.3 7.9 8.1 6.7 6.0 5.5 5.4 5.7 5.8




Nominal wage growth (% year-on-year change)(1) 7.7 10.5 7.6 9.9 9.6 10.1 8.7 8.9 8.0

Exchange rate (BRL per USD, end-year) 1.77 2.34 1.74 1.67 1.88 2.04 2.35 2.60 2.60

Exchange rate (BRL per USD, average) 1.95 1.84 1.99 1.76 1.67 1.95 2.16 2.45 2.60

REER (% year-on-year change, annual average)(2) 7.2 2.7 0.7 12.8 2.6 -12.2 -6.9 -8.2 -0.3

REER (% change, December to December)(2) 12.7 -23.3 25.7 7.2 -7.6 -12.0 -8.5 -7.8 -1.2

Selic interest rate (%, end-year) 11.25 13.75 8.75 10.75 11.00 7.25 10.00 10.75 12.00

Fiscal data

General government fiscal balance (% of GDP) -2.8 -2.0 -3.3 -2.5 -2.6 -2.5 -3.3 -4.3 -3.7

General government primary balance (% of GDP) 3.3 3.4 2.0 2.7 3.1 2.4 1.9 1.3 2.3

General government expenditure (% of GDP)(3) 36.4 35.8 36.6 36.2 37.1 37.9 38.3 39.2 38.8

Gross general government debt (% of GDP, end-year)(4) 58.0 57.4 60.9 53.4 54.2 58.6 57.2 60.0 61.0

Net general government debt (% of GDP, end-year)(5) 45.5 38.5 42.1 39.1 36.4 35.1 33.8 34.5 35.5





Domestic credit (% year-on-year) na 10.8 11.9 -3.7 10.4 13.7 9.1 9.3 12.0

Domestic credit to private sector (% of GDP)(6) 43.4 49.5 52.1 53.9 58.2 64.1 67.8 71.9 76.5

Domestic credit to private sector (% year-on-year) na 30.1 12.5 20.3 18.7 17.0 14.0 15.7 16.0

Balance of payments



Exports (goods and non-factor services, % change in $ value) 17.4 23.7 -20.9 29.2 26.0 -4.0 -0.4 4.0 5.7

Imports (goods and non-factor services, % change in $ value) 31.0 39.6 -20.7 39.8 23.8 0.6 7.3 0.5 5.3

Current account balance ($bn) 1.6 -28.2 -24.3 -47.3 -52.5 -54.2 -81.4 -72.0 -79.0

Current account (% of GDP) 0.1 -1.7 -1.5 -2.2 -2.1 -2.4 -3.6 -3.4 -3.6

Net FDI ($bn)(7) 27.5 24.6 36.0 36.9 67.7 68.1 67.5 47.0 58.0

FDI ($bn)(8) 34.6 45.1 25.9 48.5 66.7 65.3 64.0 55.0 60.0

Scheduled debt amortization ($bn)(9) 38.2 22.4 30.1 33.8 37.7 39.7 60.1 50.5 64.1


Public ($bn) 70.3 67.4 77.2 82.8 77.2 82.2 85.1 82.0 80.0

Private ($bn)(10) 170.2 195.6 200.4 269.1 326.8 358.4 403.2 430.0 440.0

Foreign debt (% of GDP, end-year)(10) 17.6 15.9 17.1 16.4 16.3 19.5 21.8 24.0 23.9

Foreign debt (% of exports of goods and services)(10) 130.3 115.1 153.6 150.7 137.3 156.0 173.6 175.0 168.1


Central bank gross FX reserves, including forward FX transactions ($bn) 180.3 206.8 239.1 288.6 352.0 378.6 375.8 375.0 380.0


(1) Average annual growth in nominal wages. (2) Real effective exchange rate. Deflator: CPIs. Increase indicates appreciation. (3) Total government expenditures; includes interest payments. (4) Figures related to the Central Bank's new methodology. (5) Net of international reserves, Worker's Fund (FAT) assets, Central Bank holdings of government securities, social security system holdings of government securities. (6) Includes bank lending to individuals and private corporate debt (debentures and bank loans to the sector). (7) Net FDI inflow minus Brazilian investments abroad. (8) Net inflow of foreign-owned companies. (9) Scheduled amortizations for public and private sectors. (10) Included intercompany loans.

Source: IBGE, Central Bank of Brazil, Credit Suisse

06 March 2014


Chile: The slowdown is not over yet In Chile, clear signs of an economic slowdown have emerged in recent months.

For 2014, we are projecting average annual real GDP growth of 3.8%, down from the

estimated 4.0% average growth rate in 2013. This would be the lowest annual growth

rate since 2009. Though fixed investment continues to be the main driver of the

slowdown, private consumption has also lost some strength, despite the still high levels

of consumer confidence. We think that the central bank will continue to address the

slowdown by cutting the monetary policy rate further in upcoming months, even if this

leads to further weakening pressures on the Chilean peso.

Recent weakness in investment-related indicators has been in line with our long-

held view that Chile's strong investment cycle would inevitably come to an end.

Our 2014 house forecasts of lower copper prices and of weaker GDP growth in China

represent downside risks to investment growth in upcoming quarters. Private

consumption is another source of risk, particularly if labor market conditions were to

worsen further, as consumers remain generally optimistic about the economy and their

own personal situation, according to the latest surveys.

Weakening growth and the moderation in wage increases should help keep

inflation in-check, despite the recent depreciation of the peso. As we wrote in our

previous quarterly, however, there is inflation uncertainty as it is still unclear if the

recently revamped consumer price index will have a clear upward bias in the

measurement of inflation. In our view, the potential upward bias comes from the fact that

inflation categories that gained (lost) representation in the new index were for the most

part the ones showing the highest (lowest) inflation readings in recent quarters. Our

year-end 2014 inflation forecast is 3.5% and compares to consensus expectations of

3.0% in the latest central bank survey.

Central bank data show that the real exchange rate is now cheap to its ten-year

average. Despite this, we think that the Chilean peso remains vulnerable to further

weakness in upcoming months, as we think that the central bank will continue to ease

monetary policy to spur growth and to ensure that inflation is near the 3.0% target over

the policy horizon. Our year-end 2014 exchange rate forecast is 570 pesos per dollar,

versus 560 pesos per dollar at present. As for the monetary policy rate, our forecast is

unchanged that the central bank will make three additional rate cuts of 25bps each, from

4.25% to 3.5%, most likely by July. The swaps market is pricing in a terminal rate of

3.75% and a quick return to a tightening cycle, which we do not envision.

Chile's external savings remain abundant. The economic and social stabilization fund

had assets worth $15.6bn as of January 2014, equivalent to 6.0% of this year's

estimated GDP. This fund, as well as other assets owned by the Treasury (worth

$4.0bn), could be repatriated at any time, in the event of a more pronounced economic

downturn or if there were excessive weakening pressures on the Chilean peso. These

external savings along with the government's firm committment to fiscal discipline should

continue to help anchor the country's very solid (A+ and AA-) long-term foreign-currency

debt ratings.

Finally, on the political front, the inauguration of Michelle Bachelet as President

will take place on 11 March. We think that investor focus will remain on her ambitious

fiscal reform agenda that calls for an increase in tax collections in an amount equivalent

to 3% of GDP over four years. This would be achieved via higher corporate, excise and

financial transaction taxes, and the proceeds would be used to fund her ambitious

education reform. As we have stated before, market impact from these potential

changes would probably be felt mainly in a weaker exchange rate, as opposed to local

yields, given the government's net creditor position.

Alonso Cervera

+52 55 5283 3845

[email protected]

https://plus.credit-suisse.com/r/PRlZL2

https://plus.credit-suisse.com/r/tD12vz

06 March 2014


Real GDP growth has been

trending lower for the past

several months.

Consumption indicators that

had been resilient in the

past, like retail sales, are

now also showing signs of

a slowdown.

Exhibit 184: Real GDP proxy Exhibit 185: Retail sales

2008=100, seasonally adjusted; growth in % 2009=100, seasonally adjusted; growth in %

-0.6

-0.2

0.2

0.6

1.0

1.4

105

110

115

120

125

Dec-11 Dec-12 Dec-13

Index (lhs)

3M avg. of monthlygrowth (rhs)

-3

-2

-1

0

1

2

3

110

120

130

140

150

160

170


Index (lhs)


Source: Central bank, Credit Suisse Source: INE, Credit Suisse

The loss in momentum

started earlier in investment-

related indicators, including

construction activity and

imports of capital goods.

We think that these trends

simply reflect the end of a

three-plus year investment

boom.

Exhibit 186: Construction activity index

Exhibit 187: Imports of capital and consumer goods

2008=100, seasonally adjusted $ billions, 3m moving average

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

100

105

110

115

120

125

130

Dec-11 Aug-12 Apr-13 Dec-13

Index (lhs)


0.8

1.0

1.2

1.4

1.6

1.8

2.0


Consumer goods

Capital goods

Source: Chilean Construction Chamber, Credit Suisse Source: Central bank, Credit Suisse

The labor market remains

generally tight, but there are

some indicators that

suggest some loosening of

conditions at the margin.

These include data on help

wanted indices and a slight

moderation in wage

increases.

Exhibit 188: Unemployment rates Exhibit 189: Nominal wage increases

% %, increases are year on year

2

4

6

8

10

12

14

4Q03 4Q05 4Q07 4Q09 4Q11 4Q13

National unemployment

Unemployment in Santiago

0

2

4

6

8

10

12

Dec-11 Jun-12 Dec-12 Jun-13 Dec-13

Construction

Mining

Total

Source: Central bank, Universidad de Chile, Credit Suisse Source: INE, Credit Suisse

06 March 2014


Business sentiment has

been worsening for several

months, while consumers

have remained optimistic. At

the same time, demand and

supply perceptions about

commercial bank loans

have not changed much

recently.

A worsening in these

indicators would add

downside risk to growth

prospects.

Exhibit 190: Economic perceptions index

Exhibit 191: Perceptions about demand and supply for commercial bank loans

Readings above (below) 50 denote optimism (pessimism) % of total answers, average of all sectors

40

45

50

55

60

65

70


Firms Consumers

-100

-80

-60

-40

-20

0

20

40

60

80

100

4Q05 4Q07 4Q09 4Q11 4Q13

Demand

Supply

Wea

ker

<---

-->

Stro

nge

r

Source: Adimark, Icare, Credit Suisse Source: Central bank, Credit Suisse

We think that the central

bank will cut the monetary

policy rate to 3.5% from

4.25% at present, most

likely by July 2014.

The yield curve is pricing in

50bps of rate cuts and a

quick return to a tightening

cycle, which is not in our

forecast.

Exhibit 192: Consumer price inflation and the monetary policy rate Exhibit 193: Swaps curve

Inflation in year-on-year terms %

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%


Monetary policy rate

Headline inflation

Core inflation

3.0

3.5

4.0

4.5

5.0

5.5

0 2 4 6 8 10

3-March-14

4-March-13

Source: Central bank, INE, Credit Suisse Source: Credit Suisse

The real exchange rate is

now cheap to its own

historical average for the

first time in two years. We

think the peso is vulnerable

to further weakness.

Despite the ongoing

slowdown, Chile's economic

fundamentals remain very

solid and the A+/AA- ratings

on the government's foreign

debt are fully warranted.

Exhibit 194: Real exchange rate Exhibit 195: Long-term foreign currency sovereign credit rating

2000=100, increase denotes appreciation

90

95

100

105

110

115

120


REER

10-yr. avg.

Mar-04 Sep-06 Mar-09 Sep-11 Mar-14

S&PMoody'sBBB+

A-

A

A+

AA-

Source: Central bank, Credit Suisse Source: Rating agencies, Credit Suisse

06 March 2014


Chile: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 5.2 3.3 -1.0 5.8 5.9 5.6 4.0 3.8 4.0

Growth in real private consumption (%) 7.6 5.2 -0.8 10.8 8.9 6.1 5.4 4.0 3.8

Growth in real fixed investment (%) 10.8 17.9 -12.1 12.2 14.7 12.3 5.3 4.0 4.0


Nominal GDP ($bn) 173.2 179.2 172.6 217.7 251.2 268.4 279.5 262.0 283.1

Population (mn) 16.6 16.8 16.9 17.1 17.2 17.4 17.6 17.7 17.9

GDP per capita, $ 10,435 10,691 10,195 12,733 14,562 15,422 15,921 14,790 15,840

Unemployment (% of urban labor force, average year)(1) 7.0 7.7 10.5 8.3 7.2 6.5 6.0 6.5 6.8


CPI inflation (%, December to December) 7.8 7.1 -1.4 3.0 4.4 1.5 3.0 3.5 3.0


Exchange rate (CLP per USD, end-year) 498.10 638.50 507.45 468.00 521.46 479.20 525.45 570.00 550.00

Exchange rate (CLP per USD, average) 522.12 523.64 558.78 510.00 483.71 486.34 495.34 565.00 560.00

REER (% year-on-year change, annual average)(2) -2.4 -2.5 0.5 4.6 -0.5 2.4 0.2 -7.0 1.0

Nominal wage growth (% year-on-year change, average)(3) 7.3 8.5 6.4 3.6 5.9 6.4 5.7 5.3 5.0

Monetary policy rate (%, end-year) 6.00 8.25 0.50 3.25 5.25 5.00 4.50 3.50 3.50

Fiscal data

General government fiscal balance (% of GDP) 7.8 4.1 -4.2 -0.4 1.3 0.6 -0.6 -0.6 -0.3

Central government primary fiscal balance (% of GDP) 8.4 4.5 -3.8 0.1 1.8 1.1 0.0 0.0 0.3

Central government expenditure (% of GDP) 17.8 20.1 23.2 21.9 21.4 21.4 21.3 21.4 21.0

Gross central government debt (% of GDP, end-year)(4) 3.9 4.9 5.8 8.6 11.1 11.9 12.3 12.4 12.4

Net central government debt (% of GDP) -13.0 -19.5 -10.6 -7.0 -8.6 -6.8 -7.0 -7.8 -7.1



Broad money supply (M2, % year-on-year change) 20.5 18.6 -5.3 9.3 18.5 7.6 14.5 6.0 10.0





Balance of payments



Exports (goods and non-factor services, % change in $ value) 15.4 -3.0 -15.0 28.1 15.4 -3.9 -1.0 3.0 4.0


Current account balance ($bn) 7.1 -5.8 3.5 3.2 -3.3 -9.5 -12.5 -11.9 -10.4

Current account (% of GDP) 4.1 -3.2 2.0 1.5 -1.3 -3.5 -4.5 -4.5 -3.7

Net FDI ($bn) 7.7 6.4 5.7 5.9 2.6 9.2 10.2 5.0 7.0



Foreign debt ($bn, end-year) 53.4 63.7 71.9 84.5 98.7 117.8 131.0 136.4 135.5

Public ($bn) 11.7 11.7 13.2 17.2 20.5 25.2 25.4 25.8 26.5

Private ($bn) 41.7 52.1 58.7 67.2 78.2 92.5 105.6 110.6 109.0




(1) Adjusted for seasonality (2) Real effective exchange rate, increase indicates appreciation (3) General compensation index (includes fringe benefits) (4) Excludes debt of the central bank (5) Scheduled amortizations for public and private sectors

Source: Central Bank, INE, Budget Office, Ministry of Finance, Credit Suisse

06 March 2014


Colombia: Timing the next hiking cycle In Colombia, investor focus in upcoming months will likely be on the potential

start and extent of the next monetary policy tightening cycle. Our central scenario

continues to be that the central bank will start removing the monetary stimulus in the

second half of this year as activity accelerates, the output gap closes, and inflation

returns to the central bank's target. However, we recognize the risk that the central bank

may choose to stay on hold for longer if activity or inflation surprise on the downside.

We have kept our average annual real GDP growth forecast for 2014 unchanged at

4.5% but we have revised next year's to 4.9% from 4.7%. Growth potential is

estimated at about 4.5%. In our view, domestic demand should continue to be a key

growth driver, particularly consumption and investment. In fact, sustained growth in both

variables is behind our revision for 2015 growth. Net exports, on the other hand, will

probably fail to grant a boost to growth as import growth outpaces that of exports. The

inability of some coal companies to export during the first quarter of 2014 will likely be a

drag on exports, though low base effects from 2013 may help real exports show positive

year-on-year growth in the first quarter. We think imports are likely to reflect the

increased dynamism in investment and the stability in consumption.

Consumption should continue to reap the benefits from strentgth in the labor

market. Since late 2012 there has been a steady improvement in formal job creation,

which by December 2013 was 51% of the labor market, up from 48% in July 2012. We

believe that this can help Colombia attain lower structural unemployment rates, while

supporting consumption growth in time. Meanwhile, high real wage increases should be

another positive factor supporting consumption.

Investment will likely flourish with the implementation of the government’s

infrastructure plan. We believe that the 4G concessions can be an important boost for a

struggling industrial sector and contribute to increasing the country's potential output in the

medium term. For this to happen, however, the government will have to overcome the

delays in early 2014 in the scheduling for the presentation of bids for the first projects.

Meanwhile, we project that inflation will converge towards the midpoint of the

central bank’s target (3% +/-1%) by the end of 2014 from 2.1% yoy at present. For

2015, we now see annual inflation edging higher to 3.4% from 3.2% previously. In our

view, a closing output gap, the dissipation of supply-side shocks and a weaker currency

will determine the speed at which inflation accelerates throughout the year. This will be

key in assessing potential changes in inflation expectations. Thus far, inflation

expectations for 2014 have remained anchored around 3.0%, endorsing the view that

the below-target inflation prints in late 2013 were driven by temporary supply-side

shocks. In this context, we continue to expect the central bank to start hiking interest

rates in the second half of the year, as inflation continues to edge higher.

We have penciled-in 125bps of interest rate hikes in 2014 starting in July, in 25bps

consecutive increments. The monetary policy rate is currently at 3.25%. We expect

the full hiking cycle to be completed by the first quarter of 2015, taking the policy rate to

5.0%. If our projections are accurate, by the end of 2015 short-term real interest rates

would reach levels similar to the recent peak of 1.8% recorded in late 2012. We view

those levels as neutral. Currently, we think that the main risk for the central bank is to

lose its grip on inflation expectations if it fails to act ahead of the curve as the economy

converges towards its steady state. Still, lower-than-expected growth or inflation could

also allow the central bank to stay on hold for an extra few months.

We think that the central bank will end its US dollar purchase program in March.

Through 3 March, the central bank had purchased $400mn, after purchasing $6.8bn

during 2013 and $4.8bn in 2012. This program has been aimed at speeding up the pace

of international reserves accumulation. International reserves reached 11.6% of GDP in

2013, up from 9.6% in 2011. We also highlight that the intervention of the central bank


+1 212 325 4245

[email protected]

06 March 2014


does not have the size to affect the value of the currency, although it does send a signal

to the market regarding the bank’s comfort zone about the currency.

We do not see fundamental reasons for the Colombian peso to weaken

dramatically in our forecast horizon. We expect a slight strengthening from current

levels of 2,048 pesos per dollar towards a year-end 2014 level of 2,036 per dollar. For

2015, we believe the COP will end the year between 2,015 and 2,030 per dollar. Our

view is that at-potential growth, the coming hiking cycle and robust macroeconomic

fundamentals should have positive effects in the currency. The counterbalance will

probably come from reduced capital inflows due to lower international liquidity and the

inability of key sectors to soak in marginal FDI flows, and risk sentiment. Misaligned

expectations regarding tapering and future rate hikes in the US, and their impact on

capital flows to emerging markets, is the greatest risk to our currency forecast.

The outlook for fiscal accounts remains stable, and we expect Colombia to reach

its fiscal deficit target of 2.3% of GDP this year. Government debt is also likely to

continue on a downward trend, helping the strengthening of Colombia’s balance sheet.

The government issued $2.0bn in January as part of its 2014 financing plan, which was

the full amount it had allotted to foreign issuances this year. However, we cannot rule

out further issuance later in the year to pre-finance the 2015 budget, a similar strategy

used in 2013.

We have revised our forecast for the current account deficit to 3.7% of GDP from

3.4% of GDP previously. The main reason is the expected underperformance of

traditional exports in the context of sustained import growth, which will likely contribute to

a lower trade surplus this year. We are not overly concerned by Colombia’s current

account deficit, as long-term capital flows should fully fund the deficit.

On the political front, we expect President Juan Manuel Santos to be re-elected in

the 25 May presidential election based on recent voter intentions. Santos has

confirmed that German Vargas Lleras will be his running-mate as vice president in the

presidential campaign. Vargas Lleras is a seasoned and well-respected politician in

Colombia, and we expect him to boost Santos’ vote intentions further. Vargas Lleras

previously served as Minister of Housing and Interior under the Santos administration,

and has been a senator since the 1990s.

According to the most recent polls, the leading contender is Oscar Ivan Zuluaga,

who is running for the Centro Democratico party. The leader of the party is former

president Alvaro Uribe, who is currently running for the Senate. Zuluaga trails by around

20 points, according to the latest poll released by Ipsos, and by 25 points according to

Gallup. We expect the presidential race to run smoothly and do not expect political noise

to get in the way of the macroeconomic performance of the country. The main political

risk we see at this point is that governability may become a bit more difficult for

President Santos if Uribe pulls an important number of legislators into the Senate with

him. Uribe has become a vocal critic of President Santos, and could rally forces against

presidential initiatives in key topics like security.

Finally, we see a favorable medium-term scenario for macroeconomic

fundamentals in Colombia. The main positive event on the pipeline continues to be the

peace process with the FARC guerrillas. Together with a plentiful implementation of the

government’s infrastructure program, we believe potential output in Colombia could be

at least one percentage point higher in the next five years. Continued compliance with

the fiscal rule may also lead to further rating upgrades towards the end of the year or in

2015. Moody’s currently has a positive outlook on its Baa3 rating, but we believe further

improvement in fiscal accounts will be needed before a more definite action takes place.

Fitch and S&P may move towards assigning a positive outlook throughout the year, with

likely conditional upgrades happening in 2015.

06 March 2014


Domestic demand is likely

to continue to be the main

contributor to growth,

particularly via consumption

and investment.

As the output gap closes

and activity accelerates,

inflation should continue to

trend upwards in 2014 and

2015.

Exhibit 196: Demand-side contributions to GDP growth Exhibit 197: Output gap and inflation

Percentage points %

-4

-2

0

2

4

6

8

10

12

14

06 07 08 09 10 11 12 13E14F15F

Government spendingPrivate consumptionNet exportsInvestmentGDP growth

0

1

2

3

4

5

6

7

8

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

07 08 09 10 11 12 13 14F 15F

Output gap (lhs)

Average yearly inflation (rhs)

Source: Central bank, Credit Suisse Source: Central bank, Credit Suisse

Our expectations on the

upcoming hiking cycle

suggest real rates will

remain in expansionary

levels through 2014.

Towards 2015, the annual

average of real rates may

be higher than recent

historical averages,

consistent with above

potential growth

Exhibit 198: Nominal and real interest rates

Exhibit 199: Real interest rate medium- and long-term moving averages

%, real interest rate is 12-month average %

0

2

4

6

8

10

12


Nominal interest rate

Real interest rateCS forecast

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


12 month

30 month60 month

CS forecast


Gains in formal market job

creation support sustainable

growth in consumption.

This has already been

reflected in indicators such

as retail sales and contrasts

with the supply side of the

economy which continues to

struggle.

Exhibit 200: Participation of formal and informal markets in job creation

Exhibit 201: Retail sales and industrial production

% of total 12-month accumulated, % yoy

47

48

49

50

51

52

53


Formal Informal

-10

-5

0

5

10

15

20


Retail sales IP

Source: DANE, Credit Suisse Source: DANE, Credit Suisse

06 March 2014


Capital flows into Colombia

are expected to decelerate

from record-breaking levels

of 2012 and 2013, as

international liquidity

diminishes.

Central bank intervention

has remained in place,

despite a weaker peso, in

an effort to increase the

country’s international

reserve position

Exhibit 202: Net capital flows Exhibit 203: Daily dollar purchases and nominal exchange rate

Cash basis 12-month accumulated, $bn Dollar purchases are $mn

0

5

10

15

20

Jan 07 Oct 08 Jul 10 Apr 12 Jan 14

Portfolio flows FDI

1750

1800

1850

1900

1950

2000

2050

2100

0

10

20

30

40

50

60

3-Mar-13 3-Mar-14

Dollar purchases (lhs)

USDCOP (rhs)

Source: Central bank, Credit Suisse Source: Central bank, the BLOOMBERG PROFESSIONAL™

service, Credit Suisse

Further improvement in the

fiscal accounts will be

needed for more sovereign

credit upgrades to take

place, in our view.

Exhibit 204: Central government budget balance

Exhibit 205: Long-term foreign-currency sovereign debt ratings

% of GDP

-5

-4

-3

-2

-1

0

1

06 07 08 09 10 11 12 13

Nominal

Primary


S&P

Moody's

Fitch

BB

BB+

BBB-

BBB

Source: Ministry of Finance, Credit Suisse Source: Rating agencies, Credit Suisse

President Juan Manuel

Santos is still the favorite to

win the presidential election

in May, although a run-off

vote may be needed.

A peace agreement with the

FARC would be an

important boost for the

country in the medium term

in social as well as

economic terms.

Exhibit 206: Vote intentions for May presidential elections

Exhibit 207: Terrorist attacks to oil pipelines and oil production

% of total Oil production in millions of barrels per day

0

5

10

15

20

25

30

35

40

JuanManuelSantos

OscarIvan

Zuluaga

ClaraLópez

Obregón

MarthaLucia

Ramirez

Nov-13

Dec-13

Feb-14

0

10

20

30

40

50

60

0.6

0.7

0.8

0.9

1.0

1.1


Terrorist attacks (rhs)

Oil production (lhs)

Source: Gallup, Credit Suisse Source: ANH, Ministry of Defense, Credit Suisse

06 March 2014


Colombia: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 6.9 3.5 1.7 4.0 6.6 4.2 4.2 4.5 4.9




Nominal GDP ($bn) 207.6 243.7 233.9 285.9 336.5 370.2 379.1 377.5 412.4

Population (mn) 43.9 44.5 45.0 45.5 46.0 46.6 47.2 47.7 48.1

GDP per capita, $ 4,725 5,483 5,201 6,283 7,309 7,945 8,040 7,914 8,573





Exchange rate (COP per USD, end-year) 2,018 2,250 2,043 1,908 1,938 1,770 1,930 2,036 2,020

Exchange rate (COP per USD, average) 2,077 1,968 2,157 1,906 1,847 1,798 1,869 2,035 2,028

REER (% change, December to December)(1) 6.9 -2.3 3.7 10.8 -0.2 7.5 -6.8 -1.6 0.1


Reference rate (%, end-year) 9.50 9.50 3.50 3.00 4.75 4.25 3.25 4.50 5.00

Fiscal data

Central government's fiscal balance (% of GDP) -2.7 -2.3 -4.1 -3.9 -2.8 -2.3 -2.4 -2.3 -2.4

Central government primary fiscal balance (% of GDP) 1.0 0.9 -1.1 -1.1 -0.1 0.2 0.0 0.1 0.1


General government fiscal balance (% of GDP) -1.0 0.1 -2.4 -3.3 -1.8 0.4 -1.4 -1.3 -1.4

Consolidated public sector overall balance (% of GDP) -0.6 -0.1 -2.6 -3.3 -2.0 0.3 -1.4 -1.3 -1.4

Gross general government debt (% of GDP, end-year) 43.8 42.6 45.1 46.1 42.9 40.5 39.7 38.5 36.6









Balance of payments



Exports (goods and non-factor services, % change in $ value) 19.8 24.7 -11.1 19.2 39.5 5.8 -1.0 6.6 7.6


Current account balance ($bn) -6.0 -6.8 -5.0 -8.9 -9.8 -12.1 -13.6 -14.1 -14.9

Net transfers ($bn) 5.2 5.5 4.6 4.5 4.8 4.6 4.6 4.9 5.1

Current account (% of GDP) -2.9 -2.8 -2.1 -3.1 -2.9 -3.3 -3.6 -3.7 -3.6

Net FDI ($bn)(4) 8.1 8.3 4.0 0.4 5.1 16.0 12.6 13.1 12.8




Public ($bn) 28.8 29.4 37.1 39.5 42.8 46.4 47.4 49.0 49.0

Private ($bn) 15.7 16.9 16.6 25.2 33.1 32.7 39.0 39.8 42.3





(1) Increase indicates appreciation (2) Wages for manufacturing workers (3) Non-financial public sector debt net of intergovernmental loans and holdings of public sector bonds by public sector entities (4) Net FDI measured on an accrued basis (flows reported on a cash-basis may be significantly different; for example, in 2010, net FDI on a cash basis was $9.1bn) (5) Scheduled amortizations for public sector

Source: DANE, Central Bank, Ministry of Finance and Public Credit, Credit Suisse

06 March 2014


Mexico: A transition year 2013 was the year of Mexico's structural reforms. It was a year in which, against the

consensus view, the Mexican government built enough congressional support to

approve the long-awaited and meaningful reforms that seek to boost GDP growth

potential over the medium and long term. In our view, these reforms are already in the

process of re-shaping the country's labor market, the education system, the anti-trust

regulator, as well as the media, telecommunication, energy and financial sectors.

We view 2014 as a transition year in which structural reforms will be fully

implemented. This will require the congressional approval of the secondary legislation

of some of the 2013 reforms, particularly those related to energy, telecommunications

and competition. We remain optimistic that the main political parties, PRI and PAN, will

support pending secondary legislation in the current congressional period which ends

30 April. Contrary to constitutional reforms, approval of secondary legislation requires

only a simple majority in both houses of congress (which PAN and PRI have) and no

ratification from state legislatures.

In a transition year, the Mexican economy is unlikely to reap the full benefits of

the reforms, however. We are lowering our annual average real GDP growth forecast

for 2014 to 2.8% from 3.7%. This downward revision reflects a very disappointing GDP

report for the final quarter of 2013, as well as a slow start in 2014, partly due to the

implementation of the fiscal reform in Mexico and to the weak numbers out of the US

year-to-date. Our 2014 growth forecast for Mexico is based on our real GDP growth

forecast of 2.6% for the US (3.9% growth in industrial output). We estimate that last year

US real GDP and industrial output growth rates were 1.9% and 2.6%, respectively.

We think that the first quarter of 2014 will be the most challenging one for the

Mexican economy. We project quarterly growth of just 0.3% (non-annualized) and 1.1%

in year-on-year terms. This quarter should reflect the impact on consumer spending from

the higher tax burden associated to income tax increases, the introduction of excise

taxes on soft drinks and junk food, and price increases for some important spending

items, like public transportation in large metropolitan cities. It should also reflect the

impact from advanced purchases made by firms and households in late 2013 as they

tried to avoid the impact from the fiscal changes. First quarter GDP data are due on

23 May. For the second, third and fourth quarters, our annual real GDP growth forecasts

are 2.7%, 3.0% and 4.1%, respecitively.

In our projections we have Mexico benefitting from an acceleration in US growth

starting in the second quarter. This is the biggest risk to our forecast. It implies that

stronger US GDP and industrial output growth will also lead to a recovery in US imports,

particularly for the types of goods that Mexico sells in the US. These include cars,

trucks, autoparts and all sorts of consumer electronics. US data through year-end 2013,

however, show that total US imports from the world (ex-oil and gas) have been

weakening steadily in recent years, posting annual nominal growth rates of 21%, 14%,

5% and 2% in 2010, 2011, 2012 and 2013, respectively. For Mexico's main export items,

we estimate that total US import growth last year was just 3.2%, versus 9.2% in 2012.

The main engine of growth for the domestic economy in 2014 will likely be the

expansion in public sector spending. Data from the Ministry of Finance already show

a significant acceleration in government spending since September 2013, a trend that

will likely persist as the year progresses. In our view, the main challenge for the federal

government resides in the timely launching of large infrastructure projects that will have

a large multiplier effect in the economy. Until now, the only high-profile project the

government has announced is the construction of a railroad from Toluca to Mexico City.

We think that more announcements of this sort would go a long way in strengthening

investor confidence in the country's investment outlook.

Alonso Cervera

+52 55 5283 3845

[email protected]

06 March 2014


Meanwhile, some of the obstacles to growth in 2013 are unlikely to re-surface in

2014. These include the natural gas shortages in western Mexico, the under-execution

of the public sector budget in the first seven months of the year and the shock to

construction from the financial troubles of three of the largest home builders.

We see no room for additional monetary or fiscal stimulus in 2014, even if growth

were to disappoint. From a monetary policy standpoint, we think that the main

constraint to further action by the central bank are the expectations that annual headline

inflation will likely hover around 4.0% throughout this year. This level is the upper-end of

the variability range around the 3.0% target. In our view, the central bank would risk

losing credibility for no clear economic gain, if it were to ease monetary policy further.

From a fiscal standpoint, we would not expect the government to seek an

additional authorization from congress to widen the fiscal deficit for 2014. In late

2013 the government already sought congressional authorization to expand last year's

deficit, while it announced a larger-than-expected expansion of the deficit for 2014 and

subsequent years. In our view, a widening of the deficit from the projected 3.5% of GDP

in 2014 would impact investor sentiment, with potential negative consequences in the

local financial markets, given the additional net indebtedness that this could entail.

We project that annual headline inflation will close 2014 at 4.0%, unchanged

versus 2013. Our forecasts call for inflation to be below 4.0% from March to June, and

above 4.0% for most of the second half of the year. Our forecasts of core inflation are

more benign, as we project annual core readings near 3.0% for most of the year. Within

non-core inflation, we anticipated annual administered price inflation to remain very

sticky near 10% and to account for most of the gap between headline and core inflation.

We have tempered our optimism about the Mexican peso for 2014. We now expect

the exchange rate to end the year at 13.00 pesos per dollar, compared to our previous

expectations of 12.50. Some of the factors behind our revision include weaker growth

prospects, a worsening in investor sentiment towards emerging markets, and the

realization that the main direct investment flows associated to structural reforms will only

begin to fully materialize in 2015.

External accounts are unlikely to be a source of investor concern yet. We are

projecting a current account deficit of $29.3bn in 2014, equivalent to 2.3% of GDP. Last

year, the current account deficit was equivalent to 1.8% of GDP. Though net FDI inflows

are unlikely to be sufficient to fund the deficit, access to external financing should be

ample, as well as net portfolio inflows.

On the political front, we think that investor focus in upcoming months will be on

the congressional approval of pending legislation and on the internal elections

within PAN and PRD. The timing for the approval of secondary legislation on energy,

telecommunications and anti-trust reforms will most likely be March-April. Investor

anxiety on this issue, however, should be far less consuming than the one associated to

the approval of the constitutional reforms last year. Meanwhile, the processes to select

the leadership of the PAN and PRD should also be less exciting for investors,

particularly abroad, than last year's reform approval processes. Our central scenario is

that Gustavo Madero and Carlos Navarrete will be selected to lead the PAN and the

PRD respectively, which would be a favorable market development. The PAN elections

are in May, while the PRD's will take place by the end of September.

Finally, the only sovereign debt rating action we envision for now is the potential

for a change in the outlook from "stable" to "positive" by Fitch (BBB+ rating). We

think that this may happen by early May, before the first anniversary of the upgrade to

BBB+. S&P and Moody's announced a one-notch upgrade to Mexico's debt in

December 2013 and February 2014, respectively, and therefore do not expect any

ratings action from them in the foreseeable future.

06 March 2014


Our annual average real

GDP growth forecast of

2.8% for 2014 implies a

significant sequential

recovery in upcoming

quarters.

The main growth driver for

the domestic economy will

likely be government

spending.

Exhibit 208: Real GDP growth Exhibit 209: Government spending growth

%, QoQ is from seasonally adjusted data YoY, real terms

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

4Q10 1Q12 2Q13 3Q14F 4Q15F

YoY (lhs)

QoQ (rhs)

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Jan-11 Jan-12 Jan-13 Jan-14 Source: INEGI, Credit Suisse Source: Ministry of Finance, Credit Suisse

Signs of a recovery in

construction are more

evident in the public sector

than among private sector

companies. Part of this may

reflect previous uncertainty

about the fiscal reform.

On the external front,

Mexican exports have

continued to gain market

share in a stagnant US

import market.

Exhibit 210: Construction spending by sector

Exhibit 211: Manufacturing exports and US total imports in US dollar terms

Dec-07=100, seasonally adjusted in real terms Dec-08=100

0

20

40

60

80

100

120

140


PublicTotalPrivate ex-housingPrivate

60

80

100

120

140

160

180

Dec-08 Aug-10 Apr-12 Dec-13

Manufacturing exports

US imports

Source: INEGI, Credit Suisse Source: US Department of Commerce, INEGI, Credit Suisse

Slowing US import growth

has been evident across

industry groups.

The weakening of US import

demand for some Mexican

exports like televisions and

computers in late 2013 is

concerning.

Exhibit 212: Annual US import growth in selected goods categories

Exhibit 213: US selected imports from Mexico

% Billions of dollars, seasonally adjusted

0%

5%

10%

15%

20%

25%

30%

35%

40%

2010 2011 2012 2013

All other imports excl. oil & gas

Computer & electronic pcts.

Transportation equipment

Electrical equipment

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.4

0.6

0.8

1.0

1.2

1.4

1.6


TV's (lhs)

Computers (lhs)

Vehicles and autoparts (rhs)

Source: USITC, Credit Suisse Source: USITC, Credit Suisse

06 March 2014


The spike in headline and

core inflation in early 2014

was caused by the

implementation of the fiscal

reform. We project annual

core inflation to remain near

3.0% in 2014.

The swaps curve is pricing-

in some rate hikes in the

next six quarters, which we

do not think will materialize.

Exhibit 214: Consumer price inflation Exhibit 215: Swaps curve

%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%


Headline

Core

3

4

5

6

7

8

9

0 5 10 15 20

Six months agoOne year ago4-March-14

Source: INEGI, Credit Suisse Source: Credit Suisse

Foreign holdings of

government securities have

been remarkably resilient in

light of outflows from

emerging market funds.

Additional increases in net

indebtedness, which are not

in our central scenario,

could hurt market sentiment

in the local fixed income

market.

Exhibit 216: Daily foreign holdings of government securities

Exhibit 217: Gross financing needs of the federal government

Billions of pesos % of GDP

900

1,100

1,300

1,500

1,700

1,900

30-A

pr-

12

24-J

un-1

2

18-A

ug

-12

12-O

ct-1

2

06-D

ec-1

2

30-J

an-1

3

26-M

ar-

13

20-M

ay-

13

14-J

ul-1

3

07-S

ep

-13

01-N

ov-1

3

26-D

ec-1

3

19-F

eb

-14

0

2

4

6

8

10

12

2006 2008 2010 2012 2014

Gross financing needs

Amortizations

Net indebtedness

Source: Central bank, Credit Suisse Source: Ministry of Finance, Credit Suisse

The current account deficit

widened last year on higher

interest payments abroad

and on profit repatriation.

We expect an additional

widening of the deficit in

2014 to still manageable

levels.

We do not anticipate further

rating upgrades in the

foreseeable future. The next

move may be a change in

the outlook to "positive" by

Fitch.

Exhibit 218: Current account balance and net foreign direct investment

Exhibit 219: Long-term foreign currency sovereign debt rating

Billions of dollars; twelve-month rolling basis

-30

-20

-10

0

10

20

30

40

4Q03 4Q05 4Q07 4Q09 4Q11 4Q13

Net FDI

CA balance

Mar-04 Sep-06 Mar-09 Sep-11 Mar-14

Moody's

S&P

Fitch

BBB+

BBB-

BBB

A-

Source: Central bank, Credit Suisse Source: Rating agencies, Credit Suisse

06 March 2014


Mexico: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 3.1 1.4 -4.7 5.1 4.0 3.9 1.1 2.8 4.5


Growth in real fixed investment (%) 6.0 5.0 -9.3 1.3 7.9 4.6 -0.2 4.5 7.0


Nominal GDP ($bn) 1,043 1,101 895.1 1,055 1,172 1,188 1,236 1,286 1,422

Population (mn) 106.9 108.7 110.5 112.3 113.7 115.1 116.4 117.7 119.0

GDP per capita, $ 9,758 10,131 8,100 9,387 10,303 10,319 10,615 10,927 11,955





Exchange rate (MXN per USD, end-year) 10.87 13.54 13.08 12.37 13.97 12.87 13.09 13.00 12.50

Exchange rate (MXN per USD, average) 10.93 11.13 13.51 12.60 12.40 13.13 13.01 13.10 12.75

REER (% change, December to December)(1) -2.1 -13.0 3.6 6.6 -9.5 9.0 2.1 1.0 2.0



Fiscal data

General government fiscal balance (% of GDP)(3) 0.0 -0.1 -2.2 -2.8 -2.5 -2.8 -2.6 -3.5 -3.2

General government primary fiscal balance (% of GDP) 2.1 1.8 -0.1 -0.9 -0.6 -0.7 -0.4 -1.1 -0.1


Oil-related revenues (% of total public sector revenues) 35.4 36.9 31.0 32.9 33.7 33.7 33.2 31.9 30.8

Gross general government debt (% of GDP, end-year)(4) 33.4 38.6 39.2 38.0 39.1 38.7 41.8 43.4 41.4








Balance of payments


Oil exports (% of GDP) 4.1 4.6 3.4 4.0 4.8 4.5 4.0 4.0 4.0


Exports (goods and non-factor services, % change in $ value) 8.8 6.9 -20.9 28.3 16.4 6.0 3.3 6.0 7.0




Net transfers ($bn) 26.4 25.5 21.6 21.5 23.0 22.6 21.8 22.2 22.9

Net FDI ($bn) 23.9 27.2 7.5 8.0 10.4 -5.2 25.2 15.0 20.0




Public ($bn)(6) 55.4 56.9 96.4 110.4 116.4 125.7 130.0 138.0 145.0

Private ($bn) 72.7 72.5 69.6 87.6 94.4 101.6 108.0 112.0 115.0



Central government gross FX reserves ($bn) 87.2 95.2 99.9 120.6 149.2 167.1 180.2 200.2 220.2


(1) Real effective exchange rate, increase indicates appreciation. (2) Contractual wage increases at a national level in the public and private sectors (excludes fringe benefits). (3) Narrow definition that excludes off-balance expenditures. (4) Includes all contingent liabilities associated with IPAB, Pidiregas, FARAC, financial intermediation and other debtor support programs. (5) Scheduled short- and long-term market and non-market amortizations for public and private sectors. (6) Includes the total stock of Pidiregas debt.

Source: INEGI (Government's statistics agency), Banco de Mexico, Ministry of Finance, Credit Suisse

06 March 2014


Peru: Marginal improvement thanks to mining We stand by our forecast of 5.5% annual average real GDP growth for 2014 and

5.8% for 2015. The key growth drivers should continue to be increased mining

production, improved business sentiment, and sustained consumption growth. In 2013,

Peru expanded at its lowest growth rate since 2004, excluding 2009. Going forward, we

see Peru growing faster but below its 6.0% potential growth rate, as its growth strategy

continues to be focused on copper mining.

The government's statistics agency will release on 6 March the new base year for

the national accounts (2007), which will likely show that mining represents nearly

15% of the economy. This is three times more than under the previous base year

(1994). We estimate that under the new base year, annual real GDP growth since 2006

may be revised downwards by approximately one-half of a percent per year, on average,

given the weak performance of the mining sector in those years. Conversely, stronger

mining production expected for 2014 and 2015, combined with the higher weight in the

mining sector, represents an upside risk to our current growth expectations.

During 2013, evidence of the strong impact of commodity prices on the economy

was overwhelming, in our view. Lower copper and gold prices affected external and

fiscal accounts dramatically. Peru posted its largest current account deficit since 1998

and its first trade deficit since 2001. Similarly, the government’s fiscal surplus narrowed

to 0.7% of GDP from 2.0% of GDP in 2012. We expect that as commodity prices

continue to slip in 2014, the recovery of the external balances will be marginal, with the

current account deficit narrowing to 4.6% of GDP from a deficit of 4.9% of GDP last

year. Meanwhile, fiscal accounts could weaken further to a surplus 0.2% of GDP.

We believe that the move towards establishing a structural fiscal balance rule will

be positive for the economy. The results of the Finance Ministry’s studies regarding the

structural fiscal balance show that, on a structural basis, Peru had a deficit equivalent to

0.6% of GDP in 2013, although it also smooths out important deficits of the beginning of

the past decade. The structural fiscal target for the non-financial public sector will be

implemented in 2015, and will be a deficit limit of 1.0% of GDP. In the meantime, the fiscal

rule for 2014 indicates that the fiscal balance for this year cannot be deficitary.

In the context of lower commodity prices and reduced global liquidity, we expect

capital inflows to decline in 2014. Long-term capital flows will likely continue to cover

the current account deficit, although at lower margins than before. Hence, we think that

the sol (PEN) will find a weaker equilibrium at 2.86 per dollar by year-end versus 2.81 at

present. For 2015, however, we are revising our PEN forecast stronger to 2.84 soles per

dollar from 2.91, on the back of improved growth, commodity prices and capital flows.

Inflation spiked in February due to supply-side factors, leading us to revise our

2014 forecast to 2.9% yoy from 2.6% yoy. However, we do not believe this will lead to

a change in the strategy of the central bank and, therefore, expect the policy rate to be

held unchanged at 4.0% throughout the year. In our view, the bank's main monetary

policy tool will likely continue to be reserve requirements. For 2015, we expect the

central bank to increase interest rates to 4.5% towards the end of the year, as economic

activity approaches potential and inflation remains high. We expect continued

intervention in the FX market if excessive depreciation pressures resurface.

Political noise remains a cause of concern, since it can hurt business confidence

and investment decisions. We think that political stability and stronger institutions

would be a catalyst for further upgrades to Peru’s sovereign ratings. Currently, Moody’s

rates Peru's long-term foreign currency debt at Baa2, while Fitch and S&P are at BBB+.

We still believe that a Moody’s upgrade is not far away since it has had a positive

outlook on Peru since August 2012. However, the jump to single A ratings will depend

on further improvements in Peru’s political landscape and on continued evidence of

macro stability and poverty alleviation, in our view.


+1 212 325 4245

[email protected]

06 March 2014


2014 growth will benefit

from a higher carryover,

while incremental growth is

likely to come from stronger

mining production.

Exhibit 220: Carryover and incremental growth

Exhibit 221: Projected copper production

Percentage points Millions of metric tons

0

2

4

6

8

10

12 Incremental growth

Growth carryover

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2011 2012 2013 2014F 2015F


A new base year for

national accounts likely led

to downward revisions to

growth for the past few

years.

For the next two years,

however, the mining

sector’s contribution to

growth will increase

alongside copper

production.

Exhibit 222: GDP growth according to 1994 and 2007 base years

Exhibit 223: Change in expected contribution to GDP growth

Annual average rates Percentage points

0

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012 2013

Base 1994

Base 2007

0

0.5

1

1.5

2

2.5

1994 2007 1994 2007 1994 2007

Mining Commerce Services

2014

2015

Source: INEI, Credit Suisse Source: INEI, Credit Suisse

Stronger copper production

is also likely to help external

balances improve thanks to

stronger export growth.

The trade balance will likely

return to surplus in 2015,

helping the current account

deficit narrow.

Exhibit 224: Copper output and exports Exhibit 225: Trade balance

12-months accumulated, millions of metric tons 12-months accumulated, $bn

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5


Copper productionCopper exports

-2

0

2

4

6

8

10

12


CS Forecast

Source: Central bank, Ministry of Production, Credit Suisse Source: Central bank, Credit Suisse

06 March 2014


The move towards a

structural fiscal balance can

increase Peru’s chances of

further rating upgrades in

the future.

We think that a

strengthening of the

institutional framework and

stronger evidence of poverty

alleviation will be needed

for Peru to achieve a single

A rating.

Exhibit 226: Government’s nominal and structural balances

Exhibit 227: Long-term foreign-currency sovereign debt rating

% of GDP

-4

-3

-2

-1

0

1

2

3

4

5

00 01 02 03 04 05 06 07 08 09 10 11 12 13

Structural BalanceNominal Balance


S&P

Moody's

Fitch

BB-

BBB+

BB+

BB

BBB-

BBB

Source: Ministry of Finance, Credit Suisse Source: Rating Agencies, Credit Suisse

Risk aversion has been

reflected in the decline in

foreign holdings of Peruvian

assets in the local market.

Central bank intervention to

control FX volatility will likely

be strong if such episodes

continue, hampering the

effectiveness of monetary

policy.

Exhibit 228: Non-resident holdings of government’s local debt

Exhibit 229: Reserve requirements and central bank FX intervention

% of total CB intervention is 12-m accumulated, lagged 4 months

0

10

20

30

40

50

60

70


0

5

10

15

20

25

-10

-5

0

5

10

15

20

Mar-07 Sep-10 Mar-14

CB Intervention ($bn, lhs)

Reserve requirements (%, rhs)

Source: Ministry of Finance, Credit Suisse Source: Central bank, Credit Suisse

Political noise can become

a drag to growth given its

potential impact on business

confidence.

Business confidence is a

key driver of private

investment, which was the

main anchor to growth in

2013.

Exhibit 230: Business confidence and private investment

Exhibit 231: President Humala’s approval and disapproval ratings

Private investment is 4-qtr moving average SAAR %

-30

-20

-10

0

10

20

30

40

30

35

40

45

50

55

60

65

70

75

80


Business confidence (lhs, index)

Private investment (rhs)

25

30

35

40

45

50

55

60

65

Aug-12 Feb-13 Aug-13 Feb-14

Approval

Disapproval

Source: Central bank, INEI, Credit Suisse Source: Pulso Peru, Credit Suisse

06 March 2014


Peru: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 8.9 9.8 0.9 8.8 6.9 6.3 5.0 5.5 5.8




Nominal GDP ($bn) 107.4 127.1 127.4 153.9 176.7 199.7 206.6 213.5 232.7

Population (mn) 28.5 28.8 29.1 29.5 29.8 30.1 30.5 30.8 31.2

GDP per capita, $ 3,770 4,414 4,377 5,217 5,928 6,636 6,775 6,931 7,460





Exchange rate (PEN per USD, end-year) 2.98 3.11 2.88 2.82 2.70 2.57 2.79 2.86 2.84

Exchange rate (PEN per USD, average) 3.13 2.93 3.01 2.83 2.75 2.64 2.70 2.84 2.83

REER (% change, December to December)(1) 1.2 4.7 -0.6 1.0 5.2 5.0 -1.0 -2.5 0.3



Fiscal data

General government fiscal balance (% of GDP) 2.8 2.4 -1.5 -0.1 1.9 2.0 0.7 0.2 0.8

General government primary fiscal balance (% of GDP) 4.5 4.0 -0.2 1.1 3.1 3.0 1.8 1.1 1.7


Gross public sector debt (% of GDP, end-year) 28.5 25.9 26.0 23.5 21.4 19.7 19.2 17.9 17.1

Net public sector debt (% of GDP, end-year)(3) 17.1 13.6 13.7 11.8 8.2 4.8 4.1 3.8 3.7





Domestic credit (% year-on-year) 34.6 -5.3 29.7 21.7 8.5 11.9 3.4 10.4 13.1



Balance of payments



Exports (goods and non-factor services, % change in $ value) 18.0 11.0 -11.7 28.3 29.0 1.4 -7.2 7.6 16.2


Net balance of factor income ($bn) -8.3 -8.7 -8.4 -11.2 -13.7 -12.7 -11.2 -10.8 -13.8

Current account balance ($bn) 1.5 -5.3 -0.7 -2.6 -3.3 -6.5 -10.2 -9.7 -8.3

Net transfers ($bn) 2.5 2.9 2.9 3.0 3.2 3.3 3.2 3.0 3.1

Current account (% of GDP) 1.4 -4.2 -0.6 -1.7 -1.9 -3.3 -4.9 -4.6 -3.6

Net FDI ($bn) 5.4 6.2 6.0 8.2 8.1 12.3 10.0 9.2 10.1




Public ($bn) 21.5 20.2 20.2 23.0 24.3 26.4 24.1 23.5 23.0

Private ($bn) 11.8 14.8 14.9 20.7 23.7 32.5 36.3 39.2 42.3





(1) Real effective exchange rate, increase indicates appreciation (2) Minimum wage (3) Public sector debt net of public sector deposits in the financial system (4) Scheduled amortizations for public sector only

Source: Central Bank, INEI, Ministry of Finance, Credit Suisse

06 March 2014


Venezuela: The heat is on Venezuela has become the second hottest spot in our Emerging Markets

coverage universe, after Ukraine. Tensions between student and opposition protestors

and the government continue after at least 18 deaths and hundreds of detentions since

12 February. President Nicolas Maduro’s government can probably weather the current

storm, but the situation highlights the risk that growing dissatisfaction could eventually

become a destabilizing force. Meanwhile, the government is preparing to implement a

more flexible and transparent foreign exchange market. This could potentially help

reduce shortages, benefit fiscal accounts and bring down inflation later in the year, albeit

depending on still unknown factors including the exchange rate and trading volumes.

Anti-government demonstrations show no sign of abating, but President Maduro

retains control of key domestic institutions for the time being. These include the

military, national guard and police forces, the judiciary and most domestic media outlets.

The government also remains firmly in command of state oil company PDVSA, whose

production has not been jeopardized by the protests. Although the demonstrations have

re-energized the political opposition, they have also given the various factions of

Chavismo an opportunity to unify against a common threat. Tensions could be

prolonged, as neither side appears prepared to compromise presently, and the situation

should be monitored closely. Still, we do not expect Maduro to be forced out in the near

term, unless protest-related chaos and violence escalate sharply from current levels.

We remain concerned about political stability over the medium term. Rising

frustration with crime, basic goods shortages, the cost of living and unemployment could

erode the government’s popular base over time. Broadening of anti-government

demonstrations to include large numbers of lower-income Venezuelans could be a

game-changer in terms of forcing the government to choose between accommodation

and an even more severe crack-down than has been delivered so far. These dynamics

could expose the significant divisions among the various Chavista factions, the military

and Cuba and jeopardize governability before the current presidential term ends in

2019. Meanwhile, the next electoral test for the government is legislative elections in

2015.

On the economic front, the government is poised to finally roll out the SICAD 2

foreign exchange market. Additional specifications are pending, but private individuals

and companies, PDVSA and the central bank will be able to transact in dollars and dollar

assets through banks and brokers once this market is operational. Overall, this appears

to be a positive development that should broaden access to foreign exchange beyond

the restricted number of exporters and others approved to buy dollars from the National

Foreign Trade Center (CENCOEX) or in SICAD 1. It may also increase the

transparency, predictability and speed of foreign exchange sales. However, there are

significant implementation risks. We expect the government to actively regulate this

market, and its exchange rate in particular, which could limit its effectiveness.

SICAD 2 implies a further devaluation of the weighted average exchange rate. The

authorities have said that the SICAD 2 exchange rate will vary with central bank

intervention, but have not clarified how it will be determined. Allowing it to float is out of

the question, in our view, given the severe economic contraction and inflationary shock

that would result. We expect an initial SICAD 2 exchange rate around 20 bolivares per

USD. We would be surprised to see the government allow it to weaken beyond 25 in the

near term. Meanwhile, we assume that the CENCOEX exchange rate remains steady at

6.3 in 2014, while the SICAD 1 rate gradually weakens towards 15. Depending on

trading volumes, SICAD 2 could reduce pressure on the parallel exchange rate, which is

now around 80, but we do not anticipate convergence with the official exchange rates.

We now expect real GDP to contract by 0.5% in 2014. This compares to our previous

forecast of 1.6% growth and would be down from an estimated 1.6% expansion last

year. We project that growth in private consumption will decelerate further this year as

Casey Reckman

+1 212 325 5570

[email protected]

06 March 2014


real wage losses endure and unemployment rises. A modest slowdown in government

spending and a continued contraction in investment driven by economic and political

uncertainty should also contribute to the reduction in economic activity. Oil production

could rise, but perhaps by only 50,000 barrels per day (an approximately 1.8% increase)

as Orinoco Belt projects advance rather slowly.

Inflation could recede but is likely to remain over 40%. We expect the implicit

devaluation associated with foreign exchange sales in SICAD 1 and SICAD 2 to keep

12-month inflation above 50% yoy during the first half of 2014. However, if somewhat

successful, SICAD 2 could help reduce inflation later in the year by easing bottlenecks,

reducing domestic liquidity pressures driven by monetary financing of PDVSA and

strengthening the parallel exchange rate. Thus, we project that headline Caracas CPI

inflation will fall to 43.5% yoy by December versus 52.7% one year earlier.

SICAD 2 may help alleviate basic goods shortages. Venezuela relies heavily on

certain consumer and intermediate goods imports after over a decade of difficult

conditions for the private sector. Thus, increased domestic access to foreign exchange

could lead to greater supply of some items. However, many administered price ceilings

must also be adjusted to ensure it makes economic sense to import those goods. The

government may be hesitant to do this due to the inflationary consequences, especially

while it is trying to contain the protests. As a result, some degree of scarcity will likely

persist as a highly visible result of Venezuela’s incoherent economic policies.

SICAD 2 should also support moderate fiscal consolidation. The increased bolivar

value of PDVSA’s dollar revenues sold in the new market and some expenditure

reduction should help narrow the overall public sector deficit to a still large 8.2% of GDP

in 2014, from an estimated 11.5% last year. This will likely decrease, but not eliminate,

monetary issuance associated with financing PDVSA’s domestic spending. Sizeable

bolivar-denominated borrowing will probably remain another main fiscal funding source.

We expect $5bn in combined public sector dollar bond issuance in 2014. Economic

Vice President Rafael Ramirez said recently that Venezuela could sell new dollar bonds

to supply SICAD 2. The central bank’s portfolio of dollar bonds to sell in SICAD 1 and

SICAD 2 may need to be restocked as soon as this second quarter, depending on the

volumes sold in those markets. This could imply another private placement by PDVSA to

repay bolivar-denominated financing from the central bank, especially if market

conditions for the sovereign and PDVSA remain challenging. We also do not rule out

liability management efforts to extend near-term maturities (the government and PDVSA

have $1.5bn and $3.0bn, respectively, in principal due in October).

We do not foresee an interruption in debt service this year. The combined public

sector owes a total of $10.2bn in dollar-denominated interest and principal in 2014.

Cash-generating oil exports are worth at least $4bn per month, according to our

calculations. This is based on our relatively stable in-house oil price projections as well

as conservative assumptions for domestic oil consumption and deliveries to China,

Cuba, Petrocaribe, etc. We also estimate that the government has around $5.0bn in

unencumbered liquid foreign assets, which provide a buffer for 2014 debt service. 3

Concerns about the transparency of holdings in off-budget funds and market access

make the outlook for 2015 and beyond more risky, though.

Debt dynamics will likely continue deteriorating. We project that consolidated

general government and PDVSA debt will rise to 47.5% of GDP this year, up from an

estimated 40.3% in 2013. We also forecast erosion of the public sector’s net external

creditor position to 1.4% of GDP by year-end 2014, down from approximately 2.4% in

2013 and 9.2% in 2012. These trends, along with poor economic prospects, could lead

to downgrades of Venezuela’s sovereign ratings, all of which face negative outlooks.

3 This excludes items such as gold reserves, SDR holdings, Venezuela’s net credit position with the IMF, loans from China for

projects and less liquid securities held by FONDEN.

06 March 2014


Venezuela’s institutional

quality is among the

weakest in the region, which

helps foster social tensions.

Basic goods shortages are

likely to remain elevated

following years of

underinvestment in local

industry and price controls,

but could lessen if SICAD 2

increases foreign exchange

availability.

Exhibit 232: Selected World Bank governance indicators

Exhibit 233: Scarcity of goods indicator

Percentile %, May 2003 = 100

0

50

100

Govt.effective-

ness

Politicalstability

andabsence

ofviolence

Rule oflaw

Control ofcorruption

Venezuela Latam average

5

10

15

20

25

30

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Source: World Bank, Credit Suisse Source: Central bank, Credit Suisse

We currently project a -0.5%

contraction in real GDP in

2014, following a weak

1.6% expansion last year.

Meanwhile, inflation is

projected to decelerate, but

remain above 40% yoy this

year.

Exhibit 234: Real GDP growth Exhibit 235: Headline and food inflation

Contribution to real GDP growth, pp % yoy, Caracas CPI

8.8

5.3

-3.2

-1.5

4.2

5.6

1.6

-0.5

1.0

-15

-10

-5

0

5

10

15

20

25

30

07 08 09 10 11 12 13E 14F 15F

Net exportsInvestmentPriv. consumptionPublic spending

0

10

20

30

40

50

60

70

80


Headline inflation

Food inflation


The government has relied

on large public sector

nominal wage increases to

help mitigate social

pressures, but has done

little to contain domestic

liquidity.

The pace of monetary

expansion could slow if

more foreign exchange is

provided to the domestic

market and the ability to sell

dollars in SICAD 2 means

that PDVSA requires less

bolivar financing from the

central bank.

Exhibit 236: Nominal wages and inflation Exhibit 237: Loan and money growth

% change yoy % change year on year in nominal terms

0

10

20

30

40

50

60

70

80

90

Sep-10 Sep-11 Sep-12 Sep-13

Caracas CPIAverage wagesPrivate sector wagesPublic sector wages

0

10

20

30

40

50

60

70

80


M2

Loans


06 March 2014


The upcoming

implementation of SICAD 2

will result in a devaluation of

the weighted-average

exchange rate, although the

magnitude will depend on

trading volumes and the

exchange rates applied.

It could also help

consolidate the overall

public sector deficit as

PDVSA sells foreign

exchange in this market.

Exhibit 238: Official and parallel exchange rates

Exhibit 239: Consolidated public sector fiscal balance

Bolivares per dollar, as of 4 March % of GDP

0

20

40

60

80

100

120

Mar-13 Jul-13 Nov-13 Mar-14

Official exchange rate

Parallel exchange rate

SICAD 1 auction exchange rate*

SICAD 2 exchange rate**

-15

-10

-5

0

5

10

05 07 09 11 13E 15F

Interest paymentsPublic sector primary balancePublic sector balanceCentral gov. balance

*Weighted average rates for individual and corporate bidders **Credit Suisse estimate Source: Central bank, paralelovenezuela.com, Credit Suisse

Source: Ministry of Finance, Credit Suisse

PDVSA and Venezuela both

have bonds maturing in

October 2014, which could

be targets for liability

management operations.

We do not expect a credit

event this year, but

acknowledge increased

risks to future debt service

capacity if off-budget assets

are depleted and external

financing is unavailable.

Exhibit 240: Monthly public sector external debt service payments

Exhibit 241: Annual public sector external debt service payments

$bn, principal and interest $bn, principal and interest

0

1

2

3

4

5

6

Jan

-14

Feb-1

4

Mar-

14

Ap

r-14

May-1

4

Jun

-14

Ju

l-1

4

Au

g-1

4

Se

p-1

4

Oct-

14

Nov-1

4

Dec-1

4

0

2

4

6

8

10

12

2014 2015 2016 2017

PDVSAVenezuela

Source: Ministry of Finance, PDVSA, the BLOOMBERG PROFESSIONAL™ service, Credit Suisse

Source: Ministry of Finance, PDVSA, the BLOOMBERG PROFESSIONAL™ service, Credit Suisse

Limited disclosure of public

sector asset figures reduces

our visibility and confidence

regarding medium-term

capacity to pay.

We would not be surprised

by additional ratings

downgrades, particularly

from Fitch, which has

Venezuela at B+ with a

negative outlook.

Exhibit 242: Public sector liquid foreign assets

Exhibit 243: Long-term foreign currency sovereign debt rating

Credit Suisse estimates for year-end 2013 Dotted part means SD; long-term foreign currency IDR for Fitch

Non-gold FX reserves$6.0bn

Gold reserves$15.4bn

Gran Vol.

China loan

$3.0bn

Joint China-Venz. fund

$5.0bn

Fonden$5.0bn

Bandes$0.5bn National

Treas.$0.5bn


S&P

Fitch

Moody'sCCC+

B-

B

B+

BB-

Source: Central bank, Credit Suisse Source: Fitch Ratings, Moody’s Investor Services, Standard & Poor’s

Ratings Services, Credit Suisse

06 March 2014


Venezuela: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 8.8 5.3 -3.2 -1.5 4.2 5.6 1.6 -0.5 1.0

Growth in real private consumption (%) 16.9 7.5 -2.9 -1.9 4.0 7.0 4.5 2.8 3.5

Growth in real fixed investment (%) 25.6 2.4 -8.3 -6.3 4.4 23.3 -5.0 -3.5 0.0


Nominal GDP ($bn)(1) 230.4 315.6 329.4 236.5 315.7 381.5 366.6 290.9 264.0

Population (mn) 27.3 27.7 28.2 28.6 29.1 29.5 29.9 30.3 30.7

GDP per capita, $(1) 8,443 11,380 11,689 8,259 10,859 12,924 12,243 9,599 8,600






Exchange rate (VEB per USD, end-year)(3) 2.15 2.15 2.15 4.30 4.30 4.30 6.30 12.93 19.79

Exchange rate (VEB per USD, average)(3) 2.15 2.15 2.15 4.30 4.30 4.30 6.29 11.76 18.33

REER (% change, December to December)(4) 10.9 37.3 16.4 -38.5 25.6 16.0 -2.0 -28.0 1.3

90 day deposit rate (%, end-year) 10.9 17.6 15.0 15.0 14.5 14.6 14.7 14.5 14.5

Fiscal data

Consolidated public sector overall balance (% of GDP)(5) -2.6 -3.5 -8.7 -10.4 -11.6 -12.5 -11.5 -8.2 -6.5

Consolidated public sector primary balance (% of GDP)(5) -1.0 -2.0 -7.2 -8.6 -9.4 -10.3 -9.0 -6.0 -4.0

Consolidated public sector expenditure (% of GDP)(5) 35.5 35.6 33.3 31.6 39.5 42.0 40.9 39.4 38.5

Central government balance (% of GDP) 3.0 -1.2 -5.0 -3.6 -4.0 -4.8 -4.0 -1.9 -0.3

General government and PDVSA debt (% of GDP, end-year)(6) 26.3 18.8 24.7 35.1 36.2 36.5 40.3 47.5 44.9








Balance of payments



Exports (goods and non-factor services, % change in $ value) 7.0 35.4 -38.4 13.0 40.2 5.0 -3.3 1.4 -2.0

Imports (goods and non-factor services, % change in $ value) 45.6 10.5 -17.5 -3.3 20.6 23.4 -7.2 1.1 0.7

Current account balance ($bn) 16.0 32.1 2.3 8.8 24.4 11.0 8.5 5.0 3.9

Current account (% of GDP) 6.9 10.2 0.7 3.7 7.7 2.9 2.3 1.7 1.5

Net FDI ($bn) 1.5 0.1 -4.4 0.1 4.9 0.8 3.0 0.7 0.7




Public ($bn) 38.7 50.7 67.4 83.2 98.0 105.8 106.4 106.0 105.2

Private ($bn) 17.6 14.9 14.5 9.6 12.7 13.2 14.5 14.5 14.5





Gap between public sector's external assets and liabilities ($bn, end-year) 51.2 67.3 41.1 22.2 36.1 35.0 8.9 4.0 5.3

Gap between public sector's external assets and liabilities (% of GDP, end-year) 22.2 21.3 12.5 9.4 11.4 9.2 2.4 1.4 2.0

(1) Forecasts based on a projected weighted average exchange rate across official FX markets (CENCOEX, SICAD 1 and SICAD 2). (2) Public and private sector wages (3) Expressed in strong bolivares for all years; 2014 and 2015 forecasts represent a weighted average exchange rate across official FX markets (CENCOEX, SICAD 1 and SICAD 2). (4) Real effective exchange rate, increase indicates appreciation. (5) Central government, regional governments, PDVSA; does not include liabilities of other public institutions such as the Central bank, National Development Bank, Foreign Trade Bank, Industrial Bank of Venezuela and Andean Region Development Bank. (6) Consolidation of Central Government, PDVSA, Non-Financial Public Enterprises, Venezuelan Social Security Institute and Deposit and Guarantee Fund for 2005-2009; preliminary consolidation of central government and PDVSA 2010-2011. (7) Central government only for 2004-2009.

Source: Central Bank, INE, Ministry of Finance, PDVSA, the BLOOMBERG PROFESSIONAL™ service, Credit Suisse

06 March 2014


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06 March 2014


Europe, Middle East and Africa

06 March 2014


Emerging Europe, Middle East and Africa: Diverging growth outlook Reflecting two separate developments within the EEMEA region, we revised lower

our regional real GDP growth forecast for 2014 to 2.2% from 2.9% previously. While

we revised higher our 2014 real GDP growth forecasts for CE3 countries on the back of a

stronger-than-expected rebound in 4Q 2013, we revised them lower for Russia, Turkey,

South Africa and Ukraine compared to our forecasts published in the November

Emerging Markets Quarterly. (Some of these forecast changes have already taken place

in between the two Quarterly publications.) Our real GDP growth forecast revision for

South Africa was primarily driven by the new data (and not impacted by the repo rate hike

on 29 January) while recent political, exchange rate and policy developments played a

large role in our revisions for Russia and Turkey.

Exhibit 244. EEMEA: Real GDP growth rates

%, annual

November 2013 Quarterly March 2014 Quarterly

2013E 2014F 2015F 2013E 2014F 2015F

EEMEA 2.1 2.9 3.4 2.2 2.2 3.4

Czech Republic -1.0 2.0 2.5 -1.1 2.5 2.5

Hungary 0.5 1.5 1.5 1.2 1.9 1.5

Israel 3.8 3.5 3.5 3.5 3.5 3.5

Kazakhstan 4.6 5.6 6.0 4.6 5.6 6.0

Poland 1.0 2.5 3.3 1.6 2.8 3.3

Russia 1.3 2.3 2.5 1.3 1.3 3.1

Saudi Arabia 4.2 4.4 4.7 3.8 4.4 4.6

South Africa 2.0 3.1 3.6 1.9 2.8 3.4

Turkey 4.0 4.2 4.5 4.3 2.2 3.1

Ukraine -1.0 -1.5 2.0 0.0 -4.0 2.5

United Arab Emirates 4.0 3.5 4.2 4.1 3.1 3.9

Source: National authorities, IHS Global Insight, Credit Suisse

In Russia, early indicators suggest that sequential real GDP growth is probably

decelerating in 1Q after a pick-up in 4Q 2013. Additionally, the sharp rouble depreciation

will likely put further downward pressure on real GDP growth in early 2014. In our base

case scenario, we see a further slowdown in consumer demand in 1H on the back of

higher inflation and no early rebound in capex this year. The growth outlook for 2H now

appears somewhat brighter than we expected earlier, due both to domestic and external

factors, but the full-year real GDP growth forecast is likely to be about 1pp lower than we

forecast at the time of the November Quarterly.

In Turkey, real GDP growth seems to have held up well in 4Q 2013 but is also likely

slowing now. (Turkey’s 4Q real GDP data will be released on 31 March.) The political

noise has driven both consumer and business confidence in January-February to their

lowest levels since 2H 2012. The confluence of macroprudential measures that were

announced on 31 December, the monetary policy tightening on 28 January and

moderating capital inflows is dampening the credit growth momentum – more notably for

consumer loans than overall loans – towards 15%, in our view. We also believe that the

risks to investment growth remain to the downside, especially if the weaker consumer and

business confidence is coupled with a more modest pick-up in the global economy than

we currently expect. Accordingly, we forecast that real GDP growth will be substantially

lower at 2.2% this year compared to our November forecast of 4.2%.

Berna Bayazitoglu

+44 20 7883 3431

[email protected]

06 March 2014


We also revised our regional inflation forecast for end-2014 higher to 5.2% from

4.7% previously, mainly due to forecast changes in Russia, Turkey and Kazakhstan.

Our projection for further disinflation in Russia and Turkey in 2014 at the time of the

November Quarterly was not borne out by the recent developments as both countries

experienced notable exchange rate depreciation since November. In the case of Turkey,

tax hikes announced on 1 January also contributed to our higher inflation forecast. We are

now forecasting lower end-2014 inflation for CE3 countries compared to the November

Quarterly, mainly due to lower household utility prices, particularly in the case of Hungary,

but we expect core inflation to pick up gradually in all CE3 countries. We also expect lower

inflation in Israel now compared to the November Quarterly, largely due to the downside

surprise in January inflation. Our current forecast for South Africa’s end-2014 inflation is

broadly unchanged compared to the forecast published in the November Quarterly.

Exhibit 245. EEMEA: CPI inflation rates

%, end-period


2013E 2014F 2015F 2013E 2014F 2015F

EEMEA 4.4 4.7 4.6 4.5 5.2 4.7

Czech Republic 1.1 2.0 2.0 1.4 1.7 2.2

Hungary 1.1 3.4 3.5 0.4 3.1 3.4

Israel 1.5 2.0 1.7 1.8 1.4 1.7

Kazakhstan 5.0 5.7 5.7 5.0 8.3 4.7

Poland 1.1 2.4 2.3 0.7 2.0 2.3

Russia 6.0 5.2 5.0 6.5 6.3 5.4

Saudi Arabia 3.0 3.0 3.1 3.0 3.0 3.1

South Africa 5.6 6.0 5.9 5.4 5.9 5.8

Turkey 7.7 7.1 7.5 7.4 7.7 7.2

Ukraine 0.5 7.2 6.2 0.5 7.2 6.2



We are now forecasting better current account deficit dynamics for most EEMEA

countries in 2014 compared to our previous forecasts. We maintain our view that the

large current account deficit countries of the region – South Africa and Turkey – will likely

exhibit different dynamics in 2014. While we expect Turkey’s current account deficit to

narrow as domestic demand slows notably and export performance is boosted by the

recovery in the euro area, we expect South Africa’s current account deficit to widen in

2014 based on our forecasts for the country’s terms of trade. Our new current account

deficit forecasts for South Africa are based on the revised historical balance of payments

data, published in the Reserve Bank’s Quarterly Bulletin on 10 December 2013, which

resulted in a 1pp decline in the ratio of the current account deficit to GDP for 2010 to 2013.

For Russia, we have revised our full-year current account surplus projection higher for

2014. Given the recent estimates of Economic Expert Group economists on import

demand elasticities and our forecast of subdued consumer and investment demand

growth, we believe that a sustained weakening of the rouble in 1H will stabilize Russia’s

current account surplus to GDP in 2H, at about 1.5% of GDP (compared with our previous

full-year forecast of 0.9% of GDP).

06 March 2014


Exhibit 246. EEMEA: Current account balances

% of GDP


2013E 2014F 2015F 2013E 2014F 2015F

EEMEA 1.4 0.3 -0.3 1.3 1.1 0.5

Czech Republic -1.4 -2.1 -2.3 -1.0 -1.2 -1.3

Hungary 1.6 1.2 0.5 1.9 1.1 0.5

Israel 2.1 2.3 2.8 1.2 1.6 2.1

Kazakhstan 3.9 3.1 3.2 3.9 3.1 3.2

Poland -2.0 -2.5 -2.9 -1.5 -2.0 -2.5

Russia 1.7 0.9 0.4 1.6 1.6 1.1

Saudi Arabia 19.0 15.0 11.2 19.0 17.7 13.6

South Africa -7.0 -8.3 -6.9 -5.7 -7.0 -6.4

Turkey -6.7 -6.6 -6.6 -7.7 -5.7 -5.6

Ukraine -7.6 -5.7 -6.2 -9.0 -8.8 -7.4



Given the overall current account dynamics, we expect most EEMEA currencies to

remain under depreciation pressure in 2014. The only EEMEA currency which we think

have the scope for appreciation in 2014 is the Polish zloty, on the back of rebounding

growth and returning cross-border lending inflows to Poland.

Exhibit 247. EEMEA: Exchange rates

% of GDP


2013E 2014F 2014F 2013 2014F 2015F

Czech Republic (per EUR) 27.00 27.00 27.00 27.50 27.50 27.50

Hungary (per EUR) 300.00 310.00 320.00 300.00 315.00 320.00

Israel (per USD) 3.45 3.40 3.30 3.47 3.55 3.55

Kazakhstan (per USD) 153.00 152.50 151.50 153.00 182.50 181.50

Poland (per EUR) 4.15 4.10 4.00 4.15 4.10 4.00

Russia (against basket) 37.80 39.00 39.50 38.50 42.00 43.50

Saudi Arabia (per USD) 3.75 3.75 3.75 3.75 3.75 3.75

South Africa (per USD) 10.30 11.00 11.50 10.52 11.50 11.50

Turkey (against basket) 2.40 2.50 2.58 2.54 2.60 2.65

Ukraine (per USD) 8.46 8.92 9.24 8.24 12.28 10.76

United Arab Emirates (per USD) 3.67 3.67 3.67 3.67 3.67 3.67


Monetary policy outlook across EEMEA countries appears quite divergent now.

Based on the inflation outlook, we expect Russia’s central bank to cut its one-week repo

rate by 50bps following the emergency rate hike of 150bps (to 7.0%) on 3 March which

was driven by excess rouble volatility due to the developments around Ukraine. Turkey’s

MPC was forced by the market to tighten monetary policy aggressively on 28 January and

simplify its operational framework. Although the extent of tightening on 28 January was not

as large as the hike in the one-week repo rate to 10.00% from 4.50% suggests, the

magnitude of the tightening was still significant at 225bps-275bps. The policy response on

28 January seems to have broadly stabilized the lira’s nominal basket exchange rate

within 2.60-2.65. However, in case further notable depreciation pressure on the lira

materializes (not our baseline), either due to global or domestic reasons, the MPC might

be forced to hike interest rates even further. Despite the unexpected 50bps hike in South

Africa’s repo rate on 29 January, we are maintaining our expectation for further 50bps

hikes in May and July this year. Our baseline projection envisages unchanged policy rates

06 March 2014


in the Czech Republic (at 0.05%), in Poland (at 2.50%) and in Hungary (at 2.70%) in

2014, but we see a significant risk of further monetary policy easing in Hungary. We

expect Israel to ease monetary policy further, by 25bps, in the remainder of this year.

Exhibit 248. EEMEA: Policy rates

%, end-period


2013E 2014F 2015F 2013 2014F 2015F

EEMEA 3.90 3.89 4.46 3.90 5.14 5.47

Czech Republic 0.05 0.05 1.00 0.05 0.05 0.25

Hungary 3.00 3.00 4.00 3.00 2.70 4.00

Israel 1.00 0.50 1.50 1.00 0.50 1.50

Kazakhstan 5.50 5.50 5.50 5.50 5.50 5.50

Poland 2.50 2.50 4.00 2.50 2.50 3.50

Russia 5.50 5.25 5.25 5.50 6.50 6.00

Saudi Arabia 0.96 1.07 1.54 0.95 0.88 1.32

South Africa 5.00 6.00 7.00 5.00 6.50 7.50

Turkey 4.50 4.50 5.50 4.50 10.00 11.00

Ukraine 6.50 6.50 6.50 6.50 6.50 6.50



06 March 2014


Czech Republic: A strong rebound Full-year real GDP in 2013 was 1.1% lower than in 2012, but a recovery has started

to take shape since 2Q 2013 in sequential terms. Following six quarters of

contraction, real GDP expanded 0.3% qoq in 2Q, 0.2% qoq in 3Q and 1.6% qoq in

4Q 2013. We believe that the particularly sharp rebound in 4Q was driven by industrial

exports, as the volume of industrial production rose 2.5% qoq, and the volume of goods

exports increased around 3% qoq, on our estimates, following 3.5% qoq in 3Q.

We forecast that real GDP growth will reach 2.5% in 2014. Continued expansion in

Germany and a weaker koruna exchange rate are likely to keep Czech export growth on

track, and the recovery in exports is likely to filter through to improving domestic

demand, in our view. Employment was 0.8% higher at end-2013 than a year earlier,

private sector credit growth picked up to around 4% yoy in 2013, from around 2% yoy in

2012, and retail sales were up 5.2% yoy in December, in volume terms. Accordingly, we

project that real GDP growth will stabilize around 0.5% qoq in 1Q-2Q 2014, reaching

around 2.5% in both full-year 2014 and 2015. Moreover, possible fiscal policy loosening

by the new government could lend additional support to economic activity, in our view.

We believe that the current account deficit is likely to widen gradually. The current

account deficit narrowed to around 1.0% of GDP in 2013 from 2.4% of GDP in 2012,

driven by an increase in the foreign trade surplus as exports rebounded and imports

remained subdued, but we project that the gradual recovery in domestic demand will

contribute to a moderate widening of the current account deficit to around 1.2% of GDP

in 2014 and 1.3% of GDP in 2015.

Stable sources of external financing (EU funds and FDI inflows) are likely to keep

the basic balance in a surplus in the coming years. Although net FDI inflows dipped

to 0.6% of GDP in 2013 from 4.7% of GDP in 2012, we believe that this is likely to be

temporary, and net EU capital transfers are likely to remain around 2% of GDP in the

coming years, keeping the Czech Republic’s basic balance (including the current

account, unclassified FX flows, EU funds, and FDI) in a surplus in 2014-2015.

In the meantime, cross-border lending inflows are recovering. Other investments

recorded on the balance of payments (which comprise mainly cross-border lending)

turned positive again in 2013. Following 2.9% of GDP net outflows in 2012, other

investments recorded 1.5% of GDP net inflows in 2013. We believe that this can be

primarily explained by the stabilization in the euro area, and the recovery in cross-border

lending is likely to continue in the coming months. Additionally, net portfolio investment

inflows reached 2.4% of GDP in 2013, but these might moderate in 2014, in our view.

CPI inflation was below the central bank’s 2.0% yoy target in 2013, and dropped

further at the beginning of 2014. CPI inflation declined to 0.2% yoy in January 2014

from a peak of 3.8% yoy in March 2012, mainly due to a decline in the contribution of

energy prices (by around 2pp) and food prices (by around 0.5pp). Our measure of core

inflation (excluding food, energy, alcohol and tobacco prices) declined from a peak of

1.9% in April 2012 to close to zero in January 2014, in year-on-year terms, shaving

around 1pp off year-on-year CPI inflation during this period. In the meantime, monetary-

policy relevant inflation (excluding the first-round effects of changes due to indirect

taxes) also came in close to zero, reaching 0.1% yoy in October 2014.

To accelerate the return of CPI inflation towards the central bank’s target, the

Czech National Bank (CNB) Board decided on 7 November 2013 to start FX-

interventions to weaken the koruna’s exchange rate. Accordingly, the CNB bought

foreign exchange worth about CZK200bn in the period up to 20 November, and the

koruna’s exchange rate versus the euro weakened from around 25.8 to around 27.3

during this period. Subsequently, the koruna’s exchange rate stabilized around levels

weaker than 27.0 versus the euro, even without further central bank intervention.

Gergely Hudecz

+33 1 7039 0103

[email protected]

06 March 2014


Nevertheless, on 6 February, the CNB Board highlighted that the depreciation of the

koruna significantly contributed to averting the threat of deflation and confirmed its

commitment to intervening in the FX market, if needed, to keep the koruna’s exchange

rate weaker than 27.0 versus the euro. The CNB Board also reiterated on the same day

that “maintaining the exchange rate close to this level [27.0] at least until the beginning

of 2015 delivers the necessary easing of the monetary conditions” – suggesting that the

CNB Board had been satisfied with the impact of the koruna depreciation until

6 February 2014. Indeed, the FX interventions appear to have been successful so far,

as the run-rate of monetary-policy relevant inflation picked up to close to 2% by January

from -0.8% in September, on our estimates. (We define the run-rate as the annualized

three-month moving average of the month-on-month change in the seasonally adjusted

price index.)

In our view, the CNB’s primary aim with FX interventions is to avoid deflation, but

the weakening of the koruna’s exchange rate also supports economic growth. We

believe that a weaker koruna exchange rate could improve the Czech Republic’s price

competitiveness and thereby support exports. Furthermore, if the central bank’s FX

interventions are not sterilized, credit growth and domestic demand might also benefit

from the monetary easing, in our view. Such FX intervention may be seen as an

unconventional measure for a strictly inflation targeting central bank such as the CNB,

but it is a widely used monetary policy tool among central banks of other emerging

economies. Although other unconventional measures (such as balance sheet expansion

by increasing liquidity provision to banks) could also have an impact on domestic

demand, we believe that these remain unlikely at this juncture.

The central bank’s projection published on 6 February 2014 envisaged that year-

on-year CPI inflation would return to the central bank’s target in late 2014. Our

projection also envisages a gradual pick-up in CPI inflation, to 1.7% yoy by end-2014,

and we believe that the CNB is unlikely to extend its exchange rate commitment in 2015.

In the meantime, however, the recovery in economic activity could put some upward

pressure on the koruna’s exchange rate, and therefore the CNB Board is likely to exit its

FX intervention regime with dovish forward guidance on the policy rate, in our view, to

avoid a rapid appreciation of the koruna’s exchange rate. Our baseline scenario

envisages only 20bps of monetary policy tightening towards the end of 2015, and our

end-2015 policy rate forecast is 0.25%. In keeping with this, we project a broadly stable

koruna exchange rate versus the euro of around 27.5 throughout 2014 and 2015.

The new government might loosen fiscal policy, in our view. Following a general

government budget deficit of 4.4% of GDP in 2012, the previous government cut the

deficit to 2.7% of GDP in 2013, and we estimate that the deficit would continue to narrow

in 2014 on the back of recovering economic activity, assuming no policy change.

However, the new government might review the 2014 budget. Following parliamentary

elections on 25-26 October 2013, the Social Democrat CSSD party entered a coalition

with the pro-business ANO and Christian Democrat KDU-CSL, and our understanding is

that the new government is seeking to ease fiscal policy to stimulate domestic demand

and support the recovery in economic activity. Therefore, we believe that the general

government budget deficit is likely to widen in 2014, although there is only limited room

to loosen fiscal policy, in our view, if the government remains committed to complying

with the 3% of GDP deficit threshold. In keeping with this we believe that general

government gross debt is likely to stabilize around 47% of GDP by 2015.

Exposure to the euro area weighs on the Czech Republic’s credit ratings. The

Czech Republic’s long-term foreign-currency sovereign credit is currently rated AA- by

S&P, one notch above Moody’s A1, and Fitch’s A+ rating, all with stable outlook. We

believe that the Czech Republic’s sovereign credit rating is dependent on the outlook for

the euro area, but a credit rating change remains unlikely at this juncture, in our view.

06 March 2014


Full-year real GDP in 2013

was 1.1% lower than in

2012, but a recovery has

started to take shape since

2Q 2013 in sequential

terms.

Following six quarters of

contraction, real GDP

expanded 0.3% qoq in 2Q,

0.2% qoq in 3Q and

1.6% qoq in 2013.

Exhibit 249: Level of real GDP Exhibit 250: Composition of GDP growth

Contributions to quarter-on-quarter real GDP growth, pps

13.4

13.5

13.6

13.7

13.8

Q4-01 Q4-05 Q4-09 Q4-13

Level of real GDP (in logs)

Long-term linear trend

-6

-4

-2

0

2

4

6

Q3-11 Q1-12 Q3-12 Q1-13 Q3-13

ExportsImports and inventoriesInvestment spendingGovernment spendingHousehold spendingGDP, % qoq

Source: CZSO, Eurostat, Credit Suisse Source: CZSO, Eurostat, Credit Suisse

We estimate that the

particularly sharp rebound in

4Q was driven by industrial

exports, as the volume of

industrial production rose

2.5% qoq, and the volume

of exports increased around

3% qoq.

Continued expansion in

Germany and a weaker

koruna exchange rate are

likely to keep Czech export

growth on track, and the

recovery in exports is likely

to filter through to improving

domestic demand.

Exhibit 251: Manufacturing PMI and industrial production volume

Exhibit 252: Volume of the Czech Republic’s goods exports and imports

Volume index 2010 = 100, sa, % qoq

43

45

47

49

51

53

55

57

-3

-2

-1

0

1

2

3


Industrial production,2010=100, sa, % qoq

Manufacturing PMI

-3

-2

-1

0

1

2

3

4

5

Q4-11 Q2-12 Q4-12 Q2-13 Q4-13

Exports

Imports

Source: Eurostat, Haver Analytics, Credit Suisse Note: December 2013 data is Credit Suisse estimate based on trade value data. Source: CZSO, Eurostat, Credit Suisse.

Employment was 0.8%

higher at end-2013 than a

year earlier, credit growth

picked up to around 4% yoy

in 2013, from a low of

around 2% yoy in 2012, and

retail sales were also up

5.2% yoy in December, in

volume terms.

We project that real GDP

growth will stabilize around

0.5% qoq in 1Q-2Q 2014,

reaching around 2.5% in

full-year 2014.

Exhibit 253: Employment and gross wages

Exhibit 254: Lending to households and retail sales volume

24

25

26

27

28

4.8

4.9

5.0


Employment, sa, mn

Gross wages, CZK thous,right scale

97

98

99

100

101

102

103

104

105

106

1,050

1,100

1,150

1,200


Outstanding loans tohouseholds, CZK bn

Retail sales, 2010=100, sa,right scale

Source: CZSO, Credit Suisse Source: CNB, CZSO, Credit Suisse

06 March 2014


CPI inflation declined to

0.2% yoy in January 2014

from a peak of 3.8% yoy in

March 2012, mainly due to a

decline in the contribution of

energy prices (by around

2pp) and food prices (by

around 0.5pp).

In our view, the central

bank’s FX interventions

have been successful, as

the three-month run-rate of

monetary-policy relevant

inflation picked up close to

2% by January from -0.8%

in September.

Exhibit 255: CPI inflation and run-rate of monetary-policy relevant inflation

Exhibit 256: Exchange rate and policy rate

Contributions year-on-year CPI inflation, pps

-2

-1

0

1

2

3

4

5

6


EnergyFoodAlcohol and tobaccoCore, CS measureRun-rate of monetary-policy inflation, %

24

25

26

27

28

-2

-1

0

1

2

3

4

5

6

Mar-12 Mar-13 Mar-14

Policy rate, %

EURCZK, right scale

Source: CZSO, Eurostat, Credit Suisse Source: CNB, the BLOOMBERG PROFESSIONAL™ service


narrowed from 2.4% of GDP

in 2012 to 1.0% of GDP in

2013, but we project that the

recovery in domestic

demand will contribute to a

widening of the current

account deficit to around

1.2% of GDP in 2014.

Nevertheless, stable

sources of external

financing are likely to keep

the basic balance in a

surplus in the coming years,

while cross-border lending

inflows are recovering.

Exhibit 257: Selected components of the balance of payments

12-month rolling, % of GDP

-6

-4

-2

0

2

4

6

8


Errors and omissionsCurrent account balanceNet direct investmentsNet EU capital transfersNet portfolio investmentsNet other investments

Source: CNB, CZSO, Credit Suisse

Following a general

government budget deficit of

4.4% of GDP in 2012, the

previous government cut the

deficit to 2.7% of GDP in

2013, but the new

government might loosen

fiscal policy.

In keeping with this we

believe that general

government gross debt is

likely to stabilize at around

47% of GDP by 2015.

Exhibit 258: Government budget Exhibit 259: Government debt (ESA95)

Narrowly defined budget, 12-month rolling, % of GDP General government gross debt, % of GDP

-4

-3

-2

-1

0

1

2

3

4

26

27

28

29

30

31

32


Balance, right scale

Revenues

Expenditures

20

25

30

35

40

45

50

2003 2005 2007 2009 2011 2013E 2015F Source: CZSO, Ministry of Finance, Credit Suisse Source: Eurostat, Credit Suisse

06 March 2014


Czech Republic: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 5.7 3.1 -4.5 2.5 1.8 -1.0 -1.1 2.5 2.5

Real private consumption growth (%) 4.2 2.8 0.2 1.0 0.5 -2.2 -0.2 1.3 2.8

Real fixed investment growth (%) 13.2 4.1 -11.1 1.0 0.4 -4.5 -5.0 6.0 3.5


Nominal GDP ($bn) 181.6 226.7 198.8 198.8 216.3 196.4 199.5 197.6 207.5

Population (mn) 10.3 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5

GDP per capita ($) 17,631 21,590 18,933 18,933 20,600 18,705 19,002 18,822 19,762

Unemployment (% of labor force, end-year)


CPI inflation (% change, December to December) 5.5 3.3 0.5 2.3 2.8 2.4 1.4 1.7 2.2

CPI inflation (% change in average index for the year) 2.9 6.3 1.0 1.5 1.9 3.3 1.4 1.0 2.4

Nominal wage growth (% change, December to December) 7.2 7.9 3.4 2.2 2.5 2.7 1.0 2.0 3.0

Exchange rate (CZK per EUR, end-year) 26.5 26.9 26.4 25.0 25.6 25.1 27.5 27.5 27.5

Exchange rate (CZK per EUR, average) 27.8 25.0 26.5 25.2 24.6 25.4 26.3 27.5 27.5

Exchange rate (CZK per USD, average) 20.1 17.1 19.0 19.1 17.6 19.8 19.5 20.4 20.4

REER (% change, December to December) (1) 8.4 3.5 0.1 0.4 -1.0 -0.1 -8.8 -0.5 0.9

Central bank policy rate (%, end-year) 3.50 2.25 1.00 0.75 0.75 0.05 0.05 0.05 0.25

Fiscal data (2)

General government revenue (% of GDP) 40.3 38.9 38.9 39.1 40.0 40.1 40.5 41.0 41.0


General government primary balance (% of GDP) 0.4 -1.2 -4.5 -3.3 -1.8 -2.9 -1.2 -1.5 -1.5

General government balance (% of GDP) -0.7 -2.7 -5.8 -4.7 -3.2 -4.4 -2.7 -3.0 -3.0

General government gross debt, ESA95 (% of GDP, end-year) 27.9 28.7 34.6 38.4 41.4 46.2 46.1 46.4 46.8


Broad money supply (% of GDP) 63.0 68.4 70.5 71.4 73.7 77.0 80.5 81.8 83.6

Broad money supply (% year-on-year change) 16.3 14.1 0.6 2.2 4.1 4.6 5.0 5.3 7.3

Domestic credit outstanding (% of GDP) 59.0 63.5 67.5 69.8 74.3 78.2 79.2 80.6 82.3

Domestic credit growth (% year-on-year change) 21.6 13.0 3.9 4.4 7.4 5.4 1.6 5.3 7.3

Domestic credit to the private sector outstanding (% of GDP) 46.3 50.6 52.0 53.1 55.6 56.9 58.9 59.9 61.2

Domestic credit to the private sector growth (% year-on-year change) 26.3 15.8 0.1 4.0 5.9 2.5 3.8 5.3 7.3

Balance of payments

Exports (% of GDP) 68.3 64.7 59.7 67.9 73.7 78.3 79.9 81.9 80.7

Imports (% of GDP) 65.4 62.1 55.4 64.5 69.8 73.2 73.7 74.9 72.7

Exports (goods and non-factor services, % year-on-year change in $ value) 25.4 18.8 -18.8 14.3 18.1 -3.0 6.1 1.5 3.5

Imports (goods and non-factor services, % year-on-year change in $ value) 26.3 18.8 -21.4 17.1 17.7 -4.2 4.9 0.7 2.0


Current account balance (% of GDP) -4.4 -2.1 -2.4 -3.8 -2.8 -2.4 -1.0 -1.2 -1.3

Net FDI inflows ($bn) 0.0 2.3 2.0 4.9 2.5 9.3 1.3 4.0 4.0

Scheduled external debt amortization ($bn) (3) 3.5 5.0 4.4 4.7 5.0 4.0 4.0 4.0 4.0


Foreign debt ($bn) 76.0 83.1 89.2 94.2 94.2 101.9 100.0 100.0 100.0

Public ($bn) 15.2 15.3 20.1 24.8 23.8 28.8 30.0 30.0 30.0

Private ($bn) 60.8 67.8 69.1 69.4 70.4 73.1 70.0 70.0 70.0

Foreign debt (% of GDP) 41.9 36.7 44.9 47.4 43.6 51.9 50.1 50.6 48.2


Central bank foreign reserves ($bn) 34.9 37.0 41.6 42.5 40.3 44.9 56.2 61.4 61.4

Central bank foreign reserves, excl. gold ($bn) 34.5 36.7 41.2 41.9 39.7 44.3 55.8 61.0 61.0

(1) Real effective exchange rate (CPI-deflated), increase indicates appreciation. (2) Consolidated fiscal accounts of the broadly defined general government on an accrual basis. (3) Scheduled amortizations of medium- and long-term external debt of both the public and private sector, based on Credit Suisse assumptions.

Sources: CNB, CZSO, Eurostat, Ministry of Finance, IMF, JEDH, the BLOOMBERG PROFESSIONAL™ service, Haver Analytics, Credit Suisse

06 March 2014


Hungary: Taking it easy in election year Real GDP growth rebounded in 2013, as external demand strengthened and the

domestic policy mix loosened ahead of the parliamentary elections in April 2014. Following 1.7% contraction in 2012, real GDP expanded 1.2% in 2013, mainly driven by a recovery in exports, which grew around 5% in volume terms, on our estimates. In addition, investment spending growth picked up, expanding around 3%, on our estimates, and household spending also showed tentative signs of recovery.

Real GDP growth is unlikely to accelerate in sequential quarter-on-quarter terms, but full-year growth may be higher in 2014 than it was in 2013, in our view. Real GDP growth slowed to 0.6% qoq in 4Q from 0.8% qoq in 3Q 2013, and industrial production contracted marginally in 4Q, in quarter-on-quarter terms. We believe that demand from Germany is likely to keep the Hungarian recovery on track, but Hungary’s real export growth might moderate to around 3% in 2014. Meanwhile, domestic demand is likely to continue to recover, as employment and wage growth have been picking up, driven by public investments and public wage hikes in the run-up to the parliamentary elections scheduled for 6 April 2014. However, recovering household and investment spending are likely to pull in imports and dampen net exports' contribution to real GDP growth, in our view. Accordingly, we forecast that real GDP growth is likely to stabilize around 0.4% qoq in 1Q-2Q 2014, reaching 1.9% in 2014 and 1.5% in 2015 full-year.

CPI inflation is likely to pick up gradually in 2014 and rise above the central bank’s 3% target in 2015, in our view. CPI inflation declined to close to nil in January 2014 from a peak of 6.6% in September 2012, in year-on-year terms, mainly driven by utility price cuts enforced by the government: the contribution of energy prices fell by 3.7pps, while the contribution of food prices declined by 1.7pps and the contribution of core prices by 0.7pp during this period. However, we believe that underlying inflationary pressures are gradually building up, as domestic demand is recovering. Our measure of core inflation (excluding energy, food, alcohol and tobacco prices) reached 2.0% yoy in January, and its run-rate in the three months to January was around 1.5%. (We define the run-rate as the annualized three-month moving average of the month-on-month change in the seasonally adjusted price index.) In keeping with this, we believe that once the impact of the utility price cuts falls out of the year-on-year series, CPI inflation is likely to rise above the central bank’s 3% target in 2015.

We believe that the monetary policy easing cycle is coming to an end. The Monetary Council (MC) embarked on an easing cycle in August 2012 and lowered the policy rate by a cumulative 430bps to 2.70% by end-February 2014. In addition, to stimulate domestic demand, the central bank launched a Funding for Growth Scheme, providing preferential refinancing to banks for SME lending. The first tranche of the program was open from June to September 2013, allocating HUF 750bn (around €2.5bn, or 2.5% of GDP), and the second tranche opened in October, providing an additional HUF 500bn (around €1.7bn, or 1.7% of GDP). Nevertheless, in February 2014 the MC indicated that it will decide on the need and possibility for continuing the easing cycle based on the upcoming March inflation report. The central bank’s previous projection (released in December) envisaged that average annual CPI inflation will be 1.3% in 2014 and 2.8% in 2015, but we believe that risks are skewed to the upside, and hence the MC is unlikely to continue the easing cycle. In contrast, we forecast that the MC will start monetary policy tightening in 2015, raising the policy rate to 4.00%.

Meanwhile, fiscal policy is likely to loosen further in 2014, in our view. Hungary’s general government budget deficit narrowed from 4.6% of GDP in 2009 to 2.0% of GDP in 2012, and the EU decided to abrogate the Excessive Deficit Procedure, averting the risk of suspending its transfers to Hungary. However, as general government spending picked up to 50.1% of GDP in 2013 from 48.6% of GDP in 2012, while revenues rose only to 47.7% of GDP in 2013 from 46.6% of GDP in 2012, the general government budget deficit widened to 2.4% of GDP in 2013. Moreover, we believe that the government is unlikely to tighten fiscal policy this year, as after the parliamentary elections, the European elections are due in May, and municipal elections are due in the autumn of this year. Hence, the general government budget deficit might reach 4% of GDP in 2014, in our view, and general government gross debt might rise to around 79% of GDP in 2014 from around 78% of GDP at end-2013 before stabilizing in 2015.

Gergely Hudecz

+33 1 7039 0103

[email protected]

06 March 2014


The government’s FX-deposits at the central bank cover its external debt

repayments at least until end-September 2014, on our estimates. The government

had around $3.1bn of FX deposits at the central bank at end-January, and around $2.8bn

of its medium- and long-term FX-denominated debt matures by September 2014.

Additionally, inflows from EU transfers (around $4bn in 2014, on our estimates) also

support the government’s ability to repay its maturing FX-debt. Nevertheless, we believe

that foreign demand for forint-denominated government securities remains crucial for the

government to meet its overall funding needs, as non-residents’ holdings of forint-

denominated government securities amounted to around $20.7bn at end-February 2014

(36% of total forint-denominated government securities, on our estimates), and around

$1.7bn of non-residents’ holdings mature in 3Q 2014.

Hungary’s overall external financing needs remain elevated, but the surplus on its

basic balance is likely to cover net external debt repayments in 2014, in our view.

On the one hand, Hungary’s gross external debt stock was around $196bn (140% of GDP)

at end-September 2013, including around $22bn (16% of GDP) short-term debt with an

original maturity of one year or less, and around $16.5bn (12% of GDP) medium- and

long-term debt maturing in 2014. On the other hand, in the four quarters to 3Q 2013,

Hungary’s basic balance surplus (including the current account, unclassified FX flows, EU

funds, and FDI) reached around $9bn (7% of GDP) and around $2.5bn (2% of GDP) net

portfolio investment inflows helped to repay maturing external debt. Net portfolio

investment inflows might moderate, but we believe that the surplus on the basic balance is

likely to remain broadly unchanged, covering around 20% of Hungary’s maturing external

debt in 2014. Accordingly, we estimate that as long as 80% of Hungary’s maturing external

debt is rolled over, which we think is likely, the country will be able to meet its external

financing needs. Thus, the forint is likely to weaken only gradually versus the euro, and we

forecast EURHUF 315 at end-2014 and 320 at end-2015.

The issue of FX-mortgages continues to generate political noise and uncertainty.

The bulk of the household FX-mortgages are CHF-denominated and were taken out

between 2005 and 2008 with over five years as original maturity. The CHF value of this

stock reached its peak around CHF 25bn in 2009, but subsequently the authorities

implemented various measures which led to a reduction in the stock of outstanding FX-

mortgages to around CHF 15bn by end-2013. The government also introduced a voluntary

exchange rate cap scheme in 2011, fixing the exchange rate for the monthly repayments

of CHF and EUR-denominated housing loans at CHFHUF 180 / EURHUF 250. The

differential between the fixed and the market exchange rate has been accumulating in a

separate “overflow” account, which households will have to repay after an initial five-year

period. In our view, this measure is effectively a restructuring, as monthly repayments are

reduced for a five-year period. However, participation in this scheme (around 40%) has

been below the authorities’ expectations, and in November 2013 the scheme was opened

up to households with home-equity loans. Nevertheless, the government indicated that this

is merely a temporary measure until further steps are taken, and we anticipate additional

announcements during the election campaign.

Risks to Hungary’s credit ratings are skewed to the downside, but a downgrade is

not imminent, in our view. S&P revised the outlook for Hungary's long-term foreign

currency sovereign credit rating to negative from stable, while it affirmed its rating at BB on

21 March 2013. S&P stated that the revision indicates “the potential for a downgrade if a

deterioration of Hungary's policy framework weakens confidence and medium-term

economic growth prospects, or significantly raises financing costs and leaves Hungary

exposed to diminished capital inflows.” S&P’s move contrasts with Fitch’s move in

December 2012, as Fitch revised the outlook for Hungary's long-term foreign-currency

sovereign credit rating to stable from negative, while it affirmed its rating at BB+ (one notch

above S&P’s rating). Fitch stated that the revision “is underpinned by progress in reducing

the budget deficit and stabilising government debt along with improved fiscal and external

financing conditions.” Moody's Ba1 rating for Hungary’s long-term foreign-currency

sovereign credit is in line with Fitch’s rating, but Moody’s outlook is negative.

06 March 2014


Following 1.7% contraction

in 2012, real GDP expanded

1.2% in 2013, driven by a

recovery in exports, which

grew around 5% in volume

terms, on our estimates.

Additionally, investment

spending picked up,

expanding around 3%, and

household spending also

showed tentative signs of

recovery, in our view.



15.3

15.4

15.5

15.6

Q4-01 Q4-05 Q4-09 Q4-13



-4

-3

-2

-1

0

1

2

3

4

5

Q3-11 Q1-12 Q3-12 Q1-13 Q3-13


Source: Eurostat, KSH, Credit Suisse Source: Eurostat, KSH, Credit Suisse

However, real GDP growth

slowed to 0.6% qoq in 4Q

from 0.8% qoq in 3Q 2013,

and industrial production

contracted marginally in 4Q,

in quarter-on-quarter terms.

We believe that demand

from Germany is likely to

keep the Hungarian

recovery on track, but

Hungary’s real export

growth might moderate to

around 3% in 2014.


Exhibit 263: Volume of Hungary’s goods exports and imports

Volume index 2010=100, sa, % qoq

42

44

46

48

50

52

54

56

58

-3

-2

-1

0

1

2

3


Industrial production,2010=100, sa, % qoqManufacturing PMI

-4

-3

-2

-1

0

1

2

3

Q4-11 Q2-12 Q4-12 Q2-13 Q4-13

Exports Imports

Source: Eurostat, Haver Analytics, Credit Suisse Note: December 2013 data is Credit Suisse estimate based on trade value data; Source: KSH, Eurostat, Credit Suisse

Domestic demand is also

likely to continue to recover,

as employment and wage

growth have been picking

up, driven by public

investments and public

wage hikes in the run-up to

the parliamentary elections

on 6 April 2014.

In the meantime, we believe

that underlying inflationary

pressures are gradually

building up, as domestic

demand is recovering.

Exhibit 264: Employment Exhibit 265: Wages and core inflation

million employees, 12-month moving average

1.81

1.82

1.83

1.84

1.85

1.86

1.87

0.73

0.74

0.75

0.76

0.77

0.78

0.79


Public

Private, right scale

0

1

2

3

4

5

6

0

1

2

3

4

5

6

7

8

9


Average monthly gross earningsexcluding bonus, 3mma % yoy

Core inflation excluding indirecttaxes, % yoy, right scale

Note: Including those who work at least 60hrs per month, excluding part-time and self-employed; Source: Eurostat, KSH, Credit Suisse

Source: KSH, MNB, Credit Suisse

06 March 2014


CPI inflation declined to

close to nil in January 2014

from a peak of 6.6% yoy in

September 2012, mainly

due to utility price cuts, but

our measure of core

inflation remained at 2.0%

yoy in January.

We believe that the MC is

unlikely to continue its

easing cycle, but likely to

start monetary policy

tightening in 2015, raising

the policy rate to 4.00%.

Exhibit 266: Contributions to CPI inflation and run-rate of core inflation


Contributions to year-on-year CPI inflation, pps

-2

-1

0

1

2

3

4

5

6

7

8


EnergyFoodAlcohol and tobaccoCS coreCS core, run-rate %

270

280

290

300

310

320

-2

-1

0

1

2

3

4

5

6

7

8


Policy rate, %

EURHUF, right scale

Source: KSH, Eurostat, Credit Suisse Source: MNB, the BLOOMBERG PROFESSIONAL™ service

In the four quarters to 3Q

2013, Hungary’s basic

balance surplus reached

around $9bn (7% of GDP)

and net portfolio investment

inflows amounted to around

$2.5bn (2% of GDP).

The surplus on the basic

balance is likely to remain

broadly unchanged,

covering around 20% of

Hungary’s maturing external

debt in 2014.


Exhibit 269: Cross-border lending flows in the private sector

4-quarter rolling, % of GDP 4-quarter rolling flows, EUR bn

-15

-10

-5

0

5

10

15

Q3-11 Q3-12 Q3-13


-6

-5

-4

-3

-2

-1

0

1

2

3

4

Q3-10 Q3-11 Q3-12 Q3-13

Short-term

Long-term

External debt repayment

Source: MNB, KSH, Credit Suisse Note: other investment liability flows on the balance of payments,

mainly comprising cross-border lending; Source: MNB, Credit Suisse

As government spending

has been picking up, the

budget deficit widened to

2.4% of GDP in 2013 from

2.0% of GDP 2012, and

might reach around 4% of

GDP in 2014, in our view.

We project that general

government gross debt

might rise to around 79% of

GDP in 2014 from around

78% of GDP at end-2013

before stabilizing in 2015.

Exhibit 270: Government budget deficit

Exhibit 271: Government debt (ESA 95)

Narrowly defined budget, 12-month rolling, HUF trn General government gross debt, % of GDP

0.0

0.5

1.0

1.5

2.0

2.5

8

9

10

11

12

13


Deficit, right scale

Expenditures

Revenues

50

55

60

65

70

75

80

85

90

2003 2005 2007 2009 2011 2013E 2015F

Source: Ministry for National Economy, Credit Suisse Source: Eurostat, Credit Suisse

06 March 2014


Hungary: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 0.1 0.9 -6.8 1.1 1.6 -1.7 1.2 1.9 1.5

Real private consumption growth (%) 1.1 -0.7 -6.6 -3.0 0.4 -1.6 0.0 2.4 3.0

Real fixed investment growth (%) 3.9 2.9 -11.2 -8.5 -5.9 -3.7 3.0 3.0 4.0


Nominal GDP ($bn) 136.1 154.2 126.7 127.5 137.5 124.6 139.1 139.6 140.8

Population (mn) 10.1 10.0 10.0 10.0 10.0 9.9 9.9 9.9 9.8

GDP per capita, $ 13,520 15,350 12,631 12,732 13,774 12,545 14,001 13,987 14,369






Exchange rate (HUF per EUR, end-year) 252 266 271 279 315 291 300 315 320

Exchange rate (HUF per EUR, average) 251 252 280 276 279 303 296 308 318

Exchange rate (HUF per USD, average) 183 171 202 208 201 237 219 228 235

REER (% change, December to December) (1) 5.1 -2.4 2.4 -3.1 -7.5 8.0 -3.0 -4.7 0.4


Fiscal data

General government revenue (% of GDP) (2) 45.6 45.5 46.9 45.6 44.4 46.6 47.7 48.0 49.0


General government primary balance (% of GDP) (2) -0.9 0.5 0.1 -0.2 -1.4 2.2 1.8 0.2 1.2

General government balance (% of GDP) (2) -5.1 -3.7 -4.6 -4.3 -5.6 -2.0 -2.4 -4.0 -3.0




Broad money supply (% year-on-year change) 8.6 9.0 1.8 0.0 7.1 -1.2 4.4 6.7 8.6


Domestic credit growth (% year-on-year change) 12.8 18.5 -3.5 4.3 -0.7 -9.6 -2.7 3.0 8.6


Domestic credit to the private sector growth (% year-on-year change) 17.1 19.5 -3.7 3.3 -0.8 -13.0 -4.9 1.9 8.6

Balance of payments

Exports (% of GDP) 80.8 81.3 77.3 84.7 91.3 94.3 96.1 95.5 94.6

Imports (% of GDP) 80.2 81.0 72.5 79.2 85.0 87.2 88.8 89.8 90.4

Exports (goods and non-factor services, % year-on-year change in $ value) 27.7 15.4 -22.0 8.8 15.6 -7.8 13.6 -1.0 0.7


Current account balance ($bn) -10.0 -11.1 -0.2 0.3 0.7 1.1 2.6 1.6 0.6

Current account balance (% of GDP) -7.3 -7.2 -0.2 0.2 0.5 0.9 1.9 1.1 0.5




Foreign debt ($bn) 176.9 222.8 240.0 206.8 209.3 202.9 195.0 190.0 185.0

Public ($bn) 49.9 54.0 62.7 60.6 62.2 67.9 65.0 65.0 65.0

Private ($bn) 127.0 168.8 177.3 146.2 147.1 135.0 130.0 125.0 120.0



Central bank foreign reserves ($bn) 24.1 33.9 44.2 45.0 48.8 44.7 46.5 46.5 46.5

Central bank foreign reserves, excl. gold ($bn) 24.0 33.8 44.1 44.8 48.6 44.5 46.4 46.4 46.4

(1) Real effective exchange rate (CPI-deflated), increase indicates appreciation. (2) ESA95 represents the consolidated fiscal accounts of the broadly defined general government on an accrual basis; excluding one-off transfers from pension funds to the government budget. (3) Scheduled amortizations of medium- and long-term external debt of both the public and private sector.

Sources: AKK, National Bank of Hungary, Ministry for National Economy, KSH, IMF, JEDH, the BLOOMBERG PROFESSIONAL™ service, Haver Analytics, Credit Suisse

06 March 2014


Israel: Still in easing mode Real GDP growth in 2H 2013 was softer than in 1H due to a sharp fall in net exports.

(All data below are in seasonally adjusted and annualized terms.) Real GDP growth

increased slightly to 2.3% qoq in 4Q from 2.1% qoq in 3Q but remained well below its

2012-13 average of 3.1%. While the components of the quarterly GDP data are subject to

significant future revisions, the semi-annual GDP data reveal that the slowdown in real

GDP growth in 2H (to 2.8% from 3.2% in 1H) was largely led by a sharp fall in net exports

growth. The volume of exports of goods and services contracted 1.1% in 2H (after

expending 4.7% in 1H) while import growth surged 9.6% in 2H (from a mere 0.7%

expansion in 1H). Household spending growth – the largest contributor to full-year real

GDP growth in 2013 – remained unchanged in 2H compared to 1H (at 4.3%) while both

government spending and investment spending growth accelerated in 2H compared to 1H,

but this was not enough to offset the decline in net exports’ contribution to 2H real GDP

growth.

Early 2014 data are suggesting a mild cyclical improvement potentially driven by

exports growth. Strong goods exports and imports figures for January (up 10.9% mom

and 7.2% mom respectively on a seasonally adjusted basis) have pushed the central

bank’s real GDP growth proxy for January – the so-called State of Economy Index (SEI) –

to record its highest month-on-month change (on a seasonally adjusted basis) since April

2013, suggesting that real GDP growth momentum picked up in January. Exports recovery

in January came after the dollar value of exports surged 7.5% qoq in 4Q, following a

broad-based contraction of 7.8% qoq in 3Q.

We stick to our 2014 full-year real GDP growth projection of 3.5%. We see little

reason to change our 2014 real GDP growth forecast since we revised it lower in

November 2013. Our projection remains highly sensitive to the recovery in the US and

euro area – Israel’s main export destinations. We expect export volumes (for goods and

services) to rise 4.0% in 2014 (compared to 0.9% in 2013) – slighlty below the IMF’s 4.7%

global import growth forecast – with a stronger exports recovery likely to take place in 2H.

Meanwhile, our 2014 real GDP growth forecast envisages a slowdown in household

spending growth to 2.5% (from 3.8% in 2013), an increase in investment spending growth

to 4.0% (from a four-year low of 1.7% in 2013), and an increase in government spending

growth to 3.7% (from 3.1% in 2013).

Headline CPI inflation remains moderate with the run-rate of core inflation having

moved to negative territory in January. After hovering around 1.8-1.9% in 4Q, year-on-

year headline inflation slowed to 1.4% in January from 1.8% in December – led by a

decline in year-on-year food price inflation (to 3.1% in January from 4.8% in December)

and core prices inflation (to 0.8% in January from 1.0% in December). Furthermore, the

run-rate of core inflation (on our measure) fell sharply in January – to -0.4% from 2.1% in

December – recording a negative print for the first time since November 2012. (Our

definition of core inflation excludes food, energy, tobacco and alcohol. We calculate the

run-rate as the annualized three-month moving average of the month-on-month change in

the de-seasonalized core inflation index).

We recently revised our end-2014 CPI inflation forecast lower to 1.4% (from 1.7%).

The downside surprise in January inflation was the primary reason behind our forecast

revision (we had expected smaller declines in year-on-year food and housing price

inflation in January). We still expect year-on-year inflation to remain volatile throughout

2014, due to base effects arising from tax hikes and fluctuations in energy price inflation in

2013, and to peak at 1.8-1.9% in 2Q – still below the mid-point of the central bank’s 1.0-

3.0% inflation target band. A strong currency, weak wage growth, and sluggish domestic

demand growth keep inflation risks to the downside, in our view.

However, housing price inflation remains uncomfortably elevated. The Housing Price

Index (HPI) was up 8.1% yoy in November-December compared to 7.9% yoy in October-

Nimrod Mevorach

+44 20 7888 1257

[email protected]

06 March 2014


November – after slowing for four consecutive months. Meanwhile, the run-rate of housing

price inflation (according to the HPI) also accelerated in November-December – to 7.2%

from 5.7% in October-November – and is now within the range of the past six months.

The resilience of the shekel against a backdrop of an ongoing EM currency

weakness is supported by strong basic balance flows. (We define the basic balance

as the combined current account and net FDI flows). Although official balance of

payments data for 4Q are due to be published on 11 March, 4Q GDP data suggest that

the current account returned to a surplus of $1.5bn in 4Q 2013, after recording a deficit

of $1.8bn in 3Q. According to the partial financial account data, we also estimate that

net FDI inflows were probably in the order of $2.0bn in 4Q compared to $0.8bn in 3Q.

Meanwhile, the central bank purchased about $1.5bn throughout 4Q – absorbing slightly

half of these basic-balance inflows. We note that the shekel appreciated by 1.5%

against the dollar in 4Q.

Portfolio inflows turned positive in 4Q but were moderate. Non-residents were net

buyers of $0.8bn of Israeli bonds and equities in 4Q (according to the partial financial

account data), after being net sellers of $0.7bn in 3Q. Meanwhile, residents continued to

increase their portfolio positions abroad and bought $2.6bn of foreign bonds and equities

in 4Q (compared to $3.4bn in 3Q). However, in our understanding these sizable resident

portfolio outflows in 4Q were mostly FX hedged and therefore they only partly offset the

strong appreciation pressures on the shekel arising from the basic balance flows during

that period.

Following the 25bp cut in the policy rate on 24 February whose timing was a

surprise to us, we expect another 25bp policy rate cut later in the year – taking the

policy rate to 0.50% by end-2014. The surprising policy rate cut came after the

Monetary Committee (MC) had kept the policy rate steady for four consecutive months,

and was largely driven by the combination of the soft 4Q GDP data and the decline in

January CPI inflation. Benign inflation dynamics and continuing domestic pressures on

the central bank (and on the Ministry of Finance) from exporters to continue to address

the strong shekel would lead to another 25bp policy rate cut later in the year – probably

in 2Q-3Q – in our view.

Setting a floor to the shekel’s exchange rate against the dollar (or against a basket

of curreinces) is unlikely but other FX measures to weaken the shekel are still on

the table, in our view. Although the central bank and the Ministry of Finance are still

considering various FX measures (other than FX interventions and policy rate cuts) to

address the strong currency – such as increasing the tax burden on foreign portfolio

holdings or by providing significant government support to exporters – Central Bank

Governor Flug remains reluctant to set a floor to the shekel’s exchange rate, in our view.

We think that only a sharp appreciation of the shekel (not our base case) could lead the

central bank to seriously consider a floor similar to those implemented by the Swiss and

the Czech central banks.

Meanwhile, the fiscal position is solid and we expect a credit rating upgrade later in

the year. The 12-month rolling budget deficit narrowed further to 3.0% of GDP in January

from 3.1% of GDP in December (which was significantly below the full-year budget deficit

target of 4.65% of GDP in 2013). In the absence of a significant change in the real GDP

growth outlook and with the government remaining responsive to a potential shortfall in

revenues, we feel confident with our full-year budget deficit forecasts of 3.0% of GDP for

both 2014 and 2015. Meanwhile, Fitch revised its outlook on Israel’s long-term foreign

currency debt credit rating (currently A) to “positive watch” (from “neutral”) on 29

November 2013. The revision was largely driven by the positive fiscal performance,

improving public debt sustainability, and the initiation of gas production in 2013. We

believe that Fitch is likely to upgrade Israel’s credit rating this year to A+ which would bring

it in line with the ratings assigned by S&P (A+) and Moody’s (A1).

06 March 2014


Sequential quarter-on-

quarter real GDP growth in

3Q and 4Q remains well

below its 2012-13 average

of 3.1%.

The 2013 real GDP growth

pattern was similar to that of

2012 – with household

spending as the primary

driver followed by smaller

contributions of government

spending and net exports.

Exhibit 272: Real GDP growth Exhibit 273: Contributions to real GDP growth

% qoq, annualized and seasonally adjusted pps, with the exception of real GDP growth

2.8 2.8

4.3

3.9

2.2

4.6

2.12.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

-8

-6

-4

-2

0

2

4

6

8

2008 2009 2010 2011 2012 2013

Net exportsStatistical discrepancyInvestment spendingHousehold spendingGovernment consumptionReal GDP growth

Source: Central Bureau of Statistics, Credit Suisse Note: Statistical discrepancy includes changes in inventories.

Source: Central Bureau of Statistics, Credit Suisse

After a broad-based

contraction in 3Q (-7.8%

qoq), the dollar value of

exports surged in 4Q

(+7.5% qoq).

The central bank’s real GDP

growth proxy for January

recorded its highest month-

on-month change since

April 2013, suggesting that

real GDP growth

momentum picked up in

early 2014.

Exhibit 274: Export components Exhibit 275: State of the Economy Index

qoq growth of the seasonally adjusted dollar value of exports 2011 = 100, seasonally adjusted

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

1Q/2013 2Q/2013 3Q/2013 4Q/2013

High tech industries

Medium-high tech industries

Low-medium tech industries

Services

All

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

80

85

90

95

100

105

110

115

120


Index (2011=100)

% mom (right)

Source: Central Bureau of Statistics, Haver Analytics®, Credit Suisse Source: Bank of Israel, Credit Suisse

Year-on-year headline

inflation slowed to 1.4% in

January from 1.8% in

December – led by a

decline in year-on-year food

prices inflation and core

prices inflation

The run-rate of core inflation

fell sharply in January – to

-0.4% from 2.1% in

December – recording a

negative figure for the first

time since November 2012.

Exhibit 276: Contributions to year-on-year CPI inflation

Exhibit 277: Run-rates of headline and core inflation

pps, with the exception of CPI Annualized three-month moving average of the month-on-month change in the de-seasonalized price index (%)

-2

-1

0

1

2

3

4

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14

Food Housing

Energy Other

CPI

-3

0

3

6

9


Headline Inflation

Core inflation

Source: Central Bureau of Statistics, Credit Suisse Source: Central Bureau of Statistics, Credit Suisse

06 March 2014


The Housing Price Index

was up 8.1% yoy in

November-December

compared to 7.9% yoy in

October-November – after

slowing for four consecutive

months.

The central bank has

purchased $7.1bn between

returning to the FX market

in April 2013 and end-

January.

Exhibit 278: The Housing Price Index (HPI) and new mortgages taken by households

Exhibit 279: Central bank’s FX purchases and the USDILS

ILS, bn $bn

2

4

6

8

-10%

0%

10%

20%

30%

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14

New mortgages (right)

HPI run-rate*

HPI yoy

3.3

3.4

3.5

3.6

3.7

3.8

3.9

4.0

4.1

4.2

4.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


BoI FX purchase

USDILS average(right)

*We calculate the run-rate of housing price inflation as the annualized three-month moving average of the month-on-month change in the de-seasonalized HPI.

Source: Bank of Israel, Central Bureau of Statistics, Credit Suisse

Source: Bank of Israel, Credit Suisse

We estimate that the current

account returned to a

surplus of $1.5bn in 4Q

2013, after recording a

deficit of $1.8bn in 3Q.

Non-residents held only

3.7% of the total

outstanding govenment

bonds in December – down

from 5.9% in April.

Exhibit 280: Current account balance Exhibit 281: Non-residents’ holdings in local currency government bonds

4-quarter rolling (% of GDP)

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

Q4-10 Q4-11 Q4-12 Q4-13

Current transfers

Income account balance

Services account balance

Goods account balanceCurrent account balance

0

2

4

6

8

10

0

2

4

6

8

10


$bn

% share of outstanding

Source: Central Bureau of Statistics, Credit Suisse Source: Bank of Israel, Credit Suisse

After keeping the policy rate

steady for four consecutive

months, the MC surprised

market participants with a

25bp policy rate cut to

0.75% on 24 February.

The government’s 12-month

rolling budget deficit

narrowed to 3.0% of GDP in

January from 3.1% of GDP

in December – down from a

peak of 4.3% of GDP in

February 2013.

Exhibit 282: BoI policy rate and CPI inflation

Exhibit 283: Central government fiscal balance

% 12-month rolling, % of GDP

0

1

2

3

4

5

6

Feb-10 Feb-11 Feb-12 Feb-13 Feb-14

BoI policy rate, %

CPI inflation, % yoy

21

22

23

24

25

26

27

28

29

-7

-6

-5

-4

-3

-2

-1

0

1


Budget balance

Tax revenues (right)

Source: Bank of Israel, Central Bureau of Statistics, Credit Suisse Note: The government deficit is excluding net credit.

Source: Ministry of Finance, Credit Suisse

06 March 2014


Israel: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 6.9 5.0 0.9 5.5 4.6 3.3 3.5 3.5 3.5




Nominal GDP ($bn) 175.0 213.1 205.8 232.0 258.2 257.6 291.7 314.9 329.9

Population (mn) 7.2 7.4 7.6 7.7 7.8 8.0 8.1 8.3 8.4

GDP per capita, $ 24,155 28,904 27,247 30,147 32,949 32,261 35,845 37,978 39,044





Nominal wage growth (% year-on-year change) 4.3 0.1 1.7 4.8 3.3 4.5 3.0 3.0 3.5

Exchange rate (ILS per USD, end-year) 3.85 3.80 3.78 3.55 3.82 3.73 3.47 3.55 3.55

Exchange rate (ILS per USD, average) 4.11 3.59 3.93 3.73 3.58 3.86 3.61 3.52 3.55

REER (% change, December to December) 1.4 9.9 -2.2 7.1 -4.8 -1.3 7.1 0.2 0.6

Base rate (%, end-year) 4.00 2.50 1.00 2.00 2.75 1.75 1.00 0.50 1.50

Fiscal data

Central government's fiscal balance (% of GDP) 0.4 -2.0 -4.9 -3.5 -3.1 -3.9 -3.1 -3.0 -3.0

Central government primary fiscal balance (% of GDP) 6.4 3.3 0.2 1.4 1.7 0.8 1.4 1.4 1.3



Net general government debt (% of GDP, end-year) 58.3 53.2 45.9 40.9 40.9 38.7 39.2 40.4 39.8







Domestic credit to private sector (% year-on-year) 7.2 7.5 -6.5 6.4 4.9 -1.0 3.4 2.5 1.6

Balance of payments




Imports (goods and non-factor services, % change in $ value) 18.7 14.5 -24.9 22.1 20.6 -0.3 -1.3 -0.8 3.9



Net FDI ($bn) 0.2 3.7 2.7 -3.6 5.4 7.1 9.6 4.3 4.6




Public Foreign Debt ($bn) 32.0 28.2 31.2 40.3 36.1 31.3 31.6 30.2 30.5

Private Foreign Debt ($bn) 58.9 60.2 62.1 67.5 69.2 65.7 70.8 72.1 73.1




Source: Central Statistical Bureau, Bank of Israel, Ministry of Finance, Credit Suisse

06 March 2014


Poland: A more balanced growth outlook Following a low in mid-2012, sequential quarter-on-quarter real GDP growth

started to pick up gradually in 2H 012 and gained further momentum in 2013. The

initial phase of the rebound in 2H 2012 was mainly driven by a higher contribution of net

exports, as exports expanded and imports remained subdued, but domestic demand

has also been strengthening since the beginning of 2013. Following a marginal

contraction in 3Q 2012, household spending growth has been reviving and reached

0.6% in 4Q 2013, in quarter-on-quarter terms, while investment spending also bottomed

out in 2H 2012 and rebounded in 2013. Nevertheless, real GDP in 2013 full-year was

only 1.6% higher than in 2012 full-year, following 1.9% growth in 2012 full-year.

The improvements in the labor market are likely to sustain the rebound in

domestic demand and real GDP growth is likely to reach 2.8% in 2014, in our view.

Employment bottomed out in 2Q and started to pick up gradually in 2H 2013, while real

wage growth was around 2% in 2013 full-year, up from close to zero in 2012, on our

estimates. Furthermore, credit growth rose to around to 7% yoy in 2013 from a low of

around 0.5% yoy in 2012. Although real export growth slowed to 1.5% qoq in 4Q from

2.6% qoq in 3Q and industrial production growth slowed to 0.8% qoq in 4Q from 2.1%

qoq in 3Q, we believe that the slowdown was temporary, as industrial production

rebounded sharply in January and the manufacturing PMI indicator continued to improve

in February. Against this backdrop, we forecast that real GDP growth is likely to stabilize

around 0.7% qoq in 1Q-2Q 2014, reaching 2.8% in 2014 and 3.3% in 2015 full-year,

mainly driven by rebounding growth in domestic demand. In the meantime, possible

additional fiscal policy loosening in the run-up to the 2015 parliamentary elections

represents an upside risk to our forecasts, while potential spill-over from the crisis in

Ukraine may pose a downside risk to real GDP growth in Poland, in our view.

We project that the current account deficit is likely to widen gradually. Poland’s

current account deficit narrowed considerably over the past years, to 1.5% of GDP in

2013 from a peak of 5.7% of GDP in the 12 months to July 2011, driven by a narrowing

foreign trade deficit, as imports remained subdued while exports continued to expand. In

the meantime, unclassified FX outflows also moderated significantly, to 1.6% of GDP in

2013 from a peak of 3.3% of GDP in the 12 months to May 2011, and hence the sum of

the current account deficit and unclassified FX outflows narrowed to 3.2% of GDP in

2013 from a peak of 8.5% of GDP in the 12 months to June 2011. However, we believe

that the adjustment is coming to an end. As Poland’s domestic demand growth is

gaining momentum, the current account deficit is likely to widen and reach around 2.0%

of GDP in 2014 and 2.5% of GDP in 2015, in our view. Nevertheless, we believe that

stable sources of external financing (EU funds and FDI inflows) will continue to cover

most of the deficit due to the current account and to unclassified FX outflows.

Portfolio investment inflows are fading, but cross-border lending to Poland is

reviving. Poland’s stock of gross external debt reached around $377bn (73% of GDP)

at end-September 2013, including around $81bn (15% of GDP) short-term debt with an

original maturity of one year or less, and around $34bn (6% of GDP) medium- and long-

term debt maturing in 2014, according to IMF estimates. Nevertheless, we believe that

Poland will be able to roll over its maturing external debt. Although net portfolio

investment inflows were close to zero in 2013 (following 4.1% of GDP net inflows in

2012), net other investment inflows (which mainly comprise cross-border lending)

reached 0.8% of GDP in 2013 (following net outflows of 1.2% of GDP in 2012). As the

financial stress in the euro area continues to abate, cross-border lending inflows to

Poland are likely to strengthen further in 2014 and in 2015, in our view. In keeping with

this, we forecast a gradual strengthening of the zloty’s exchange rate versus the euro to

4.10 by end-2014 and to 4.00 by end-2015.

Gergely Hudecz

+33 1 7039 0103

[email protected]

06 March 2014


Meanwhile, central bank FX-intervention remains a possibility, if the zloty’s

exchange rate versus the euro weakens sharply. The central bank previously

intervened in the FX market by selling euros on 7 June 2013, when the zloty’s exchange

rate weakened to around 4.30 versus the euro, and the Monetary Policy Council (MPC)

noted in its 2014 guidelines that the floating exchange rate regime does not rule out FX-

interventions to ensure “macroeconomic and financial stability." The central bank has

substantial FX reserves (€78.5bn at end-January) to defend the zloty's exchange rate,

and the IMF’s Flexible Credit Line (FCL) provides an additional buffer against external

shocks. The precautionary FCL arrangement is effective until the beginning of 2015 in

the amount of around SDR 22bn ($33bn or €25bn). The authorities do not intend to draw

on the FCL, but this arrangement reduces Poland’s external vulnerabilities, in our view.

We believe that CPI inflation is likely to remain subdued, below the central bank’s

2.5% target throughout 2014 and 2015. CPI inflation has been hovering around 0.7%

yoy between October 2013 and January 2014, while our measure of core inflation

(excluding energy, food, alcohol and tobacco prices) reached a low of 0.2% yoy in

January 2014 (down from a peak of 3.2% yoy in December 2011) and its run-rated

dipped into negative territory. (We define the run-rate as the annualized three-month

moving average of the month-on-month change in the seasonally adjusted price index.)

After its meeting on 5-6 November 2013, the MPC stated that inflationary pressures

were likely to remain subdued in the coming quarters and the policy rate “should be kept

unchanged at least until the end of the first half of 2014” – subsequently, the MPC

reaffirmed this guidance on 6 February 2014. We also project that inflationary pressures

are likely to be subdued in 2014, as the output gap remains negative, and CPI inflation

is likely to pick up only gradually, remaining below the central bank’s target in 2015.

Accordingly, our baseline scenario envisages that the MPC will keep the policy rate

unchanged at 2.50% throughout 2014 and likely to tighten monetary policy only in 2015.

We forecast 100bps policy rate hikes, bringing the policy rate to 3.50% by end-2015.

The pension reform opens some fiscal space for the government ahead of the

elections in 2014 and in 2015, in our view. Following 3.9% of GDP general

government budget deficit in 2012, the deficit widened to 4.4% of GDP in 2013, due to

lower revenues. Nevertheless, we project that the rebound in economic activity will lead

to a recovery in revenues, improving the deficit to around 4.0% of GDP in 2014.

Additionally, on 3 February, privately managed pension funds transferred government

securities held in their portfolios (worth around 9% of GDP) to the government, which

technically push the budget balance into a surplus of around 5% of GDP in 2014, on our

estimates. In the meantime, we estimate that the broadly defined general government

gross debt is likely to drop to around 52% of GDP by end-2015 from around 58% of

GDP at end-2013, due to the transfers from privately managed pension funds. Although

the improvement will be merely optical, as the government is also taking on ‘implicit’

pension liabilities (claims by future pensioners on the government), we believe that the

government might use this opportunity to ease fiscal policy, ahead of the municipal

elections (due in 2H 2014) and parliamentary elections (due in 2H 2015).

Without further fiscal consolidation, a credit rating upgrade is unlikely, in our

view. Poland’s long-term foreign-currency sovereign credit is currently rated A2 by

Moody’s and A- by Fitch and S&P. Fitch revised the outlook for Poland’s long-term

foreign-currency sovereign credit rating to stable from positive on 23 August 2013, due

to the fiscal slippage in 2013 and reduced fiscal credibility. The outlooks for Moody’s and

S&P’s rating for Poland’s long-term foreign-currency sovereign credit are also stable.

06 March 2014


Following a low in mid-2012,

sequential quarter-on-

quarter real GDP growth

started to pick up gradually

in 2H 012 and gained

further momentum in 2013.

The initial phase of the

rebound in 2H 2012 was

mainly driven by a higher

contribution of net exports,

as exports expanded and

imports remained subdued,

but domestic demand has

also been strengthening

since the beginning of 2013.



5.4

5.5

5.6

5.7

5.8

5.9

Q2-03 Q4-05 Q4-07 Q4-09 Q4-11 Q4-13



-2

-1

0

1

2

Q4-11 Q2-12 Q4-12 Q2-13 Q4-13


Source: GUS, Eurostat, Credit Suisse Source: GUS, Eurostat, Credit Suisse

Real export growth (goods

and services combined)


from 2.6% qoq in 3Q and

industrial production growth


from 2.1% qoq in 3Q, but

we believe that the

slowdown was merely

temporary, as industrial

production rebounded in

January and the

manufacturing PMI indicator

continued to improve in

February.


Exhibit 287: Volume of Poland’s goods exports and imports

Volume index 2010=100, sa, % qoq

44

46

48

50

52

54

56

-3

-2

-1

0

1

2

3

4


Industrial production,2010=100, sa, % qoq

Manufacturing PMI

-2

-1

0

1

2

3

4

5

Q4-11 Q2-12 Q4-12 Q2-13 Q4-13

Exports

Imports

Source: Eurostat, Haver Analytics, Credit Suisse Note: December 2013 data is Credit Suisse estimate based on trade

value data; Source: GUS, Eurostat, Credit Suisse

We believe that the

improvements in the labor

market are likely to sustain

the rebound in domestic

demand. Employment

bottomed out in 2Q and

started to pick up gradually

in 2H 2013, while real wage

growth was around 2% in

2013 full-year, up from close

to zero in 2012.

Furthermore, credit growth

rose to around to 7% yoy in

2013 from a low of around

0.5% yoy in 2012.

Exhibit 288: Employment and gross wages

Exhibit 289: Lending to households and retail sales volume

3,600

3,700

3,800

3,900

4,000

5.4

5.5

5.6


Employment in enterprisesector, number ofemployees, mnAverage monthly earnings,PLN, sa, right scale

185

190

195

200

520

530

540

550

560

570


Otstanding loansto households,PLN bn

Retail sales,2000=100, sa,right scale

Source: GUS, Credit Suisse Source: GUS, NBP, Credit Suisse

06 March 2014


CPI inflation has been

hovering around 0.7% yoy

between October 2013 and

January 2014, while our

measure of core inflation

reached a low of 0.2% yoy

in January 2014.

The MPC stated reiterated

on 6 February that the

policy rate “should be kept

unchanged at least until the

end of the first half of 2014.”

Exhibit 290: Contributions to CPI inflation and run-rate of core inflation


pps, with the exception of the run-rate of core inflation

-1

0

1

2

3

4

5


EnergyFoodAlcohol and tobaccoCS coreCS core, rune-rate %

3.9

4.0

4.1

4.2

4.3

4.4

4.5

-1

0

1

2

3

4

5


Policy rate, %

EURPLN, right scale

Source: GUS, Eurostat, Credit Suisse Source: NBP, the BLOOMBERG PROFESSIONAL™ service


narrowed to 1.5% of GDP in

2013 from a peak of 5.7% of

GDP in the 12 months to

July 2011, but we believe

that the adjustment is

coming to an end.

Net portfolio investments

are receding, but cross-

border lending seems to be

returning, following net

outflows in 2011-2012.


12-month rolling, % of GDP

-8

-6

-4

-2

0

2

4

6



Source: GUS, NBP, Credit Suisse

Following a 3.9% of GDP

general government budget

deficit in 2012, the deficit

widened to 4.4% of GDP in

2013, due to lower

revenues.

Due to the pension reform,

the broadly defined general

government gross debt is

likely to drop to around 52%

of GDP by end-2015 from

around 58% of GDP at end-

2013, but the improvement

will be merely optical.

Exhibit 293: Government budget deficit

Exhibit 294: Government debt (ESA 95)

Narrowly defined budget, 12-month rolling, % of GDP General government gross debt, % of GDP

-1

0

1

2

3

17

18

19

20

21

Nov-11 Nov-12 Nov-13

Deficit, right scale

Expenditures

Revenues

40

45

50

55

60

2003 2005 2007 2009 2011 2013E 2015F Source: GUS, Ministry of Finance, Credit Suisse Source: Eurostat, Credit Suisse

06 March 2014


Poland: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 6.8 5.1 1.6 3.9 4.5 1.9 1.6 2.8 3.3

Real private consumption growth (%) 4.9 5.7 2.0 3.1 2.6 1.2 0.8 2.0 3.2

Real fixed investment growth (%) 17.6 9.6 -1.2 -0.4 8.5 -1.7 -0.4 8.0 9.0


Nominal GDP ($bn) 425.3 529.4 430.9 469.8 515.8 489.9 533.9 556.2 598.4

Population (mn) 38.1 38.1 38.2 38.5 38.5 38.5 38.5 38.5 38.5

GDP per capita, $ 11,163 13,895 11,280 12,203 13,397 12,725 13,867 14,446 15,544






Exchange rate (PLN per EUR, end-year) 3.60 4.15 4.11 3.96 4.47 4.08 4.15 4.10 4.00

Exchange rate (PLN per EUR, average) 3.78 3.52 4.33 3.99 4.12 4.17 4.12 4.13 4.05

Exchange rate (PLN per USD, average) 2.76 2.39 3.12 3.02 2.97 3.26 3.05 3.06 3.00

REER (% change, December to December) (1) 7.2 -7.3 -0.7 0.2 -9.2 10.9 -2.3 1.2 3.3


Fiscal data

General government revenue (% of GDP) (2) 40.3 39.5 37.2 37.5 38.4 38.3 37.4 38.0 38.5


General government primary balance (% of GDP) (2) 0.4 -1.5 -4.8 -5.2 -2.3 -1.1 -1.8 -1.4 -0.9

General government balance (% of GDP) (2) -1.9 -3.7 -7.5 -7.9 -5.0 -3.9 -4.4 -4.0 -3.5




Broad money supply (% year-on-year change) 14.2 20.2 8.3 8.4 11.5 4.2 6.6 6.4 8.0


Domestic credit growth (% year-on-year change) 26.2 35.2 8.1 7.8 11.7 0.9 7.3 6.4 8.0


Domestic credit to the private sector growth (% year-on-year change) 26.5 35.3 7.0 6.8 10.7 2.5 4.1 6.4 8.0

Balance of payments

Exports (% of GDP) 40.8 40.0 39.4 42.2 45.1 46.7 49.2 50.9 52.6

Imports (% of GDP) 44.1 44.8 40.0 44.1 46.7 46.8 47.4 48.1 48.8








Foreign debt ($bn) 233.3 245.5 280.2 317.1 323.3 365.7 370.0 370.0 370.0

Public ($bn) 78.5 67.7 86.8 109.6 116.0 150.3 150.0 150.0 150.0

Private ($bn) 154.8 177.8 193.4 207.5 207.3 215.4 220.0 220.0 220.0



Central bank official reserve assets ($bn) 65.8 62.2 79.6 93.5 97.9 108.9 106.2 106.2 106.2

Central bank official reserve assets, excl. gold ($bn) 63.0 59.3 75.9 88.8 92.2 103.4 102.2 102.2 102.2

(1) Real effective exchange rate (CPI-deflated), increase indicates appreciation. (2) Consolidated fiscal accounts of the broadly defined general government on an accrual basis; excluding one-off transfers from pension funds to the government budget. (3) Scheduled amortizations of medium- and long-term external debt of both the public and private sector.

Sources: GUS, Ministry of Finance, National Bank of Poland, IMF, JEDH, the BLOOMBERG PROFESSIONAL™ service, Haver Analyitcs, Credit Suisse

06 March 2014


Russia: Ukraine tensions prompt monetary policy action The risk of military confrontation with Ukraine rattled Russia's markets at the start

of this month and triggered early action from the central bank (CBR) to defend

financial stability. President Putin's request on 1 March for parliamentary approval of the

use of armed forces in Ukraine shocked observers and investors alike leading to a sharp

sell-off in all Russian assets on 3 March. The selling pressure on the rouble was

particularly strong, leading to record-high interventions by the CBR (over $11.3bn in a day)

and an early (and credible) hike in all policy rates, by 150bps. The CBR's decision to

amend the intervention mechanism in order to reduce currency volatility aimed to curb

household demand for FX. Near-term prospects for the rouble and other local assets are

closely linked to the outcome of the confrontation over Crimea and Russia's potential

support for separatists in Eastern Ukraine. In the longer run, the persistently slow pace of

economic growth and the declining current account surplus suggest that a recovery in the

rouble would require measures to boost productivity and help the investment climate.

Sequential GDP growth picked up in 4Q 2013 to an estimated 0.3% qoq sa, after a

0.2% qoq sa drop in 3Q, but will likely decelerate again in 1Q, on weak investment

activity. The first official estimate of 2013 real GDP growth at 1.3% yoy was in line with

our own projection and below market consensus of 1.5% yoy. Growth in domestic demand

slowed to 3.4% yoy (from 6.9% yoy in 2012), including in the household sector to 4.7%

yoy (from 7.9% yoy in 2012). Fixed investment fell 0.3% yoy, following 6.4% yoy growth in

2012. From the supply side, the strongest growth was registered in financial intermediation

(12.0% yoy, after 19.6% yoy in 2012) and agriculture (3.2% yoy). Performance of all the

sectors comprising industrial output was dismal: manufacturing expanded 0.8% yoy,

following 2.7% yoy growth in 2012, mining and quarrying rose 0.9% yoy, compared to

1.9% yoy in the previous year, while utilities output fell 1.6%, following the virtually

stagnant (0.2% yoy) output in 2012.

The sharp rouble depreciation and uncertainty over Ukraine will likely put further

downward pressure on real GDP growth in 1H 2014. We cut our GDP growth forecast

for this year sharply in early February (Russia: No respite for growth and the rouble until

2H 2014), from 2.3% yoy to 1.6% yoy, on the back of a projected spike in inflation, with a

further slowdown in consumer demand and weaker investment activity. Following the

eruption of the Ukraine crisis, with likely negative implications for bilateral trade flows, we

further scaled down our 2014 growth forecast, to 1.3% (in line with the 2013 outturn).

Outlook for 2H now appears somewhat brighter than we expected earlier, due both to

domestic (higher competitiveness of some local manufacturers after the rouble’s slide) and

external factors (a pick-up in global IP momentum, projected from mid-2014).

Outlook for inflation this year deteriorated materially following the nearly 11%

rouble depreciation in January-February. Making a reliable estimate of the impact of

the sharply weaker exchange rate on this year’s inflation outturn is not straightforward, due

to the lack of a comparable pattern in Russia’s recent economic history. The CBR’s own

pass-through coefficient estimate cited in the monetary policy report published on 18

February is close to 10%. The brunt of the pass-through from the rouble’s move in

January-February will probably materialize with one quarter’s lag (in April-May). Taking

into account the fact that some 0.5pp of food price increases in 4Q 2013 (particularly for

eggs and dairy products) were due to temporary supply shocks (expected to dissipate in

1H 2014), we estimate that headline inflation will likely peak in April (below 7% yoy),

before edging closer to 6% in July (when headline inflation is set to reflect the much lower

annual tariff increases compared with those in 2013). The inflation path in 2H will depend

on the pace of recovery in economic activity and the rouble’s performance over the

summer months. At this stage, we think that any progress on inflation in 2H will be modest,

projecting end-2014 inflation at 6.3%, above the 5.0% target but within the +/- 1.5pps

range around it.

Sergei Voloboev

+44 20 7888 3694

[email protected]

Alexey Pogorelov

+7 495 967 8772

[email protected]

https://plus.credit-suisse.com/r/aaHxzF

https://plus.credit-suisse.com/r/aaHxzF

06 March 2014


The CBR adopted a tightening bias at its meeting on 14 February but was reluctant

to hike policy rates then, only to go for a large (and pre-emptive) hike, of 150 bps, in

the early stages of the Ukraine-related sell-off on 3 March. Further rouble weakness

would likely put at risk the CBR’s ability to reach even the "enlarged" inflation target this

year, of 6.5%, so an early cut in policy rates (including the key

1-week repo rate, currently at 7.0%) appears unlikely to us at the moment. We expect the

CBR to reverse part of the 150bps hike in 3Q or early 4Q, once it becomes confident that

headline inflation will be comfortably within the 6.5% upper target level, by cutting all policy

rates by 50bps. An alternative, of cutting the repo rate while keeping the RUB implied FX

swap rate (the upper edge of interest rates corridor) flat, would mean a widening of the

interest rate corridor which would contradict the CBR’s longer-term objective of

progressively narrowing the interest rates corridor.

We believe that the narrowing current account surplus, unfavorable global risk

environment and subdued domestic economic activity were the main reasons

behind the unexpectedly sharp rouble depreciation. Since the beginning of 2014, the

rouble has weakened to all-time lows, by about 10% against the dollar, the euro and the

basket. The CBR spent roughly $13bn in FX interventions in order to smooth out the

volatility in the FX market. A number of changes in the FX policy have been introduced

since the beginning of the year. In January, the CBR abandoned its "regular" (planned) FX

interventions, in order to increase the flexibility of its intervention mechanism. Effective 19

February, the CBR has been purchasing $100mn a day on behalf of the Finance Ministry,

for the transfers to the Reserve Fund. Both developments were in line with the CBR's

objective of increasing exchange rate volatility in the run-up to introduction of inflation

targeting at end-2014. However, amid the sharp rouble sell-off on 3 March the CBR moved

to curb rouble volatility, by boosting the threshold of accumulated interventions required for

a RUB 0.05 shift in the RUB band, from $350mn most recently to $1.5bn. In the absence

of proactive reforms to boost productivity and help investment climate, or a sustained

improvement in the balance of payments, we see no reason to be bullish the rouble,

notwithstanding the likely pullbacks due to heavy long USD positioning; we see the rouble

at about 37.0 per USD at end-2014.

The current account surplus narrowed to $33bn (1.6% of GDP) in 2013 from $72bn

(3.5% of GDP) in 2012. The narrowing of the current account surplus was attributed

mainly to non-tradable components, including services trade balance and paid investment

income, while the goods trade surplus was resilient. Based on the recent estimates of

import demand elasticities by economists at the Economic Expert Group4 and our own

forecast for subdued growth in consumer and investment demand, we believe that a

sustained weakening of the rouble in 1H 2014 would lead to stabilization in the ratio of

current account surplus to GDP in 2H, at about 1.5% of GDP (compared with our previous

full-year forecast of 0.8% of GDP).

Fiscal balances should benefit from a weaker rouble and oil price stability in 2014.

The government should be able to not only accumulate significant fiscal reserves this year

but also retain a significant degree of flexibility regarding its debt strategy. On Finance

Ministry's estimates, a weakening of the exchange rate by 1 rouble against the dollar

would lead to additional nominal revenue of RUB180bn (0.25 pp of GDP) at the federal

budget level. Based on our higher average Urals oil price assumption for 2014 and 2015

($109/bbl and $104/bbl respectively) compared to that of the government ($100/bbl and

$97/bbl, respectively), a weaker exchange rate (RUB 36.5 versus 33.4 in 2014, and 37.9

versus 33.9 in 2015) and somewhat weaker growth, we have revised our federal budget

balance forecast to near zero in 2014 and 2015, from a deficit of 0.5% of GDP in 2014 and

0.7% in 2015. Under these assumptions, the Finance Ministry should have a high degree

of flexibility in meeting its debt issuance targets.

4 E.Gurvich, I.Prilepskiy, How to Provide External Sustainability of the Russian Economy. 2013.

06 March 2014


On government estimates,

GDP was flat in seasonally

adjusted terms in December

and rose 0.3% qoq sa in 4Q

2013, after a 0.2% qoq sa

drop in 3Q 2013. In January

real GDP growth slowed to

0.7% yoy, consistent with a

drop of 0.5% mom in

seasonally adjusted terms.

We estimate the negative

output gap at around 0.8%

of GDP in 4Q 2013.

Exhibit 295: Contributions to year-on-year real GDP growth

Exhibit 296: Output gap and unemployment

pps, except for real GDP (yoy % change) Actual versus potential GDP growth (based on HP filter)

-15

-10

-5

0

5

10

15

-15

-10

-5

0

5

10

15

Dec-04 Jun-09 Dec-13

Statistical discrepancyNet exportsInvestment demandConsumer demandReal GDP growth

-8

-6

-4

-2

0

2

4

6

8

105

6

7

8

9

10

Dec-06 Sep-08 Jun-10 Mar-12 Dec-13

Output gap (right scale)

Unemployment rate

Source: Rosstat, Economy Ministry, Credit Suisse The latest available unemployment reading (January 2014) is 5.6%.

Source: Rosstat, Credit Suisse

There are signs of a

renewed slowdown in output

in early 2014. In seasonally

adjusted terms, IP fell 1.0%

mom in January, following a

1.1% mom sa drop in

December (revised from

estimated growth of a

similar magnitude, following

the change of a base year,

from 2008 to 2010). The

data extended the string of

weak PMI and IP readings,

with even the higher

demand for utilities sector

output due to cold weather

not helping much.

Exhibit 297: IP and key PMI components Exhibit 298: Real sector indicators

% yoy, three-month moving average

-5

0

5

10

15

45

50

55

60

65


New orders

PMI

IP, % yoy (right scale)

-30

-20

-10

0

10

20

30

40

Fixed Investment

Retail sales

Real wages

Source: PMI Premium, Rosstat, Credit Suisse Source: Rosstat, Credit Suisse

Headline inflation picked up

to 6.2% yoy at end-

February, from 6.1% yoy in

January. We expect the

brunt of the pass-through

effect from the nearly 10%

RUB depreciation in

January-February to come

through quickly (within three

months) and project

headline inflation to stay

within the targeted range of

3.50%-6.50% in 2014,

closer to 6%. By end-2015,

we expect headline inflation

to slow to 5.5% yoy

Exhibit 299: Contributions to year-on-year CPI inflation Exhibit 300: Core inflation

pps, except for CPI

0

2

4

6

8

10


CS CoreFood & NABEnergyAlcohol & TobaccoHeadline inflation

2

4

6

8

1011 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14

2

4

6

8

10

Feb-11 Nov-11 Aug-12 May-13 Feb-14

CS core, 3m % ann.CS core, % yoyOfficial core, % yoyIndicative CBR target

Source: Rosstat, Credit Suisse Official core CPI is net of fruit and vegetables, includes most other

food items. CS core CPI is net of all food and energy items. Source: Rosstat, Credit Suisse

06 March 2014


The CBR left all policy rates

on hold on 14 February,

adopting a tightening bias. It

later hiked all policy rates by

150bps on 3 March, to

counter the impact of sharply

higher geopolitical risks. The

weak output data and higher

inflation will likely further

complicate the central bank's

policy dilemma. We expect

the CBR to reverse part of

this hike once headline

inflation is deemed on

course to meet the 6.50%

target at end-2014.

Exhibit 301: FX reserves and money Exhibit 302: Interest rates

% yoy US$ bn % per annum

200

250

300

350

400

450

500

550

600

650

-20

-10

0

10

20

30

40

50

60

70

Jan-09 Apr-10 Jul-11 Sep-12 Dec-13

FX reserves (right scale)M2 (left scale)M0 (left scale)

2

4

6

8

10

12

14

2

4

6

8

10

12

14

May-09 Jul-10 Sep-11 Dec-12 Feb-14

Fixed tom-next deposit rate

Mosprime O/N

1-week direct repo

CBR RUB XCCY o/n rate

Source: Central Bank of Russia, BLOOMBERG PROFESSIONAL™ service, Credit Suisse

Source: Central Bank of Russia, BLOOMBERG PROFESSIONAL™ service, Credit Suisse

In mid-February, the rouble

weakened to the record

level of 41.90 against the

basket despite stable oil

prices and the CBR’s heavy

interventions in the FX

market. The latest leg of

rouble depreciation came on

the back of the Finance

Ministry’s start of FX

purchases for the Reserve

Fund, alongside the

escalation of the conflict in

Ukraine. We expect the

rouble to trade around 42

against the basket this year.

Exhibit 303: Rouble and Brent oil price Exhibit 304: Approximate rouble band

$/bbl RUB against the basket comprising $0.55 and €0.45

70

80

90

100

110

12033

34

35

36

37

38

39

40

41

42

43

44

Dec-11 Jun-12 Jan-13 Jul-13 Feb-14

Rouble vs basket (LHS)

Oil price (Brent), (RHS, inv)

31

32

33

34

35

36

37

38

39

40

41

42

43

31

32

33

34

35

36

37

38

39

40

41

42

43

Oct-10 Nov-11 Dec-12 Feb-14

Source: Central Bank of Russia, Credit Suisse Note: The $0.55/€0.45 basket is in effect since 8 February 2007. Source: BLOOMBERG PROFESSIONAL™ service, Credit Suisse.

The 12-month rolling goods

trade balance was resilient

in 2H 2013, having stayed

at around 8.4%-8.6% of

GDP. We expect imports

growth to fall starting from

February in response to

weaker rouble and subdued

economic demand.

January's federal budget

was in a surplus of 0.3% of

GDP (on a 12-month rolling

basis), after a deficit of 0.5%

in 2013 thanks both to

weaker rouble, and sharply

lower expenditure.

Exhibit 305: Merchandise trade Exhibit 306: Federal budget operations

$bn % yoy change in dollar values 12-month rolling, % of GDP

-50

-35

-20

-5

10

25

40

55

70

85

100

50

75

100

125

150

175

200

225

Sep-10 Oct-11 Nov-12 Dec-13

Balance (12m rolling, left scale)

Imports, % yoy, 3mma

Exports, % yoy, 3mma

-15

-10

-5

0

5

10

15

20

25

-15

-10

-5

0

5

10

15

20

25

Jan-09 Apr-10 Jul-11 Oct-12 Jan-14

Non-oil budget balance

Overall budget balance

Primary expenditure

Source: Central Bank of Russia, Credit Suisse Source: Finance Ministry, Credit Suisse

06 March 2014


Russia: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 8.5 5.2 -7.8 4.5 4.3 3.4 1.3 1.3 3.1




Nominal GDP ($bn) 1,300 1,661 1,223 1,525 1,899 2,022 2,093 1,915 1,951

Population (mn) 142.8 142.8 142.7 142.9 142.9 143.0 141.9 141.4 141.0

GDP per capita, $ 9,102 11,631 8,568 10,674 13,289 14,140 14,749 13,541 13,841





Nominal wage growth (% year-on-year change) 30.2 15.3 10.2 15.6 18.2 11.9 12.2 9.3 8.0

Exchange rate (RUB per USD, end-year) 24.55 29.38 30.24 30.48 32.20 30.37 32.87 37.00 38.50

Exchange rate (RUB against the basket, end-year) 29.62 34.66 36.12 35.50 36.50 34.80 38.50 42.00 43.50

Exchange rate (RUB per USD, average) 25.58 24.85 31.74 30.37 29.38 30.84 31.86 36.20 37.90

REER (% change, December to December) 5.1 4.3 -3.9 6.9 3.8 5.7 1.2 -5.0 -0.5

Overnight deposit rate (%, end-year) 2.75 6.75 3.50 2.75 4.00 4.50 4.50 5.50 5.00

1-week repo rate (%, end-year) 6.00 9.00 6.00 5.00 5.25 5.50 5.50 6.50 6.00

Fiscal data

General government fiscal balance (% of GDP) 6.0 4.8 -7.0 -4.1 1.5 0.4 -0.6 -0.5 -0.1

Federal government primary fiscal balance (% of GDP) 5.9 4.5 -5.5 -3.9 1.2 0.5 0.1 0.8 0.8


Federal government fiscal balance (% of GDP) 5.4 4.1 -6.0 -3.9 0.7 0.0 -0.5 -0.1 0.0


Net general government debt (% of GDP, end-year) -4.2 -9.9 -4.0 0.4 -0.1 0.0 1.7 2.9 3.0








Balance of payments



Exports (goods and non-factor services, % change in $ value) 17.6 32.8 -34.0 29.3 29.1 3.1 -0.4 -0.8 1.0

Imports (goods and non-factor services, % change in $ value) 34.8 30.4 -31.1 27.5 28.1 7.1 6.8 -8.1 1.1



Net FDI ($bn) 9.2 19.4 -7.8 -10.5 -14.4 -18.0 -18.6 -28.0 -10.0




Public Foreign Debt ($bn) 37.4 29.5 31.3 34.5 34.7 44.8 49.3 53.3 58.5

Private Foreign Debt ($bn) 426.5 451.0 435.9 454.4 510.7 587.0 668.6 682.6 702.6




Source: Rosstat, Central Bank of Russia, Finance Ministry of the Russian Federation, Credit Suisse

06 March 2014


South Africa: Adjusting policies as pressure mounts The changes to South Africa's monetary and fiscal policies that started in January

and February, respectively, will need to continue through the rest of the year, in

our view. Further policy adjustments will be needed in response to the following global

developments: (a) a likely end to US quantitative easing by 3Q 2014; (b) a likely

renewed rise in 10-year US Treasury yields to 3.65% by 4Q 2014; (c) a likely stronger

dollar; (d) stronger economic growth in developed markets, which will likely (e) continue

to attract capital away from emerging markets; (f) likely below trend growth in China,

with negative implications for (g) industrial metals' prices. We think that the Reserve

Bank will hike rates further this year, although not to the extent currently priced in the

market, in our view. Furthermore, the National Treasury will need to deliver on its

renewed commitment to fiscal tightening. These policy adjustments will be necessary as

a result of six likely South African macro developments.

First, we continue to expect the current account deficit to widen further this year.

The current account deficit in 4Q 2013 looks likely to have narrowed sharply. We view this

as a temporary reprieve. Based on our commodity analysts' price forecasts for gold, iron

ore, coal, platinum and oil, we estimate another year of a decline in South Africa's terms of

trade in 2014, of 1.8%, compared to an estimated decline of 1.1% in 2013. According to

our estimates an expected acceleration in the growth rate of export volumes in 2014

(5.1%) will be insufficient to negate the negative terms-of-trade effect that we are

estimating. The growth rate of import volumes also looks likely to be sustained at a level

similar to that of 2013 (5.7%). We forecast a current account deficit of 7.0% of GDP for

2014, compared to an estimated deficit of 5.7% in 2013 (5.2% in 2012).

Second, international capital inflows are likely to remain weak, in our view. Net

international purchases of South African equities were broadly flat in 2013. Net

international purchases of South African government bonds declined to $1.7bn in 2013,

compared to net purchases of $10.5bn in 2012. Total net international portfolio flows

were negative for four consecutive months until February 2014, when flows turned a

positive $1.3bn. Domestic and international developments over the next three to six

months are not supportive of strong international capital inflows into South Africa, in our

view: the unresolved strike in the platinum sector will likely keep investors wary; the

National elections on 7 May are likely to keep investors cautious; US Treasury yields are

likely to resume their climb; and the dollar is likely to appreciate.

Third, in this context for the current and capital accounts the rand looks likely to

resume its depreciation, in our view. Our forecasts remain 11.20 and 11.50 on 3- and

12-month horizons. We estimate real depreciation in the currency of 2.5% this year

compared to 11% in 2013. As at 3 March, the rand's real effective exchange rate

(REER) was 24% cheap to our estimated fair value, the fourth cheapest currency in EM.

The rand was 2.3 standard deviations cheap to fair value, compared to 0.8 in May 2013.

We think that this cheapness is likely to persist this year.

Fourth, we expect that inflation will accelerate to 6.5% yoy by June, before

declining in 2H 2014. The sharp increase in domestic maize prices over the past two

months, both as a result of the weaker rand as well as domestic inventory shortages,

looks likely to push food price inflation higher, to 7.2% yoy by June (from 4.3% in

January 2014), according to our estimates. The weaker rand will also transmit to

headline inflation via the transport component of CPI, which we estimate will be up

9.1% yoy by June (from 7.8% in January 2014). We assume that both maize prices and

Brent oil prices decline in 2H 2014, resulting in a decline in headline CPI inflation to

5.9% by the end of the year. Our assumption for the average oil price for the year is

$102 per barrel. If we assume an average oil price for calendar 2014 of $110 and keep

all other inputs unchanged, then inflation increases to 6.7% by June and declines to only

6.4% by December 2014.

Carlos Teixeira

+27 11 012 8054

[email protected]

06 March 2014


Fifth, structural reforms that could help cushion the country from expected

adverse external developments look likely to be delayed until well after the

National Elections on 7 May, in our view. Consequently, the burden of adjustment will

continue to rest on the monetary and fiscal authorities, which (in the absence of

structural reforms) have to respond to the risks that confront the economy. These

include a deterioration in the terms of trade, high financing needs, a vulnerable rand,

and upside risks to inflation. A tightening of policy is therefore required even though

GDP growth is mediocre and fragile, and unemployment rates remain high.

The ratings agencies continue to highlight these risks, despite a generally

positive reaction to the Budget Speech on 26 February. Moody's and Standard &

Poor's look likely to maintain their negative outlooks until after the elections, in our view5.

In line with recent polls, we expect the ANC to win the elections, with a slightly reduced

majority. President Zuma is likely to reshuffle his cabinet, which will deliver a 100-day

plan of action for the government. Thereafter, the ANC government will prepare its

Medium-Term Strategic five-year plan. We, and likely the ratings agencies, will be

looking for an unambiguous reference to the National Development Plan.

The fiscal consolidation plan that has been delivered for FY 2014-FY 2015 is

achievable, in our view. We are less convinced on FY 2015-FY 2016 and FY 2016-

FY 2017. While the National Treasury's GDP growth and inflation assumptions for

FY 2015- FY 2016 and FY 2016- FY 2017 are reasonable, there are downside risks to

the revenue estimates and upside risks to the expenditure estimates. On the former, we

think that hikes in tax rates will be necessary to achieve the budgeted figures. On the

latter, we think that the budgeted low nominal growth rates for employee compensation

of 6.7% and 6.4% for these two fiscal years, respectively, will be difficult to achieve. The

public sector's three-year wage agreement comes up for renegotiation in 2015.

In response to the above described risks we expect the Reserve Bank's monetary

policy committee to increase the policy interest rate by an additional 100bps this

year. We think that the monetary policy committee (MPC) will hold the rate at 5.50% at

its meeting on 27 March, but hike by 50bps in May and in July. The market is pricing

200bps of rate hikes by January 2015, 100bps more than our forecast. For 2015, we

expect the MPC to hike by 50bps in March and 50bps in May. Here again, the market is

more aggressive in its rate hike expectations, as reflected in the forward rate

agreements (FRAs).

Current market interest rates (both in real and nominal terms and both in level and

spread terms), the rand and monetary conditions all continue to suggest that

monetary policy needs to be adjusted (tightened further). First, real short-term

interest rates and the real effective exchange rate remain near historical lows. Second,

monetary conditions have eased to five-year lows, according to our estimates, and are

well below their long- and medium-term averages. Third, the current loose monetary

conditions suggest that there is upside risk to inflation. Fourth, monetary conditions

remain loose enough to be supportive of a lagged improvement in GDP growth. Fifth,

the premium for real (inflation-adjusted) ZAR exposure has declined to four-year lows, at

both the short and longer ends of the yield curve. Sixth, our Taylor Rule estimates,

under a variety of different assumptions for the appropriate equilibrium real short-term

interest rate, suggest a range for the policy rate by the end of 2015 between 6.5% and

9.5%, or an average 8.0%, compared to the current 5.5%.

5 Moody's: changed outlook to negative on 9 November 2011, cut rating on 27 September 2012, and maintained negative outlook.

Moody's reaffirmed its negative outlook on 6 January 2014. S&P: changed outlook to negative on 28 March 2012, cut rating on 12 October 2012, and maintained negative outlook. S&P reaffirmed its negative outlook on 20 December 2013. Fitch: changed outlook to negative on 13 January 2012, cut rating on 10 January 2013, and moved outlook back to neutral.

06 March 2014



in 4Q 2013 looks likely to

have narrowed, but we

expect it to widen again in

2014 as a result of a further

decline in the terms of trade.

International portfolio

inflows to fund the basic

balance deficit dried up in

the four months to February,

when inflows turned

positive, totaling $1.3bn.

Exhibit 307: Basic balance Exhibit 308: Total net portfolio flows

% of GDP, 4-quarter rolling net FDI + current account $bn $bn

-8

-6

-4

-2

0

2

4

6

8

90 92 94 96 98 00 02 04 06 08 10 12 14

-15

-12

-9

-6

-3

0

3

6

9

12

15

-4

-3

-2

-1

0

1

2

3

4

10 11 12 13 14

Monthly

Rolling 12-month sum (right)

Source: Reserve Bank, Credit Suisse Source: JSE, the BLOOMBERG PROFESSIONAL™ service, Thomson Reuters DataStream, Credit Suisse

The outlook for portfolio

inflows is uncertain.

Stronger GDP growth

should attract renewed

inflows into the equity

market, where international

holdings are low. However,

our global equity strategists

believe that South Africa is

expensive. Similarly, the

sell-off in domestic debt

since October 2013 and a

significantly weaker rand

could entice investors back

into this asset class.

However, international

holdings are already at

historical highs.

Exhibit 309: Net international purchases of South African equities

Exhibit 310: Net international purchases of South African bonds

$bn $bn $bn $bn

-11

-9

-7

-5

-3

-1

1

3

5

7

9

11

-3

-2

-1

0

1

2

3


Monthly (left)

Rolling 12-month sum

-11

-9

-7

-5

-3

-1

1

3

5

7

9

11

-3

-2

-1

0

1

2

3


Monthly (left)

Rolling 12-month sum

Source: JSE, the BLOOMBERG PROFESSIONAL™ service, Thomson Reuters DataStream, Credit Suisse

Source: JSE, the BLOOMBERG PROFESSIONAL™ service, Thomson Reuters DataStream, Credit Suisse

The rand is undervalued

according to our models, yet

we think that it will resume

its depreciation in the

months ahead.

Consequently, we expect

CPI inflation to continue to

increase until mid-year.

Food prices also look likely

to accelerate as a result of

the two-month rally in

domestic maize prices.

Exhibit 311: Nominal effective rand and nominal interest rates

Exhibit 312: Maize prices and food price inflation

% Index: higher = appreciation % year-on-year change

45

65

85

105

125

145

165

185

205

225

0

5

10

15

20

25

90 92 94 96 98 00 02 04 06 08 10 12 14

Nominal long rate

Nominal short rate

NEER (right)

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

-25

-20

-15

-10

-5

0

5

10

15

20

25

09 10 11 12 13 14

Food (14.20% of CPI)

Meat (4.56% of CPI)

Breads, Cereals (3.55% of CPI)

Maize (right)

Source: the BLOOMBERG PROFESSIONAL™ service, Thomson Reuters DataStream, Credit Suisse

Source: Statistics South Africa, Thomson Reuters DataStream, Credit Suisse

06 March 2014


The growth rate of tax

revenues has accelerated,

helping to push the budget

deficit target for the current

fiscal year to 4.0% of GDP,

from an original estimate of

4.2%. In contrast, the

growth rate of expenditure

has been running below

budget.

Exhibit 313: Fiscal revenues as a percentage of GDP

Exhibit 314: Fiscal expenses as a percentage of GDP

% of annualized GDP, nominal prices % of annualized GDP, nominal prices

23.0

23.5

24.0

24.5

25.0

25.5

26.0

26.5

27.0

05 06 07 08 09 10 11 12 13

25.0

25.5

26.0

26.5

27.0

27.5

28.0

28.5

29.0

29.5

30.0

30.5

05 06 07 08 09 10 11 12 13 Source: National Treasury, Reserve Bank, Credit Suisse Source: National Treasury, Reserve Bank, Credit Suisse

Finance Minister Gordhan presented a budget that

recommits the government to fiscal tightening over the

next three years. The National Treasury delivered lower-than-expected deficit targets of 4.0% of GDP for

FY 2013- FY 2014, declining to 2.8% by FY

2016-FY 2017. Consequently, borrowing

needs over the next three fiscal years are budgeted to

be 5% lower than was estimated in the Medium

Term Budget Policy Statement (MTBPS) in

October 2013.

Exhibit 315: National government budget deficit

Exhibit 316: National government budget deficit

% of GDP pps

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

05 06 07 08 09 10 11 12 13 14

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

06 07 08 09 10 11 12 13 14

Above cyclically adjusted fiscal deficit

Below cyclically adjusted fiscal deficit

Source: National Treasury, Reserve Bank, Credit Suisse Source: National Treasury, Reserve Bank, Credit Suisse

Current monetary

conditions are loose

enough to suggest that

there is upside risk to

inflation and loose enough

to be supportive of a

lagged improvement in

GDP growth. The response

from the Reserve Bank is

likely to be a continued

tightening of monetary

policy. We expect an

additional 100bps this year

and 100bps in 2015.

Exhibit 317: Monetary conditions index Exhibit 318: Taylor Rule

Index: January 2002 = 0 %

-5

-3

-1

1

3

5

7

9

05 06 07 08 09 10 11 12 13 14

Tighter

Looser

Average

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10 11 12 13 14 15 16

Taylor Rule Repo Rate

Actual Repo Rate

Source: Statistics South Africa, Reserve Bank, the BLOOMBERG PROFESSIONAL™ service, Thomson Reuters DataStream, Credit Suisse

Source: Statistics South Africa, Reserve Bank, the BLOOMBERG PROFESSIONAL™ service, Thomson Reuters DataStream, Credit Suisse

06 March 2014


South Africa: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 5.7 3.5 -1.3 3.2 3.5 2.4 1.9 2.8 3.4


Growth in real fixed investment (%) 14.0 13.0 -4.3 -2.1 4.2 4.4 3.0 3.4 4.7


Nominal GDP ($bn) 285.8 273.5 286.0 365.3 403.8 382.4 350.3 328.3 349.1

Population (mn) 48.9 49.6 50.2 50.9 51.6 52.3 53.0 53.7 54.4

GDP per capita, $ 5,837 5,636 5,799 7,307 7,982 7,470 6,612 6,115 6,416






Exchange rate (ZAR per USD, end-year) 6.81 9.53 7.38 6.63 8.09 8.48 10.52 11.50 11.50

Exchange rate (ZAR per USD, average) 7.05 8.27 8.42 7.32 7.26 8.21 9.65 11.20 11.50

REER (% change, December to December)(2) 0.1 -16.5 22.5 10.0 -13.8 -2.5 -10.9 -2.5 2.5

Repo rate (%, end-year) 11.00 11.50 7.00 5.50 5.50 5.00 5.00 6.50 7.50

Fiscal data(3)

General government fiscal balance (% of GDP) 0.9 -1.1 -6.5 -4.3 -3.7 -4.3 -4.0 -4.2 -4.0

General government primary balance (% of GDP) 3.4 1.3 -4.2 -1.8 -1.2 -1.5 -1.1 -1.2 -0.9



Net general government debt (% of GDP, end-year) 23.0 22.9 27.4 29.7 33.0 36.1 39.5 41.8 44.2







Domestic credit to private sector (% year-on-year) 21.5 13.6 -0.1 5.5 6.2 10.1 6.1 8.6 8.6

Balance of payments



Exports (goods and non-factor services, % change in $ value) 14.8 9.1 -20.4 32.8 19.2 -7.4 -4.4 -11.1 -0.1

Imports (goods and non-factor services, % change in $ value) 15.4 8.9 -24.3 25.8 20.2 -0.1 -2.0 -8.9 -2.8



Net FDI ($bn) 3.6 12.4 6.4 3.7 4.5 1.6 3.5 3.2 4.5



Foreign debt ($bn, end-year)(5) 75.3 74.9 82.9 111.3 118.2 142.3 151.5 160.2 169.1

Public ($bn) 24.4 22.3 27.9 43.4 53.7 71.6 76.8 80.4 84.3

Private ($bn) 52.8 52.7 55.0 67.9 64.5 70.7 74.7 79.7 84.7




Central bank net FX reserves ($bn) 31.3 33.5 39.0 43.4 47.9 47.9 45.5 40.8 40.2


(1) Based on remuneration per worker, index 2000=100. (2) Real effective exchange rate, increase indicates appreciation. (3) Data for fiscal years starting 1 April. Selected data refer to the government’s consolidated fiscal balances from 2009. (4) Of medium- and long-term debt only. (5) Including rand-denominated debt held by non-residents.

Source: South African Reserve Bank, Statistics South Africa, National Treasury, Credit Suisse

06 March 2014


Turkey: No end in sight for the turf war The next few months appear to be potentially very challenging for Turkey. Political

visibility remains low and might get even more blurred in the coming period, in our view.

This is because the power struggle between Prime Minister Erdogan and the supporters of

Fethullah Gulen – a Muslim preacher in self-imposed exile in Pennsylvania since 1999 –

might intensify ahead of the 30 March municipal elections and perhaps also ahead of the

nomination of the candidates before late June if Erdogan decides to run in the August

presidential elections. Meanwhile, domestic demand growth is slowing and the economy is

rebalancing towards external demand, reducing the country’s main vulnerability, i.e., the

large current account deficit. However, the near-term inflation outlook (especially in April-

May) is quite challenging, raising the possibility of further monetary policy tightening (not

our baseline scenario).

Credible opinion polls (before 24 February) show the AKP winning the 30 March

municipal elections. The AKP is still the leading political party in Turkey, although its

support has declined since the power struggle (see above) became public in the local

media on 17 December when corruption investigations were launched against AKP

members and their families by the alleged Gulenists in the judiciary and the police force.

Credible opinion polls as reported by the local media (before 24 February) put the AKP’s

support level at 43-48%, down from about 50% prior to mid-December. However, an audio

recording (claimed by the government to be fabricated) apparently of Erdogan asking one

of his sons to dispose of large cash sums that appeared in the social media on 24

February may have reduced support for the AKP further since then.

In our view, an AKP victory on 30 March is unlikely to end the power struggle

between Erdogan and the Gulenists. If the AKP garners 40-45% of the votes in the

municipal elections and also wins in Istanbul and Ankara, as most available opinion polls

suggest, this should improve political visibility somewhat. However, such an outcome is

unlikely to stop the Gulenists, in our view, as their ultimate objective appears to be the

prevention of Erdogan’s presidency. We attach a high probability to Erdogan’s nomination

for the presidency (sometime in June) if the AKP gets 40-45% of the votes on 30 March.

(In the less likely scenarios of the AKP winning less than 40% or the AKP losing its

stronghold in Istanbul even if its country-wide support level exceeds 40%, Erdogan might

reconsider his nomination for the presidency. If Erdogan decides not to run, he may try

and change the AKP’s “three-term rule” to run in the parliamentary elections that are

currently scheduled for June 2015 and continue as prime minister.)

In our view, the AKP government has so far failed to achieve the delicate balance

between the need to address the issue of a “parallel state” and the need to ensure

an independent judiciary to probe the corruption allegations appropriately.

According to Erdogan, a group of prosecutors and police, which he collectively refers to as

"a state within the state" or “parallel state,” has cooperated with Gulen to stage a coup

against him since 17 December. Accordingly, the government has intervened directly in

the corruption investigations, and many members of the police force and the judiciary have

been removed from their posts. Subsequently, all detainees under the 17 December probe

were freed on 28 February. Not surprisingly, Erdogan has also been arguing that an AKP

victory on 30 March will free him and others of all allegations, underscoring the likelihood

that an appropriate investigation into corruption allegations will not be carried out in the

case of an AKP victory.

Although political stability in terms of the rule of a single-party government might

be maintained, the country’s democratic credentials and the credibility of the state

institutions have been eroded considerably, in our view. While the AKP claims that it

is purging state institutions of Gulenist elements, its critics maintain that it is meddling with

the independence of the judiciary. Additionally, the AKP has, over the past two months,

enacted legislation that tightens the government's control over the judiciary and the

internet. These bills also cast a shadow on Turkey’s relations with the EU, which have

Berna Bayazitoglu

+44 20 7883 3431

[email protected]

06 March 2014


been revived somewhat since the November 2013 opening of a negotiation chapter

following a three-year hiatus and the resumption of peace talks in Cyprus a few weeks

ago. The bills appear to move Turkey away from the EU’s standards on the independence

of the judiciary and the freedom of expression. While, in the near term, investors in

government bonds might focus on the unity of the government and its continuing rule

rather than the country’s democratic credentials and the rule of law, we think the erosion of

the democratic institutions might at some point turn into a sovereign creditworthiness

problem if its adverse impact on the business climate and real GDP growth becomes long-

lasting.

The government’s immediate economic policy response to the political

developments was prudent, in our view. As the lira’s nominal basket exchange rate

weakened after 17 December, the government proactively tightened the policy mix by

announcing various macroprudential measures on 31 December and tax hikes on 1

January. However, the market was not convinced by the adequacy of this policy response

and the lira has depreciated further in the second half of January.

Subsequently, the monetary policy committee (MPC) was forced by the market to

tighten monetary policy aggressively on 28 January and simplify its operational

framework. The lira’s depreciation quickened following the MPC’s 21 January meeting,

when the MPC tightened monetary policy on an occasional basis under its complicated

monetary policy framework and did not adopt a clear tightening stance. Following a sizable

($3.15bn) but ineffective FX intervention on 23 January, the MPC held an extraordinary

meeting on 28 January. Although the extent of tightening on 28 January was not as large

as the hike in the one-week repo rate to 10.00% from 4.50% suggests, the magnitude of

the tightening was still significant at 225-275bps. (Prior to 28 January, the central bank

provided most of its funding at the upper end of the short-term interest rate corridor,

7.75%, rather than at the one-week repo rate of 4.50%.) The MPC also simplified its

operational framework on 28 January – the interest rate corridor is now between 8.00%

and 12.00%, with the bulk of central bank funding provided at the one-week repo rate of

10.00%.

Year-on-year headline inflation increased modestly to 7.9% in February from 7.4% in

December, but this masks a sharp deterioration in core inflation dynamics. The

central bank’s favorite core inflation indicator (the so-called core index I, which excludes

food, energy, tobacco, alcoholic beverages and gold from the CPI basket) increased to

8.4% yoy in February from 7.1% yoy in December, recording its highest level since early

2012 (following the exchange rate shock of 2011). More importantly, the run-rate of core

inflation rose more sharply than we expected to 9.5% in February from about 7.0%-7.5% in

December-January. (We calculate the run-rate of core inflation as the annualized three-

month moving average of the month-on-month change in the de-seasonalized core index

I.) Admittedly, with the existing data, we cannot discern the impacts of the moves in the

lira’s exchange rate and the tax adjustments that were announced on 1 January.

Nevertheless, the data underscore that economic activity was still strong enough in

February to allow the producers to pass on to consumers both the exchange rate

weakness and the tax adjustments at a high pace.

We maintain our end-2014 inflation forecast at 7.7% under our nominal basket

exchange rate assumption of 2.60 throughout this year; that said, the inflation

outlook is pretty challenging in the near term (especially in April-May). Headline

inflation might move towards 8.5-9.0% in April-May from 7.9% in February given the

unfavorable base effects for food price inflation in those months and depending on the

pace of pass-through in the coming months from the lira's depreciation in January. Our

end-year headline inflation forecast of 7.7% incorporates utility price adjustments in

October. However, if the government decides to increase utility prices in 2Q, following the

municipal elections on 30 March, this would make 2Q even more challenging.

06 March 2014


The MPC hopes that the “strong and front-loaded” rate hike of 28 January will be

adequate to rein in the inflation expectations. The policy response on 28 January

seems to have broadly stabilized the lira’s nominal basket exchange rate within 2.60-2.65.

In our view, this should also stabilize inflation expectations, which have worsened steadily

since May-June 2013 and quite abruptly in January-February 2014. We expect the central

bank to be able to navigate 2Q without having to amend the interest rate corridor, but it

might have to tighten lira liquidity by limiting the amount of lira provided at the one-week

repo rate of 10.00% if the inflation outlook deteriorates further. Under its simplified

operational framework, the central bank can easily push the interbank overnight rate close

to 12% (or even higher to 15% which is the interest rate at its late liquidity window) simply

by restricting the amount of lira liquidity provided at 10.00%. In case further notable

depreciation pressure on the lira materializes (not our baseline), either due to global or

domestic reasons, the MPC might be forced to hike interest rates even further.

Real GDP growth seems to have held up well in 4Q 2013 but is likely slowing now.

(Real GDP data for 4Q will be released on 31 March.) Industrial production expanded

1.3% qoq in 4Q on a seasonally and workday adjusted basis, up from 0.8% qoq in 3Q.

However, the environment has changed markedly since mid-December. The capacity

utilization rate in the manufacturing industry declined to 74.5% on average in January-

February, after increasing to 75.6% in 4Q from 75.0% in 3Q on a seasonally adjusted

basis. The political noise has driven both consumer and business confidence in January-

February to their lowest levels since 2H 2012. The confluence of macroprudential

measures that were announced on 31 December, the monetary policy tightening on 28

January, and moderating capital inflows is dampening the credit growth momentum –

more notably for consumer loans than overall loans – towards 15%, in our view. We also

believe that the risks to investment growth remain to the downside, especially if the weaker

consumer and business confidence is coupled with a more modest pick-up in the global

economy than we currently expect. Accordingly, we forecast that real GDP growth will

halve to 2.2% this year from a projected 4.3% in 2013.

Aggregate demand is rebalancing towards external demand and the current

account deficit is adjusting narrower. Mainly driven by the pick-up in the euro area,

Turkey’s merchandise goods exports increased 3.1% qoq in 3Q and 3.0% qoq in 4Q in

volume terms, after contracting on average 2.1% qoq in the previous three quarters.

Although three-month ahead export orders have weakened recently, we think that the

continuing recovery in the euro area should broadly continue to support Turkey’s exports.

Combined with the slowdown in domestic demand growth, this should lead to a much-

needed downward adjustment in the current account deficit in 2014. The run-rate of the

current account deficit was 8.0% of GDP in December, on our estimates, up from about

7.0% of GDP in September but lower than 9.5% of GDP in June. (We define the run-rate

of the current account deficit as the annualized three-month moving average of the

seasonally adjusted current account deficit.) We forecast that the current account deficit

will narrow to 5.7% of GDP in 2014 from 7.7% of GDP in 2013, but a further revival in

Turkey’s export orders would lead us to revise our 2014 current account deficit forecast

lower.

Moody’s and Fitch do not seem to be in a rush to reconsider their investment grade

ratings for Turkey’s long-term sovereign FX debt despite the political noise. Both

agencies keep the outlook on their ratings at “stable”. We do not expect either agency to

downgrade Turkey in the near term, but we think both agencies will be watching the

outcome of the municipal elections on 30 March and the presidential elections in August

closely to assess whether political stability will be maintained. On 7 February, S&P revised

the outlook on its sub-investment BB+ rating for Turkey’s long-term sovereign FX debt to

“negative” from “stable”. The timing of this move was not meaningful, in our view, as it

followed the MPC’s aggressive monetary policy response on 28 January.

06 March 2014


The lira’s nominal basket

exchange rate depreciated

to as weak as 2.77 before

the MPC’s extraordinary

meeting on 28 January and

has stabilized around 2.60-

2.65 since then. The lira’s

REER was 101.9 in

February (compared to a

base of 100 in 2003),

corresponding to

“excessively cheap” territory

in the central bank’s view.

As of 3 March, the lira’s

REER was about 12% (one

standard deviation) cheaper

than our estimate of its fair

value.

Exhibit 319: Lira’s nominal basket exchange rate

Exhibit 320: Lira’s real effective exchange rate (REER)

Average of USDTRY and EURTRY 2003=100

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

Mar-13 Jul-13 Nov-13 Mar-14

80.00

90.00

100.00

110.00

120.00

130.00

140.00

Feb-06 Feb-08 Feb-10 Feb-12 Feb-14

REER

1.5% appreciation p.a. after 2003

2.0% appreciation p.a. after 2003

Source: Central Bank, Credit Suisse Source: Central Bank, Credit Suisse

The central bank sold about

$24bn since June 2013

during which time residents’

FX deposits increased by

about $23bn, with

households’ FX deposits

rising by $12bn and

corporates’ FX deposits

increasing by $11bn.

Residents’ demand for

dollars continued even after

the aggressive rate hike on

28 January.

Exhibit 321: Central bank’s FX sales Exhibit 322: Short-term interest rates

$bn %

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jun

-13

Jul-1

3

Au

g-13

Se

p-13

Oct

-13

Nov

-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14*

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Jul-1

3

Au

g-13

Se

p-13

Oct

-13

Nov

-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Interbank overnight rateCentral bank's effective funding rateOne-week repo rate

*CS estimate for the full month. Source: Central Bank, Credit Suisse

Source: Borsa Istanbul, Central Bank, Credit Suisse

The run-rate of core inflation

rose more sharply than we

expected to 9.5% in

February from about 7.0-

7.5% in December-January,

underscoring that economic

activity was still strong

enough in February to allow

producers to pass on to

consumers both the

exchange rate weakness

and the tax adjustments at a

high pace. Inflation

expectations have

worsened steadily since

May-June 2013 and quite

abruptly in January-

February 2014.

Exhibit 323: Core prices Exhibit 324: Inflation expectations

%, annual %, annual

-2

0

2

4

6

8

10

12

14


Core index I*

Run-rate of core index I**

5.0

6.0

7.0

8.0


12-month forward

24-month forward

*Core index I excludes food, energy, tobacco products, alcoholic beverages and gold from the CPI basket. **Calculated as the annualized three-month moving average of the month-on-month changes in the seasonally adjusted core index I. Source: Statistics Office, Credit Suisse

Source: Central Bank

06 March 2014


The confluence of

macroprudential measures

that were announced on 31

December, the monetary

policy tightening on 28

January, and moderating

capital inflows is dampening

the credit growth

momentum – more notably

for consumer loans than

overall loans – towards

15%, in our view.

Exhibit 325: Consumer loan growth Exhibit 326: Overall loan growth

%, annualized, 13-week moving average, week-on-week change in loan stock

%, annualized,13-week moving average, week-on-week change in loan stock

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

1 5 9 13 17 21 25 29 33 37 41 45 49

2013

Average 2007-2012

2014

Weeks

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

1 5 9 13 17 21 25 29 33 37 41 45 49

2013

Average 2007-2012

2014

Weeks

Source: Central Bank, Credit Suisse Source: Banking Regulation and Supervision Agency, Central Bank, Credit Suisse

Mainly driven by the pick-up

in the euro area, Turkey’s

merchandise goods exports

increased 3.1% qoq in 3Q

and 3.0% qoq in 4Q in

volume terms, after

contracting on average

2.1% qoq in the previous

three quarters. Although the

three-month ahead export

orders have been

weakening recently, we

think the continuing

recovery in the euro area

should broadly continue to

support Turkey’s exports.

Exhibit 327: Export and import volumes

Exhibit 328: Three-month ahead export orders

For goods only, 2010=100 Seasonally adjusted

60.0

80.0

100.0

120.0

140.0

Q4-09 Q4-10 Q4-11 Q4-12 Q4-13

Export volumes

Import volumes

100.0

105.0

110.0

115.0

120.0

125.0

130.0

135.0

Feb-12 Aug-12 Feb-13 Aug-13 Feb-14

Source: Statistics Office, Credit Suisse Source: Central Bank

Combined with the

slowdown in domestic

demand growth, this should

lead to a much-needed

downward adjustment in the

foreign trade and current

account deficits in 2014

following a deterioration in

4Q compared to 3Q 2013.

We forecast that the current

account deficit will narrow to

5.7% of GDP in 2014 from

7.7% of GDP in 2013.

Exhibit 329: Foreign trade deficit Exhibit 330: Current account deficit

$bn, seasonally adjusted $bn, seasonally adjusted, 3mma

0.0

2.0

4.0

6.0

8.0

10.0

12.0


Foreign trade deficit

Foreign trade deficit (3mma)

3.0

4.0

5.0

6.0

7.0

8.0


Source: Statistics Office, Credit Suisse Source: Central Bank, Credit Suisse

06 March 2014


Turkey: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 4.7 0.7 -4.8 9.2 8.8 2.2 4.3 2.2 3.1

Growth in real private consumption (%) 5.5 -0.3 -2.3 6.7 7.7 -0.6 3.8 1.3 2.2

Growth in real fixed investment (%) 3.1 -6.2 -19.0 30.5 18.0 -2.7 3.5 0.0 3.0


Nominal GDP ($bn) 647.8 735.2 615.7 732.4 777.1 789.8 838.8 796.4 884.4

Population (mn) 70.6 71.0 71.4 71.8 72.2 72.6 73.0 73.4 73.8

GDP per capita, $ 9,176 10,355 8,624 10,200 10,762 10,877 11,487 10,844 11,976





Nominal wage growth (% year-on-year change)(1) 14.7 10.6 -1.9 15.8 15.7 15.6 14.4 14.0 14.0

Exchange rate (TRY per USD, end-year) 1.16 1.51 1.51 1.55 1.91 1.78 2.13 2.18 2.23

Exchange rate (TRY against the basket, end-year)(2) 1.44 1.83 1.83 1.80 2.18 2.07 2.54 2.60 2.65

Exchange rate (TRY per USD, average) 1.30 1.29 1.55 1.50 1.67 1.79 1.90 2.21 2.21

REER (% change, December to December)(3) 17.5 -12.7 1.7 7.7 -12.9 7.8 -9.6 3.6 3.7

One-week repo rate (%, end-year)(4) 16.73 15.64 7.11 6.50 5.75 5.50 4.50 10.00 11.00

Fiscal data

Central government's fiscal balance (% of GDP) -2.5 -2.8 -6.4 -4.2 -1.6 -2.3 -1.5 -2.1 -2.4

General government fiscal balance (% of GDP)(5) -1.2 -1.9 -4.9 -3.2 -1.0 -1.7 -1.0 -1.6 -1.9

Central government primary fiscal balance (% of GDP) 2.6 1.9 -1.5 -0.4 1.3 0.4 0.9 0.4 -0.2

General government primary balance (% of GDP)(5) 3.5 2.2 -0.6 0.2 1.5 0.6 1.1 0.7 0.1


General government expenditure (% of GDP)(5) 33.3 33.8 37.3 34.8 32.3 33.6 33.7 34.6 35.2

Gross central government debt (% of GDP, end-year) 39.6 40.0 46.3 43.1 40.0 37.6 37.2 35.0 32.9



Broad money supply (M2, % of GDP)(7) 40.8 45.9 51.8 53.4 52.0 52.5 56.6 60.6 64.5






Balance of payments




Imports (goods and non-factor services, % change in $ value) 21.3 19.0 -28.5 29.9 28.5 -1.6 7.0 -0.8 9.8



Net FDI ($bn) 19.9 17.2 7.1 7.6 13.8 9.2 9.6 9.0 9.0




Public ($bn) 89.3 92.4 96.6 100.6 103.6 111.1 114.8 117.8 120.8

Private ($bn) 161.1 188.7 172.4 191.2 200.7 227.6 270.1 282.4 295.8





(1) For the private manufacturing sector for 2004 and 2005; gross earnings index (2010=100) for the overall industrial sector for the period after 2006. (2) The basket exchange rate is the average of USDTRY and EURTRY exchange rates. Our forecasts for USDTRY are derived from our basket exchange rate forecasts and the previous month's EURUSD average. (3) Real effective exchange rate, increase indicates appreciation. (4) One-week repo rate has been the central bank's policy rate since 18 May 2010 but it has temporarily lost relevance between late 2010 and early 2014. (5) The definition of the consolidated government comprises the central government, extra-budgetary funds, state-owned enterprises, social security institutions and the Unemployment Insurance Fund. The data for government spending and gross debt are for the central government. (6) Gross general government debt minus the central bank's net assets, public sector's deposits/securities and the assets of the Unemployment Insurance Fund. (7) Central bank’s old definition of M2 is used for both 2004 and 2005 due to lack of data on the new definition. (8) Of medium- and long-term debt, including repayments to the IMF.

Source: Statistics Office, Central Bank, Treasury, IMF, Credit Suisse

06 March 2014


Ukraine: A chance for comprehensive policy adjustment The dramatic change of power in Kiev over 21-22 February has opened an opportunity

for comprehensive policy adjustment and large-scale Western aid. However, it has also

prompted Russia's leaders to deploy military forces in Crimea and to indicate possible

intervention in support of ethnic Russians in Eastern regions, thus sharply raising risks to

Ukraine's integrity and control over its territory. While the risk of a full-scale military

confrontation with Russia appears to have declined somewhat in recent days (to probably

not more than 15%-20%, on our estimates), investors clearly cannot afford to ignore it

altogether, in view of the dire implications of such a scenario for Ukraine's territorial and fiscal

integrity, ability to negotiate with lenders and capacity to service FX debt.

The swift political changes over several days in late February left Ukraine with an

entirely different political configuration. The prolonged confrontation between anti-

Yanukovich protesters and government forces led to an unprecedented loss of human

life over 18-20 February and an EU-brokered power-sharing agreement that proved to

be short-lived, after Maidan leaders failed to support it and threatened further armed

resistance. The Rada promptly voted to reinstate the 2004 constitution, sharply boosting

the authority of the parliament and the government at the expense of the presidency. It

also passed a bill that allowed Yulia Tymoshenko to be released from prison. Late on 21

February Yanukovich fled Kiev, emerging in Russia a week later. The political vacuum

was swiftly filled by anti-Yanukovich figures who formed a coalition with unaffiliated MPs

and some of the 70 Regions Party deputies who crossed the floor. Early presidential

elections have been scheduled for 25 May. Tymoshenko's close allies have become the

acting head of state (Turchinov) and the new prime minister (Yatsenyuk).

President Putin’s move on 1 March to seek parliament’s consent to Russia’s use of

its armed forces in Ukraine came as a shock to observers and investors, even after

reports of earlier movements of Russia-affiliated forces in Crimea. The permission to

use troops in Ukraine (and not just in Crimea) could in theory cover a much larger

operation, including deployment of troops in at least three Eastern regions of Ukraine

(Donetsk, Kharkiv and Luhansk). Putin subsequently defended Russia's decision to "assist

its allies in Crimea," while indicating that further use of its military elsewhere in Ukraine

was unlikely. Putin has also warned that Russia may not recognize the outcome of early

presidential elections, pointing in our view to the potential for future bilateral tensions.

Notwithstanding the high security, solvency and fiscal integrity risks, the new

government (which includes a core group of technocrats) is well positioned to make

progress on the much-needed policy adjustment in key areas, in our view. Strong

political support from the EU and the US looks set to translate into large-scale financial

support, part of which could be available prior to the conclusion of talks with the IMF on a

multi-year stand-by program. The core elements of the EU part of the package (unveiled

on 5 March) will include €1.6bn in macro-financial assistance (over a two-year period,

usable for debt service purposes) and various project loans and guarantees from the EU,

EBRD and the EIB, for up to €11bn in total. The US government has made a decision to

allocate $1bn to Ukraine, mainly in the form of loan guarantees, including for the purposes

of supporting energy sector reform. Urgent measures to advance energy reform are

imperative in order to reduce the remarkably large energy subsidies (over 7% of GDP in

economic terms, on IMF estimates), with implications for both fiscal and external accounts.

We also find it likely that multilateral creditors will demand private sector involvement (PSI)

as part of a comprehensive improvement of the country's debt profile.

Growth performance in early 2014 was exceptionally weak, reversing the

improvement in late 2013. Sequential GDP growth is estimated to have rebounded by

1% qoq sa in 4Q 2013, following a drop of similar magnitude in 3Q. The recovery in

GDP growth late last year (yet to be backed by official data) was due primarily to a good

harvest that supported both agriculture and the food industry. However, so far in 2014,

Sergei Voloboev

+44 20 7888 3694

[email protected]

Alexey Pogorelov

+7 495 967 8772

[email protected]

06 March 2014


even prior to the outbreak of violence in Kiev in February and the ensuing run on the

currency and bank deposits, activity indicators were dismal. Industrial output

performance deteriorated sharply in January, to a 5.0% yoy decline, compared to -0.5%

yoy in December. In seasonally adjusted terms, on our estimates, output fell a massive

2.1% mom, after a 0.7% mom sa increase in December. The particularly poor output

data on the Kiev region (down 19.4% yoy) and the city of Kiev (-9.7% yoy) point to the

likely impact of political strikes in Kiev and its region. We now project that GDP will likely

drop 5.3% yoy in 1Q 2014, consistent with a 4.4% qoq sa collapse.

A near-term recovery in growth looks unlikely, due to the impact of the dramatic

political developments and exchange rate volatility on capital expenditure. In

addition, any stabilization program backed by the IMF would have to include urgent

measures to reduce the gapping current account deficit (9% of GDP in 2013). This

means that, even after financing sources become available, the government would not

be able to use fiscal policy as a viable counter-cyclical tool in order to support domestic

demand. Accordingly, we expect GDP to be broadly flat in seasonally adjusted terms in

both 2Q and 3Q, returning to growth in 4Q 2014. This would result in a GDP decline of

about 4% yoy in 2014. In 2015, growth prospects look much better, thanks to more

stable politics (post presidential election) and a much more competitive exchange rate.

The current account deficit stayed very large in 4Q 2013. On the four-quarter rolling

basis, the deficit in 4Q totaled $16.1bn (9.0% of GDP), in line with the 3Q outturn and

compared to 8.2% of GDP deficit in 2012. The pace of a decline in goods exports in

USD value terms slowed to 4.3% yoy in 4Q, compared to 9.6% yoy in 3Q. Over the

same period, imports values fell 4.2% yoy, compared to a 2.0% yoy increase in the

previous quarter. For 2013 as a whole, export values fell 7.6% yoy (compared to a 1.2%

yoy increase in December 2012), driven by steep declines in exports of chemical

products (nearly a 14% drop), steel products (7.0% yoy) and agricultural goods (by 4.8%

yoy). Import values fell 5.8% yoy in 2013, including that of natural gas by 17.2% yoy,

machinery and equipment (by 12.6% yoy). The capital and financial account surplus

widened to $18.2bn (10.2% of GDP) from $10.1bn (5.8% of GDP) in 2012, due mainly to

large-scale external borrowing by the sovereign and corporate entities. FX debt rollover

ratios by corporate non-bank entities rose to 101% in 2013, from 81% in 2012; for the

banking sector liabilities, rollover ratios declined to 111%, from 152% in 2012. Net direct

investment fell twofold, to $3.3bn, from $6.6bn in 2012.

Ukraine’s external situation has been deteriorating through end-February, as

illustrated by the large-scale declines in the stock of FX reserves. The 12-month

decline in the stock of non-gold reserves increased to $6.7bn (30% of total) in January.

Reserves fell by $2.7bn in January 2014 alone and by a similar amount in February (when

gross reserves reportedly fell to $15bn, from $17.8bn in January). Urgent financial aid has

now become critical for uninterrupted FX debt service by the public sector (estimated at

$1.0bn in March-May, prior to the $1.0bn Eurobond maturity in early June). In late

February, the central bank stopped intervening in support of the hryvnia. Combined with

the large-scale liquidity support for the banking system, this led to a sharp spike in UAH to

10.7 against USD, followed by a swift correction. Despite the good prospects for large-

scale external aid later in the year, we expect the terms to the IMF program to preclude

any sizeable support for the hryvnia, in order to help compress domestic demand and the

large current account deficit. With the growth picture remaining bleak until much later in the

year, we expect further large-scale declines in the exchange rate, towards 12 in late 2014,

before a recovery in both growth and UAH in 2015.

Fiscal policy is set to be tightened significantly under the forthcoming IMF

program, primarily through sharp cuts in spending. Prime Minister Yatsenyuk has

already suggested a reduction in the initial 2014 budget targets by 14%-17%. We expect

the consolidated budget deficit to be cut to 3.5% of GDP in 2014, from 4.3% in 2013,

despite the recessionary environment.

06 March 2014


Sequential GDP growth is

estimated to have

rebounded by 1% qoq sa in

4Q 2013, following a drop

of similar magnitude in 3Q.

So far in 2014, activity

indicators were dismal.

Industrial output

performance deteriorated

sharply in January, to a

5.0% yoy decline,

compared to -0.5% yoy in

December. In seasonally

adjusted terms, on our

estimates, output fell a

massive 2.1% mom, after

0.7% mom sa increase

in December.

Exhibit 331: Output indicators (industrial output and a GDP proxy)

Exhibit 332: Contributions to year-on-year real GDP growth

% year-on-year change Index (2007=100) pps, except for real GDP

60

70

80

90

100

110

120

-40

-30

-20

-10

0

10

20


Industrial output

Key sectors output

IP, SA, right scale

-20

-15

-10

-5

0

5

10

-20

-15

-10

-5

0

5

10

Jun-08 Mar-10 Dec-11 Sep-13

Agriculture

Retail trade

Industrial Production

Transp.& Telecoms

Construction

Services, other

Real GDP

Note: The proxy indicator covers 72% of GDP. Source: State Statistics Agency, Central Bank, Credit Suisse

Source: State Statistics Agency, Credit Suisse

The prolonged disinflation

cycle has come to an end,

as a result of the large-

scale currency depreciation

since the beginning of the

year and the projected

increases in energy tariffs.

We expect headline

inflation to exceed 7% yoy

at end-2014, with only a

modest decline in 2015.

Exhibit 333: Contributions to year-on-year CPI inflation

Exhibit 334: Consumer, producer, and core prices

pps, except for CPI % year-on-year change

-5

0

5

10

15

20

25

30

35

-5

0

5

10

15

20

25

30

35

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Services

Transport & telecoms

Housing & utilities

Non-food

Food

CPI

-2

0

2

4

6

8

10

12

14

16

18

20

22

-2

0

2

4

6

8

10

12

14

16

18

20

22


CPI

Core inflation(Ukrstat)

PPI

Source: State Statistics Agency, Credit Suisse Source: State Statistics Agency, Credit Suisse


stayed very large in 4Q

2013, at 9% of GDP on the

four-quarter rolling basis.

The pace of a decline in

goods exports in USD

value terms slowed to 4.3%

yoy in 4Q, compared to

9.6% yoy in 3Q, while

import values fell 4.2% yoy,

compared to a 2.0% yoy

increase in the previous

quarter. The stock of FX

reserves fell nearly $7bn in

the 12 months to end-

January 2014, to $17.8bn.

Exhibit 335: Merchandise trade Exhibit 336: Current and capital account

12-month rolling, $bn % yoy change in USD values % of GDP, 12-month rolling

-65

-45

-25

-5

15

35

55

75

-25

-20

-15

-10

-5

0

5


Trade balance

Exports (right scale)

Imports (right scale)

0

5

10

15

20

25

30

35

40

-12

-8

-4

0

4

8

12

16

20

Q4-04 Q3-06 Q2-08 Q1-10 Q4-11 Q3-13

Current account

Capital & financial account

Gross reserves (stock, right scale)

Source: State Statistics Agency, Credit Suisse Note: the latest reserves data, of $21.7bn, is for end-August 2013. Source: National Bank of Ukraine, Credit Suisse

06 March 2014


In late February, the

central bank stopped

intervening in support of

the hryvnia, in order to

preserve FX reserves for

near-term FX debt

payments ($1bn in March-

May). Combined with the

large-scale liquidity

support for the banks, this

led to a sharp spike in

UAH to 10.7 against USD,

followed by a swift

correction. We expect

further large-scale

declines in UAH, towards

12.0 in late 2014.

Exhibit 337: Hryvnia’s exchange rates Exhibit 338: Interest rates

UAH REER* (2001 = 100) UAH per USD, spot % p.a.

4

5

6

7

8

9

10

11

1290

95

100

105

110

115

120

125

130

135

May-06 Apr-08 Apr-10 Mar-12 Mar-14

REER of UAH

UAH vs USD, rightscale

0

5

10

15

20

25

0

5

10

15

20

25


NBU Discount rate

T-bill yields, primary, wa

Interbank lending rate 7-30 day

UAH loan rates to residents, wa

Source: BLOOMBERG PROFESSIONAL

TM Service, Credit Suisse Source: National Bank of Ukraine, Credit Suisse

Ukraine’s external

situation has been

deteriorating through end-

February, as illustrated by

the large-scale declines in

the stock of FX reserves.

The 12-month decline in

the stock of non-gold

reserves increased to

$6.7bn (30% of total) in

January. Reserves fell by

$2.7bn in January 2014

alone and by a similar

amount in February (when

gross reserves reportedly

reached $15bn, from

$17.8bn in January.

Exhibit 339: FX reserves, interventions Exhibit 340: Monetary aggregates

$bn % year-on-year change

16

20

24

28

32

36

40

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Net FX purchases (left scale)

Stock of non-gold reserves

-5

5

15

25

35

45

-5

5

15

25

35

45


M0

M2

Source: National Bank of Ukraine, Credit Suisse Source: National Bank of Ukraine, Credit Suisse

Private sector credit

growth (7.7% yoy in

November) has been

lagging accumulation of

deposits (20.5% yoy). In

early 2014, accumulation

of deposits stopped,

followed by a run on

deposits (a 7% decline) at

the peak of the street

violence in Kiev over 18-

20 February. The fiscal

position was very

precarious in early 2014,

with fiscal reserves

near zero.

Exhibit 341: Credit to the private sector Exhibit 342: Consolidated budget

% year-on-year change % of GDP, 12-month rolling

-30

-15

0

15

30

45

60

75

90

-30

-15

0

15

30

45

60

75

90


Total (UAH equivalents)

in local currency

in FX (US$ equivalents)

21

22

23

24

25

26

27

28

29

30

-5

-4

-3

-2

-1

0

1

2

3

4


Overall balance (left scale)

Revenue

Expenditure

Source: National Bank of Ukraine, Credit Suisse Source: Economy Ministry, Credit Suisse

06 March 2014


Ukraine: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 7.9 2.3 -14.8 4.1 5.2 0.2 0.0 -4.0 2.5

Growth in real private consumption (%) 17.2 13.3 -14.9 6.9 15.7 11.7 5.7 -2.9 2.7

Growth in real fixed investment (%) 23.9 0.7 -50.5 4.8 9.9 0.9 -5.8 -9.1 5.6


Nominal GDP ($bn) 143.1 179.4 113.7 128.4 163.1 174.3 178.9 143.3 145.0

Population (mn) 46.4 46.1 46.0 45.8 45.6 45.6 45.4 45.3 45.2

GDP per capita ($) 3,085 3,888 2,473 2,804 3,573 3,826 3,938 3,163 3,208



CPI inflation (% year-on-year change, December over December) 16.6 22.3 12.3 9.1 4.6 -0.2 0.5 7.2 6.2

CPI inflation (% change in average index for the year) 12.8 25.2 15.9 9.4 8.0 0.6 -0.3 4.9 6.5

Nominal wage growth (% year-on-year change, December over December) 31.2 19.5 11.6 17.7 16.2 10.6 5.7 5.3 5.7

Exchange rate (UAH per USD, end-year) 5.05 7.82 8.05 7.94 8.04 8.05 8.24 12.28 10.76

Exchange rate (UAH per USD, average) 5.04 5.28 8.06 7.95 7.98 8.08 8.15 10.53 11.40

REER (% year-on-year change, December over December) (1) 0.6 -12.5 -1.3 5.5 5.2 -7.8 0.3 -10.1 5.9

NBU’s discount rate (% p.a., end-year) 8.00 12.00 10.25 7.75 7.75 7.50 6.50 6.50 6.50

Fiscal data

General government fiscal balance (% of GDP) (2) -3.7 -4.3 -3.5 -2.6 -2.7 -3.7 -4.3 -3.5 -2.6

General government primary balance (% of GDP) (2) -1.9 -2.6 -1.9 -1.0 -0.9 -1.9 -2.6 -1.9 -1.0


Consolidated government debt (% of GDP, end-year) 37.4 41.3 53.8 59.6 37.0 37.4 41.3 53.8 59.6





Domestic credit (% year-on-year change) 7.1 10.4 11.0 17.9 12.3 7.1 10.4 11.0 17.9

Domestic credit to the private sector (% of GDP) 54.5 56.5 60.3 63.9 56.5 54.5 57.3 60.3 64.5

Domestic credit to the private sector (% year-on-year change) 4.3 7.3 10.5 16.0 8.5 4.3 7.3 10.5 16.0

Balance of payments



Exports (goods and non-factor services, % year-on-year change in $ value) 1.3 -5.1 -3.3 4.6 28.3 1.3 -5.2 0.5 4.7

Imports (goods and non-factor services, % year-on-year change in $ value) 5.4 -3.6 -6.2 2.0 35.2 5.4 -6.1 -3.0 5.3




Scheduled debt amortization ($bn) (3) 23.2 19.7 22.7 19.1 23.7 24.1 25.7 21.3 19.1


Foreign debt ($bn) 135.0 136.5 141.0 152.8 126.2 135.0 130.1 132.9 136.8

Public ($bn) 32.2 37.5 43.3 52.1 33.4 32.2 31.1 35.2 36.1

Private ($bn) 102.9 99.0 97.7 100.7 92.9 102.9 99.0 97.7 100.7

Private debt net of trade credits and inter-company loans ($bn) 72.7 68.2 69.8 71.3 65.3 72.7 68.2 69.8 71.3




Central bank non-gold FX reserves ($bn) 22.6 18.8 20.7 21.8 30.4 22.6 16.8 18.6 23.4

(1) Real effective exchange rate, increase indicates appreciation. (2) Excluding impact of bank recapitalization and transfers to Naftogaz. (3) Scheduled amortization of the private and the public sectors.

Source: National Bank of Ukraine, Ministry of Finance, Economy Ministry, State Statistics Office, IMF, Credit Suisse

06 March 2014


Non-Japan Asia

06 March 2014


Non-Japan Asia: Our high conviction calls By way of a summary, we have briefly outlined our highest conviction, mainly non-

consensus, economic calls, covering each of the ten non-Japan Asian economies we

follow. These are spelt out in more detail in the individual country sections as well as our

latest Focus Asia report.

China's comprehensive and ambitious reform plan should make significant

progress: Although some measures, particularly those designed to tackle the huge local

government debt problem, will hit growth in the short term, the platform for higher quality

economic growth over the medium to long term will continue to be laid, in our view.

Hong Kong property prices should start to fall this year, although a collapse is

likely to be avoided: Record-low transaction volumes do not bode well for property

prices, which have risen 135% over the past five years. But while prices look set to fall

we doubt they will collapse this year, underpinned to some extent by demand from the

mainland.

India policy rates to rise 75bps: The Reserve Bank of India is shifting its monetary

policy regime away from its existing dual mandate to a pure inflation target. We believe

the stated headline CPI objectives will be very hard to achieve, particularly without

government buy-in, and expect RBI Governor Rajan to deliver further rate increases –

25bps in each of the upcoming September, December and March quarters.

Indonesian domestic demand growth likely to disappoint and we expect 100bps of

policy rate cuts in H2: Likely ongoing weakness in commodity prices should keep a lid

on investment growth, while private consumption growth looks set to soften from Q2.

Meanwhile, we believe sharply lower inflation will mean Bank Indonesia cuts rates

100bps in the second half of the year.

Korea's economic recovery is most unlikely to be derailed by yen weakness or QE

tapering: In our view, the consensus is overestimating the impact these two factors will

have on GDP growth, which we expect to hold up reasonably well.

Malaysia GDP growth should shift towards investment and away from

consumption: Further subsidy cuts and a central bank keen to keep credit conditions

tight to contain property prices and consumer leverage should cap consumption growth.

Meanwhile, the government will likely press on with key infrastructure projects under the

ETP program.

Philippines' monetary policy too loose for too long and GDP growth expected to

surprise on the upside: We doubt the BSP will start to hike rates in 2014 as it is

likely to see the recent rise in inflation as transitory. Separately, analysts are probably

too pessimistic about 2014 GDP growth, overestimating the negative effects of

Typhoon Haiyan.

Singapore's supply-side constraints likely to become increasingly binding: A

further tightening of foreign labor restrictions should mean stronger GDP growth will be

accompanied by higher wage growth and CPI inflation.

Taiwan should enjoy stronger growth in 2014 despite recent disappointments:

While the country has yet to benefit much from stronger global growth, this is likely to

change somewhat this year as the nature of developed world demand broadens.

Thailand’s GDP growth expected to disappoint: We believe most market observers

are underestimating the sensitivity of the economy to the current political uncertainty.

Even when there is a new government, we believe its main focus will be on

governance reforms and scaling back controversial fiscal programs rather than adding

a major fiscal stimulus.

Dong Tao

+852 2101 7469

[email protected]


+65 6212 3707

[email protected]

Christiaan Tuntono

+852 2101 7409

[email protected]

Santitarn Sathirathai

+65 6212 5675

[email protected]

Weishen Deng

+852 2101 7162

[email protected]

Michael Wan

+65 6212 3418

[email protected]

https://plus.credit-suisse.com/u/EluG3e

06 March 2014


Summary of non-Japan Asia economic forecasts

GDP growth (% yoy) CPI inflation (year end, % yoy) Policy rates (year-end, %)**

Current

Previous (as per last Global Quarterly) Current

Previous (as per last Global Quarterly) Current

Previous (as per last Global Quarterly)

2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015F

China 7.3 7.9 7.7 8.2 3.5 3.6 4.0 4.1 6.00 6.00 6.00 6.00

Hong Kong 3.4 3.8 3.4 3.8 3.4 3.6 3.9 3.8 0.40 0.80 0.40 0.80

India* 6.0 6.3 6.6 6.9 8.0 6.5 - - 8.75 8.75 7.75 7.50

Indonesia 5.0 5.3 5.0 5.3 4.8 5.0 4.8 5.0 6.50 6.50 6.50 6.50

Korea 3.3 3.6 3.3 3.6 2.6 2.4 3.1 2.5 2.50 2.50 2.50 2.50

Malaysia 5.3 4.7 5.0 4.7 2.8 3.5 2.7 3.4 3.25 3.50 3.25 3.50

Philippines 7.0 6.8 6.8 6.8 3.2 3.7 4.1 3.8 3.50 4.00 3.50 4.25

Singapore 4.0 5.0 4.0 5.0 2.7 2.9 3.2 3.5 0.50 0.80 0.50 0.80

Taiwan 3.2 3.5 3.2 3.5 2.6 1.9 1.5 2.5 1.88 1.88 1.88 1.88

Thailand 2.0 4.5 4.5 5.0 2.8 3.0 2.6 3.0 2.00 2.50 2.50 3.00

NJA weighted average 6.2 6.7 6.6 7.0 4.3 4.1 4.6 4.4

NJCA weighted average 4.8 5.3 5.3 5.6 5.3 4.7 5.3 4.7

Note: IMF PPP weights are used to compute regional aggregate figures. *CPI for India. Forecasts for CPI not available in last Global Quarterly; fiscal years from April-March. **China: 1 year lending rate, Hong Kong: 3m HIBOR, India: repo rate, Indonesia: overnight rate, Korea: overnight rate, Malaysia: overnight rate, Philippines: reverse repo rate, Singapore: 3m SIBOR, Taiwan: rediscount rate, Thailand: overnight repo rate. Source: CEIC, Credit Suisse

Summary macroeconomic data: GDP growth

3Q 13 4Q 13 1Q 14F 2Q 14F 3Q 14F 4Q 14F 1Q 15F 2Q 15F 3Q 15F 4Q 15F


2013F 2014F 2015F

NON-JAPAN ASIA 15,022.6 16,149.8 17,786.9 6.3 6.3 6.2 6.0 6.1 6.3 6.9 6.8 6.6 7.0

NJA ex-China 5,923.2 6,250.8 6,796.8 3.0 5.1 6.5 4.4 4.2 4.7 6.1 5.3 4.9 6.1

NJA ex-China and India 4,061.1 4,220.8 4,524.1 3.7 5.1 3.0 3.8 4.0 4.6 4.5 4.3 4.8 5.0

China 9,099.4 9,899.0 10,990.1 9.1 7.4 6.0 7.4 7.8 7.8 7.6 8.2 8.1 7.8

Hong Kong 272.1 287.4 302.6 6.8 5.1 3.3 3.1 -1.6 5.0 6.2 4.0 3.8 1.8

India 1,862.1 2,030.0 2,272.7 2.0 5.1 10.8 5.1 4.4 4.8 8.1 6.6 5.1 7.6

Indonesia 836.3 842.3 927.0 5.3 6.7 4.3 3.9 4.8 6.1 5.2 4.9 5.4 6.3

Korea 1,198.6 1,295.5 1,364.5 4.5 4.0 3.1 2.4 2.5 2.9 3.4 4.5 4.9 4.8

Malaysia 316.6 324.9 347.8 7.0 9.1 2.4 4.5 4.9 5.3 5.7 2.8 4.5 4.9

Philippines 272.0 282.5 311.8 5.2 6.1 8.2 7.4 7.4 7.0 6.6 6.6 6.6 6.1

Singapore 295.8 307.3 328.7 0.3 6.1 -0.4 5.3 5.7 5.7 5.3 4.3 3.9 3.9

Taiwan 487.2 497.5 519.1 1.4 5.8 2.8 2.6 3.4 2.1 3.4 4.4 4.7 4.6

Thailand 382.6 383.5 422.7 5.8 2.4 -9.0 4.7 13.8 9.9 -5.4 1.4 11.2 8.4

Note: IMF PPP weights are used to compute regional aggregate figures.

Source: the BLOOMBERG PROFESSIONAL™ service, national statistical offices, Credit Suisse

06 March 2014


China: Embracing higher risks Growth is expected to surprise on the downside, even after the market has turned

significantly more bearish on China. This time, the surprise comes from the low end

of consumption as a result of the anti-corruption campaign. Orders from SOEs and

government bodies have fallen dramatically, as executives and officials, nervous about

attracting corruption probes, have suspended spending, even on projects that seem

legitimate to us (for details, see our note China: Themes for 2014 - R³: Retreat, Reform

and Risk, 29 January). Public works-related spending accounts for 20% of total retail

sales and we think that the economy is growing at 6% SAAR for 1Q 2014, though year-

on-year growth at 7.3% is benefitting from an extraordinarily favorable base effect. The

luxury end of consumption has suffered as well.

Fixed asset investment also seems to be moderating, due to the anti-corruption

campaign and shrinking shadow banking financing. However, the weakness is

covered by strong land acquisitions which are included in fixed asset investment but not

in the gross capital formation in GDP under the national accounts. Industrial production

has softened too, as reflected in the poor PMI figures, though bad weather could be

partially blamed for the slow production in February. We consider this to be the cost of

reforms, which should be positive for long-term growth.

Government response to the growth slowdown may be late and limited in size, in

our judgment. (1) It is politically incorrect to complain about the slowdown as the clamp

down on corruption has been engineered by senior leaders and endorsed by the

National People’s Congress (NPC). (2) The threshold for stimulus is higher for this

administration than the previous one. (3) The decision-making center seems to have

shifted from the state council to the president's office. This undermines the power of the

premier to launch counter-cyclical measures. We expect a minor stimulus around mid-

year, which could stabilize the economy but without much upward momentum.

Credit cycle has turned after a decade of expansion, in our view. The PBoC

started to drain liquidity through open market operations in June 2013. SHIBOR is

clearly on the rise, even after stripping out mid-year, year-end, and Chinese New Year

seasonality. China as a whole has no shortage of liquidity as the real economy

undertakes limited investment and SOEs always have access to bank lending. The

property sector is flooded with liquidity with only some areas, e.g., smaller banks,

developers, and local governments finding themselves short of liquidity. We expect the

central bank to continue to drain liquidity gently though we do not rule out the PBoC

returning liquidity tactically when the market is in panic before withdrawing it again.

New total social financing stood at RMB2.6tn and bank credit was RMB1.3tn in

January, growing by 17.8% and 14.3% yoy respectively. These are solid numbers

compared to 4Q 2013 data, but lending activity is usually high in the beginning of the

year. We expect the government to rein in shadow banking activity a little in 1H 2014,

but show more tolerance as the economy loses growth momentum. Bank lending has

become less important as shadow banking counts for more than 40% of total lending

and the key credit channel for marginal lending. Wealth management products and trust

funds, each exceeding RMB10tn, are the pillars of funding nowadays.

Credit default risks related to local government are on the rise, in our view. China

has RMB3.5tn in local debt maturing this year, by far the largest in history. Trust

funds alone have about RMB2.3tn coming due in 2H 2014. This batch of trust funds,

mainly lending to local governments, was incorporated in 2012 and we see higher risks

than with previous batches which lent largely to the property sector. In our opinion, the

near-default related to a product from the China Credit Trust may happen frequently

after May and much more frequently during the summer. Unlike bank lending, shadow

banking is funded by millions of individual investors who could be more sentiment

driven. Policy errors could trigger a chain reaction that would amplify the systematic risk

in the shadow banking system.

Dong Tao

+852 2101 7469

[email protected]

Weishen Deng

+852 2101 7162

[email protected]

https://plus.credit-suisse.com/r/dG8EWd

https://plus.credit-suisse.com/r/dG8EWd

06 March 2014


The latest report from the National Audit Office suggests RMB20.7tn in

government-related direct debt and RMB10.9tn in local direct debt. We suspect an

underestimation at the local debt level, especially in local government investment

vehicles, the segment with high default risk. Local government infrastructure projects are

mainly long-term utility investments but are funded by short-term capital, with an obvious

duration mismatch. While Beijing is setting up a mechanism for future funding (e.g.,

municipal bond market, rating agency), it has not done enough to address the existing

local debt issue. Beijing seems keen to “teach the local officials a lesson” to stop moral

hazards, but that may be cause for concern. Further, structured products tend to bundle

risks together, so a few defaults potentially could provoke bigger problems.

Export picture looks a little brighter, with 10.6% yoy rise in January. The global

recovery, led by the developed world, does help, though we are skeptical about double-

digit export growth as the acceleration in global GDP growth is fuelled by reduced fiscal

drag rather than a large rise in demand. We expect weak imports, as infrastructure

investment slows down. However, we are observing rising demand for commodities for

financial use, as importers seek collateral for credit.

We think it is unlikely that Beijing will launch harsh policies against the property

sector in the near future. This is the only growth engine that is still on the rise, critical

for maintaining the economy afloat. China has a very high savings rate and with a closed

capital account. Besides wealth management products, the public needs vehicles for

storing value. Housing fits that purpose well. Unlike the Wen administration, the present

government prefers market-based measures, e.g., mortgage rates and land supply, to

cool off speculation. Without the launch of a property tax, local housing probably can

hold up well. We do think the high prices in the tier 1 cities and high inventory in the

lower tier cities pose a threat to housing prices, but that risk does not seem imminent.

RMB exchange rate saw some large devaluations lately. We believe that the PBoC

attempted to introduce volatility to stop the “one-way focus” mentality in the FX market.

This has triggered large-scale unwinding of structured products in the offshore market

and carry trades among domestic players. We still expect the RMB to appreciate against

the USD beyond this round of “lesson teaching” because Beijing cannot afford to turn

around the expectation of RMB appreciation as it may result in capital flight. Meanwhile,

infrastructure build-up in RMB internationalization continues, with further easing in QFII

and QDII schemes and more functions being added to the offshore centers on the

horizon.

We expect more executions on structural reforms. In the third plenary session of the

party congress last November, 60 reform initiatives were revealed. This is the most

comprehensive and ambitious reform package seen in the history of the People’s

Republic. The success of these reforms very much depends on details and execution,

but if half of the plan goes through, China would look very different five to seven years

down the road. President Xi is driving the reforms very hard, with the establishment of

the Comprehensive and Deepening Reform Commission. We expect details about fiscal

reforms and SOE reforms to become available to the public in the near future.

06 March 2014


Growth is expected to

surprise to the downside,

even after the market turns

significantly more bearish.

Chinese New Year Retail

sales growth in 2014 was

the lowest since 2007,

dragged down by the anti-

corruption campaign.

Exhibit 343: GDP growth Exhibit 344: Chinese New Year sales growth

3

4

5

6

7

8

9

10

11

12Real GDPGrowth(%SAAR)

CSForecast

June 13, stimuluswas launched.

May 12, stimuluswas launched.

New regulations were launched against shadow banking.

PBoC started to drain liquidity and anti-corruption campaign.

Anti-speculation measures in housing sector.

?

13

14

15

16

17

18

19

20

2007 2008 2009 2010 2011 2012 2013 2014

Chinese New Year Catering and Retail SalesGrowth (%)

13.3

Source: NBS, Credit Suisse estimates Source: The Ministry of Commerce, Credit Suisse

The deteriorating PMI

readings suggest an

underlying weakness in

industrial activity.

The very soft CPI provides

another data point that

reflects weakened overall

domestic demand.

Exhibit 345: HSBC PMI vs. NBS PMI Exhibit 346: CPI inflation

35.0

40.0

45.0

50.0

55.0

60.0

65.0

Feb-0

8

Au

g-0

8

Feb-0

9

Au

g-0

9

Feb-1

0

Au

g-1

0

Feb-1

1

Au

g-1

1

Feb-1

2

Au

g-1

2

Feb-1

3

Au

g-1

3

Feb-1

4

NBS PMI (sa)

HSBC PMI (sa)Feb NBS PMI :50.2

Feb HSBC PMI :48.5

2.7

8.7

1.0

2.7

4.94.5

3.2

2.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

07 08 09 10 11 12 13 14

Headline CPI Inflation in theChinese New Year month(% yoy)

Source: NBS, Markit Economics, Credit Suisse Source: NBS, Credit Suisse

The credit cycle has turned

around and M2 growth has

slowed down since the

PBoC started to withdraw

liquidity through its open

market operations.

Exhibit 347: Total social credit and M2 growth

Exhibit 348: PBoC’s net injection into the Open Market

0

5

10

15

20

25

30

35

40

Jan

-09

Jun

-09

Nov-0

9

Ap

r-10

Se

p-1

0

Feb-1

1

Jul-1

1

Dec-1

1

Ma

y-1

2

Oct-1

2

Ma

r-13

Au

g-1

3

Jan

-14

Total Credit(%yoy)

M2(%yoy)

17.8

13.2

-250

-200

-150

-100

-50

0

50

100

150

200

30

.Ma

r.1

24.M

ay.1

28.J

un.1

213.J

ul.1

21

7.A

ug

.12

21

.Se

p.1

226.O

ct.12

30.N

ov.1

24.J

an.1

38.F

eb

.13

15

.Ma

r.1

319.A

pr.

13

24.M

ay.1

328.J

un.1

32.A

ug.1

36.S

ep.1

311.O

ct.13

12.N

ov.1

320.D

ec.1

324.J

an.1

428.F

eb.1

4

Net Injection intothe Open Market (4-week movingaverage, Rmb bn)

Source: PBoC, CEIC, Credit Suisse Source: PBoC, CEIC, Credit Suisse

06 March 2014


Interbank interest rates are

on the rise after stripping

out seasonality.

Shadow banking is the key

credit channel for marginal

new lending.

Exhibit 349: Interbank rates Exhibit 350: Total social credit to GDP ratio

3.5

4.0

4.5

5.0

5.5

6.0

6.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0 1W Repo -lhs

1M Shibor quarterly average -rhs

70

90

110

130

150

170

190Total social credit*-to-GDP(%)

Loan-to-GDP(%)

* Based on PBoC's total social financing

Source: PBoC, CEIC, Credit Suisse Source: PBoC, CEIC, Credit Suisse

We expect to see a peak of

trust fund repayments in 2H

2014 when RMB2.3tn is due

to mature.

Trade growth seemed a little

brighter in January, helped

by the global recovery, but

we are skeptical about

double-digit export growth.

Exhibit 351: Trust fund repayment Exhibit 352: Trade Growth

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800 Trust fund repayment of 14,348 products(Rmb bn)

1 Trillion line

-40

-20

0

20

40

60

80

-25

-15

-5

5

15

25

35

45

Export growth (%yoy, 3m mav) -lhs

Import growth (%yoy, 3m mav) -rhs

Source: WIND, Credit Suisse Source: General Administration of Customs, Credit Suisse

The PBoC attempted to

introduce volatility to stop

the “one-way focus”

mentality in the FX market.

With higher volatility, we

expect the CNY to stay on

an appreciation track

against the USD.

Exhibit 353: CNY deviation from central bank’s fixing Exhibit 354: USDCNY exchange rate

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2010 2011 2012 2013

% deviation of CNY spot from daily fix

Onshore CNY daily trading band around fixing

6.00

6.10

6.20

6.30

6.40

6.50

6.60

6.70

6.80

Mar-

11

Jun

-11

Se

p-1

1

Dec-1

1

Mar-

12

Jun

-12

Se

p-1

2

Dec-1

2

Mar-

13

Jun

-13

Se

p-1

3

Dec-1

3

Mar-

14

USDCNY

Source: CEIC, Credit Suisse Source: CEIC, Credit Suisse

06 March 2014


China: Selected economic indicators*

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 14.2 9.6 9.1 10.3 9.2 7.7 7.7 7.3 7.9

Growth in real private consumption (%) (1) 10.4 8.7 9.6 8.3 10.0 8.6 8.2 7.7 7.9

Growth in real gross fixed capital formation (%) (2) 11.4 10.2 19.1 11.9 10.4 7.6 8.7 7.6 7.7


Nominal GDP ($bn) 3,495 4,514 4,994 5,969 7,295 8,260 9,247 10,049 11,157

Population (mn) 1,321 1,328 1,335 1,342 1,348 1,355 1,362 1,369 1,376

GDP per capita ($) 2,645 3,399 3,742 4,449 5,410 6,095 6,788 7,339 8,107

Unemployment (% of urban labor force, average year) 4.0 4.2 4.3 4.1 4.1 4.2 4.1 4.1 4.0


CPI inflation (%, December over December) 6.5 1.2 1.9 4.6 4.1 2.5 2.5 3.5 3.6

CPI inflation (% change in average index for the year) 4.8 5.9 -0.7 3.3 5.4 2.6 2.6 3.0 3.5

Exchange rate (RMB per USD, end-year) 7.29 6.82 6.83 6.62 6.35 6.23 6.07 6.04 5.98

Exchange rate (RMB per USD, average) 7.61 6.96 6.83 6.73 6.49 6.29 6.15 6.06 6.01

REER (% year-on-year change December to December) (3) 5.6 10.1 -2.9 2.9 6.9 0.8 7.5 2.6 2.6

Nominal wage growth (% year-on-year change, average) 18.5 16.9 11.6 13.3 14.4 11.9 9.0 5.8 6.0

1-year lending rate (%) 7.47 5.31 5.31 5.81 6.56 6.00 6.00 6.00 6.00

3-month interbank rate (%, end-year) 4.43 1.90 1.83 4.62 5.47 3.91 5.30 5.80 5.95

Fiscal data

General government fiscal balance (% of GDP) 0.6 -0.4 -2.3 -1.7 -1.1 -1.5 -2.0 -1.7 -1.6

General government primary fiscal balance (% of GDP) 1.0 0.0 -1.5 -1.0 -0.4 -0.8 -1.4 -1.0 -0.9






Domestic credit(5) (% of GDP) 127.8 120.8 141.8 146.3 145.4 155.1 163.0 167.1 163.5




Balance of payments



Exports (goods and non-factor services, % increase in $ value) (6) 26.4 17.8 -15.7 30.8 19.9 7.6 8.0 5.0 5.6

Imports (goods and non-factor services, % increase in $ value) (6) 21.3 19.2 -9.7 36.6 25.5 5.7 8.6 3.4 4.6



Net FDI ($bn) 139.1 114.8 87.2 185.7 231.7 191.1 170.8 161.1 150.2




Public ($bn) (8) 119.9 120.6 121.2 121.9 122.6 123.3 124.0 124.7 125.4

Private ($bn) 269.3 269.6 307.4 427.0 572.4 613.7 653.7 620.7 590.1



Central bank gross FX reserves ($bn) 1,528 1,946 2,399 2,847 3,181 3,278 3,709 3,932 4,254

Central bank gross non-gold FX reserves ($bn) 1,524 1,942 2,389 2,830 3,159 3,251 3,680 3,901 4,221

*All the projections are based on the central case scenario assumption that there is no credit default event in China. (1) Calculated based on annual GDP data released by the NBS. (2) Calculated based on annual GDP data released by the NBS. (3) Real effective exchange rate: increase indicates appreciation. (4) The National Audit Office (NAO) for the first time released the gross government debt data on 30 Dec 2013. The data point released by the NAO is 2012. Historical data and forecasts are based on the NAO's measures which include debt that government holds repayment obligation and the contingent liabilities. (5)Domestic Credit follows the IMF consolidated monetary survey definition. (6)Exports and imports growth forecasts for 2013 and 2014 based on figures after the government’s policy against carry trades. (7) Scheduled and estimated amortizations for public and private sectors. (8) Public debt defined as direct loans by government, state banks and SOEs, excluding trade credit.

Source: National Bureau of Statistics, The National Audit Office, People’s Bank of China, CEIC, Credit Suisse

06 March 2014


Hong Kong: Looming long-term fiscal challenge Concerns over a weaker-than-expected US and global recovery and further

slowdown in China are posing uncertainty over our sanguine outlook on Hong

Kong's economy this year. The slide in the ISM index and the weakish US macro data

during the snow-heavy January have cast uncertainty on the strength of the global

recovery we expected to be seen this year. The Chinese economy may also see further

moderation, as the anti-corruption campaign and the turn of the credit cycle are expected

to weaken consumption and investment growth. We are concerned that any worse-than-

expected development in the two global economic giants would negatively affect Hong

Kong's exports and domestic demand this year.

Retail sales growth has stabilized at around mid-single digit level in recent months,

but we expect to see it slow in 2Q on a higher statistical base. The robust gold sales

last year have driven retail sales growth to surge between April and June. Since then, the

demand on gold has dissipated, and we do not expect to see the same rigor this year. On

the national account, we expect to see service export growth weaken in 2Q, narrowing the

contribution it makes to headline GDP.

We think the impasse in the property market would continue, until it is met with a

growth or interest rate shock. Home transactions remain very low, even worse than the

lows seen after the onset of the SARS epidemic in 2003. With interest rates not rising and

the global economy continuing on its gradual recovery, we do not see a strong catalyst to

break through the current stalemate. We maintain our view that although home prices are

pressured to decline at this juncture, the risk of a sharp fall remains low this year. We think

the most likely timing of a sharper drop in home prices could be in 2016, when the Fed is

expected to start normalizing the Fed funds rate.

Chief Executive Leung Chun-ying aims to bolster Hong Kong's economic

competitiveness, summarizing his measures in the second Policy Address. Focuses

of Leung's Policy Address are on the economy, social welfare, education, housing and

environmental protection. In the face of an aging population, we think Leung's initiatives

are important to maintain Hong Kong's productivity growth and to provide the necessary

support to the elderly and other social needies. Leung's policies were echoed by Financial

Secretary John Tsang in the Budget Speech, in which he provided the needed funding to

support the various industries and social welfare programs.

We think the key to resolving Hong Kong's long-term fiscal challenge lies in

correcting the inherent volatility of the revenue base. In the Budget Speech, Tsang

laid out the long-term fiscal challenge Hong Kong faces, but said that the government's

priorities remain on supporting economic growth to overcome the constraints posed by the

aging population. We think the real weakness of Hong Kong's fiscal structure lies in its

over reliance on a narrow and pro-cyclical revenue base. A revamp over the revenue

structure is needed, but Tsang has only recognized that without offering any solid plans to

tackle it. In our view, the government is at the very beginning stage of raising public

awareness on this fundamental issue, and that it may proceed cautiously in the coming

years to address it.

We have raised our projection on 2014's CPI inflation, as a number of government

subsidies were removed in the latest budget. The removal of the electricity tariff

subsidies and the scale down of the public rent waiver are expected to cause prices to

step up from a year ago. This should help offset the downward pressure on inflation led by

weaker imported food inflation and the peaking of commercial and residential rents. We

have raised our headline CPI inflation forecast for 2014 to 4.3%, from 3.8% previously,

and expect the underlying inflation rate to be at 3.6%.

The outlook for Hong Kong’s ratings appears stable. An adjustment remains unlikely

over the next six months, in our view. Hong Kong is rated Aa1 (Moody’s), AAA (S&P) and

AA+ (Fitch).

Christiaan Tuntono

+852 2101 7409

[email protected]

06 March 2014


Concerns over a weaker-

than-expected US and

global recovery and further

slowdown in China are

posing uncertainty over our

sanguine outlook on Hong

Kong's economy this year.

Exhibit 355: Real GDP Exhibit 356: Leading indices

-4

-3

-2

-1

0

1

2

3

4

4

6

8

10

12

14

16

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

China (% yoy)USA (% yoy RHS)

10

20

30

40

50

60

70

80

90

94

96

98

100

102

104

106

108

Jul-0

9O

ct-

09

Jan

-10

Ap

r-10

Jul-1

0O

ct-

10

Jan

-11

Ap

r-11

Jul-1

1O

ct-

11

Jan

-12

Ap

r-12

Jul-1

2O

ct-

12

Jan

-13

Ap

r-13

Jul-1

3O

ct-

13

Jan

-14

Ap

r-14

CN: Leading Index (3m forward)US ISM New Orders (3m forward)…

Source: World Bank WDI., Credit Suisse Source: US ISM. NBS, Credit Suisse

Although home prices are

pressured to decline at this

juncture, we maintain our

view that the risk of a sharp

fall remains low this year.

Exhibit 357: Property Prices Exhibit 358: Property transactions

20

40

60

80

100

120

140

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Centaline Property Price Index (July1997=100)

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

Property sales transactions(HKD mn)

Source: Centaline Property Agency Ltd., Credit Suisse Source: CEIC, Credit Suisse

We think the key to

resolving Hong Kong's long-

term fiscal challenge lies in

correcting the inherent

volatility of the revenue

base.

We have raised up our 2014

headline CPI inflation

forecast to 4.3%, as a

number of government

susidies were removed in

the latest budget.

Exhibit 359: Fiscal revenue Exhibit 360: CPI Inflation

Profit and salary tax

40%

Stamp duties10%

Land premium

16%

Investment income

7%

Others27%

FY 2012/13 Consolidated Revenue (HKD 442bn)

Cyclical components

-2

-1

0

1

2

3

4

5

6

7

2008 2009 2010 2011 2012 2013

CPI (%yoy, 3m mav)

Forecast

Source: Credit Suisse Source: Census and Statistics Dept., Credit Suisse

06 March 2014


Hong Kong: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 6.4 2.1 -2.3 6.8 4.5 1.5 2.9 3.4 3.8




Nominal GDP ($bn) 207.2 218.9 212.7 227.7 248.0 261.2 272.1 287.4 302.6

Population (mn) 6.9 7.0 7.0 7.1 7.1 7.1 7.1 7.2 7.2

GDP per capita ($) 29,828 31,285 30,277 32,281 35,010 36,718 38,100 40,079 42,023



CPI inflation (%, December over December) 3.8 2.1 1.3 3.0 5.7 3.7 4.3 3.4 3.6


Exchange rate (HKD per USD, end-year) 7.78 7.75 7.76 7.77 7.78 7.75 7.75 7.80 7.80

Exchange rate (HKD per USD, average) 7.78 7.78 7.75 7.77 7.78 7.76 7.75 7.78 7.80

REER (% year-on-year change December to December) (1) -5.9 0.6 -1.9 -4.4 0.6 2.4 3.4 2.9 2.1

Nominal wage growth (% year-on-year change, average) 2.6 3.4 -1.0 2.5 6.0 2.0 3.3 2.4 2.6

3-month HIBOR (%, end-year) 3.5 1.0 0.1 0.3 0.3 0.4 0.4 0.4 0.8

Fiscal data

General government fiscal balance (% of GDP) 7.7 0.1 1.6 4.2 3.8 3.2 0.6 0.8 -0.3

General government primary fiscal balance (% of GDP) 7.7 0.1 1.6 4.3 3.8 3.2 0.6 0.9 -0.2




Broad money supply (HKD M2, % of GDP) 203.1 193.2 210.3 211.6 219.0 231.8 250.1 256.0 262.0

Broad money supply (HKD M2, % year-on-year change) 18.1 -1.3 5.3 8.0 12.9 11.1 12.3 8.5 8.1





Balance of payments



Exports (goods and non-factor services, % increase in $ value) 10.8 6.0 -11.0 22.8 11.9 5.4 6.3 9.4 10.1

Imports (goods and non-factor services, % increase in $ value) 11.2 6.4 -10.3 24.7 13.0 6.6 6.3 9.5 10.4



Net FDI ($bn) -6.8 9.9 -3.7 -15.6 0.2 -9.3 -9.5 -9.5 -9.3

Scheduled external debt amortization ($ bn) (3) 18.6 13.3 10.3 11.4 11.8 11.9 12.2 13.2 14.2


Foreign debt ($bn, end-year) (4) 85.6 50.1 79.0 100.7 125.8 133.9 133.7 135.9 141.0

Public ($bn) 2.2 2.3 1.7 1.7 1.5 1.9 1.9 2.0 2.1

Private ($bn) 83.3 47.9 77.3 98.9 124.3 132.0 131.8 134.0 138.9





(1) Real effective exchange rate, increase indicates appreciation. (2) Also includes debt issued under the Government Bond Program. Excludes debt guaranteed by the government. (3) Scheduled and estimated amortizations for total medium- and long-term public and private sector debt. (4) Non-bank foreign debt to Hong Kong entities.

Source: Census and Statistics Department, Hong Kong Monetary Authority, CEIC, Credit Suisse

06 March 2014


India: Inflation fighting, dismal growth & election issues

A single-minded approach: Reserve Bank of India Governor Raguram Rajan has

made no secret of his desire to switch to an explicit inflation targeting regime, moving

away from the existing dual growth and inflation mandate. Arguably, he has already

started to practice what he has preached, justifying the unexpected January interest rate

hike on the basis that without such action consumer price inflation would probably

overshoot "the recommended disinflationary path" set by the Urjit Commitee. The latter

was set up Rajan himself in September last year and was chaired by Dr. Urjit Patel, a

deputy governor of the central bank. Amongst other things, it suggested the appropriate

headline CPI objectives should be 8% by January 2015, 6% by January 2016 and 4%

(+/- 2pp) thereafter. By way of context, inflation was 8.8% at the beginning of this year

and has averaged 8.4% since 2005.

Tough targets: Given the problems stubbornly high inflation has been causing in India

over recent years, these represent admirable objectives and ones that the governor

looks to have broadly accepted. The trouble is we think there is little chance of achieving

them and, by attempting to do so at this stage, could inflict unnecessary damage on

growth and the RBI's own credibility.

The importance of non-monetary factors: The crux of the problem is that inflation is

far from a pure monetary phenomenon in India. Food and fuel account for 57% of the

CPI basket (comfortably the highest in Asia), with prices heavily influenced by supply-

side factors and government policies. Simple arithemetic suggests if food and fuel

inflation was to remain at 9%, the core rate would need to fall to roughly 2% (from 8%

currently) to achieve a 6% headline inflation rate. While there is clear statistical evidence

that the repo rate influences inflation, the monetary tightening required to achieve this

would almost certainly be prohibitive.

Government buy-in is essential, but far from guaranteed: The government has much

greater, albeit far from complete, control over food and energy prices by setting

Minimum Support Prices for many agricultural products and the subsidised price of

some fuels (although the latter is being gradually dismantled). With this in mind, we

believe the government must fully buy into the project, something that, judging by

Finance Minister Chidambaram's recent comments, is most unlikely before this year's

general election and is far from guaranteed thereafter.

Further rate rises to come ...: Rajan has already raised the repo rate 75bps since he

took the helm at the RBI last September and although further rate increases are unlikely

to be required to meet the 8% inflation objective in January 2015, we expect him to

deliver three more 25bp repo rate hikes during the 2014/15 fiscal year. In our view,

these are most likely to come in the September, December, and March quarters as the

RBI begins to focus on achieving the 6% target, recognising the lags with which interest

rates work.

... which has led us to revise down our GDP growth forecast: With the prospect of

tighter monetary policy than we previously envisaged, we have lowered our 2014/15 and

2015/16 GDP growth projections by 60bps to 6.0% and 6.3% respectively. The former

compares with a consensus forecast of 5.4%, however, and is still at the top of the

consensus range (there is no formal consensus for 2015/16 yet, although it seems likely

we would be at or close to the top again). In our view, second-round effects from the

recent pick-up in agricultural growth, stronger investment reflecting replacement capex

as well as the first benefits of the Cabinet Commitee's efforts to unlock many stalled

projects, improved exports and lower inflation, which will boost real incomes, mean

economic activity is likely to outpace the gloomy prognosis of most India commentators.


+65 6212 3707

[email protected]

06 March 2014


Growth still stuck in a sub-par steady state: While many forecasters overreacted to

the mini-crisis of August/September, slashing their 2013/14 forecasts close to 4% or

below in some cases, GDP growth in the December quarter could hardly be desribed as

stellar. On a year-on-year basis it actually slipped slightly to 4.7% from 4.8% in the

September quarter. Yes, growth probably bottomed in the June quarter (at 4.4%), but

the economy has now registered four consecutive GDP rises of less than 5%. For the

reasons mentioned, we expect growth to break out of this range shortly (while upward

revisions, not least to agricultural output, are entirely possible), but for now the economy

appears to be stuck in what may be termed a worrisome sub-par steady state.

What about India's double deficits? On the back of our GDP growth downgrades we

have also built in smaller current account deficits over the forecast period. Specifically,

we now look for the external shortfall to amount to 2.6% of GDP in 2014/15 and 2.9% in

2015/16, compared with 2.9% and 3.5% previously. The former still represents an

increase from the 2.2% of GDP outcome we anticipate in the current fiscal year, albeit

largely because we assume the authorities will ease existing duties and restrictions on

gold imports in the coming fiscal year. The helpful effect these measures have had is

illustrated by the fact that in the year to October (the latest available data), India's gold

imports fell US$5.7bn, explaining 60% of the improvement in the visible trade balance

over the same period. At the same time, we have opted to leave our central government

budget projections for 2014/15 and 2015/16 unchanged at 4.7% and 4.5% of GDP

respectively. Although economic growth is likely to be softer than previously imagined

we expect the new government, be it Congress or BJP-led, to keep the fiscal shortfall in

check in order to avoid a politically damaging ratings downgrade.

Bonds and the rupee: In reaction to the macroeconomic revisions we have made, our

local rates strategist has revised up his 10-year government bond yield forecast to 8.5%

from 8.0% for March 2015. He has, however, left his March 2016 projection at 8.0%,

implying an inverted yield curve. This is based largely on the view that inflation will have

fallen meaningfully by then, while the RBI will have improved its inflation-fighting

credentials and the budget deficit will remain under control. Finally, our foreign exchange

strategy team has revised its 12-month ahead INR forecast to 64.0 from 65.5 previously.

A smaller current account deficit and higher real interest rates are the two key reasons

for the change. (For more details of the issues surrounding the RBI's effective adoption

of inflation targeting see India's Risky Regime Shift).

Election effects: The current government must call a general election in the next couple

of months (its five-year term finishes on 31 May) and, according to all opinion polls,

Congress will win far fewer seats that the main oppoistion party – the BJP. At the same

time, however, the same polls suggest the BJP-led National Democratic Alliance (NDA),

will fall short of the 272 seats required for a majority in the lower house of parliament.

History suggests the opinion polls are often inaccurate, but at this stage the most likely

outcome is an NDA government relying on a few "fringe" parties to gain a parliamentary

majority. The previous BJP-led govenment of 1999-2004 privatized many companies,

encouraged foreign investment, set up export processing zones and gave the go ahead

to the so-called Golden-Quadilateral – a road network linking the cities of Delhi, Mumbai,

Kolkata, and Chennai. Further business/market friendly measures should be expected if

it returns to power, but it is unlikely to have a completely free rein.

Rating risk? The main rating agencies will almost certainty wait for the election results

and the first actions (including the budget) of the new government before coming to any

rating decision. We expect all of them to keep India at Investment Grade in 2014/15,

although it's fair to say our conviction level is low given the election uncertainties.

https://plus.credit-suisse.com/u/HN3CD0

06 March 2014


The production of durable

consumer goods has

collapsed in India, currently

falling more than at the

height of the global financial

crisis. By contrast, capital

goods production has

strengthened although it is

hardly stellar.

Although extremely

tentative, we see signs that

domestic motor vehicle

sales and mobile phone

subscriptions are finally

bottoming.

Exhibit 361: Consumer output collapse Exhibit 362: Finally bottoming?

-20

-10

0

10

20

30

40

50

60

70

06 07 08 09 10 11 12 13 14

Cap. goods*

Con. Durables**

Industrial Production (% yoy)

-30

-20

-10

0

10

20

30

40

50

60

-20

0

20

40

60

80

100

120

140

03 05 07 09 11 13

Cellular Sub.** (%yoy)

MV* sales (RHS, %yoy)

* Capital goods. ** Consumer durables. Source: CEIC, Credit Suisse

* Domestic motor vehicle sales. ** Mobile phone subscriptions. Source: CEIC, Credit Suisse

We have never found a

reliable lead indicator of

industrial or GDP growth in

India. One of the better

coincident indicators is the

Dun & Bradstreet survey

although even here the link

has weakened. For what it's

worth the series rose in the

March quarter, reaching its

highest level since the June

quarter of 2011.

In our view, GDP growth will

improve through 2014/15.

While we have cut our

growth forecast, our 6%

number is at the top of the

consensus range.

Exhibit 363: Confidence and GDP growth has bottomed

4

5

6

7

8

9

10

11

12

90

110

130

150

170

190

210

03 04 05 06 07 08 09 10 11 12 13 14 15

D&B* business optimism index (LHS) GDP growth (RHS)

F'cst

* Dun and Bradstreet. Source: CEIC, Credit Suisse

The RBI is now focusing

squarely on headline

consumer price inflation,

with Rajan seemingly intent

on getting it down to 8% in

January 2015 and 6% in

January 2016. While we

believe he has done enough

to achieve the former,

further rate increases are

likely to be necessary to

achieve the latter. We

expect 75bps of further repo

rate hikes in 2014/15.

Exhibit 364: Repo up, inflation down Exhibit 365: Real rate to turn positive

2

4

6

8

10

12

14

02 04 06 08 10 12 14 16

CPI (%yoy) Repo rate

F'cst

-10

-8

-6

-4

-2

0

2

4

02 04 06 08 10 12 14 16

Real repo rate (%)

F'cst

Source: Credit Suisse, CEIC Source: Credit Suisse, CEIC

06 March 2014


India: Selected economic indicators

(Fiscal year beginning April) (1) 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F


Real GDP growth (%)(2) 9.3 6.7 8.6 9.3 6.2 4.6 4.8 6.0 6.3

Growth in agricultural GDP (%) 5.8 0.1 0.8 8.6 5.0 1.4 4.2 3.4 2.5

Growth in industrial GDP (%) 9.7 4.4 9.2 7.6 7.8 1.0 0.7 4.7 6.5

Growth in services GDP (%) 10.3 10.0 10.5 9.7 6.6 7.0 6.8 7.1 7.0


Growth in real fixed investment (%) 16.2 3.5 7.7 14.0 8.0 0.8 0.9 9.4 11.1


Nominal GDP ($bn) 1243 1226 1368 1711 1879 1851 1862 2030 2273

Population (mn) 1138 1154 1170 1186 1202 1217 1233 1249 1264

GDP per capita ($) 1092 1063 1169 1443 1566 1529 1510 1625 1798


WPI inflation (% year-on-year change, fiscal year – March over March) 7.6 8.0 11.8 9.7 9.4 10.4 8.3 8.0 6.5

WPI inflation (% change in average index for the year) 5.9 9.2 10.6 9.5 9.5 10.2 9.5 8.0 7.0

Exchange rate (INR per USD, end-year) 40.4 51.2 45.5 45.0 50.9 54.3 62.0 64.0 64.0

Exchange rate (INR per USD, average) 40.1 45.9 47.4 45.5 47.9 54.4 60.5 63.3 64.0

REER (% year-on-year change, March over March) (3) 2.7 -11.5 14.3 3.1 -5.2 -2.7 -10.0 -1.5 1.0

Repo rate (%, end-year) (4) 7.75 5.00 5.00 6.75 8.50 7.50 8.00 8.75 8.75

Reverse repo rate (%, end-year) (4) 6.00 3.50 3.50 5.75 7.50 6.50 7.00 7.75 7.75

Fiscal data

General government fiscal balance (% of GDP) (5) -4.0 -8.3 -9.4 -6.8 -8.1 -7.2 -7.1 -7.2 -7.0

General government budget balance (% of GDP) excl. disinvestment receipts -4.9 -8.3 -9.7 -7.2 -8.3 -7.5 -7.3 -7.4 -7.2

Central government fiscal balance (% of GDP) (5) -2.5 -6.0 -6.4 -4.7 -5.7 -4.8 -4.6 -4.7 -4.5

Central government budget balance (% of GDP) excl. disinvestment receipts -3.5 -6.1 -6.7 -5.1 -5.9 -5.1 -4.8 -4.9 -4.7

Central government primary fiscal balance (% of GDP) 0.9 -2.6 -3.1 -1.8 -3.0 -1.8 -1.6 -1.6 -1.7


Central government revenue (% of GDP) 11.7 9.8 9.3 10.5 8.7 9.1 8.9 8.9 9.3









Balance of payments



Exports (goods and non-factor services, % year-on-year change in $ value) 26.6 13.3 -4.4 37.5 17.9 0.3 8.0 13.0 15.0

Imports (goods and non-factor services, % year-on-year change in $ value) 31.6 16.6 -0.1 28.8 24.2 1.1 -2.0 14.5 16.5





Foreign debt ($bn) 224 224 261 318 346 392 420 440 460





(1) The years above are fiscal years beginning in April and ending in March, i.e., 2010 refers to the period of April 2010-March 2011, also written as FY2010/11. (2) Revised GDP series with base 2004-05. All historical ratios expressed as % of GDP may appear smaller since the revised GDP values in the new series (with base year of 2004) are higher. (3) Real effective exchange rate: an increase indicates appreciation. (4) The RBI uses a mix of instruments such as the repo rate, reverse repo rate, CRR (Cash Reserve Ratio), etc. (5) Note, effective from 2010, the central government includes proceeds from disinvestments as revenue in calculating the fiscal deficit.

Source: Ministry of Finance, Reserve Bank of India, CSO, CEIC, Credit Suisse

06 March 2014


Indonesia: Re-balancing before rate cutting What a difference (a change of) year makes: After a fairly dismal 18 months,

Indonesia's markets have sprung to life this year – the equity market rising 7%, helped by

renewed foreign inflows totaling USD826mn; the rupiah appreciating from 12,200 to

11,560 against the US dollar; and the 10-year government bond yield falling sharply to

8.1% from 9.0%. All in all, not a bad performance and certainly better than we imagined a

few weeks ago when we argued there was "light at the end of the tunnel" for the country's

economy and markets (see Focus Asia, 1Q 2014).

Better fundamentals, but…: Recent economic data have generally been favourable,

although not startlingly so. For example, while GDP growth for the fourth quarter

unexpectedly strengthened (from 5.6% to 5.7%), leading some to argue that the economy

had bottomed, the pick-up largely reflected a temporary export boost as domestic growth

softened. The export surge, as companies attempted to beat the government's ban on the

sale of unprocessed mineral ores abroad, also helped the merchandise trade position

towards the end of last year, but Indonesia returned to deficit in January. Finally, headline

consumer price inflation dropped to a sub-consensus 7.7% in February (from 8.2%), albeit

entirely as a result of fall in food and fuel inflation – the core rate edged up to 4.6%.

Still worried about GDP growth: Looking ahead, we continue to see downside risks to

economic activity on several fronts. First, export growth will almost certainly weaken as the

ban on unprocessed mineral exports takes effect and Chinese domestic growth remains

relatively soft. Second, while private consumption growth is set to bounce in Q1, ahead of

the Parliamentary elections on 9 April, we expect it to slow through the rest of 2014 as the

lagged impact of the real income squeeze, mining/investment slowdown and the central

bank's 175bps of rate hikes bite. Third, we don't see a catalyst for a meaningful

improvement in capex, particularly while coal prices remain so depressed.

Trend trade improvement: The plus side of a further softening in domestic demand,

however, is that it will keep a firm lid on import growth, which we expect to underperform

exports. As such, we very much doubt the export ban (worth around 0.3% of GDP) will

prevent the merchandise trade and current account positions from continuing to trend

improve through 2014. Specifically, we expect the current account deficit to narrow to

2.8% of GDP this year from 3.3% in 2013. This would obviously be above Bank

Indonesia's 2% "target", although this should be seen as a more medium term objective.

Much more disinflation: The best macroeconomic news should come in the form of

sharply lower headline CPI inflation, which is set to fall close to 4% by July. Another

helpful, food-related base effect will see it drop further in March, while a big decline will

come in June and July when last year's 44% hike in the subsidised gasoline price drops

out of the annual comparison. This, of course, assumes the president will not raise the

subsidised fuel price further, but given he/she will probably only take power in September

(after a second round) and the most likely winner according to polls – current Jakarta

governor, Joko Widodo – opposed last year's increase this seems the most likely outcome.

Sticking with 100bps of cuts: We have removed our forecast of a final 25bp Bank

Indonesia rate hike and continue to expect the central bank to lower the policy rate by

100bps in the second half of this year. Although BI governor, Agus Martowardojo, recently

played down the chances of rate cuts in the context of rising international interest rates, we

find it hard to believe this will be avoided when, as seems likely, the real policy rate rises

by 3pp-3.5pp in July (the nominal policy rate is currently 7.5%). The politicians would likely

demand action if our central scenario plays out, while BI could argue it is simply taking its

foot of the brake rather than pressing the accelerator if it were to cut. Barring significant

turmoil in international markets, the rupiah is also unlikely to be badly affected and could

even strengthen to the extent the rate action encourages more in the way of bond and

equity inflows.

The bottom line: All in all, while markets may have overdone the optimism in the short

run, we believe the macroeconomic fundamentals generally bode well for the performance

of Indonesian rates and equities this year.


+65 6212 3707

[email protected]

06 March 2014


Merchandise import growth lagged the downturn in

export growth through 2012, but the former is now weaker

than the latter, largely reflecting the relative

weakness of Indonesian domestic demand and soft

commodity prices.

The ban on the exports of some unprocessed mineral

ores from mid-January is unlikely to reverse the trend improvement in the external

accounts. We expect the current account deficit to shrink to 2.8% of GDP in

2014 from 3.3% last year.

Exhibit 366: Exports outpacing imports Exhibit 367: Current a/c deficit turning

-40

-30

-20

-10

0

10

20

30

40

50

60

09 10 11 12 13 14

Exports*

Imports*

% y-o-y

-5

-4

-3

-2

-1

0

1

2

3

09 10 11 12 13

% of GDP

% of GDP (4 qtr MA*)

Current account

* Merchandise export and import values

Source: Credit Suisse, CEIC


While investment growth peaked back in mid-2012 (at

12%), consumer spending growth has held remarkably

(some might say suspiciously well ) well

according to the national accounts data. We doubt

this strength will last, however.

The lagged effects of the central bank's monetary tightening measures are likely to be felt from 2Q,

while knock-on effects from the weakness of the

commodity sector are probable.

Exhibit 368: Consumption growth set to follow capex growth down from 2Q 2014

-5

0

5

10

15

20

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Private consumption (% yoy) Investment (% yoy, RHS)

F'cst


Headline consumer price inflation was 7.7% in

February, but price pressures are a lot lower on

a seasonally adjusted, sequential basis. We expect the year-on-year CPI rate to

drop to 4%-4.5% in July/August, with the biggest

risk to this being another meaningful rise in subsidised

fuel prices.

Much weaker inflation should help drive bond yields and

spreads lower. We also expect BI to cut 100bps.

Exhibit 369: Softening CPI… Exhibit 370: …to see bond yield drop

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011 2012 2013 2014

CPI (% yoy)

CPI (% 3m-on-3m, RHS)

2

4

6

8

10

12

14

16

18

05 06 07 08 09 10 11 12 13 14

ID 10y yield*

ID-US 10yspread

Source: CEIC, Credit Suisse * Indonesian 10 year government bond yield

Source: CEIC, Credit Suisse

06 March 2014


Indonesia: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 6.3 6.0 4.6 6.2 6.5 6.3 5.8 5.0 5.3


Growth in real fixed investment (%) 9.3 11.9 3.3 8.5 8.3 9.7 4.7 4.9 6.3


Nominal GDP ($bn) 432.3 510.6 538.6 709.5 845.4 876.9 836.3 842.3 927.0

Population (mn) 225.6 228.5 231.4 237.6 244.0 247.2 250.4 253.4 256.4

GDP per capita ($) 1,916 2,234 2,328 2,985 3,465 3,547 3,340 3,324 3,615


CPI inflation (% year-on-year change, December over December) 6.6 9.8 4.8 5.1 5.4 4.3 8.0 4.8 5.0


Exchange rate (IDR per USD, end-year) 9,419 10,950 9,400 8,991 9,068 9,670 12189 12100 12000

Exchange rate (IDR per USD, average) 9,139 9,692 10,408 9,087 8,776 9,384 10863 11975 12000

REER (% year-on-year change, December over December) (1) -6.5 -8.6 15.6 5.9 -1.2 -4.7 -11.6 2.0 3.0

Nominal wage growth (% year-on-year change) (2) 4.2 7.6 5.3 12.2 3.4 20.4 5.0 6.0 5.0

Overnight rate (%, end-year) (3) 8.00 9.25 6.50 6.50 6.00 5.75 7.50 6.50 6.50

Fiscal data (4)

General government fiscal balance (% of GDP) -1.3 -0.1 -1.6 -0.7 -1.1 -1.9 -2.2 -2.3 -2.0

General government primary fiscal balance (% of GDP) 0.8 1.7 0.1 0.6 0.1 -0.6 -0.9 -0.7 -0.5








Domestic credit (% year on year change) 16.2 14.3 12.2 9.9 22.4 19.2 16.0 14.0 16.0



Balance of payments (6)



Exports (goods and non-factor services, % year-on-year change in $ value) 13.4 18.7 -14.2 31.7 26.7 -4.5 -2.6 -1.0 6.0

Imports (goods and non-factor services, % year-on-year change in $ value) 15.0 32.3 -23.0 37.6 28.5 8.1 -0.9 -6.0 4.0

Current account balance ($bn) 10.5 0.1 10.6 5.1 1.7 -24.4 -27.6 -23.6 -21.3

Current account balance (% of GDP) 2.4 0.0 2.0 0.7 0.2 -2.8 -3.3 -2.8 -2.3


Scheduled external debt amortization ($bn) 14.4 15.5 17.1 18.7 26.5 36.4 34.6 42.0 48.0


Foreign debt ($bn) 141.2 155.1 172.9 202.4 225.4 252.4 264.1 273.0 281.0

Public ($bn) 80.6 86.6 99.3 118.6 118.6 126.1 123.5 132.0 135.0

Private ($bn) 60.6 68.5 73.6 83.8 106.7 126.2 140.5 141.0 146.0




Central bank net non-gold FX reserves ($bn) 55.0 49.6 63.6 92.9 106.5 108.8 96.4 100.0 105.0

(1) Real effective exchange rate, increase indicates appreciation. (2) Nominal wage: manufacturing. (3) BI changed its policy target from 1m SBI rate to overnight rate in 2008. (4) Refers to central government. The government assumed an oil price of $61 per barrel for 2009 in its revised budget announced in June 2009. (5) Excludes SOE and BI debt. (6) BoP numbers from 2004 onwards have been revised; exports & imports include credits & debits on net income, respectively, in 2000-03.

Source: Bank Indonesia, Ministry of Finance, Central Bureau Statistics, CEIC, World Bank, Credit Suisse

06 March 2014


Korea: Entering a soft patch We think a weaker US ISM index, together with the peaked momentum in the CS

Basic Material Index and CRB metal price index, suggests that Korea's export

growth is likely to enter a soft patch in the near term. Both indices have an

approximate three-month lead over Korea's trend export growth, prompting us to expect

headwinds against export momentum in the coming months. In our view, global

industrial activities may moderate to a trend growth in 1Q 2014 from an above-trend

level seen in the prior quarter. This suggests that the underlying short-term outlook for

global activity is likely to be reasonable, but not tremendous.

The weaker-than-expected January-February export growth supported our near-

term cautious stance. Combining January-February together, we saw exports rise

0.6% yoy and imports increase 1.4% yoy. Export growth has weakened from the mid-

single-digit gain in 4Q last year, but import growth has remained resilient when

compared to the prior quarter. Geographically, export growth to Asia bounced in

February, but exports to the US fell. Product-wise, wireless telecommunication,

semiconductors and automobile exports recorded strong gains. We maintain our view

that a better global recovery should help support exports this year, but the trade surplus

is likely to narrow as import growth recovers.

The latest momentum in industrial production remains unclear under the lunar

new year effect, but we expect to see some softness nonetheless. Manufacturing

industrial production fell by a more-than-expected 3.8% yoy in January. We expect to

see some softness in the near term as global industrial activities take a breather, but

have maintained our view that the Korean economy should continue cruising on a

gradual recovery path this year. Indications from other macro-data have remained mixed

so far. Producers’ shipments fell 4.7% yoy in January, but retail sales jumped 5.7% yoy.

The value of construction completed, on the other hand, saw a very strong bounce at

12.8% yoy, possibly reflecting the pick-up in building construction activities.

Inflationary pressure remains very tame. Combining January-February together,

headline inflation was at 1.1% yoy, slowing for the third consecutive year from as high as

3.9% yoy back in 2011. Food and alcoholic beverage prices (-1.3% yoy) and

transportation prices (-0.8% yoy) fell when compared to a year ago. We think the

discrepancy between headline and core inflation suggests that the weak food and crude

oil prices are the main drags on an otherwise low but stable inflation trend in Korea. We

have revised down our forecast for the 2014 headline inflation rate further to 1.9%, from

2.2% previously, anticipating the low price pressure to continue in the coming months.

We expect the BoK to keep the policy base rate unchanged throughout 2014.

Despite the soft patch ahead, we believe better global demand should continue to

drive the Korean economy on a gradual recovery path. This should lessen the need for

the BoK to lower the policy base rate in support of the economy at this juncture. At the

same time, inflationary pressure remains at bay, suppressed by the low agricultural

and fuel price changes. We think continued growth and the current low inflation

environment suggest that the timing for an adjustment in the policy base rate could still

be sometime away. The possibility of a rate hike in 2H may exist, if the global

economy poses stronger-than-expected growth that closes Korea's output gap earlier

than expected; consideration for a rate cut, on the other hand, would need exports and

other macro-data to disappoint visibly to challenge the BoK's current sanguine outlook

on the economy.

Christiaan Tuntono

+852 2101 7409

[email protected]

06 March 2014


Former BoK Senior Deputy Governor Lee Ju-yeol is nominated by President Park

as the new BoK Governor. Lee will succeed the current Governor Kim Choong-soo as

the head of the central bank after Kim finishes his term by the end of March this year. A

long-time central banker, Lee joined the Bank of Korea back in 1977 and served in

various posts before retiring as its senior deputy chief in 2012. Lee will chair the BoK's

Monetary Policy Committee from April onwards, driving Korea's interest rate decision

amidst the challenge posed by the Fed's QE exit and a weak global growth recovery.

We think the nomination of Lee could be read with a neutral-to-dovish tone (vis-a-vis

Kim), though we think the strength of the domestic economy and inflation trend would

remain the main drivers of monetary policy decisions going forward.

We expect the KRW to strengthen on the resumption of positive seasonality on

the current account in the coming quarters. Negative current account seasonality in

1Q and the recent sell-off across EM currencies have been putting pressure on the

KRW, driving it up to its current level against the USD. We maintain our view that the

KRW should see support in the coming quarters, driven by the expected recovery in

exports and favorable seasonality in its current account balance. This should drive

USDKRW lower to 1055 by the end of this year, in our view. The lack of stronger

monetary easing measures from the Bank of Japan has also helped curb the JPY's

weakness recently, lessening the depreciation pressure on the KRW.

Although the Fed's exit from its quantitative easing program has triggered selling

across a number of emerging market currencies, we do not think it would lead to a

severe capital flight from Korea. We believe the strong current surplus and the hefty

foreign exchange reserves Korea has would help stem the rise of significant selling on

the KRW. In addition, the government's comprehensive measures to reduce FX liquidity

risks in 2009 and 2010 have lowered the short-term external debt exposure. In terms of

the domestic economy, bank lending rates, which are priced on short-term interest

rates, remain largely unaffected by the Fed's action so far, even though Korea's long-

term bond yield is on the rise. We do not expect the limited rise in mortgage and

consumer lending rates to hamper the recovery of housing and consumption demand

this year.

President Park has launched the Three-Year Economic Innovation Plan, which

aims at boosting Korea's domestic demand and raising the country's potential

growth rate. Highlights of the package include deregulation on the services sector and

other red-tape regarding business investments. The Plan also aims at normalizing

publicly owned enterprises by selling assets and streamlining operations. We think these

initiatives are similar to what China vowed to do by launching its structural reform

package at the Third Plenum. While we agree with Park's efforts, we believe Korea

could face more challenges than China to make it successful: (1) Korea is more

urbanized than China, implying a lesser boost to consumption; (2) Korea is a more

market-based economy than China; hence, further regulatory liberalization may not yield

as much growth dividend; and (3) Korea is already much more developed than China,

implying less room to accelerate labor productivity gains.

Fiscal revenue may disappoint again in 2014, causing constraints on fiscal

spending. The government's gross fiscal revenue shortfall reached an 11-year high at

KRW 10.9trn in 2013, dragged down by the decline in corporate and capital gains taxes

amidst a slow economy. Given that the government’s official forecast of 3.9% GDP

growth this year is likely to be overly optimistic, we think the chance of seeing another

fiscal revenue shortfall this year does exist. This may cause headwinds for the

government to deliver on President Park’s welfare promise and to balance the fiscal

account (excluding social security funds) over the medium term.

We expect no change to Korea’s sovereign debt rating over the next six months.

Korea is currently rated Aa3 (Moody’s), A+ (S&P) and AA- (Fitch), with a stable outlook.

06 March 2014


We think a weaker US ISM

index, together with the

peaked momentum in the

CS Basic Material Index and

CRB metal price index,

suggests that Korea's

export growth is likely to

enter a soft patch in the

near term.

Exhibit 371: US ISM and metal prices Exhibit 372: Exports to US

20

30

40

50

60

70

80

-50

-30

-10

10

30

50

Ju

l-08

Oct-

08

Ja

n-0

9A

pr-

09

Ju

l-09

Oct-

09

Ja

n-1

0A

pr-

10

Ju

l-10

Oct-

10

Ja

n-1

1A

pr-

11

Ju

l-11

Oct-

11

Ja

n-1

2A

pr-

12

Ju

l-12

Oct-

12

Ja

n-1

3A

pr-

13

Ju

l-13

Oct-

13

Ja

n-1

4A

pr-

14

Korea exports to US (% yoy, 3m mav)

CRB Metal prices (% yoy, 3mma forward,RHS)US ISM New orders (3m forward, RHS)

-3

-2

-1

0

1

2

3

-50

-40

-30

-20

-10

0

10

20

30

40

50

Ju

l-08

Oct-

08

Ja

n-0

9A

pr-

09

Ju

l-09

Oct-

09

Ja

n-1

0A

pr-

10

Jul-10

Oct-

10

Ja

n-1

1A

pr-

11

Ju

l-11

Oct-

11

Ja

n-1

2A

pr-

12

Ju

l-12

Oct-

12

Jan-1

3A

pr-

13

Ju

l-13

Oct-

13

Jan-1

4A

pr-

14

Korea exports to US (% yoy,3m mav)

CS BMI (% yoy, 3m mav, RHS)

Source: ISM, CEIC, Credit Suisse Source: CEIC, Credit Suisse

The weaker-than-expected

January-February export

growth supported our near-

term cautious stance.

We maintain our view that a

better global recovery

should help support exports

this year, but the trade

surplus is likely to narrow as

import growth recovers.

Exhibit 373: Merchandise trade Exhibit 374: Export growth

-40

-30

-20

-10

0

10

20

30

40

50

60

-40

-30

-20

-10

0

10

20

30

40

50

60

2004 2006 2008 2010 2012 2014

Trade balance (USD mn, 12-month rollingsum)Exports (% yoy, RHS)

Imports (% yoy, RHS)

-60

-40

-20

0

20

40

60

80

100

Ju

l-08

Oct-

08

Ja

n-0

9A

pr-

09

Ju

l-09

Oct-

09

Ja

n-1

0A

pr-

10

Ju

l-10

Oct-

10

Ja

n-1

1A

pr-

11

Ju

l-11

Oct-

11

Ja

n-1

2A

pr-

12

Ju

l-12

Oct-

12

Ja

n-1

3A

pr-

13

Ju

l-13

Oct-

13

Ja

n-1

4

US EU

China Japan

ASEAN

Korea exports (% yoy, 3m mav)

Source: MITE, Credit Suisse Source: MITE, Credit Suisse

The latest momentum in

industrial production

remains unclear under the

lunar new year effect, but

we expect to see some

softness as global industrial

activities take a breather.

Exhibit 375: Industrial production and other macro data

(% YoY, unless otherwise stated) 1Q13 2Q13 3Q13 4Q13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14

Manufacturing industrial production -1.5 -0.8 0.1 1.9 0.9 3.2 -3.9 3.3 -0.7 2.9 -3.8

% mom, seasonally adjusted -1.5 0.4 -0.3 1.7 -0.2 1.6 -2.5 2.6 0.0 2.4 0.1

Consumer sales 0.1 1.1 0.8 1.0 1.0 2.5 -1.2 1.7 1.3 0.2 5.7

Shipments -2.0 -0.7 0.2 1.8 0.4 4.5 -4.8 3.2 0.4 1.9 -4.7

Inventories 5.4 2.9 6.4 7.3 7.0 3.4 9.0 9.4 6.5 6.1 6.3

Production capacity 1.1 1.2 1.6 1.7 1.7 1.5 1.6 1.6 1.7 1.9 1.3

Leading indicator index (% MoM) 0.2 0.7 0.6 0.8 0.8 0.7 0.3 0.8 0.8 0.7 0.4

Manufacturing confidence index outlook 76.0 82.0 77.0 78.0 78.0 73.0 77.0 82.0 84.0 78.0 79.0 81.0 85.0

National Statistical Office, Bank of Korea, Credit Suisse research

06 March 2014


We have revised down our

forecast for 2014 inflation

further to 1.9%, from 2.2%

previously.

We expect the BoK to keep

the policy base rate

unchanged throughout

2014.

Exhibit 376: CPI Inflation Exhibit 377: Policy base rate

0

1

2

3

4

5

6

7

2007 2008 2009 2010 2011 2012 2013 2014

Headline CPI Inflation (% yoy)Core CPI Inflation (% yoy)

-3

-2

-1

0

1

2

3

4

5

6

2004 2006 2008 2010 2012 2014

Base rate (%)CPI inflation (% yoy)Real base rate (%)

Forecast

Source: NSO, Credit Suisse Source: BoK, Credit Suisse

We expect to see KRW

strengthen against the USD,

driving the cross lower to

1055 by the end of this year.

The lack of stronger easing

measures from the BoJ has

helped curb the JPY's

weakness recently,

lessening the depreciation

pressure on the KRW .

Exhibit 378: USDKRW Exhibit 379: JPYKRW

800

900

1000

1100

1200

1300

1400

1500

1600

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

USDKRW

6

8

10

12

14

16

18

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

JPYKRW

Source: BoK, Credit Suisse Source: BoK, CEIC, Credit Suisse

We believe the strong

current account surplus and

the hefty FX reserves Korea

holds would help stem the

rise of significant selling on

the KRW.

Exhibit 380: External funding position

Korea Indonesia India

1997 Latest* 1997 Latest* 1997 Latest*

USD bn

GDP 526.2 1182.9 215.8 888.8 423.1 1864.6

FX Reserves 20.4 336.9 17.4 95.7 29.7 277.2

Current Account -8.2 65.0 -5.0 -32.1 -5.5 -76.9

Short-term External Debt 63.8 111.5 32.9 47.1 5.0 96.8

Ratio

FX Reserves/GDP 3.9% 28.5% 8.1% 10.8% 7.0% 14.9%

Current Account/GDP -1.6% 5.5% -2.3% -3.6% -1.3% -4.1%

Short-term External Debt/FX Reserves 312.7% 33.1% 188.6% 49.2% 17.0% 34.9%

Note: As of 3Q 2013, GDP and Current Account in four-quarter roll sum Source: CEIC, Credit Suisse

06 March 2014


Korea: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 5.1 2.3 0.3 6.3 3.6 2.0 2.8 3.3 3.6


Growth in real fixed investment (%) 4.2 -1.9 -1.0 7.0 -2.1 -1.7 3.8 2.4 2.7


Nominal GDP ($bn) 1049.1 929.1 831.1 1,012.0 1,114.8 1,148.0 1,198.6 1,295.5 1,364.5

Population (million) 48.5 48.6 48.7 48.9 49.0 49.2 49.3 49.5 49.6

GDP per capita ($) 21,650 19,115 17,050 20,705 22,740 23,347 24,304 26,190 27,503





Exchange rate (KRW per USD, end-year) 938 1,257.5 1,167.6 1,139 1,153 1,064 1,055 1,055 1,055

Exchange rate (KRW per USD, average) 929 1,104.8 1,281.4 1,159 1,108 1,108 1,094 1,055 1,055

REER (% year-on-year change) (1) -6.6 -24.5 7.0 0.5 -2.7 9.8 2.0 2.6 2.4

Nominal wage growth (% year-on-year change) 5.9 3.1 -0.7 6.1 -0.7 -0.9 0.2 2.3 4.4

Overnight base rate (%, end year) 5.00 3.00 2.00 2.50 3.25 2.75 2.50 2.50 2.50

Fiscal data

Consolidated government fiscal balance, (% of GDP) (2) 1.9 -0.3 -2.7 -0.8 -0.4 -0.2 -1.0 -0.9 -0.5

Consolidated government primary balance, (% of GDP) 3.0 0.8 -1.6 0.4 0.8 0.9 0.0 0.1 0.4

Consolidated government expenditure, (% of GDP) 28.0 29.6 31.0 27.7 28.1 28.8 29.2 29.8 30.0

Consolidated government debt, (% of GDP, end-year) (3) 36.3 36.2 39.5 39.4 40.9 42.1 43.8 42.7 41.1








Balance of payments




Imports (goods and non-factor services, % year-on-year change in $ value) 16.6 20.2 -23.8 29.1 20.1 -0.2 -0.5 4.3 4.6


Current account balance (% of GDP) 2.1 0.3 3.9 2.9 2.3 4.2 5.9 4.8 4.2

Net FDI inflows ($bn) -17.9 -16.9 -14.9 -22.2 -16.4 -18.9 -13.1 -12.1 -11.1

Scheduled debt amortization ($bn) (4) 35.4 39.1 30.5 33.7 34.3 35.2 36.1 37.0 37.9


Foreign debt ($bn) (5) 333.4 317.4 345.4 360.0 398.7 413.6 411.8 409.6 407.3

Public ($bn) (6) 61.3 61.8 80.3 96.1 104.1 123.4 125.9 128.4 130.9

Private ($bn) 272.1 255.6 265.1 263.9 294.6 290.2 285.9 281.2 276.5




Central bank gross non-gold FX reserves ($bn) (7) 262.1 201.1 269.9 291.5 306.3 326.9 341.4 349.7 356.7

(1) Real effective exchange rate (CPI-deflated); increase indicates appreciation. (2) Include social security funds. (3) Include Grain Securities, Seoul Metro bonds, National Housing Bonds, Seoul Metro Subway Bonds, and Industrial Finance Debentures (4) Scheduled amortizations of medium- and long-term external debt of both the public and private sectors. (5) Liabilities vis-à-vis non-residents (i.e., includes FX-denominated and local-currency debt). (6) Includes government and central bank. (7) Central bank forex reserves minus monetary authorities’ other liabilities.

Source: Bank of Korea, National Statistical Office, Ministry of Strategy and Finance, CEIC, Credit Suisse

06 March 2014


Malaysia: Changing the growth mix Changing the fiscal policy mix. To lower subsidy expenses and move towards a budget

deficit target of 3.5% of GDP this year (3.9% in 2013), we think the government will need

to hike the subsidized fuel price again in 2014, on top of its recent move to increase

electricity tariffs. This will likely add to headline inflation and have some negative

implications for GDP growth, while allowing the federal budget shortfall to reach its target

and preventing government debt from exceeding the 55% of GDP self-imposed limit. To

offset the negative effects on GDP, the government will boost capital spending by non-

financial public enterprises (NFPE). While the government is projecting investment by

these entities to fall by 13% yoy in 2014, we note that it projected an 11% yoy decline in its

2013 budget announcement only to revise this figure recently up to a 50% yoy increase.

Keeping investment growth robust is also consistent with the government’s stated

commitment to implement the key infrastructure projects under the Economic

Transformation Program (e.g., double tracking of southern railways, Klang Valley MRT).

Shifting the domestic spending growth mix. We continue to doubt that the strength of

household spending growth seen last year is sustainable given the following headwinds:

(1) Lowering of government subsidies in the context of weak palm oil and rubber prices

should result in a real income squeeze for households. (2) High household leverage and

recent macro-prudential measures by the central bank will likely cap consumer borrowing.

In fact, the sharp downturn in the consumer sentiment index recently fits with our view that

2014 private consumption growth will likely slow more than the market expects (5.5% vs.

6% yoy consensus). On the other hand, the anticipated improvement in export growth and

NFPE capital spending discussed above should keep investment growth robust, after a

weak public investment print last year.

Tourism to provide additional boost to growth. As noted in ASEAN tourism (full report),

we think Malaysia tourist arrivals will be boosted by three key factors: (1) “Visit Malaysia

Year 2014”, (2) the ongoing political turmoil in Thailand, diverting tourists to Malaysia, and

3) a weaker ringgit. The likely tourism boost along with anticipated robust merchandise

export and investment growth prompted the recent upgrade to our Malaysia 2014 GDP

growth projection to 5.3% (from 5%, consensus 5.1%).

Current account to deteriorate further but at a slower pace. While improvement in

tourism and merchandise exports should boost revenue from trade, we expect import

demand to more than offset the gain in nominal exports, thanks to strong investment

growth. This will probably result in a further deterioration of the current account surplus this

year, albeit at a more modest pace than previously. We expect the current account surplus

to decline to 3.3% of GDP from 3.8% in 2013.

Inflation to surprise on the upside, interest rates to move higher. Factoring in the

higher-than-expected electricity tariff increase at the turn of the year, currency

depreciation, and the prospect of another subsidized fuel price hike, we maintain our view

that inflation is likely to surprise the market to the upside (consensus for 2014 average CPI

inflation: 3%; CS: 3.5%). We suspect that strong economic growth has enabled firms to

pass on the higher costs to consumer prices, explaining strong sequential inflation

momentum in recent months. While we do not see Bank Negara’s recent statements as

particularly hawkish, this could change in coming months if we are right in thinking that

inflation will continue to rise, pushing the real policy rate deeper into negative territory. We

maintain our view that Bank Negara will raise the overnight policy rate by 25bps to 3.25%

by end-2014.

Ringgit and bonds to remain vulnerable. With a declining current account surplus and

foreign positioning in Malaysia's bond market still large (about 45%), we think the ringgit

will remain under some pressure. Our rates strategist also sees room for the back end of

the yield curve to sell off further, against the backdrop of strong GDP growth, rising

inflation, and the risk of a policy rate hike.


+65 6212 5675

[email protected]

https://plus.credit-suisse.com/u/deQ8dt

06 March 2014


We think subsidy cuts, a

weaker ringgit, and strong

economic growth will push

up inflation more than the

market expects.

Partly due to the rise in

inflation, consumer

sentiment has already

deteriorated significantly,

pointing to a material

consumer spending

slowdown ahead.

Exhibit 381: Inflation Exhibit 382: Consumer spending

-4

-2

0

2

4

6

8

10

-15

-10

-5

0

5

10

15

20

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Producer price (% yoy)

Consumer price (% yoy)

-2

0

2

4

6

8

10

12

14

16

-60

-40

-20

0

20

40

60

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

MIER consumer sentiment index (% yoy)

Real private consumption (% yoy, RHS)

Source: CEIC, Credit Suisse Source: MIER, CEIC, Credit Suisse

Our analysis suggests that

historically Malaysia’s

tourism tends to perform

strongly when Thailand has

undergone periods of

political turmoil. In addition to

the ongoing political

problems in Thailand,

Malaysia’s tourist arrivals will

likely be boosted by the

weaker ringgit and “Visit

Malaysia Year” campaign.

Exhibit 383: Tourism to benefit from a number of catalysts

-20

-15

-10

-5

0

5

10

15

-30

-20

-10

0

10

20

30

40

50

2007 2008 2009 2010 2011 2012 2013 2014

TH MA (RHS)

2008 airport closure

2010 violent clashes

2009 East Asia summit cancelation

2011 floods

Growth of visitor arrivals relative to the region (Non-Japan Asia)

Visit Malaysia year 2007

Correlation:-0.45


We expect tourist arrivals to

record double-digit growth

this year, after a weak

performance in late 2013.

A recent recovery in

exports, led by electronic

products, also supports our

view that Malaysian exports

are benefiting from the

recovery in global growth

this year which we expect to

continue.

Exhibit 384: Tourist arrivals Exhibit 385: Exports

-15

-10

-5

0

5

10

15

20

25

30

35

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Malaysia visitor arrivals (% yoy)

-40

-30

-20

-10

0

10

20

30

40

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Overall merchandise exports (% yoy)

Electronics (% yoy)

Source: : CEIC, Credit Suisse Source: CEIC, Credit Suisse

06 March 2014


We think the government

will cut the federal budget

deficit to 3.5% of GDP as

planned but prompt state

enterprises to invest more.

Public investment growth

weakened significantly last

year, probably partly due to

the general and internal

UMNO elections. We expect

it to rebound this year on

the back of the

government's infrastructure

push.

.

Exhibit 386: Fiscal deficits Exhibit 387: Investment by ownership

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2010 2011 2012 2013 2014F

Public sector wide deficit (% of GDP)

Federal government deficit (% of GDP)

We think public sector-wide deficit could surprise significnatly on the upside

-30

-20

-10

0

10

20

30

40

50

2007 2008 2009 2010 2011 2012 2013 2014

Public investment

Private investment

% yoy

Source: MOF, CEIC, Credit Suisse Source: CEIC, Credit Suisse

We expect to see a smaller

contribution to 2014 headline

GDP growth from private

consumption, while net

exports and investment

become more helpful than

last year.

Exhibit 388: Contribution to headline real GDP growth from spending components

-5

-3

-1

2

4

6

8

10

2010 2011 2012 2013 2014F

Priv consumption Govt consumptionInvestment Net exportsReal GDP (% yoy)

Contribution to headline GDP growth


We expect the current

account surplus to

deteriorate further to 3.3%

of GDP in 2014 from 3.8%

of GDP in 2013, before

recovering in 2015.

While the current account

will likely remain in surplus

and net direct investment

flows have improved,

Malaysia is still susceptible

to changes in short-term

flows, putting pressure on

its reserves/currency.

Exhibit 389: Current account Exhibit 390: Balance of payments

0

2

4

6

8

10

12

14

16

18

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

F

20

15

F

Current account balance (% of GDP)

-15%

-10%

-5%

0%

5%

10%

15%

20%

2008 2009 2010 2011 2012 2013

Change in reserves (% of GDP, 4qtr rolling sum)

Current account (% of GDP, 4qtr rolling sum)

Direct Inv (% of GDP, 4qtr rolling sum)


06 March 2014


Malaysia: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) (1) 6.3 4.6 -1.6 7.2 5.1 5.6 4.7 5.3 4.7




Nominal GDP ($bn) 186.8 222.3 193.0 238.6 279.0 303.5 316.6 326.9 347.8

Population (mn) 27.2 27.5 27.89 28.3 28.8 29.4 30.0 30.6 31.6

GDP per capita ($) 6889 8022 6920 8446 9678 10316 10543 10673 10997




Exchange rate (MYR per USD, end-year) 3.31 3.46 3.42 3.06 3.17 3.06 3.28 3.38 3.38

Exchange rate (MYR per USD, average) 3.44 3.33 3.52 3.21 3.06 3.09 3.17 3.35 3.38

REER (% year-on-year change, December over December) (2) 1.6 5.5 -1.9 5.7 -2.0 3.0 0.5 0.5 1.0

Nominal wage growth (% year-on-year change) (3) 7.3 2.9 -4.3 11.8 7.8 7.8 7.7 7.0 7.0

Overnight policy rate (%, end-year) (4) 3.50 2.50 2.00 2.75 3.00 3.00 3.00 3.25 3.50

Fiscal data (5)

General government budget balance (% of GDP) -3.7 -4.8 -7.0 -5.8 -5.0 -4.4 -3.9 -3.5 -3.0

General government primary fiscal balance (% of GDP) -1.7 -3.1 -4.9 -3.8 -2.9 -2.0 -2.6 -2.3 -1.8











Balance of payments



Exports (goods and non-factor services, % year-on-year change in $ value) 13.0 11.4 -18.8 23.4 14.6 0.3 -2.4 4.0 5.5

Imports (goods and non-factor services, % year-on-year change in $ value) 13.9 5.9 -18.7 29.9 15.4 5.6 0.9 5.8 4.5






Foreign debt ($bn) 56.7 68.1 68.0 74.1 81.2 83.7 84.7 87.5 93.1

Public ($bn) 18.6 23.1 24.9 27.2 26.2 24.7 23.7 24.5 26.1

Private ($bn) 38.1 45.0 43.0 46.9 55.0 59.0 61.0 63.0 67.0






(1) Real GDP from 2001 has been rebased to 2000 = 100. (2) Real effective exchange rate, increase indicates appreciation. (3) Salaries and wages in the manufacturing sector. (4) BNM changed the policy rate from the intervention rate to the overnight rate in May 2004. (5) Refers to the federal government’s financial position. The government assumed an oi l price of $70 per barrel for 2009 in its revised budget announced in November 2008. (6) Not including forward FX purchases.

Source: Bank Negara Malaysia, CEIC, Credit Suisse

06 March 2014


Philippines: Against the consensus We have raised our above-consensus 2014 GDP growth forecast to 7% from 6.8%

previously (vs consensus of 6.4%): While Typhoon Haiyan (which hit on 7 November)

will no doubt impact GDP growth, particularly agricultural production, we think that many

analysts are too pessimistic in their growth forecasts. We have pointed out that the areas

most badly affected by the typhoon account for a relatively small proportion of GDP and

that the typhoon did not damage the vast majority of manufacturing and Business Process

Outsourcing (BPO) activity. The latest 4Q13 GDP print, which surprised on the upside at

6.5%yoy, is partly a testament to that. Looking forward, we think that reconstruction activity

will boost GDP in 2014. Our relatively strong 2014 growth forecast also reflects: 1) the

lagged impact of an accommodative monetary policy, and 2) a stronger global trade cycle.

We expect growth to continue to be supported by private consumption and investment

spending in particular.

Inflation should generally moderate after supply-side disruptions abate:

Notwithstanding our projection of another year of above-trend GDP growth, we have kept

our below consensus 2014 CPI inflation forecast at 3.8% (vs consensus of 4.2%). While

CPI inflation has exceeded 4%yoy over the last 2 months, from an average of 2.9% in

2013, this was no doubt partly the result of Typhoon Haiyan. We note that most of the

recent increase in headline inflation has been driven by food prices, and, to a smaller

extent, by electricity and fuel prices. Moving forward, while inflation could be volatile

depending on the outcome of the Supreme Court's Temporary Restraining Order (TRO)

on Meralco's electricity price hikes, it should generally trend down after supply-side

disruptions from typhoon-related effects abate. In addition, domestic rice prices (which

form a significant 9% weight in the CPI) could moderate if the Thailand government, as it is

now doing, manages to sell some of its huge stockpile of rice to fund payments to farmers.

Accommodative monetary policy to continue – we doubt the central bank will

tighten monetary policy meaningfully in 2014: While many analysts have built in

expectations that the central bank will start tightening policy settings meaningfully in 2014

(the consensus is for 50bps of rate hikes), we disagree with this consensus. Arguably, the

market has started to price in some of this tightening, on the back of recent comments by

the central bank governor highlighting that the space to maintain rates has 'narrowed'. In

our view, the central bank still sees the recent rise in CPI as transitory and supply driven,

thereby not warranting a monetary policy response in its view. We maintain our non-

consensus view that the central bank will leave its key policy rate and the Special Deposit

Account (SDA) rate unchanged this year. In addition, while the BSP could theoretically

start mopping up liquidity through issuing its own securities if the new BSP charter is

passed, we doubt this will be a game changer in itself. It seems to us that the central bank

is still genuinely comfortable with the level of liquidity in the economy given its bullish

estimates of trend growth, and the introduction of new ways of sterilizing liquidity will not

fundamentally alter the central bank's calculations for now.

Is it all hunky-dory? – Central bank risks keeping policy settings too loose for too

long: If our key non-consensus views are correct, we will see upside surprises in GDP

growth, downside surprises in CPI inflation, and a more dovish central bank in 2014 than

the market currently expects. Nonetheless, it is not all hunky-dory. We note that

manageable inflation does not necessarily preclude an overheating economy. As our Asia

Regional Economist, Robert Prior-Wandesforde, has consistently argued, low inflation is

far from the definitive proof of overheating that many take it to be. Inflation is often the last

indicator to signal a problem, if indeed it ever does, based on the experience of bubbly

economies such as the US prior to the housing crisis and Indonesia prior to the recent US

QE Tapering. The variable that flashes red to us right now is the surge in money supply

growth. Meanwhile, other indicators such as property prices and capacity utilisation are

flashing amber in our view. Fast forward one to two years, and on the basis of current

monetary conditions we suspect that most of these other indicators will have turned red

(See Philippines: Mad Money?).

Michael Wan

+65 6212 3418

[email protected]

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=805956020&source_id=emcsplus&serialid=%2fNBdqLU%2b21y%2bfejH2FWQp2uEFS96zlC5GnNM4jnQmpw%3d

06 March 2014


The recent rise in headline

inflation was no doubt partly

the result of Typhoon

Haiyan, which has driven

food prices higher. Stronger

electricity and fuel price

increases have also had an

impact.

Inflation is likely to trend

down through the rest of this

year, after supply-side

disruptions from typhoon-

related effects abate.

Exhibit 391: Much of the recent rise in CPI inflation has been driven by food and electricity prices

Exhibit 392: Rice and vegetable inflation in particular have been high, partly reflecting weather-related disruptions

-1%

0%

1%

2%

3%

4%

5%

6%

03 04 05 06 07 08 09 10 11 12 13 14

pp PH Contribution to Headline CPI

Excluding Food, electricity and fuels

Food

Electricity and fuels

-0.1%

0.1%

0.3%

0.5%

0.7%

0.9%

pp Contribution to Philippines Food Inflation

Contribution to Oct 2013

Contribution to Nov 2013

Contribution to Dec 2013

Contribution to Jan 2014


We have an above

consensus 2014 GDP

growth forecast of 7% (vs

consensus of 6.4%). We

think analysts are too

bearish on growth prospects

on the back of the recent

typhoon.

Reconstruction activity

should add to GDP growth

in 2014. In addition, the

central bank's loose

monetary policy should

support private consumption

growth.

Exhibit 393: We expect upside surprises to 2014 GDP growth, partly driven by stronger private consumption growth

-5%

0%

5%

10%

15%

2009 2010 2011 2012 2013F 2014F 2015F

PH Percentage point contribution to GDP growth

Private consumption Government consumption

Investment (GFCF) Net Exports

Others Overall GDP

Source: CEIC, Credit Suisse estimates

While money supply growth

is likely to moderate as the

effect of last year's SDA

restrictions fall out of the

year-on-year comparison, it

is still a tremendous step-up

in the stock of liquidity in the

economy.

Moving forward, we think

that credit growth will

accelerate over the next two

years.

Exhibit 394: The step-up in liquidity in the economy is worrying

Exhibit 395: We expect credit growth to pick up much more strongly over the next two years

35%

40%

45%

50%

55%

60%

01 03 05 07 09 11 13

PH M3 as % of GDP

M3 as % of GDP

0

5

10

15

20

25

30

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014F

2015F

PH Domestic Credit to Private Sector Growth

Domestic Credit to Private Sector(%yoy)


06 March 2014


Philippines: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 6.6 4.2 1.1 7.6 3.9 6.8 7.2 7.0 6.8




Nominal GDP ($bn) 149.4 173.6 168.5 199.6 224.8 250.2 272.0 282.5 311.8

Population (mn) 88.7 90.5 92.1 93.7 95.4 97.0 98.7 100.3 102.0

GDP per capita, $ 1,692 1,910 1,824 2,132 2,355 2,578 2,757 2,816 3,056




Exchange rate (PHP per USD, end-year) 41.4 47.5 46.4 43.9 43.9 41.2 44.4 45.5 44.8

Exchange rate (PHP per USD, average) 46.1 44.5 47.6 45.1 43.3 42.2 42.4 45.3 45.2

REER (% change, December to December) (2) 14.5 -6.7 1.8 4.0 0.6 7.3 -1.0 1.0 1.0

Nominal wage growth (% year-on-year change) (1) 4.5 5.3 2.2 3.4 6.0 4.7 2.2 2.4 4.0

Overnight borrowing rate (%, end-year) 5.45 5.86 4.00 4.00 4.50 3.50 3.50 3.50 4.00

Fiscal data

Central government budget balance (% of GDP) -1.5 -1.3 -3.7 -3.5 -2.0 -2.4 -2.0 -2.5 -2.2

Central government budget balance including privatization receipts (% of GDP) -0.2 -0.9 -3.7 -3.5 -2.0 -2.3 -2.0 -2.4 -2.2

Central government primary fiscal balance (% of GDP) 3.7 2.6 -0.2 -0.2 0.8 0.7 0.9 0.3 0.2



Gross government debt (% of GDP) 53.9 54.7 54.8 52.3 50.7 51.5 53.3 52.0 52.0

Net central government debt (% of GDP) 45.9 47.7 48.3 45.8 43.9 42.5 46.8 45.5 45.5








Balance of payments



Exports (goods and non-factor services, % change in $ value) 11.9 -2.2 -16.1 33.4 -1.1 1.2 4.3 5.5 7.0




Net FDI ($bn) (3) -0.6 1.3 1.6 0.7 1.3 1.0 2.1 3.2 4.5


Foreign debt ($bn) 55.5 54.3 54.9 60.0 60.4 60.3 59.1 56.0 53.0

Public ($bn) 38.0 40.6 43.2 46.2 46.4 45.2 42.2 40.0 38.0

Private ($bn) 17.5 13.7 11.6 13.9 14.1 15.2 16.9 16.0 15.0




Central bank gross FX reserves, including forward FX purchases ($bn) 44.5 39.4 57.8 80.1 81.3 87.8 87.2 86.0 88.0


(1) Nominal minimum wage in non-agricultural sector. Figures from 2005 onwards also include cost of living allowance and daily equivalent of 13th month pay. (2) Real effective exchange rate, increase indicates appreciation. (3) 2007 number includes a large direct investment abroad in the amount of $2.7bn. (4) Not including forward FX purchases.

Source: CEIC, Bangko Sentral Ng Pilipinas, Ministry of Finance, Credit Suisse

06 March 2014


Singapore: The consequences of stronger growth? We have kept our 2014 GDP forecast at 4% (vs consensus of 3.8%), while also

maintaining our 2015 forecast at 5%: Singapore's full-year GDP growth last year came

in at 4.1%, a significant improvement from the lacklustre 1.9% growth seen in 2012, led by

better manufacturing and trade-related services activity. It was also interesting to note that

government consumption rose 11%yoy – the highest growth rate in more than 10 years.

Looking forward, we expect GDP growth to continue to be driven by trade-related activity.

While recent weak US data, such as the ISM and retail sales numbers, have once again

instilled doubts about the ever elusive pick-up in global growth, it remains to be seen

whether these numbers portend further softness or are mainly weather-related aberrations.

We note that our preferred lead indicator for the region, the CRB Metal Price Index,

suggests a plateauing of industrial activity rather than a significant correction moving

forward. We have kept our 2014 GDP forecast, building in some softness in 1Q while also

penciling in an acceleration in growth from the 2nd

quarter.

Budget 2014: Enough is enough?: In what was an important, and marked, departure

from its previous four Budgets, the government decided not to announce further across the

board foreign labour tightening measures. Instead, it announced much more targeted

tweaks aimed at the construction sector, raising levies for basic-skilled construction

workers starting in 2016. With these more targeted changes, it seems to us that the

government, at least for now, is comfortable with the current trajectory of foreign workforce

growth, with the expectation that it will continue to moderate over the next two years on the

basis of the measures that are already in place and set to take effect over the next two

years. We note that foreign employment growth has already moderated to around 4%yoy

as of December 2013, from 7% in 2012, although still some way below the 2% to 2.5%

CAGR rate envisioned in the Population White Paper over the rest of this decade.

Nonetheless, with more foreign labour restrictions in the pipeline, coupled with the fact that

companies are still feeling the pain from existing labour curbs, we believe that GDP growth

will be capped from the supply side.

We expect core inflation to pick up over the next two years. With the labour market

still structurally tight, we expect wage growth to continue trending higher over the next two

years. We have penciled in a 5-6% rise in wage growth from the 4.3%yoy rate seen in

2013. The government's administrative measures as well as incentives to raise the wages

of lower income workers (for example, through the Wage Credit Scheme, and also

mandatory baseline salaries for cleaners) are likely to add to overall wage growth over the

coming years. We expect MAS core inflation (which excludes housing accommodation and

private transport costs) to rise from 2.2% currently, to above 3% by the end of this year.

The hurdle for monetary policy easing is high: The MAS is highly likely to keep its tight

exchange rate policy come its April meeting. Economic activity has improved, while wage

growth and MAS core inflation should pick up further given the structurally tight labour

market. In addition, the government still views the overall fiscal policy stance as

expansionary in 2014, with a positive fiscal impulse of around 1% of GDP for FY2014,

from more than +1% of GDP in FY2013.

Household balance sheets are strong, but private consumption will inevitably be

crimped when short-term interest rates rise: In the context of the inevitable eventual

rise in short-term interest rates, clients have asked whether Singapore's rapidly rising

household debt over the past few years poses dangers to the performance of the

macroeconomy. We take a relatively sanguine view (see Singapore: Household debt

dangers?). Aggregate data show that household balance sheets look strong as: 1) even

liquid assets comfortably exceed overall debt, and 2) while debt has risen, incomes have

risen too. In addition, micro-data from the CS Equity Research's proprietary housing

survey make us relatively sanguine about the ability of households to service debt for two

reasons: 1) the proportion of households that have overstretched themselves looks small,

and 2) households with higher debt service burdens generally have substantial liquid

assets. We note that with the property market cooling measures that are already in place,

household debt as a % of GDP has already come down slightly for the first time since

2Q2010. While the risk of a macro crisis looks small, private consumption will likely be

crimped once interest rates rise.

Michael Wan

+65 6212 3418

[email protected]

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=1024303451&source_id=emcsplus&serialid=AtD%2f1M1VlNRee1bPq8xEyd%2bFkEogLbHL%2ftRS53f324Q%3d

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=1024303451&source_id=emcsplus&serialid=AtD%2f1M1VlNRee1bPq8xEyd%2bFkEogLbHL%2ftRS53f324Q%3d

06 March 2014


While recent weak US data

have, once again, instilled

doubts about the ever

elusive pick-up in global

growth, it remains to be

seen whether the numbers

portend further weakness or

are simply weather-related

aberrations.

Our preferred lead indicator

for the region, the CRB

Metal Price Index, suggests

a plateauing of industrial

activity rather than a

significant correction moving

forward.

Exhibit 396: Our preferred lead indicator for the region, the CRB Metal Price Index, suggests a plateauing of industrial activity rather than a significant correction

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

-15%

-10%

-5%

0%

5%

10%

15%

03 04 05 06 07 08 09 10 11 12 13

%3m change%3m/3m saar

SG IP ex biomed sa CRB Metal (RHS)

Source: Bloomberg, CEIC

The government decided

not to announce further

across the board foreign

labour tightening measures

in Budget 2014, indicating it

is comfortable with the

current trajectory of foreign

workforce growth.

We note, however, that

foreign employment growth

is still some way above the

rates envisioned in the

government's Population

White Paper.

Exhibit 397: Foreign employment growth has slowed, while local employment has risen

Exhibit 398: Some way to go before achieving the forecasts set out in the Population White Paper

0%

2%

4%

6%

8%

10%

% yoy Singapore YoY Growth in Employment

Total Foreign Workforce

Total Local Workforce

53,300

35,000

0

10,000

20,000

30,000

40,000

50,000

60,000

Foreign EmploymentGrowth (Dec 2013)

Implied Annual ForeignEmployment Growth

(2014 to 2020)*

Actual Foreign Employment Growth vs Forecast

Ministry of Manpower, Credit Suisse * Based on numbers implied by Population White Paper

Source: Ministry of Manpower, NPTD, Credit Suisse

With the labour market still

structurally tight, and with

the government's

administrative measures to

boost the income of lower

wage workers, we expect

wage growth to continue

picking up over the next two

years.

We expect MAS core

inflation to rise above

3%yoy by the end of 2014.

Exhibit 399: We expect wage growth to continue to pick up given the still tight labour market…

Exhibit 400: … which is expected to add to MAS core inflation

-2

-1

0

1

2

3

4

5

6

7

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14F

20

15F

Nominal Wage Growth (%yoy)

-2%

0%

2%

4%

6%

8%

10%

04 05 06 07 08 09 10 11 12 13 14 15

Headline CPI %yoy

MAS core inflation* %yoyF'cst

Source: CEIC, Credit Suisse

* excludes housing accommodation and private transport costs Source: CEIC, Credit Suisse

06 March 2014


Singapore: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

National accounts, population, and unemployment

Real GDP growth (%) 9.0 1.7 -0.6 15.1 6.0 1.9 4.1 4.0 5.0



Fixed investment (as % of GDP) 23.8 26.6 25.9 23.9 23.9 25.5 23.9 23.6 24.6

Nominal GDP ($bn) 178.3 190.3 190.2 233.4 272.4 284.5 295.8 307.3 328.7

Population (mn) 4.6 4.8 5.0 5.1 5.2 5.3 5.4 5.5 5.6

GDP per-capita ($) 38,861 39,323 38,135 45,979 52,557 53,547 54,652 55,849 58,847



CPI inflation (% year-on-year change, December over December) 3.7 5.5 -0.5 4.6 5.5 4.3 1.5 2.7 2.9


Exchange rate (SGD per USD, end-year) 1.45 1.48 1.40 1.31 1.30 1.22 1.27 1.29 1.30

Exchange rate (SGD per USD, average) 1.51 1.41 1.45 1.36 1.26 1.25 1.25 1.28 1.30

REER (% year-on-year change, December to December) (1) 1.5 5.6 -2.1 6.5 2.6 8.2 5.2 6.3 5.0

Nominal wage growth (% year-on-year change) 6.2 5.4 -2.7 5.6 6.0 2.3 4.3 5.0 6.0

3-month SIBOR (%, end-year) 2.4 1.0 0.7 0.4 0.4 0.4 0.4 0.5 0.8

Fiscal data

Central government fiscal balance (% of GDP) 2.8 0.1 -0.3 0.3 1.2 1.7 1.1 -0.3 0.3

Central government primary fiscal balance (% of GDP) (2) 2.7 1.1 -0.9 0.3 0.9 2.0 1.3 0.7 0.6










Balance of payments




Imports (goods and non-factor services, % year-on-year change in $ value) 11.7 21.5 -19.8 25.3 17.3 4.3 3.3 4.0 5.0

Current account balance ($bn) (3) 46.4 28.8 33.5 62.1 65.4 51.5 50.4 49.5 53.3







(1) Real effective exchange rate, increase indicates appreciation. (2) Operating revenue minus total expenditure. (3) Current account data were revised in early 2008, leading to a downward revision of around 6pp of GDP in the 2007 current account balance. The adjustment mostly reflected revisions to the income balance. (4) Not including forward FX purchases.

Source: Monetary Authority of Singapore, CEIC, Credit Suisse

06 March 2014


Taiwan: Developed markets' demand holds the key

Growth improved in 4Q, a delayed response to the improvement in better global

economic environment. Taiwan’s 4Q13 GDP growth surprised on the upside, up 3% yoy

and 1.8% qoq (sa) (7.3% qoq annualized). A pick-up in domestic demand growth was the

driver, but we suspect it also reflect the volatility in the capital investment schedule of the

semiconductor sector. On external trade, real export growth was up 4% yoy, but real

import growth rose faster to cause a 0.3pp deduction from net trade. Assuming that global

growth will continue to improve, we expect Taiwan's export growth, facility investments and

consumer sentiment to continue to see support, helping headline GDP growth to improve

further in 2014.

Despite the rising share of Taiwan's exports to China/Hong Kong, the final demand

from developed markets remain pivotal. The recent weakness in US data and our

downgrade of China's GDP growth have casted uncertainty over the strength of the global

economy in 2014, which is pivotal to Taiwan's recovery. We use the OECD-WTO's

"Exports in Value Added" data and found that the developed world (G3) continues to be

Taiwan's most important export destination, despite its higher share of gross exports

towards China/Hong Kong (please see Korea and Taiwan: Recovery set in stone? How

weaker global demand may affect exports and growth, 10 February 2014). The analysis

shows that a genuine recovery in Taiwan is still very much dependent upon the final

demand of the developed world. China's weaker growth is no doubt negative, but unless

growth drops off more significantly than expected, the impact should still be manageable

and be offset by the stronger developed markets' demand.

Orders for technology exports remain resilient, driven by the robust demand from

the rest of the world. Export orders fell 2.8% yoy and dropped 10.7% mom (sa) in

January, heavily distorted by the lunar new year effect, in our view. But despite the

distortion, orders for information/communication and electronics exports continued to see

positive low single-digit gains. We believe this reflect the strong international demand for

telecommunication and electronic products, which have a high overseas production ratio

outside of Taiwan. Non-tech export orders, however, remained sluggish, in reflection of

their weak demand vis-à-vis the tech sectors.

Export growth recovered in 4Q13 but may see headwinds in the near term. January

exports and imports fell 5.3% yoy and 15.3% yoy, respectively, both weaker than

expected. We think the weakening of the US leading indicators suggests that Taiwan's

export growth may see some headwinds in the near term, though we continue to expect

better momentum this year upon a continued global recovery. Geographically, Taiwan's

exports to China/Hong Kong and the US saw improvement, but exports to Europe, Japan,

and other Asian countries still saw mild contractions. Within emerging markets, Taiwan's

exposure towards China/Hong Kong remain substantial, while those towards

ASEAN/India, Latin America and the Middle East/Africa are scattered. Unless emerging

markets face a synchronized slowdown, we believe its impact on Taiwan should remain

manageable.

Industrial production activities remained weak, though we would opt to wait for the

February data to give us a clearer picture. After a quick spike in December, industrial

production weakened again and fell 1.8% yoy and 1.7% mom (sa) in January. We expect

to have a clearer view on the latest IP momentum when the February data is released,

though we think it is likely to remain gradual amidst a temporal peaking in global industrial

production growth. The product breakdown details show that the production of electronic

components and chemicals managed to record positive gains from a year ago, helped by

the strong global demand for mobile devices and the re-stocking by chemical companies.

The production of computers, electronic and optical goods, basic metals, machinery and

automobile dropped, however, dragged by their more sluggish demand.

Christiaan Tuntono

+852 2101 7409

[email protected]

06 March 2014


Inflationary pressure remains very tamed amidst a slow economy. CPI inflation was

low at 0.4% yoy in January-February. With the domestic economy still weak and supply-

side factors such as food and crude oil prices remaining moderate, we do not think there is

visible upward pressure on prices at this juncture. What concerns us is the gradual

moderation of core inflation, which has softened to 0.4% yoy on a trend basis in February.

This suggests that there is room for the central bank to ease monetary policy further due to

the lack of price pressure, but we do not think it will do so. This is because: (1) we do not

think that an even lower interest rate level can stimulate facility investments on a

sustainable basis; (2) it may risk fueling property speculation, as monetary policy is being

kept too easy for too long.

We do not think the Central Bank of China will adjust its policy rediscount rate in

2014. As growth is expected to continue recovering in 2014, we expect the CBC to keep

the policy rediscount rate on hold, allowing better external demand to do the heavy lifting

of raising Taiwan’s growth momentum. The risk of a rate hike may rise in 2H 2014, if the

developed market economies show a stronger recovery and global oil prices rebound to

exert upside pressure on inflation, though we reckon that this year could be too early for

the central bank to commence its rate normalization process. Looking ahead, we think the

performance of Taiwan’s macro data will remain the ultimate driver behind the CBC’s

monetary policy decision, despite the Fed's gradual exit from its quantitative easing

measures this year.

Taiwan has one of the strongest external liquidity positions in Non-Japan Asia,

protecting the TWD from the selling pressures seen in other emerging market

currencies. Taiwan's current account surplus is strong at 11.5% of GDP as of 3Q14 (four-

quarter roll sum basis). This has provided more than enough cushion to finance the

outflows through the direct investment and portfolio investment channels. We think the

strong external liquidity position has helped the central bank to maintain USDTWD within a

stable range, fluctuating not more than 7% between 28.5 to 30.5 since 2011. We expect

the cross to remain within the range, and project it to strengthen mildly to 29.9 by the end

of this year. The current account surplus is likely to remain resilient at over $50bn (10% of

GDP) in 2014, as we expect the rise in import demand is not likely to be overly strong

throughout the year.

The Ministry of Finance launched a comprehensive fiscal reform proposal in late

February, which we think represents the start of a lengthy reform process. We think

the MoF is making the right decision in tackling the deteriorating fiscal condition, though

we do not expect it will be a smooth process. The proposal for central government fiscal

reform includes ways to limit the government debt level, adjust expenditure structure and

widen the revenue sources. To increase tax revenue, the MoF proposes three short-term

tax reform measures, which include (1) raising the business tax for banks and insurance

companies to 5%; (2) cutting the current tax credit on share dividends by 50% under the

integrated tax system; and (3) creating a new individual income tax bracket with a marginal

tax rate of 45% for income over TWD 10mn a year. Netting out other tax reductions

offered, the short-term tax adjustment is estimated to contribute about TWD 71bn (0.4% of

GDP) to the fiscal account. The MoF's proposal will need to be rectified by the Legislative

Yuan before becoming effective.

We do not expect changes in Taiwan’s ratings over the next six months. Taiwan is

currently rated at Aa3 (Moody’s), AA- (S&P) and A+ (Fitch), with a stable outlook.

06 March 2014


Taiwan’s 4Q13 GDP

growth surprised on the

upside, up 3% yoy and

1.8% qoq (sa) (7.3% qoq

annualized). On a full-year

basis, the economy gained

2.1% in 2013.

Exhibit 401: Real GDP growth Exhibit 402: Net grade

-2

-1

0

1

2

3

4

5

6

2009

2Q

09

3Q

09

4Q

09

2010

2Q

10

3Q

10

4Q

10

2011

2Q

11

3Q

11

4Q

11

2012

2Q

12

3Q

12

4Q

12

2013

2Q

13

3Q

13

4Q

13

Taiwan Real GDP (%qoq, sa)

1.70.67 0.79

3.89

2.1

-0.22

2.020.87

-0.25

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

4Q12 2013 2Q13 3Q13 4Q13

Contribution to Real GDP growth (pp)

Domestic Demand Net Trade

Source: NSO, CEIC, Credit Suisse Source: NSO, CEIC, Credit Suisse

We use the OECD-WTO's

"Exports in Value Added"

data and found that the

developed world (G3)

continues to be Taiwan's

most important export

destination, despite its

higher share of gross

exports towards

China/Hong Kong.

Exhibit 403: Exports value added – geographic breakdown

Exhibit 404: Exports value added – as % of GDP

US20.5%

EU20.4%China/H

K18.3%

ASEAN/IN

9.1%

Japan8.5%

Latam5.9%

Oceania2.0%

MEA1.9% Others

13.4%

Taiwan: Exports of Value Added (% of Total Exports)

7.1 7.1

6.3

3.1 2.9

2.0

0.7 0.7

4.6

0

1

2

3

4

5

6

7

8Taiwan: Exports of Value Added (%

of GDP)

Source: OECD-WTO, Credit Suisse Source: OECD-WTO, Credit Suisse

Export orders fell in

January, heavily distorted

by the lunar new year effect.

We think the weakening of

the US leading indicators

suggests that export growth

may see some headwinds in

the near term.

Exhibit 405: Export orders Exhibit 406: Tech exports

-60

-40

-20

0

20

40

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Export orders (% yoy)

Exports (% yoy)

-60

-40

-20

0

20

40

60

80

100

Jan

-06

Jul-0

6

Jan

-07

Jul-0

7

Jan

-08

Jul-0

8

Jan

-09

Jul-0

9

Jan

-10

Jul-1

0

Jan

-11

Jul-1

1

Jan

-12

Jul-1

2

Jan

-13

Jul-1

3

Jan

-14

Chemical exports (% yoy, 3m mav)

Electronic exports (% yoy, 3m mav)

Machinery exports (% yoy, 3m mav)

Info & Comm exports (% yoy, 3m mav)

Source: CEIC, Credit Suisse Source: CEIC, ISM, Institute for Economic Research, Credit Suisse

06 March 2014


Export growth recovered in

4Q13 but may see

headwinds in the near term.

Industrial production

activities remained weak,

though we would opt to wait

for the February data to give

us a clearer picture.

Exhibit 407: Merchandise exports Exhibit 408: Industrial production

-80

-60

-40

-20

0

20

40

60

80

-40

-30

-20

-10

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Trade balance ($ bn, 12 roll sum, LHS)

Exports (% yoy)

Imports (% yoy)

-40

-30

-20

-10

0

10

20

30

40

50

60

2002 2004 2006 2008 2010 2012 2014

Export orders (% yoy)

Industrial production (% yoy)

Note: Data are smoothed for new year effect Source: MoF, Credit Suisse Research

Note: Data are smoothed for lunar new year effect Source: CEIC, Credit Suisse

Inflationary pressure

remains very tamed amidst

a slow economy.

We do not think the Central

Bank of China will adjust its

policy rediscount rate in

2014.

Exhibit 409: CPI inflation Exhibit 410: Policy rediscount rate

-15

-10

-5

0

5

10

15

20

25

30

-3

-2

-1

0

1

2

3

4

5

6

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Consumer price index (% yoy)

Core CPI (% yoy)

Import price inflation (% yoy, RHS)

0

1

2

3

4

5

6

2004 2006 2008 2010 2012 2014

Taiwan rediscount rate (%)

Taiwan overnight rate (%)

US Federal Funds rate (%)Forecast

Source: NBS, Credit Suisse Source: CEIC, Credit Suisse

We think the strong

external liquidity position

has helped the central bank

to maintain USDTWD

within a stable range.

Exhibit 411: Current account Exhibit 412: USDTWD

-10

-5

0

5

10

15

20

1999 2001 2003 2005 2007 2009 2011 2013


Capital & Financial account (% of GDP)

Overall balance (% of GDP)

262728293031323334353637383940

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

USDTW

Source: MoF, CEIC, Credit Suisse Source: CEIC, Credit Suisse

06 March 2014


Taiwan: Select economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 6.0 0.7 -1.8 10.7 4.1 1.5 2.1 3.2 3.5

Growth in real private consumption (%) 2.1 -0.9 0.8 3.7 3.1 1.6 1.8 1.9 2.2

Growth in real fixed investment (%) 0.6 -12.4 -11.2 24.0 -2.3 -4.0 4.3 1.7 2.0


Nominal GDP ($bn) 393.1 400.2 377.6 428.2 463.5 473.1 487.2 497.5 519.1

Population (mn) 23.0 23.0 23.1 23.2 23.2 23.3 23.4 23.5 23.5

GDP per capita ($) 17,122 17,372 16,331 18,488 19,949 20,294 20,834 21,205 22,057



CPI inflation (% year-on-year change, December over December) 3.3 1.3 -0.2 1.0 2.0 1.6 0.3 2.6 1.9


Exchange rate (TWD per USD, end-year) 32.4 33.1 32.3 30.5 30.3 29.0 29.7 29.9 29.9

Exchange rate (TWD per USD, average) 32.8 31.5 33.1 31.6 29.5 29.7 29.4 29.8 29.9

REER (% year-on-year change) (1) -4.1 -2.2 2.5 6.7 2.8 5.9 -1.9 2.0 1.9

Nominal wage growth (% year-on-year change) 1.7 0.2 -2.0 1.8 1.5 0.1 0.5 3.1 5.2

Rediscount rate (end-year, %) 3.38 2.00 1.25 1.63 1.88 1.88 1.88 1.88 1.88

Overnight rate (%, end year) 2.1 0.9 0.1 0.3 0.4 0.4 0.4 0.4 0.4

Fiscal data

Consolidated government fiscal balance, (% of GDP) (2) -0.4 -0.9 -4.5 -3.3 -2.2 -2.4 -2.6 -2.7 -2.8

Consolidated government primary balance, (% of GDP) (2) 0.4 0.0 -3.8 -3.0 -2.1 -2.5 -2.7 -2.9 -3.0

Consolidated government expenditure, (% of GDP) (2) 17.7 18.6 21.4 18.9 19.1 19.6 19.4 19.6 19.6

Consolidated government debt, (% of GDP, end-year) (2) 40.9 43.4 48.4 48.3 49.7 50.9 51.8 52.8 53.9







Domestic credit to the private sector (% year-on-year change) 3.9 2.5 -0.4 7.2 5.9 4.1 6.7 7.1 7.2

Balance of payments




Imports (goods and non-factor services, % year-on-year change in $ value) 8.0 8.1 -25.3 40.7 12.6 -3.0 -0.5 4.6 6.3




Scheduled debt amortization ($bn) (3) 3.7 6.2 -0.5 4.8 9.7 6.8 6.3 6.8 7.3


Foreign debt ($bn) (4) 94.5 90.4 81.9 101.6 122.5 124.6 132.4 139.6 146.3

Public ($bn) (5) 3.5 1.5 5.9 8.0 4.5 2.8 2.8 2.8 2.8

Private ($bn) 91.1 88.9 76.0 93.5 118.0 121.8 129.6 136.9 143.5





(1) Real effective exchange rate (CPI-deflated), increase indicates appreciation. (2) General government statistics as interpreted by the Taiwan government. (3) Scheduled amortizations of medium- and long-term external debt of both the public and private sectors. (4) Liabilities vis-à-vis non-residents (i.e., includes FX-denominated and local-currency debt). (5) Includes government and central bank. (6) Central bank forex reserves minus monetary authorities’ other liabilities.

Source: Directorate-general of Budget, Accounting and Statistics, Central Bank of China, Ministry of Finance, CEIC, Credit Suisse

06 March 2014


Thailand: Political mess, economic stress

Short-term economic costs of political uncertainty are likely to be significant.

Given the recent deterioration in Thailand’s political situation, we have cut our 2014

GDP growth forecast to 2.0% from 3.0% (vs the BoT's figure of “around 3%” and

consensus’ 3.2%). Both the market’s and government’s GDP growth forecasts have

been coming down rapidly but we expect more to go. Our GDP downgrade mainly

reflects the expectation of weaker tourism growth and a more severe fiscal drag than we

initially anticipated.

Tourism hit. Our recent work suggests that Thai tourism growth faces two important

headwinds: 1) the on-going political crisis (particularly now that Mainland Chinese

tourists, which tend to be more sensitive to negative political events, now account for

around 20% of total arrivals); and 2) the Malaysian government’s “Visit Malaysia Year

2014“ promotion that historically tends to divert tourists away from Thailand. (Read our

full report here). This is why we have trimmed our 2014 forecast for the export of goods

and services by almost 1 percentage point to 4.5%.

Fiscal drag. Given our expectation that politics will likely remain highly unstable at least

until the end of 2Q, we think fiscal policy will continue to act as a drag on GDP growth in

the coming months. In particular, we make the following assumptions for our central

scenario: 1) the amount that the government owes rice farmers, equivalent to around 1%

of GDP, will not be paid in full until 2Q; 2) the rice pledging scheme for the second crop

of the year will likely be trimmed or replaced by a less generous version; 3) the

government will not implement any significant fiscal stimulus measures until the second

half at the earliest; and 4) off-budget infrastructure spending will be postponed until next

year. All of these developments imply a decline equivalent of at least 1% of GDP in fiscal

spending in 2014 relative to 2013, according to our estimates. We have incorporated this

into our recent downward revision to our GDP forecast via reductions in investment and

private consumption growth projections.

Manageable inflation, lower policy rate. We expect inflation to remain soft on the back

of weak economic activity and the government’s on-going cap on diesel prices. While the

monetary policy committee was reportedly disputing the benefit of a rate cut to GDP

growth, given the magnitude of downside risk to growth, we suspect it will be difficult to

avoid lowering the policy rate further. As such, we continue to look for a 25bps cut in the

policy rate in the not too distant future, despite a weaker baht.

A ‘forced’ rebalancing process. The silver lining in the likely ongoing weakness of

domestic spending is that the economy is rebalancing more quickly – we expect the

current account to turn to surplus later this year and credit growth to soften further.

Export growth will continue to benefit from stronger global growth while temporary

factors that depressed exports last year are reversing. In our view, the

underperformance of Thai exports late last year was not the result of a loss of

competitiveness (see full report examining Asia’s export competitiveness here). With

softer import growth likely to dominate the impact of weaker tourism revenue, the current

account balance will likely improve more than we thought previously – we have revised

our 2014 current account balance projection to 1.8% of GDP, from 0.5% earlier. Credit

growth has already slowed sharply and will likely continue to do so, alleviating the

central bank’s concerns over rising leverage.

The baht: Near-term weakness, better macroeconomic support in the long term.

Our FX strategist continues to see headwinds for the baht in the near term stemming

from: 1) ongoing political unrest, which could intensify before getting better; and 2) still-

somewhat rich valuations. However, the anticipated improvement in the current account

balance and direct investment flows should provide support for the currency over a 12-

month horizon.


+65 6212 5675

[email protected]

https://plus.credit-suisse.com/u/deQ8dt

https://plus.credit-suisse.com/r/fhncW3

06 March 2014


Recent pick up in export

growth helped alleviate

concerns that Thai exports

would continue to

underperform the region.

Our preferred lead indicator

suggests export growth

could moderate in the next

couple of months but still

see a decent gain

A product breakdown of

Thai exports shows that

agricultural products and

gold were the main drags

last year.

Exhibit 413: Export growth Exhibit 414: Export growth decomposition

-20

-15

-10

-5

0

5

10

15

-40

-30

-20

-10

0

10

20

30

2007 2008 2009 2010 2011 2012 2013 2014

CRB metal ( %3m change, RHS)

Exports % 3m-on-3m sa

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2013

Transport

Machinery

Metals

preciousmetals

Laborintensive

Chemicals

Agri

Overallexports

Percentage point contributionto YoY export growth

Source: BLOOMBERG PROFESSIONAL™ service, Credit Suisse Source: CEIC, Credit Suisse

The latest international

tourist arrival data for

January already showed a

substantial sequential

decline led by mainland

Chinese tourists.

Thailand’s market share of

visitor arrivals has tended to

fall during previous “Visit

Malaysia” years.

Exhibit 415: Tourist arrivals Exhibit 416: Tourism market share

Change in market share of arrivals during “Visit Malaysia Year”

-200%

-150%

-100%

-50%

0%

50%

100%

150%

200%

2009 2010 2011 2012 2013 2014

Visitor Arrivals (% 3m on 3mseasonally adjusted annualized)Mainland Chinese tourists

2011 floods2010 clashes

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

-6%

-4%

-2%

0%

2%

4%

6%

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

MA TH (RHS)

Visit Malaysia Year


We think likely delays in off-

budget infrastructure

spending and the rice

scheme debacle could

produce a significant fiscal

drag on GDP growth.

The recent development in

rubber prices is also not

helpful for the already weak

private consumption growth.

Exhibit 417: Fiscal policy Exhibit 418: Rubber price &consumption

30

35

40

45

50

55-6

-5

-4

-3

-2

-1

0

1

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

F

20

14

F

Series3

Fiscal balance/ GDP (%)

Public debt/GDP (%, RHS)

off -budget infrastructure

-3

-1

1

3

-40

-20

0

20

40

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Rubber prices (% 3m on 3m)

Priv consumption index (%3m on 3m, RHS)

Post flood effects and policy boosts

Source: MOF, Credit Suisse Source: BLOOMBERG PROFESSIONAL™ service, Credit Suisse

06 March 2014


4Q GDP release revealed

that final domestic demand

contracted as much as it did

at the trough of the Global

Financial crisis.

We now expect the BoT to

cut the policy rate by 25bps

to 2%, amidst weak GDP

growth and a benign

inflation environment.

Exhibit 419: GDP growth mix Exhibit 420: Policy rate and inflation

value

-10

-5

0

5

10

15

20

-60

-40

-20

0

20

40

60

80

Net exports (% yoy)

Final domestic demand (% yoy, RHS)

Global financial crisis

Floods

-2

0

2

4

6

2007

2008

2009

2010

2011

2012

2013

2014

Real policy rate

Headline inflation (% yoy)

Policy rate (%)

f'cast


The slowdown in overall and

consumer credit growth

should alleviate the central

bank’s concerns over

excess leverage growth.

We expect the current

account balance to improve

materially on the back of

weak import growth, and the

ongoing export recovery.

Exhibit 421: Credit growth Exhibit 422: Current account trend

0

5

10

15

20

25

2005

2006

2007

2008

2009

2010

2011

2012

2013

Total credit to private sector (% yoy)

Consumer credit (% yoy)

-2

-1

0

1

2

3

4

5

6

7

8

9

2007

2008

2009

2010

2011

2012

2013

2014F

2015F

Current Account/GDP (%)


The recent decline in direct

investment outflows helped

bring net direct investment

back into surplus. We

believe the weaker baht has

contributed to this and

expect the net position to

stay in surplus this year.

The value of FDI

applications in 2013

remained healthy, albeit

lower than the recent peak

in 2012

Exhibit 423: Net direct investment Exhibit 424: FDI applications

-20

-15

-10

-5

0

5

10

15

20

2009 2010 2011 2012 2013

Net Direct invetsment flows (USD bn, 12m rollingsum)NET non-resident inflows

NET resident outflows

-

1.0

2.0

3.0

4.0

5.0

6.0

2008 2009 2010 2011 2012 2013

Value of investment application approved(% of GDP)


06 March 2014


Thailand: Selected economic indicators

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


Real GDP growth (%) 4.9 2.5 -2.2 7.8 0.1 6.4 2.9 2.0 4.5




Nominal GDP ($bn) 264.7 275.4 263.8 318.8 342.2 366.0 382.6 383.2 422.8

Population (mn) 63.0 63.4 63.5 63.9 64.2 64.5 64.9 65.2 65.6

GDP per capita ($) 4198.3 4344.9 4152.5 4990.4 5117.0 5394.5 5896.3 5876.1 6449.1




Exchange rate (THB per USD, end-year) 29.6 34.7 33.2 30.1 31.0 30.6 32.7 33.5 33.8

Exchange rate (THB per USD, average) 32.2 33.0 34.3 31.7 30.8 31.1 31.1 33.5 33.7

REER (% year-on-year change, December over December) (1) 1.3 -3.2 2.5 8.0 0.2 0.3 6.2 -4.0 0.0

Nominal wage growth (% year-on-year change) (2) 3.0 10.2 -2.5 6.5 7.5 12.1 10.0 5.0 5.0

Overnight policy rate (%, end-year) (3) 3.25 2.75 1.25 2.00 3.25 2.75 2.25 2.00 2.50

Fiscal data (4)

General government budget balance (% of GDP) -1.6 -1.0 -5.7 -0.9 -2.7 -2.7 -2.5 -2.0 -1.5

General government primary fiscal balance (% of GDP) -0.3 0.2 -4.4 0.3 -1.2 -1.4 -1.5 -0.9 -1.5




Money supply and credit 0.0







Balance of payments




Imports (goods and non-factor services, % year-on-year change in $ value) 10.7 25.3 -23.7 33.0 24.0 6.3 -0.2 5.0 7.0

Current account balance ($bn) 15.7 1.6 21.9 14.8 4.1 -1.5 -2.8 6.8 8.6

Current account balance (% of GDP) 5.9 0.6 8.3 4.6 1.2 -0.4 -0.7 1.8 2.0

Net FDI inflows ($bn) 8.3 4.4 0.7 4.5 5.0 -2.0 6.5 6.5 6.0



Foreign debt ($bn) 74.4 76.1 75.3 100.5 106.6 133.2 141.5 130.3 139.5

Public ($bn) 14.9 14.8 15.4 11.0 16.6 22.1 18.0 20.0 24.0

Private ($bn) 59.5 61.3 59.9 89.5 90.0 111.1 123.5 110.3 115.5






(1) Real effective exchange rate, increase indicates appreciation. (2) From Labor Force Survey: Average Monthly Wage in the private sector. (3) Through 2006, the policy rate was the 14-day repo rate. (4) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September. (5) Includes central government, non-financial SOEs and financial institution development fund. (6) Not including forward FX purchases.

Source: Bank of Thailand, National Economic & Social Development Board, CEIC, Credit Suisse

06 March 2014


Long-term sovereign FX debt ratings (pos) Outlook positive (neg) Outlook negative No sign indicates stable outlook

Moody's S&P Fitch

LATIN AMERICA

Argentina B3 (neg) CCC+ (u) (1) (neg) CC (neg)

Brazil Baa2 BBB (neg) BBB

Chile Aa3 AA– A+

Colombia Baa3 (pos) BBB BBB

Mexico A3 BBB+ BBB+

Panama Baa2 BBB BBB

Peru Baa2 (pos) BBB+ BBB+

Venezuela Caa1 (neg) B– (neg) B+ (neg)

EASTERN EUROPE, MIDDLE EAST & AFRICA

Czech Republic A1 AA– A+

Hungary Ba1 (neg) BB (neg) BB+

Israel A1 A+ A (pos)

Kazakhstan Baa2 (pos) BBB+ BBB+

Poland A2 A– A–

Russia Baa1 BBB BBB

Saudi Arabia Aa3 AA– (pos) AA– (pos)

South Africa Baa1 (neg) BBB (neg) BBB

Turkey Baa3 BB+ (neg) BBB–

Ukraine Caa2 (neg) CCC (neg) CCC (neg)

United Arab Emirates Aa2

EMERGING ASIA

China Aa3 AA– A+

Hong Kong Aa1 AAA AA+

India Baa3 BBB– u (neg) BBB–

Indonesia Baa3 BB+ BBB–

Korea Aa3 A+ AA–

Malaysia A3 (pos) A– A– (neg)

Philippines Baa3 (pos) BBB– BBB–

Singapore Aaa AAAu AAA

Taiwan Aa3 AA–u A+

Thailand Baa1 BBB+ BBB+

Moody's rating scale S&P rating scale Fitch rating scale

Investment

grade

Sub-

investment

grade

Investment

grade

Sub-

investment

grade

Investment

grade

Sub-

investment

grade

Aa1 Ba1 AAA BB+ AAA BB+

Aa2 Ba2 AA BB AA BB

Aa3 Ba3 AA– BB– AA– BB–

A1 B1 A+ B+ A+ B+

A2 B2 A B A B

A3 B3 A– B– A– B–-

Baa1 Caa1 BBB+ CCC+ BBB+ CCC+

Baa2 BBB BBB

Baa3 BBB- BBB-

(1) “u” denotes “unsolicited”.

Source: Standard & Poor’s, Moody’s and Fitch

06

Ma

rch

20

14

Em

erg

ing M

ark

ets

Qu

arte

rly

17

4

Long-term sovereign FX debt ratings Investment Grade

Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Moody’s Kuwait

Qatar United Arab Emirates

Chile China Korea

Saudi Arabia

Taiwan

Czech Republic Estonia

Israel Oman

Botswana Poland

Slovakia

Malaysia + Mexico

Lithuania Russia

South Africa – Thailand

Bahrain – Brazil

Bulgaria Latvia +

Kazakhstan + Panama

Peru +

Azerbaijan Colombia +

India Indonesia

Philippines + Romania –

Turkey Uruguay +

AA AA- A+ A A- BBB+ BBB BBB- S&P Kuwait

Qatar

Chile China


Saudi Arabia + Taiwan

Israel Korea

Oman Slovakia

Botswana Malaysia

Poland Slovenia

Kazakhstan Latvia + Mexico

Peru Thailand

Bahrain Brazil –

Bulgaria – Colombia

Lithuania + Panama

Russia South Africa –

Azerbaijan India –

Morocco – Philippines

Uruguay

Fitch Kuwait

Korea Saudi Arabia +

China Chile


Slovakia Taiwan

Israel + Malaysia – Poland

Kazakhstan Latvia

Lithuania Mexico

Peru Slovenia –

Thailand

Bahrain Brazil

Colombia Panama

Russia South Africa

Azerbaijan Bulgaria

India Indonesia Morocco

Philippines Romania

Turkey Uruguay

Sub-Investment Grade Ba1 Ba2 Ba3 B1 B2 B3 Caa1 and below Moody’s Croatia

Hungary – Morocco –

Slovenia

El Salvador Nigeria

Portugal Tunisia –

Ghana – Lebanon –

Serbia Sri Lanka

Vietnam Argentina – Belarus –

Cyprus – Egypt –

Ecuador Greece

Pakistan – Ukraine –

Venezuela –

BB+ BB BB- B+ B B- CCC+ and below S&P Indonesia

Romania + Turkey –

Croatia Hungary – Portugal –

El Salvador – Gabon Nigeria

Serbia – Vietnam

Sri Lanka

Ecuador + Ghana –

Belarus Cyprus

Egypt Greece

Lebanon – Pakistan

Venezuela –

Argentina – Ukraine –

Fitch Croatia – Hungary

Portugal –

El Salvador – Gabon Nigeria

Sri Lanka Tunisia –

Serbia Venezuela –

Vietnam +

Ecuador Ghana

Lebanon –

Cyprus – Egypt

Greece

Argentina – Ukraine –

Source: Standard & Poor’s, Moody’s & Fitch + Outlook positive – Outlook negative No sign indicates stable outlook

06 March 2014


Key websites GENERAL WEBSITES

Central bank websites www.bis.org/cbanks.htm

National statistical offices unstats.un.org

Global election calendar www.electionguide.org

LATIN AMERICA

ARGENTINA

Central Bank www.bcra.gov.ar

Ministry of Economy www.mecon.gob.ar

Statistical Office www.indec.mecon.ar

ANSES www.anses.gob.ar

Federal tax agency www.afip.gov.ar

Di Tella University www.utdt.edu

News sources www.ambito.com – www.cronista.com – www.clarin.com – www.lanacion.com.ar – www.infobae.com

BRAZIL

Central Bank www.bcb.gov.br

Statistics Office www.ibge.gov.br

Ministry of Finance www.fazenda.gov.br

National Treasury www.tesouro.fazenda.gov.br

Brazilian Federal Revenue Service www.receita.fazenda.gov.br

Development, Industry and Trade Ministry www.mdic.gov.br

Planning Ministry www.planejamento.gov.br

Economic Research Official Bureau www.ipea.gov.br

CHILE

Central Bank www.bcentral.cl

Office of the President www.gobiernodechile.cl

Ministry of Finance and Office of the Budget www.hacienda.cl – www.dipres.gob.cl

Statistical Office www.ine.cl

Pension Fund Regulator www.safp.cl

National Emergencies Office / Ministry of the Interior www.onemi.cl

News sources www.latercera.cl – www.emol.com – www.elmercurio.cl – www.df.cl

COLOMBIA

Central Bank www.banrep.gov.co

Ministry of Finance www.minhacienda.gov.co

Statistical Office www.dane.gov.co

Financial Regulator www.superfinanciera.gov.co

News sources www.elpais.com.co – www.elespectador.com – www.eltiempo.com – www.portafolio.co – www.larepublica.co –

www.semana.com – www.dinero.com

ECUADOR

Central Bank www.bce.fin.ec

Ministry of Finance www.finanzas.gob.ec

Statistical Office www.ecuadorencifras.gob.ec

News sources www.eluniverso.com – www.elcomercio.com – www.lahora.com.ec – www.hoy.com.ec

– www.revistagestion.ec

EL SALVADOR

Central Bank www.bcr.gob.sv

Finance Ministry www.mh.gob.sv

Legislative Assembly www.asamblea.gob.sv

Bank Superintendence www.ssf.gob.sv

News Sources www.elsalvador.com – www.laprensagrafica.com – www.elmundo.com.sv – www.elfaro.net


file://www.safp.cl

http://www.elsalvador.com/

http://www.laprensagrafica.com/

http://www.elmundo.com.sv/

06 March 2014


Key websites LATIN AMERICA (cont’d)

MEXICO

Central Bank www.banxico.org.mx

Office of the President www.presidencia.gob.mx

Ministry of Finance www.shcp.gob.mx; www.hacienda.gob.mx

Federal Electoral Institute www.ife.org.mx

Ministry of Energy www.energia.gob.mx

Statistical Office www.inegi.org.mx

Pacto por Mexico www.pactopormexico.org

National Banking Commission www.cnbv.gob.mx

Pension Fund Regulator www.consar.gob.mx

Pemex www.pemex.com

News sources www.eluniversal.com.mx – www.milenio.com – www.radioformula.com.mx – www.elfinanciero.com.mx –

www.reforma.com – www.excelsior.com.mx – www.jornada.unam.mx – www.enfoquenoticias.com.mx

www.economista.com.mx – www.cronica.com.mx

PANAMA

Ministry of Finance www.mef.gob.pa

Statistical Office www.contraloria.gob.pa/inec

Bank Superintendence www.superbancos.gob.pa

National Assembly www.asamblea.gob.pa/main

Pollster www.dichter-neira.com/encuesta_opinion.php

News sources www.prensa.com – www.laestrella.com.pa

PERU

Central Bank www.bcrp.gob.pe

Ministry of Finance www.mef.gob.pe

Statistical Office www.inei.gob.pe

Bank and Pension Fund Superintendence www.sbs.gob.pe

Tax and Customs Superintendence www.sunat.gob.pe

Ministry of Mining and Energy www.minem.gob.pe

Pollster www.ipsos-apoyo.com.pe

News sources elcomercio.pe – gestion.pe – www.larepublica.pe – www.andina.com.pe – peru21.pe

URUGUAY

Central Bank www.bcu.gub.uy

Office of the President www.presidencia.gub.uy

Ministry of Finance www.dgi.gub.uy

Statistical Office www.ine.gub.uy

News sources www.observador.com.uy – www.lr21.com.uy – www.brecha.com.uy – www.espectador.com

VENEZUELA

Central Bank www.bcv.org.ve

Ministry of Finance www.mf.gov.ve

Statistical Office www.ine.gov.ve

National Electoral Council www.cne.gov.ve

National Public Credit Office www.oncp.gob.ve

PDVSA www.pdvsa.com

News sources www.el-nacional.com – www.eluniversal.com – www.unionradio.net – www.avn.info.ve


06 March 2014


Key websites EASTERN EUROPE, MIDDLE EAST & AFRICA

CZECH REPUBLIC

Czech National Bank www.cnb.cz

Czech Statistical Office www.czso.cz

Ministry of Finance www.mfcr.cz

Parliament www.psp.cz

News sources www.radio.cz – www.praguepost.com

EGYPT

Central Bank of Egypt www.cbe.org.eg

Finance Ministry www.mof.gov.eg

Statistics Office www.capmas.gov.eg

News sources www.businesstodayegypt.com – english.ahram.org.eg – www.almasryalyoum.com/en

GCC

Central Bank of Kuwait www.cbk.gov.kw

Ministry of Finance Kuwait www.mof.gov.kw

Qatar Central Bank www.qcb.gov.qa

Ministry of Finance Qatar www.mof.gov.qa

Saudi Arabian Monetary Agency www.sama.gov.sa

Ministry of Finance Saudi Arabia www.mof.gov.sa/en

Central Bank of the UAE www.centralbank.ae

Ministry of Finance and Industry UAE www.mofi.gov.ae

News sources GCC www.arabianbusiness.com

HUNGARY

National Bank of Hungary www.mnb.hu

Website of the Hungarian Government www.kormany.hu

Ministry for National Economy www.ngm.gov.hu

Debt Management Agency www.allampapir.hu

Central Statistical Office www.ksh.hu

Parliament www.parlament.hu

Hungarian Financial Supervisory Authority www.pszaf.hu

News sources www.budapesttimes.hu – www.portfolio.hu

ISRAEL

Central Bank of Israel www.bankisrael.gov.il

Central Bureau of Statistics www.cbs.gov.il

Ministry of Finance govx.mof.gov.il

Israel Securities Authority www.isa.gov.il

News sources www.haaretz.com – www.globes.co.il

KAZAKHSTAN

National Bank of Kazakhstan www.nationalbank.kz

Ministry of Finance mf.minfin.kz

Statistical Agency www.stat.kz

Ministry of Economy and Budget Planning www.minplan.kz

Financial Services Supervisory Agency www.afn.kz

Official site of the president www.akorda.kz

News sources www.kt.kz


06 March 2014


Key websites EASTERN EUROPE, MIDDLE EAST & AFRICA (cont’d)

NIGERIA

Central Bank of Nigeria www.cenbank.org

Ministry of Finance www.fmf.gov.ng

Debt Management Office www.dmo.gov.ng

Nigerian National Petroleum Corporation www.nnpcgroup.com

News sources www.thisdayonline.com – www.allafrica.com

POLAND

National Bank of Poland www.nbp.pl

Ministry of Finance www.mf.gov.pl

Central Statistical Office www.stat.gov.pl

Polish Financial Supervision Authority www.knf.gov.pl

Parliament www.sejm.gov.pl

News sources www thenews.pl – www.polandmonthly.pl – www.warsawvoice.pl

ROMANIA

Central Bank www.bnr.ro

Statistics Office www.insse.ro

Ministry of Finance www.mfinante.ro

RUSSIA

Central Bank of Russia www.cbr.ru

Finance Ministry www.minfin.ru

State Statistics Agency www.gks.ru

Economic Expert Group www.eeg.ru

The State Duma www.duma.ru

News sources www.themoscowtimes.com

SOUTH AFRICA

South African Reserve Bank www.reservebank.co.za

National Treasury www.treasury.gov.za

Statistics South Africa www.statssa.gov.za

South Africa Revenue Services www.sars.gov.za

Bureau for Economic Research www.ber.sun.ac.za

Bond Exchange of South Africa www.bondexchange.co.za

Johannesburg Stock Exchange www.jse.co.za

News sources www.businessday.co.za – www.mg.co.za – www.financialmail.co.za – www.thestar.co.za

TURKEY

Central Bank www.tcmb.gov.tr

Treasury www.treasury.gov.tr

Ministry of Finance www.maliye.gov.tr

Ministry of Development www.dpt.gov.tr

State Institute of Statistics www.tuik.gov.tr

News sources www.ntvmsnbc.com.tr – www.turkishdailynews.com.tr

UKRAINE

National Bank of Ukraine www.bank.gov.ua

Finance Ministry www.minfin.gov.ua

Economy Ministry www.me.gov.ua

State Statistics Agency www.ukrstat.gov.ua

News sources www.kyivpost.com


06 March 2014


Key websites EMERGING ASIA

CHINA

Central Bank www.pbc.gov.cn/english

Statistics Office www.stats.gov.cn

Ministry of Finance www.mof.gov.cn

News sources www.chinadaily.com – english.peopledaily.com.cn – www.xinhuanet.com

HONG KONG

Central Bank www.info.gov.hk/hkma

Statistics Office www.info.gov.hk/censtatd

Treasury Department www.try.gov.hk

News sources www.scmp.com – www.thestandard.com.hk – www.feer.com

INDIA

Central Bank www.rbi.org.in

Ministry of Finance finmin.nic.in

Government press releases www.pib.nic.in

Ministry of Statistics www.mospi.nic.in

Ministry of Commerce & Industry www.commerce.nic.in

INDONESIA

Central Bank www.bi.go.id

Investment Coordinating Board www.bkpm.go.id

News sources www.thejakartapost.com – www.antara.co.id

KOREA

Central Bank www.bok.or.kr

Statistics Office www.nso.go.kr/eng – www.mocie.go.kr

Ministry of Finance english.mofe.go.kr

News sources times.hankooki.com – english.chosun.com – www.koreaherald.co.kr – www.koreapost.com

www.theseoultimes.com – english.yna.co.kr – joongangdaily.joins.com

english.donga.com – english.yna.co.kr

MALAYSIA

Central Bank www.bnm.gov.my

Ministry of Finance www.treasury.gov.my/englishversionbaru

Department of Statistics www.statistics.gov.my

News sources thestar.com.my – www.nst.com.my – www.bernama.com – www.theedgedaily.com

PHILIPPINES

Central Bank www.bsp.gov.ph

National Statistics Office www.census.gov.ph

Department of Finance www.dof.gov.ph

Department of Budget and Management www.dbm.gov.ph

News sources www.bworld.com.ph – www.inq7.net – www.gmanews.tv/business

SINGAPORE

Central Bank www.mas.gov.sg

Department of Statistics www.singstat.gov.sg

Department of Finance www.mof.gov.sg

News sources www.asiaone.com.sg – www.channelnewsasia.com



06 March 2014


Key websites EMERGING ASIA (cont’d)

TAIWAN

Central Bank www.cbc.gov.tw

Statistics Offices eng.dgbas.gov.tw – eng.stat.gov.tw – www.moea.gov.tw – www.cepd.gov.tw

Ministry of Finance www.mof.gov.tw

News sources www.taipeitimes.com – www.chinapost.com.tw – www.taiwanheadlines.com

www.etaiwannews.com – news.cens.com – www.cna.com.tw – taiwansnews.net

THAILAND

Central Bank www.bot.or.th

National Statistical Office www.nso.go.th

Ministry of Finance www2.mof.go.th

News sources www.nationmultimedia.com – www.bangkokpost.net

VIETNAM

Vietnam Economic News www.ven.org.vn

Ministry of Finance www.mof.gov.vn

World Bank in Vietnam web.worldbank.org.vn

Vietnam Economic Portal www.vnep.org.vn


06 March 2014


Previous publications From Credit Suisse’s Economics Team since the last Emerging Markets Quarterly

GLOBAL EMERGING MARKETS

Weekly Emerging Markets Forecasts Details, B. Bayazitoglu, A. Cervera, R. Prior-Wandesforde, D. Tao, N. Teixeira

Monthly Emerging Markets: Manufacturing PMI Roundup, I. Lebwohl, N. Mustafayev, N. Soss

Monthly Emerging Markets: Non-residents’ holdings in local currency government bonds, N. Mevorach, A. Agrawal, D. Chodos

18 Feb 2014 EM IP growth momentum slows further in EM as it flattens out in DM, N. Mustafayev

16 Jan 2014 EM IP growth momentum moderates, diverging from DM, N. Mustafayev

12 Dec 2013 Global Inflation Watch: Low and steady N. Mustafayev, N. Soss

19 Nov 2013 Global Outlook: Closer to the Top, Further from the Exit, E.Miller, N. Soss

LATIN AMERICA

06 Feb 2014 Latin America: Sovereign Credit Ratings Monitor, A. Cervera, D. Fu, J.L. Maldonado, C. Reckman, O. Rodriguez

05 Feb 2014 Latin America: Hard currency relative value report, D. Chodos, D. Fu

29 Jan 2014 Latin America: Why worry about Argentina…, A. Cervera, D. Chodos, D. Fu, J.L. Maldonado, C. Reckman, N. Teixeira

27 Jan 2014 Chile and Peru: Pension fund snapshot as of Dec-2013, A. Cervera, D. Fu, J.L. Maldonado, O. Rodriguez

16 Jan 2014 Latin America: 2013 inflation recap, D. Fu, A. Cervera, C. Reckman, J.L. Maldonado, P. Coutinho, L. Fonseca

07 Jan 2014 Latin America: Hard currency relative value report, D. Chodos

04 Dec 2013 Latin America: Hard currency relative value report, D. Chodos

ARGENTINA

25 February Argentina: A better deal for the country than for bonds, D. Chodos, C. Reckman

10 Feb 2014 Argentina: An unsteady state, C. Reckman, D. Chodos

23 Jan 2014 Argentina: Throwing in the towel? C. Reckman, D. Chodos

14 Jan 2014 Argentina: Tactically underweight, cover by adding PDVSA’14, D. Chodos, C. Reckman

10 Dec 2013 Argentina: Trip notes, C. Reckman

18 Nov 2013 Argentina: Updated GDP warrants valuation, D. Chodos, C. Reckman

BRAZIL

26 Feb 2014 Brazil: Breakdown of IPCA suggests high inflation in 2014, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

21 Feb 2014 Brazil: We project GDP growth of 2.1% for 2013, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

11 Feb 2014 Brazil: We expect announcement of spending cuts of BRL 43 billion in February, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

05 Feb 2014 Brazil: We have lowered our forecast for GDP growth in 2014 from 2.0% to 1.5%, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

30 Jan 2014 Brazil: Isolated deterioration in Argentina’s economy would have limited impact on activity in Brazil, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

28 Jan 2014 Brazil: Deficit in balance of payments to rise in 2014, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

21 Jan 2014 Brazil: Despite president’s lead in voter intention polls, scenario still uncertain, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

14 Jan 2014 Brazil: IPCA inflation to remain near upper limit of target range in 2014, N. Teixeira, P. Coutinho, I. Ferrao, L. Fonseca, D. Lavarda

CHILE

08 Jan 2014 Chile: What drove inflation in 2013? A. Cervera

COLOMBIA

20 February 2014 Colombia: Sell 5Y CDS versus Mexico, D. Chodos, A. Cervera, J.L. Maldonado

MEXICO

17 Jan 2014 Mexico: Pension fund snapshot as of Dec-2013, A. Cervera, O. Rodriguez

19 Dec 2013 Mexico: Steep curves favor flatteners and forward starting swaps; short CADMXN, D. Chodos, A. Cervera, A. Marino, M. Derr

13 Dec 2013 Mexico: A bullet-proof energy reform, A. Cervera

09 Dec 2013 Mexico: The energy bill under discussion, A. Cervera

VENEZUELA

30 Jan 2014 Venezuela: Take profits on PD’14 vs. PD’22; stay long PD’14, D. Chodos, C. Reckman


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06 March 2014



EASTERN EUROPE, MIDDLE EAST & AFRICA

17 Jan 2014 EEMEA strategy: EEMEA Hard Currency Sovereign Debt Monitor, S. Hasan, N. Mevorach

09 Dec 2013 EEMEA strategy: EEMEA Hard Currency Monitor, S. Hasan, N. Mevorach

25 Nov 2013 A story of two halves: EEMEA Fixed Income Outlook for 2014, B. Bayazitoglu, S. Hasan, N. Mevorach

CZECH REPUBLIC

12 Feb 2014 Czech Republic: CPI inflation dropped sharply in January, G. Hudecz

06 Feb 2014 Czech Republic: Central bank confirms exchange rate commitment until end-2014, G. Hudecz

09 Jan 2014 Czech Republic: Koruna depreciation's impact starting to show, G. Hudecz

09 Dec 2013 Czech Republic: Core inflation still subdued, despite a pick-up in headline CPI, G. Hudecz

HUNGARY

18 Feb 2014 Hungary: MC: Waiting for the March inflation report, G. Hudecz

14 Feb 2014 Hungary: CPI inflation might have bottomed out in January, G. Hudecz

21 Jan 2014 Hungary: Slowing the pace of monetary policy easing, G. Hudecz

15 Jan 2014 Hungary: CPI inflation dropped in December, due to utility price cuts, G. Hudecz

17 Dec 2013 Hungary: The MC cut the policy rate to 3% and remained dovish, G. Hudecz

11 Dec 2013 Hungary: CPI inflation unchanged in November, likely to dip in December, G. Hudecz

26 Nov 2013 Hungary: Another 20bps policy rate cut today, and "further cautious easing of policy may follow", G. Hudecz

ISRAEL

24 Feb 2014 Israel: A surprise rate cut, N. Mevorach

15 Jan 2014 Israel: December CPI inflation data are unlikely to shift the MC's focus from the growth dynamics and the shekel, N. Mevorach

23 Dec 2013 Israel: MC on hold today, but we still expect the monetary policy easing cycle to continue in 1H 2014, N. Mevorach

25 Nov 2013 Israel: MC on hold, mainly because of the shekel, N. Mevorach

15 Nov 2013 Israel: October CPI and HPI suggest MC to remain on hold on 25 November, N. Mevorach

POLAND

02 Feb 2014: Poland: Central bank sees no need to react to exchange rate moves, G. Hudecz

15 Jan 2014: Poland: CPI inflation picked up marginally in December, but likely to remain subdued in 2014, G. Hudecz

08 Jan 2014: Poland: Still no change in the MPC’s guidance, G. Hudecz

13 Dec 2013: Poland: Core inflation still subdued in November, G. Hudecz

04 Dec 2013: Poland: No change in the MPC’s guidance, G. Hudecz

29 Nov 2013: Poland: Modest pick-up in growth in 3Q, driven by investments, G. Hudecz

14 Nov 2013: Poland: Energy and food prices drive the fall in inflation in October, G. Hudecz

RUSSIA

04 Mar 2014 Russia: Cautious but tactical opportunities arise, S.Voloboev, A.Pogorelov, N.Mevorach, A.Christovova

03 Mar 2014 Russia: FX intervention rules on hold as volatility starts to bite S. Voloboev, A. Pogorelov

02 Mar 2014 Russia/Ukraine: Putin sharply raises stakes by threatening to annex Crimea; a wider military involvement would risk comprehensive sanctions, S. Voloboev, A.

Pogorelov

14 Feb 2014 Russia: CBR adopted a hawkish policy stance, left rates on hold, S. Voloboev, A. Pogorelov

10 Feb 2014 Russia: No respite for growth and the rouble until 2H 2014, S. Voloboev, A. Pogorelov

21 Jan 2014 Russia: Weaker rouble to contain budget financing needs, S. Voloboev, A. Pogorelov, S.Hasan

16 Jan 2014 Russia: Current account and trade surpluses narrow further in 4Q 2013, S. Voloboev, A. Pogorelov

13 Dec 2013 Russia: CBR sees inflation target reached in 2H 2014; will switch to monthly liquidity auctions, S. Voloboev, A. Pogorelov

10 Dec 2013 Russia: Assessing relative value in the OFZ curve, S. Hasan, N. Mevorach


https://plus.credit-suisse.com/u/bVK04h

06 March 2014



RUSSIA (cont’d)

05 Dec 2013 Russia: High November inflation warrants CBR policy caution, S. Voloboev, A. Pogorelov

18 Nov 2013 Russia: Weak October IP data boosts the case for an early cut, S. Voloboev, A. Pogorelov

SOUTH AFRICA

26 Feb 2014 South Africa: Budget speech delivers some positive news, C. Teixeira

25 Feb 2014 South Africa: Budget Speech – opportunity for some positive news, C. Teixeira

19 Feb 2014 South Africa: Headline CPI inflation accelerates as food and transport prices jump, C. Teixeira

30 Jan 2014 South Africa: Put on 2s5s IRS flatteners, C. Teixeira, S. Hasan, N. Mevorach, M. Derr

29 Jan 2014 South Africa: SARB hikes pre-emptively; more will be needed, C. Teixeira

22 Jan 2014 South Africa: Headline CPI inflation benefits from temporarily lower food prices, C. Teixeira

15 Jan 2014 South Africa: Retail sales recover; apparel retailers outperform, C. Teixeira

14 Jan 2014 South Africa: Platinum production declines once again; iron ore volumes recover further, C. Teixeira

09 Jan 2014 South Africa: Manufacturing production volumes hold steady, boding well for 4Q GDP growth, C. Teixeira

09 Jan 2014 South Africa: Portfolio outflows and a wide basic balance deficit, C. Teixeira

08 Jan 2014 South Africa: Wage negotiations advance in the platinum sector, C. Teixeira

08 Jan 2014 South Africa: Challenged by diverging commodity prices, C. Teixeira

11 Dec 2013 South Africa: Retail sales reflect low consumer confidence, C. Teixeira

11 Dec 2013 South Africa: Headline CPI inflation declines to 5.3%, a temporary low, C. Teixeira

10 Dec 2013 South Africa: Manufacturing production rebounds, led by motor vehicle sector, C. Teixeira

10 Dec 2013 South Africa: Mining production rebounds, led by PGMs, gold and iron ore, C. Teixeira

10 Dec 2013 South Africa: Employment in the formal economy struggles to grow, C. Teixeira

21 Nov 2013 South Africa: MPC focuses on the Fed, funding for the current account and the rand, C. Teixeira

21 Nov 2013 South Africa: Strained electricity system limps towards year-end holidays, C. Teixeira

20 Nov 2013 South Africa: Wage negotiations at an impasse in the platinum sector, C. Teixeira

20 Nov 2013 South Africa: Headline CPI inflation declines to a 4-month low; core inflation steady, C. Teixeira

18 Nov 2013 South Africa: MPC stance – dovish on data; hawkish on risks, C. Teixeira

TURKEY

03 Mar 2014 Turkey: Core inflation dynamics worsened more sharply than we expected in February, B. Bayazitoglu

18 Feb 2014 Turkey - MPC: Low on adrenaline, B. Bayazitoglu

03 Feb 2014 Turkey: A good inflation print despite the tax adjustments and lira weakness, B. Bayazitoglu

29 Jan 2014 Turkey: More constructive on credit than rates, S. Hasan, N. Mevorach

28 Jan 2014 Turkey - MPC: A positive surprise for the markets, B. Bayazitoglu

28 Jan 2014 Turkey: The devil is always in the detail, B. Bayazitoglu

21 Jan 2014 Turkey - MPC: Deep into the bag of tricks, B. Bayazitoglu

03 Jan 2014 Turkey: Counting on the fiscal and macro-prudential measures, B. Bayazitoglu

24 Dec 2013 Turkey: $7bn in FX liquidity through end-January, B. Bayazitoglu

17 Dec 2013 Turkey - MPC: Further operational changes to reduce the need for "exceptional days", B. Bayazitoglu

13 Dec 2013 Turkey: Long Jan ‘15s, S. Hasan, N. Mevorach

10 Dec 2013 Turkey: Aggregate demand growth slowed and rebalanced in 3Q, B. Bayazitoglu

03 Dec 2013 Turkey: Summer's lira shock has run its course, B. Bayazitoglu

19 Nov 2013 Turkey - MPC: Some extra room to push short-term market rates higher, B. Bayazitoglu

UKRAINE

02 Mar 2014 Russia/Ukraine: Putin sharply raises stakes by threatening to annex Crimea; a wider military involvement would risk comprehensive sanctions, S. Voloboev, A. Pogorelov

26 Feb 2014 Ukraine: New cabinet to give key roles to technocrats capable of negotiating a bail-out, S. Voloboev, A. Pogorelov

17 Dec 2013 Ukraine: Russia's large financing package curbs near-term solvency risks but leaves policy direction and political outlook highly uncertain, S. Voloboev, A. Pogorelov

21 Nov 2013 Ukraine: Suspension of EU integration effort may bring near-term relief from Russia but loss of reform momentum a longer-term negative, S. Voloboev, A. Pogorelov


06 March 2014



EMERGING ASIA

07 Feb 2014 Asia rates: January non-resident flows, A. Agrawal

18 Feb 2014 ASEAN: Thailand's political crisis: What it means for ASEAN tourism, S. Sathirathai

28 Jan 2014 Contagion? Re-testing Asian vulnerability, M. Wan, R. Prior-Wandesforde, S. Sathirathai

22 Jan 2014 Focus Asia (1Q 2014): High-conviction calls for 2014, R. Prior-Wandesforde, D. Tao, S. Sathirathai, C. Tuntono, M. Wan, W. Deng, R. Farris, A. Agrawal, T.

Thuy Le

15 Jan 2014 Asia's export recovery: Seeking the leaders and laggards, S. Sathirathai

10 Dec 2013 Asia: FDI truths, myths and prospects, R. Prior-Wandesforde

03 Dec 2013 Asia Industrial Cycle: The beginning of the end or the end of the beginning?, R. Prior-Wandesforde

07 Jan 2014 Asia rates: December non-resident flows, A. Agrawal

10 Dec 2013 Asia rates: November non-resident flows, A. Agrawal

CHINA

18 Feb 2014 China: PBoC conducts the first repo operation in eight months, D.Tao, W.Deng

10 Feb 2014 China: We expect lower inflation now, D.Tao, W.Deng

10 Feb 2014 China: Higher emphasis on local debt and less on inflation in the 4Q PBOC report, D.Tao

29 Jan 2014 China: The pain first: Growth forecast downgrade, D.Tao, W.Deng

29 Jan 2014 China: Themes for 2014: R3 Retreat, Reform & Risk, D.Tao, W.Deng

21 Jan 2014 China: SHIBOR softened, for now, D.Tao, W.Deng

20 Jan 2014 China: GDP growth at 7.7%, in line with expectations, D.Tao, W.Deng

19 Dec 2013 China: Interbank rates increased as year-end approaches, D.Tao, W.Deng

17 Dec 2013 China: Shanghai launched SOE reform guidance, D.Tao, W.Deng

16 Dec 2013 China: The government kicks off the new-urbanisation concept, D.Tao

16 Dec 2013 China: The Economic Working Conference set the tone for 2014, D.Tao

06 Dec 2013 China: Abolishing the one child policy, D. Tao, W.Deng, A.Roy, S.Punhani, A.Hsieh

05 Dec 2013 China: PBoC's absence led to a net liquidity drain this week, D.Tao, W.Deng

04 Dec 2013 China: Politburo set tone for economic policies in 2014, D.Tao

28 Nov 2013 China: Is the rising bond yield a cause of concern?, D.Tao, W.Deng

18 Nov 2013 China: Detailed reform framework announced, D. Tao, W.Deng

13 Nov 2013 China: Xi's reform ideas – Comprehensive but lacking details, D. Tao

06 Nov 2013 China: PBoC warns of a prolonged period of deleveraging, D. Tao, W. Deng

HONG KONG

24 Jan 2014 Hong Kong: The fiscal surplus is expected to shrink in FY13/14, reflecting the instability of the revenue stream, C. Tuntono

16 Jan 2014 Hong Kong: The Chief Executive has maintained his policy stances on housing and the economy in his second Policy Address, C. Tuntono

28 Nov 2013 Hong Kong: Retail sales volume growth stabilised at 5.8% YoY in October, supported by better jewellery and ex-jewellery sales, C. Tuntono

18 Nov 2013 Hong Kong: 3Q13 GDP grew weaker than expected at 2.9% YoY, as consumption and service export growth slowed, C. Tuntono

INDIA

26 Feb 2014 India: RBI's risky regime shift, R. Prior-Wandesforde

28 Jan 2014 Asia rates: India – fade the sell-off, add duration risk…, A. Agrawal

19 Dec 2014 Asia rates: India – bullish despite headwinds, A. Agrawal

INDONESIA

04 Dec 2013 Asia rates: Indonesia: a mini rally or panic?, A. Agrawal


06 March 2014



KOREA

13 Feb 2014 Korea: The BoK remains on hold in February, but expresses some concerns over EM growth and domestic demand, C.Tuntono

10 Feb 2014 Korea & Taiwan: Recovery set in stone? How weaker global demand may affect exports and growth, C.Tuntono

03 Feb 2014 Korea: Export growth slowed in January, narrowing the trade surplus as per seasonal trend, C.Tuntono

23 Jan 2014 Korea: 4Q13 GDP growth increases to 3.9% YoY, C.Tuntono

09 Jan 2014 Korea: The BoK stays on hold in the beginning of 2014, turning more positive on the domestic economy, C.Tuntono

02 Jan 2014 Korea: Would weaker JPY and QE tapering derail growth?, C. Tuntono

13 Nov 2013 Korea & Taiwan: Weakness likely to be transitory, QE tapering risk should not weaken near-term strengths, C. Tuntono

MALAYSIA

22 Nov 2013 Asia rates: Malaysia – stay underweight, A. Agrawal

PHILIPPINES

12 Feb 2014 Philippines: Mad money?, M. Wan

TAIWAN

25 Feb 2014 Taiwan: Fiscal reform commences, C.Tuntono

24 Feb 2014 Taiwan: Industrial production fell 1.8% YoY in January, distorted by the lunar year effect, C.Tuntono

10 Feb 2014 Taiwan: Exports contracted more than expected in January, distorted by the lunar new year effect, C.Tuntono

10 Feb 2014 Korea & Taiwan: Recovery set in stone? How weaker global demand may affect exports and growth, C.Tuntono

06 Feb 2014 Taiwan: Inflation edges up to 0.8% YoY in January, distorted by the Lunar New Year effect, C.Tuntono

28 Jan 2014 Taiwan: 4Q13 GDP growth surprised on the upside, helped by rise in fixed investments, C.Tuntono

09 Dec 2013 Taiwan: What's wrong with exports lately?, C. Tuntono

13 Nov 2013 Korea & Taiwan: Weakness likely to be transitory, QE tapering risk should not weaken near-term strengths, C. Tuntono

THAILAND

07 Jan 2014 Thailand: Forecast reductions. Assessing the economic costs of political uncertainty, S. Sathirathai


06 March 2014


Key dates LATIN AMERICA

ARGENTINA

Interest payment on foreign law bonds (Pars) 31 March 2014

Interest payment on foreign law bonds (Global 17) 2 June 2014

Interest payment on foreign law bonds (Discounts) 30 June 2014

Last day of U.S. Supreme Court’s term 30 June 2014

Opening conference of U.S. Supreme Court’s term 29 September 2014

Interest payment on foreign law bonds (Pars) 30 September 2014

End of ordinary session in Congress 30 November 2014

Interest payment on foreign law bonds (Global 17) 2 December 2014

Interest payment on foreign law bonds (Discounts) 31 December 2014

BRAZIL

Monetary policy decision 1 April 2014

Monetary policy decision 27 May 204

Monetary policy decision 15 July 2014

Monetary policy decision 2 September 2014

Presidential, congressional and governor elections 5 October 2014

Presidential, congressional and governor elections, second round, if needed

Monetary policy decision

26 October 2014

28 October 2014

Monetary policy decision 2 December 2014

CHILE

Monetary policy decision 13 March 2014

Monetary policy minutes 28 March 2014


Monetary policy minutes 5 May 2014


Start of session in Congress 21 May 2014

Monetary policy minutes 2 June 2014

Monetary policy decision 12 June 2014



Monetary policy minutes 31 July 2014

Monetary policy decision 14 August 2014

Monetary policy minutes 1 September 2014

End of session in Congress 18 September 2014

COLOMBIA

Legislative elections 9 March 2014

Monetary policy minutes 14 March 2014

Start of second ordinary session in Congress 16 March 2014


Monetary policy minutes 4 April 2014



Presidential elections 25 May 2014



Presidential elections, second round, if needed 15 June 2014

End of second ordinary session in Congress 20 June 2014




06 March 2014


Key dates COLOMBIA (cont’d)

Start of first ordinary session in Congress 20 July 2014


Monetary policy minutes 14 August 2014




Monetary policy minutes 10 October 2014

Monetary policy decision 31 October 2014

Monetary policy minutes 14 November 2014

Monetary policy decision 28 November 2014

Monetary policy minutes 12 December 2014

End of first ordinary session in Congress 16 December 2014


MEXICO


Monetary policy minutes 4 April 2014


End of the first ordinary session in Congress 30 April 2014


Quarterly inflation report 21May 2014





Quarterly inflation report 13 August 2014

Start of second ordinary session in Congress 1 September 2014




Quarterly inflation report 19 November 2014

Monetary policy minutes 14 November 2014


End of second ordinary session in Congress 15 December 2014

Monetary policy minutes 19 December 2014

PERU


New Municipal elections 16 March 2014




End of second ordinary session in Congress 15 June 2014


Start of first ordinary session in Congress 27 July 2014



Municipal elections 5 October 2014


Monetary policy decision 13 November 2014


End of first ordinary session in Congress 15 December 2014


06 March 2014


Key dates VENEZUELA

End of first ordinary session in Congress 15 August 2014

Start of second ordinary session in Congress 15 September 2014

End of second ordinary session in Congress 15 December 2014


06 March 2014


Key dates EASTERN EUROPE, MIDDLE EAST & AFRICA

CZECH REPUBLIC

Czech National Bank Board policy rate decision 27 March 2014

Czech National Bank Board policy rate decision 7 May 2014

Elections to the European Parliament 23-24 May 2014

Czech National Bank Board policy rate decision 26 June 2014

Czech National Bank Board policy rate decision 31 July 2014

Czech National Bank Board policy rate decision 25 September 2014

Czech National Bank Board policy rate decision 6 November 2014

Czech National Bank Board policy rate decision 17 December 2014

HUNGARY

Monetary Council rate-setting meeting 25 March 2014

Parliamentary elections 6 April 2014

Monetary Council rate-setting meeting 29 April 2014

Elections to the European Parliament 25 May 2014

Monetary Council rate-setting meeting 27 May 2014

Monetary Council rate-setting meeting 24 June 2014

Monetary Council rate-setting meeting 22 July 2014

Monetary Council rate-setting meeting 26 August 2014

Municipal elections Autumn

Monetary Council rate-setting meeting 23 September 2014

Monetary Council rate-setting meeting 28 October 2014

Monetary Council rate-setting meeting 25 November 2014

Monetary Council rate-setting meeting 16 December 2016

ISRAEL

Monetary Committee rate-setting meeting 24 March 2014

Monetary Committee rate-setting meeting 28 April 2014

Monetary Committee rate-setting meeting 26 May 2014

Monetary Committee rate-setting meeting 23 June 2014

POLAND

Monetary Policy Council rate-setting meeting 8-9 April 2014

Monetary Policy Council rate-setting meeting 6-7 May 2014

Elections to the European Parliament 25 May 2014

Monetary Policy Council rate-setting meeting 3-4 June 2014

Monetary Policy Council rate-setting meeting 1-2 July 2014

Monetary Policy Council rate-setting meeting 2-3 September 2014

Municipal elections Autumn

Monetary Policy Council rate-setting meeting 7-8 October 2014

Monetary Policy Council rate-setting meeting 4-5 November 2014

Monetary Policy Council rate-setting meeting 2-3 December 2014

RUSSIA

Central bank policy meeting 14 March 2014

Central bank policy meeting 25 April 2014

G8 Summit in Sochi 4-5 June 2014

Central bank policy meeting 16 June 2014

Publication of the central bank’s monetary policy report 18 June 2014

City of Moscow legislative elections By 14 September 2014

SOUTH AFRICA

Reserve Bank Quarterly Bulletin (4Q 2013) 12 March 2014


06 March 2014


Key dates SOUTH AFRICA (cont’d)

Monetary Policy Committee meeting 27 March 2014

National Elections 7 May 2014

Monetary Policy Committee meeting 22 May 2014

Statistics South Africa supply side 1Q 2014 GDP data 27 May 2014

TURKEY

Monetary policy committee meeting 18 March 2014

Municipal elections 30 March 2014

Monetary policy committee meeting 24 April 2014

Release of the quarterly inflation report 30 April 2014

Monetary policy committee meeting 22 May 2014

Monetary policy committee meeting 24 June 2014

Monetary policy committee meeting 17 July 2014

Release of the quarterly inflation report 24 July 2014

Monetary policy committee meeting 27 August 2014

Presidential elections August 2014

Monetary policy committee meeting 25 September 2014

Submission of the draft 2015 budget to parliament 17 October 2014

Monetary policy committee meeting 23 October 2014

Monetary policy committee meeting 31 October 2014

Monetary policy committee meeting 20 November 2014

Announcement of the 2015 monetary policy framework 10 December 2014

Monetary policy committee meeting 24 December 2014

Deadline for the approval of the 2015 budget 31 December 2014

Parliamentary elections June 2015

UKRAINE

Publication of FX reserves data for February 7-10 March 2014

Referendum on in Crimea (on the autonomy’s self-determination) 16 March 2014

Presidential elections 25 May 2014

Maturity of the $1.0bn Eurobond 4 June 2014

Maturity of the $1.6bn Naftogaz Eurobond (guaranteed by the sovereign) 30 September 2014


06 March 2014


Key dates EMERGING ASIA

CHINA

The 2nd Session of the 12th National People's Congress March 2014

The 2nd Session of the 12th Chinese People's Political Consultative Conference March 2014

Economic working conference for 2015 December 2014

INDIA

RBI policy review 1 April 2014

General Elections Before 31 May 2014

INDONESIA

Bank Indonesia Monetary Policy meeting 13 March 2014

Bank Indonesia Monetary Policy meeting 8 April 2014

Legislative Elections 9 April 2014

Bank Indonesia Monetary Policy meeting 8 May 2014

Bank Indonesia Monetary Policy meeting 12 June 2014

Presidential Elections 9 July 2014

KOREA

Bank of Korea Monetary Policy meeting 13 March 2014

Bank of Korea Monetary Policy meeting 10 April 2014

Bank of Korea Monetary Policy meeting 9 May 2014

Bank of Korea Monetary Policy meeting 12 June 2014

Bank of Korea Monetary Policy meeting 10 July 2014

MALAYSIA

Bank Negara Monetary Policy Meeting 6 March 2014

Bank Negara Monetary Policy Meeting 8 May 2014

PHILIPPINES

Banko Sentral ng Pilipinas Monetary Policy meeting 27 March 2014

Banko Sentral ng Pilipinas Monetary Policy meeting 8 May 2014

Banko Sentral ng Pilipinas Monetary Policy meeting 19 June 2014

SINGAPORE

Monetary Authority of Singapore Meeting April 2014

TAIWAN

Central Bank of China quarterly Monetary Policy meeting 31 March 2014

Central Bank of China quarterly Monetary Policy Meeting 30 June 2014

Central Bank of China quarterly Monetary Policy Meeting 30 September 2014

Municipal Election 29 November 2014

THAILAND

Bank of Thailand Monetary Policy Committee meeting 12 March 2014

Bank of Thailand Monetary Policy Committee meeting 23 April 2014

Bank of Thailand Monetary Policy Committee meeting 18 June 2014


06 March 2014


Gross financing needs for 2014

Balance of payments financing needs for 2014 (% of GDP)

Government financing needs for 2014 (% of GDP)

inc. short-term debt amortization

exc. short-term debt amortization

LATIN AMERICA 6.9 5.3 10.5

Argentina 9.1 4.3 11.3

Brazil 7.6 6.1 14.5

Chile 16.8 11.0 0.6

Colombia 7.5 6.2 6.2

Mexico 4.1 3.8 9.3

Peru 8.8 5.9 0.5

Venezuela 0.8 0.8 10.1

EEMEA 17.3 8.2 6.2

Czech Republic 16.5 3.2 9.8

Hungary 27.0 10.7 23.1

Israel 17.4 1.4 9.1

Poland 20.8 8.2 8.5

Russia 9.3 7.2 0.6

South Africa 17.4 8.7 11.5

Turkey 26.8 10.5 10.0

Ukraine 48.7 25.6 8.9

NON-JAPAN ASIA 12.3 1.0 6.5

China 4.6 -1.3 6.7

Hong Kong 295.1 30.4 -0.8

India 11.4 6.4 10.1

Indonesia 14.7 9.1 4.2

Korea 9.0 -0.2 6.1

Malaysia 20.0 6.2 7.8

Philippines 2.5 -0.1 5.5

Taiwan 18.6 -6.6 3.8

Thailand 6.3 1.8 3.0

Emerging Markets 12.1 8.2 7.3

Source: Credit Suisse forecasts

06 March 2014


Balance of payments financing needs LATIN AMERICA

ARGENTINA

$bn 2009 2010 2011 2012 2013 2014F

Funding need (including short-term debt amortization) 12.2 22.5 37.0 29.1 35.1 33.2

Funding need (excluding short-term debt amortization) -4.1 11.4 17.5 11.5 17.6 15.7

Current account deficit -11.0 -1.4 2.4 0.0 4.5 3.8

FDI outflows 0.7 1.0 1.5 1.1 1.2 1.0

Medium- and long-term debt amortization 6.2 11.8 13.7 10.5 11.9 10.9

Public 4.3 5.4 9.0 5.8 6.2 5.7

Private 1.9 6.3 4.6 4.7 5.7 5.2

Short-term debt(1) 16.3 11.1 19.5 17.6 17.5 17.5

Funding sources (including gross short-term borrowing) 12.2 22.5 37.0 29.1 35.1 33.2

FDI inflows 4.0 7.1 9.9 12.1 10.4 9.9

Net portfolio investments -4.4 11.1 -4.4 -3.2 -1.6 -2.0

Government borrowing from IFIs, excluding the BIS 3.2 2.4 2.6 2.2 2.2 2.3

Central bank borrowing from BIS and bilateral lenders 11.6 11.1 11.1 12.8 12.9 9.4

Medium-term private sector borrowing 0.7 4.3 3.4 3.9 3.5 3.3

Short-term private sector borrowing 11.1 19.5 17.6 17.5 17.5 17.5

Other capital flows, including capital flight(2) -13.3 -28.4 -8.9 -21.1 -22.7 -12.2

Change in FX reserves net of borrowing from the BIS and bilateral lenders (- indicates increase) -0.6 -4.7 5.8 4.8 12.8 5.0

(1) The IMF’s data dissemination system reports that Argentina has a larger stock of short-term debt, but our understanding is that the IMF number includes debt that has been in arrears since 2001 and is not being serviced. (2) This includes accumulation of new arrears and capital flight.

Source: Central Bank, Ministry of Finance, Credit Suisse

BRAZIL

$bn 2009 2010 2011 2012 2013 2014F


Funding need (excluding short-term debt amortization) 44.3 92.7 89.1 91.1 138.0 130.5

Current account deficit 24.3 47.3 52.5 54.2 81.4 72.0

FDI outflows -10.1 11.6 -1.0 -2.8 -3.5 8.0


Public 5.0 8.1 7.7 5.0 5.0 4.5

Private 25.1 25.8 30.0 34.7 55.1 46.0

Short-term debt amortization 36.4 31.0 57.3 40.1 32.6 31.4


FDI inflows 25.9 48.5 66.7 65.3 64.0 55.0

Portfolio investments 50.9 53.9 8.6 14.2 38.5 29.5

Stocks 37.1 37.7 7.2 5.6 11.6 6.0

Fixed income 9.7 13.4 -0.2 4.8 22.8 20.5

Government bonds 4.2 2.8 1.7 3.9 4.1 3.0

Borrowing by the government (from other sources than the IMF) 4.6 5.6 2.8 3.6 1.9 2.5

Medium- and long-term borrowing by the private sector 27.1 54.2 79.1 50.4 54.9 51.4

Short-term debt contracted from abroad (gross) 31.0 57.3 40.1 32.6 31.4 30.0

Other capital inflows and errors and omissions -12.1 -46.7 7.7 -15.9 -14.2 8.5

Change in international net reserves (- indicates increase) -46.7 -49.1 -58.6 -18.9 -5.9 -15.0


06 March 2014


Balance of payments financing needs CHILE

$bn 2009 2010 2011 2012 2013 2014F



Current account deficit -3.5 -3.2 3.3 9.5 12.5 11.9

FDI outflows 7.2 9.5 20.4 21.1 10.7 5.0




FDI inflows 12.9 15.4 22.9 30.3 20.9 10.0

Net portfolio flows -12.4 -6.4 11.5 -3.4 7.0 5.0

Portfolio outflows 14.3 15.7 -0.8 13.9 9.1 7.4

Portfolio inflows 1.9 9.3 10.7 10.5 16.1 12.4

External debt issuance 5.1 9.5 12.0 10.0 10.0 10.0

Other loans 17.6 13.6 20.7 20.6 16.0 15.0

Residual 8.8 6.8 11.0 3.1 2.3 4.7

Change in gross reserves (- indicates increase) -2.2 -2.5 -14.1 0.3 0.6 -0.8

Memo items:

Nominal GDP ($ bn) 173 218 251 268 280 262

Source: Central Bank, Credit Suisse

COLOMBIA

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows 3.1 6.5 8.3 -0.3 3.7 2.8


Public sector 1.1 1.7 1.2 1.9 1.5 2.4

IFIs 0.5 0.7 0.8 0.7 0.9 1.4

Non-IFIs 0.6 1.0 0.5 1.2 0.6 1.0

Private sector 3.1 3.3 3.3 7.8 4.3 4.0

Non-financial private sector 2.8 3.2 2.2 7.6 3.5 3.3

Financial private sector 0.3 0.1 1.1 0.2 0.8 0.7



FDI inflows 7.1 6.9 13.4 15.7 16.3 15.8

IFI lending 2.1 2.1 1.5 0.8 1.0 2.0

Public sector borrowing (excluding IFI lending)* 3.5 3.3 2.0 1.7 2.6 2.0

Net portfolio investments -0.1 0.9 5.3 3.7 7.0 3.2

Medium-term private sector borrowing 3.5 8.3 7.7 6.7 5.0 5.4

Short-term financing 4.4 5.8 5.7 7.1 4.5 4.5

Other capital flows/errors and omissions -1.8 0.3 -4.7 -3.5 0.1 -2.1

Change in FX reserves (- indicates increase) -1.3 -3.1 -3.7 -5.5 -6.8 -2.5

* Includes 2014 budget pre-financing in 2013


06 March 2014


Balance of payments financing needs MEXICO

$bn 2009 2010 2011 2012 2013 2014F


Funding need (excluding non-market debt amortization) 28.8 29.5 34.5 47.8 44.3 49.1


FDI outflows 9.6 15.0 12.6 22.5 10.0 10.0

Medium- and long-term market debt amortization 5.8 7.1 6.0 2.6 4.1 5.4

Public 3.7 5.4 5.4 1.7 3.7 3.7

Private 2.1 1.7 0.6 0.9 0.4 1.7

Public sector non-market debt payments 5.3 3.8 3.6 8.0 7.9 4.5

Private sector non-market debt amortization* 15.2 19.9 20.6 7.1 4.3 3.7


FDI inflows 17.1 23.0 23.0 17.2 35.2 29.0

Net Portfolio investments -15.0 31.4 45.9 72.9 48.3 21.1

Medium- and long-term borrowing 14.0 27.8 12.7 8.4 6.0 10.0

Short-term loans 12.8 7.6 11.7 10.0 5.0 10.0

Other 22.9 -0.1 0.0 -17.0 -14.0 2.8

Error and omissions -3.2 -19.7 -9.6 -18.7 -18.7 0.0

Change in net international reserves (- indicates increase) -4.6 -20.7 -28.6 -17.8 -13.2 -20.0

Memo items:

Nominal GDP ($ bn) 895 1,055 1,172 1,188 1,236 1,284

* Reflects credit lines from suppliers, commercial bank loans and external trade loans. We do not have data on the exact original maturity of these loans, but we assume that they were typically less than one year, so that it fits with the “short-term” debt definition.


PERU

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows 0.4 0.3 0.1 -0.1 0.1 0.1


Public sector 1.8 3.9 0.8 1.2 2.6 1.0

IFIs 0.7 1.9 0.6 0.7 2.4 0.4

Paris Club 1.2 1.1 0.3 0.2 0.2 0.2

External market debt amortization 0.0 0.9 0.0 0.3 0.0 0.4

Private sector 1.2 1.3 1.1 2.1 3.1 1.8



FDI inflows 6.4 8.5 8.2 12.2 10.2 9.2

Net portfolio investments -2.8 -0.7 -1.0 -0.2 4.5 -0.4

IFI lending (excluding IMF) 1.0 1.3 0.7 0.4 0.4 0.4

Paris Club lending to Peru’s government sector 0.2 0.3 0.3 0.1 0.0 0.4

Public sector external bond issuance 2.0 2.7 0.0 0.5 0.0 0.0

Medium-term private-sector borrowing 2.2 5.3 4.0 6.3 4.1 4.4

Short-term financing 4.7 6.3 6.3 8.5 6.1 8.8

Other -1.4 0.2 -2.2 3.5 0.9 -2.1

Change in FX reserves (- indicates increase) -1.9 -11.0 -4.7 -15.2 -1.7 -2.0


06 March 2014


Balance of payments financing needs VENEZUELA

$bn 2009 2010 2011 2012 2013 2014F

Funding need (excluding short-term debt amortization) 1.1 -3.8 -20.8 -7.9 -3.6 2.4

Current account deficit -2.3 -8.8 -24.4 -11.0 -8.5 -5.0

FDI outflows 2.2 1.8 -1.1 2.5 1.5 2.0


Funding sources (including net short-term borrowing) 1.1 -3.8 -20.8 -7.9 -3.6 2.4

FDI inflows -2.2 1.8 3.8 3.2 4.5 2.7

Net portfolio investments 9.9 3.2 2.0 4.0 -4.5 8.9

Other investment -14.8 -17.0 -31.7 -13.6 -11.4 -14.3

Trade credits -3.6 -2.0 -8.2 -8.6 -0.4 -6.7

Loans 2.8 7.2 11.0 2.1 -3.5 -1.3

Currency and deposits -17.0 -19.9 -31.1 1.9 -1.7 1.3

Other assets 3.0 -2.3 -3.5 -8.9 -5.8 -7.6

Other, including errors and omissions -2.1 0.0 1.1 -2.5 -0.7 1.8

Change in gross reserves (- indicates increase) 10.3 8.1 4.0 1.0 8.4 3.4


06 March 2014


Balance of payments financing needs EASTERN EUROPE, MIDDLE EAST AND AFRICA

CZECH REPUBLIC

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows 0.9 1.2 -0.3 1.3 3.3 0.0

Medium- and long-term external debt amortization 4.4 4.7 5.0 4.0 4.0 4.0

Short-term external debt amortization 27.1 23.9 23.6 27.1 26.2 26.2


Net EU transfers (capital account) 2.7 1.7 0.8 2.7 3.8 3.5

FDI inflows 2.9 6.1 2.2 10.6 4.6 4.0

Net portfolio equity inflows 0.8 -0.3 0.1 -0.4 0.0 0.0

Medium- and long-term borrowing (incl. bonds) 12.6 9.9 1.5 12.6 4.0 4.0

Short-term borrowing (incl. bills) 23.9 23.6 27.1 26.2 26.2 26.2

Financial derivatives 0.0 -0.2 -0.1 0.4 0.3 0.0

Other items (net errors and omissions) -1.1 -2.5 0.6 -10.4 7.9 0.0

Change in reserves (- indicates increase) -4.6 -0.9 2.2 -4.6 -11.3 -5.2

Roll-over ratios: Assumptions

Medium- and long-term debt 2.9 2.1 0.3 3.2 1.0 1.0

Short-term debt 0.9 1.0 1.1 1.0 1.0 1.0

Source: IMF, Central Bank, Credit Suisse

HUNGARY

$bn 2009 2010 2011 2012 2013 2014F



Current account deficit (- indicates surplus) 0.2 -0.3 -0.7 -1.1 -2.6 -1.6

FDI outflows 1.9 1.2 4.2 11.2 0.0 0.0





FDI inflows 2.2 2.3 5.1 13.9 0.0 1.0

Net portfolio equity inflows -0.4 -0.9 2.6 2.8 2.0 0.0


- o/w IMF-EU-WB funding 10.0 0.0 0.0 0.0 0.0 0.0


Financial derivatives 1.0 0.8 -1.1 0.3 0.0 0.0

Other items (incl. errors and omissions) -1.8 2.3 7.8 -5.9 -4.1 -3.3

Change in reserves (- indicates increase) -10.3 -0.8 -3.8 4.1 -1.8 0.0



Short-term debt 1.0 1.2 1.0 0.7 1.0 1.0

Source: National Bank of Hungary, Ministry for National Economy, IMF, JEDH, Credit Suisse

06 March 2014


Balance of payments financing needs ISRAEL

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows 1.7 9.1 5.3 2.4 3.8 4.5

Medium and long-term debt amortization 5.3 6.0 4.7 5.9 6.5 5.0

Public sector 2.0 3.4 1.4 3.4 3.4 1.1

Private sector 3.3 2.6 3.3 2.5 3.1 3.9

Short-term debt amortizations 40.3 42.2 54.4 49.4 50.0 50.5


FDI inflows 4.4 5.5 10.8 9.5 13.4 8.7

Portfolio investments, net -5.9 -0.4 -8.9 -12.3 -11.9 -7.9

Medium and long-term borrowing 7.4 7.6 3.8 5.5 6.5 5.0

Public sector 3.2 3.3 1.5 3.0 3.5 2.0

Private sector 4.2 4.3 2.3 2.5 3.1 3.9

Short-term debt financing 42.2 54.4 49.4 50.0 50.5 51.0

Errors and omissions 9.9 -6.6 10.2 5.1 4.1 0.3

Change in reserves (- indicates increase) -18.1 -10.3 -4.0 -1.0 -5.9 -3.2

Rollover ratios: Assumptions

Medium- and long-term debt

Public sector 1.6 1.0 1.0 0.9 1.0 0.9

Private sector 1.3 1.6 0.7 1.0 1.0 1.0

Short-term debt 1.0 1.3 0.9 1.0 1.0 1.0

Source: IMF, Central Bank, Credit Suisse

POLAND

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows 4.5 7.4 8.2 0.8 -4.3 0.0





FDI inflows 13.1 14.5 20.4 6.0 -4.0 5.0

Net portfolio equity inflows -0.2 6.9 3.7 2.7 1.2 1.0



Financial derivatives -1.7 -0.8 -0.2 2.9 0.6 0.0

Other items (incl. net errors and omissions) -14.3 -20.7 0.8 -36.7 -8.9 -4.7

Change in reserves (- indicates increase) -17.4 -13.9 -4.4 -11.0 2.7 0.0



Short-term debt 1.2 1.0 0.9 1.0 1.0 1.0

Source: National Bank of Poland, Ministry of Finance, IMF, JEDH, Credit Suisse

06 March 2014


Balance of payments financing needs RUSSIA

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows 44.5 51.7 67.3 65.0 97.0 103.0


Public 2.9 3.2 4.8 2.8 3.0 4.0

Private 60.6 63.9 40.8 53.9 50.1 61.0



FDI inflows 36.8 41.2 52.9 47.0 78.4 75.0

Portfolio investments -2.2 -1.6 -15.0 5.0 -11.7 8.0


Short-term loans 52.7 54.1 45.0 40.0 40.0 40.0

Other flows, including errors and omissions -24.3 -20.6 -52.3 -64.0 -50.0 -15.0

Change in net international reserves (- indicates increase) -3.4 -36.8 -10.4 -32.6 17.0 35.0

Memo items:

Nominal GDP ($ bn) 1,223 1,525 1,899 2,022 2,093 1,915

Source: Central Bank of Russia, IIF, Credit Suisse

SOUTH AFRICA

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows 1.2 -0.1 -0.3 3.0 4.8 0.0


Public 1.2 0.7 0.7 1.7 3.1 2.0

Private 0.9 1.1 1.6 4.9 1.9 3.5

Short-term debt amortization(1) 25.5 21.3 21.8 20.5 27.9 28.5


FDI inflows 7.6 3.6 4.2 4.6 8.3 3.2

Portfolio investments 11.1 10.2 -1.1 6.6 -1.1 2.7

Medium- and long-term borrowing by public sector(2) 6.0 15.5 10.2 17.8 5.2 3.6

Medium- and long-term borrowing by private sector(2) 6.2 12.3 -2.0 -1.0 4.0 5.0

Short-term loans 21.3 21.8 20.5 27.9 28.5 29.2

Other(3) -9.8 -29.1 6.1 -4.6 9.0 7.1

Change in net reserves owing to BOPs (- indicates increase) -2.1 -4.1 -4.7 -1.1 4.6 6.3

Roll-over ratios:


Short-term debt 0.8 1.0 0.9 1.4 1.0 1.0

(1) Includes non-residents' deposits. (2) Estimates based on stock data. (3) Includes residents' portfolio and other investments, transfers and net errors and omissions. Repatriation of $8.6bn from abroad and net errors and omissions of $10.6bn are behind the unusually large figure in 2008.

Source: Reserve Bank, Credit Suisse

06 March 2014


Balance of payments financing needs TURKEY

$bn 2009 2010 2011 2012 2013 2014F




External debt amortization 46.5 43.8 37.6 40.3 43.2 35.5

Public (excluding scheduled payments to the IMF) 5.2 5.8 4.7 5.2 4.5 6.5

Of which: Eurobonds 1.9 2.6 1.8 2.3 1.5 3.1

Of which: Medium-term loans 3.2 3.2 2.9 2.9 3.0 3.4

Private 41.3 38.0 32.9 35.1 38.8 29.0

Banks 7.6 6.7 6.9 9.4 9.1 8.3

Non-bank corporates 33.7 31.2 26.0 25.8 29.7 20.7

FDI outflows 1.6 1.5 2.3 4.1 3.1 3.0

Short-term debt amortization(1) 52.5 49.0 77.3 81.8 100.6 129.1


FDI inflows 8.6 9.1 16.2 13.2 12.7 12.0


Equity 2.8 3.5 -1.0 6.3 0.8 0.5

Local bonds -1.7 10.7 14.8 16.8 4.1 2.0

Eurobonds (government) 3.8 6.7 4.3 7.1 6.1 6.5

Eurobonds (banks and non-bank corporates) 0.0 1.4 3.0 10.2 11.5 5.5

Loans to public sector (non-IMF) 4.8 6.8 5.0 2.8 2.9 3.0

Medium and long-term borrowing by private sector 30.0 33.3 43.3 39.5 48.2 29.8

Banks 6.0 7.6 12.6 9.6 18.6 9.1

Non-bank corporates 24.0 25.7 30.7 29.9 29.6 20.7

Short-term loans 49.0 77.3 81.8 100.6 129.1 142.0

Other(2) 16.1 5.9 26.0 1.0 7.2 3.5

Change in net reserves (- indicates increase) -0.8 -15.0 -1.0 -22.8 -10.8 8.2

Change in gross reserves (- indicates increase) -0.1 -12.8 1.8 -20.8 -9.9 8.2

IMF (net) -0.7 -2.2 -2.8 -2.0 -0.9 0.0

Principal payments to the IMF -0.7 -2.2 -2.8 -2.0 -0.9 0.0

Loans from the IMF 0.0 0.0 0.0 0.0 0.0 0.0


Medium- and long-term debt – Banks 0.78 1.13 1.82 1.03 2.05 1.10

Medium- and long-term debt – Non-bank corporates 0.71 0.82 1.18 1.16 1.00 1.00

Short-term debt 0.93 1.58 1.06 1.23 1.28 1.10

(1) Short-term debt amortizations are based on the debt stock figures from a year ago; they include the non-residents' deposits. (2) All flows that are not specified above, including residents' portfolio and other investments abroad, and net errors/omissions.

Source: Central Bank, Credit Suisse

06 March 2014


Balance of payments financing needs UKRAINE

$bn 2009 2010 2011 2012 2013 2014F




External debt amortization 17.4 19.2 23.7 23.2 19.7 23.5

Public 3.0 3.3 5.1 6.3 6.4 4.7

Private 14.4 15.9 18.6 16.9 13.3 18.8

FDI outflows 0.2 0.7 0.2 0.5 0.5 0.5

Short-term debt 21.3 18.4 25.6 32.7 33.2 33.1


FDI inflows 4.8 6.5 7.2 8.5 3.8 3.5



including the sovereign's Eurobond issuance 0.0 2.0 2.8 4.9 6.0 0.0

Short-term borrowing and other flows 18.4 25.6 32.7 33.2 33.1 31.2

Other (including multilateral financing and arrears) 6.9 2.5 0.0 0.0 3.4 13.0

Change in international reserves (- indicates increase) 5.7 -8.5 2.5 4.2 5.7 -1.9

Memo items:

Nominal GDP ($ bn) 113.7 128.4 163.1 174.3 178.9 143.4

Source: Central bank, IMF, Credit Suisse

06 March 2014


Balance of payments financing needs EMERGING ASIA

CHINA $bn 2009 2010 2011 2012 2013 2014F


Funding need (excluding short-term debt amortization) -168.8 -145.5 -54.6 -99.0 -90.3 -133.1


FDI outflows 43.9 58.0 48.4 62.4 67.4 70.9




FDI inflows 131.1 243.7 280.1 253.5 238.2 231.9

Net portfolio inflows 27.1 24.0 19.6 47.8 49.4 43.1

Short term debt borrowing 259.3 375.7 500.9 540.9 577.2 537.9

Medium- and long-term borrowings 36.1 38.2 53.9 33.7 34.9 36.1

Other capital flows / errors and omissions 4.3 -96.1 -145.6 -377.5 -5.7 -159.6

Changes in reserves (- indicates increase) -400.3 -471.7 -387.8 -96.6 -431.4 -223.4

Source: People’s Bank of China, Credit Suisse

HONG KONG $bn 2009 2010 2011 2012 2013 2014F




FDI outflows 57.9 98.0 95.7 83.5 83.9 84.1




FDI inflows 54.3 82.4 95.9 74.2 74.4 74.6

Net portfolio inflows -40.0 -56.7 -1.4 -1.6 -4.6 -4.4

Short-term loans 497.3 647.3 714.9 747.9 760.7 767.1

Medium- and long-term borrowings 16.5 2.9 39.6 14.6 10.7 14.1

Other capital flows / errors & omissions 69.8 -79.6 -95.1 -3.5 19.7 22.8


Source: Census and Statistics Department, Credit Suisse

INDIA* $bn 2009 2010 2011 2012 2013 2014F




FDI outflows 14.4 16.5 10.9 7.1 6.0 7.0

Portfolio outflows 0.0 1.2 0.2 0.9 2.0 0.5


Short-term debt at beginning of period 43.3 52.3 64.9 78.2 96.7 100.0


FDI inflows 33.1 25.9 33.0 27.0 27.0 30.0


Medium- and long-term debt disbursements 61.0 67.6 63.0 85.0 91.4 85.0

Short-term borrowing 53.6 75.7 65.0 109.3 80.0 80.0

Other capital inflows -4.0 -9.0 2.4 14.3 12.0 8.0

Errors and omissions 4.3 7.9 -2.4 2.7 2.5 2.5

Change in reserves (- indicates increase) -24.9 -26.4 11.1 2.4 -3.0 5.0

* Years are fiscal years beginning April. For instance 2010 is April 2010 to March 2011.

Source: Reserve Bank of India, Credit Suisse

06 March 2014


Balance of payments financing needs INDONESIA

$bn 2009 2010 2011 2012 2013 2014F



Current account deficit -10.7 -5.1 -1.7 24.4 27.6 23.4


FDI outflows 2.2 2.7 7.7 5.4 3.7 4.0

Portfolio outflows 0.1 2.5 1.2 5.5 1.3 7.0

Short-term debt (original maturity) at beginning of period 20.5 24.0 33.0 38.2 44.3 47.4

Unclassified capital outflows and E&O -3.0 -1.5 -3.4 -0.3 -1.6 0.0


FDI inflows 4.9 13.8 19.2 19.1 18.4 18.0


Portfolio equity inflows 0.8 2.1 -0.3 1.7 -1.8 2.0

Portfolio debt inflows 9.7 13.6 5.3 13.0 13.0 5.0

Loan disbursements 1.9 0.1 3.2 1.2 1.7 2.0

Short-term debt inflows 24.0 25.4 35.0 30.0 50.0 55.0

Other inflows -11.0 0.7 9.8 32.7 4.0 31.2

Change in reserves (- indicates increase) -14.5 -30.1 -13.9 -2.7 13.4 3.6

Memo items:

BI FX reserves, including valuation changes 66.1 96.2 110.1 112.8 99.4 95.8

ST external debt (remaining maturity) 37.6 42.7 59.5 74.6 78.9 89.4

Central bank FX reserves-to-ST external debt (%) 275.0 291.0 288.0 255.0 210.0 174.2

Rollover ratios (ST debt, times)* 1.17 1.06 1.06 0.79 1.13 1.16

*1998-2003 BOP data were based on old classification. Short-term debt figures came from IMF 2008 Article IV Consultation report published September 2008 on Indonesia.

Source: Bank Indonesia, CEIC, Credit Suisse

KOREA

$bn 2009 2010 2011 2012 2013 2014F


Funding need (excluding short-term debt amortization) 14.9 27.6 29.5 11.7 -14.7 -2.7


FDI outflows 17.2 23.3 21.2 24.6 19.9 21.9




FDI inflows 2.2 1.1 4.8 5.6 6.8 9.8

Net portfolio inflows 49.7 42.5 13.1 6.9 -6.9 -7.9

Short-term loans 153.3 159.2 154.4 147.4 138.0 132.1

Medium- and long-term borrowings 1.3 5.4 11.5 -13.1 -6.5 -8.5

Other capital flows / errors and omissions 26.9 -4.5 -1.1 15.4 -4.9 -0.2


Source: Bank of Korea, Credit Suisse

06 March 2014


Balance of payments financing needs MALAYSIA

$bn 2009 2010 2011 2012 2013 2014F




FDI outflows -7.9 -13.4 -15.0 -16.5 -12.9 -12.0

Other investment outflows 16.5 16.8 -0.4 15.0 11.0 12.0

Short-term external debt (beginning of period) 23.0 22.6 25.9 33.0 40.0 45.0

Other and unclassified items 12.2 38.9 32.9 23.9 40.1 18.8


FDI inflows 1.4 9.1 12.1 9.4 11.6 10.0

Net portfolio inflows 0.2 15.1 8.7 10.0 15.0 11.0

Short-term external borrowing 22.6 25.9 33.0 40.0 45.0 40.0

Change in net reserves (- indicates increase) -3.9 0.8 -27.1 -6.1 7.7 4.0

Memo items:

BNM FX reserves, including forward purchases 96.7 106.5 133.6 139.7 132.0 128.0

Short-term external debt (end of period) 22.6 25.9 33.0 40.0 45.0 40.0

Medium- and long-term external debt 45.3 48.2 48.0 50.0 52.0 53.0

Actual and assumed debt rollover ratios (short-term debt, times) 1.0 1.1 1.3 1.2 1.1 0.9

Source: Bank Negara Malaysia, CEIC, Credit Suisse

PHILIPPINES

$bn 2009 2010 2011 2012 2013 2014F


Funding need (excluding short-term debt amortization) -2.6 -1.7 0.6 0.7 -4.4 -0.3


FDI outflows 0.4 0.6 0.3 1.1 1.2 1.0

Medium and long-term external debt amortization* 4.2 3.7 5.5 4.2 4.2 4.2

Public sector 1.3 1.4 1.6 1.5 1.8 1.8

Private sector 2.9 2.3 3.9 2.6 3.4 3.4

Resident lending abroad 1.6 -3.0 -2.0 0.3 0.0 0.2

Currency and deposit outflows -4.6 2.2 3.6 1.4 1.4 1.8

Trade credits and unclassified items 5.6 4.3 0.7 2.0 1.0 1.0

Funding sources (including net short-term borrowing) 4.4 2.3 6.9 7.8 4.1 7.2

FDI inflows 2.0 1.3 1.9 2.0 3.3 4.2

Portfolio inflows -0.6 4.4 4.4 3.5 3.5 3.5

Equity -1.1 0.5 1.0 1.5 2.3 2.3

Debt 0.5 3.9 3.4 2.0 1.2 1.2

Medium- and long-term external borrowing 4.0 5.8 4.8 3.8 2.3 2.3

of which: government 2.2 1.4 1.7 1.4 1.5 1.6

Net short-term borrowing (including by the BSP) -0.6 -0.2 0.1 0.0 -2.5 -1.0

Change in reserves (- indicates increase) -0.3 -9.0 -4.3 -1.6 -2.5 -1.8

Memo items:

BSP FX spot reserves 44.2 62.3 75.3 83.8 83.2 82.0

Short-term external debt (original maturity, eop) 4.0 6.3 7.0 8.5 7.5 7.5

Central bank FX reserves-to-short-term external debt (%) 1105 990 1074 988 1109 1093

*Including external debt pre-payments.

Source: BSP, CEIC, IIF, Credit Suisse

06 March 2014


Balance of payments financing needs TAIWAN

$bn 2009 2010 2011 2012 2013 2014F


Funding need (excluding short-term debt amortization) -37.5 -23.5 -19.2 -30.7 -36.7 -32.6


FDI outflows 5.9 11.6 12.8 13.1 14.3 14.3

Medium- and long-term debt amortization -0.5 4.8 9.7 6.8 6.3 6.8



FDI inflows 2.8 2.5 -2.0 3.2 4.0 4.0

Net portfolio inflows -10.3 -20.7 -35.7 -42.1 -29.2 -29.2

Short-term loans 84.2 84.2 87.9 119.6 125.1 139.8

Medium- and long-term borrowings 5.4 -0.2 -5.2 -5.1 -7.0 -7.5

Other capital flows / errors and omissions 13.4 19.0 25.6 16.9 -8.1 -1.7


Source: Central Bank of China, Credit Suisse

THAILAND

$bn 2009 2010 2011 2012 2013 2014F

Funding need (including short-term debt amortization) -29.5 5.8 15.3 44.2 44.8 24.1

Funding need (excluding short-term debt amortization) -39.0 -8.6 1.8 26.9 27.1 7.0

Current account deficit -21.9 -10.0 -5.9 -0.2 2.8 -6.8

FDI outflows 4.2 4.6 8.2 12.1 6.0 6.0


Government 1.0 0.9 1.3 0.7 1.0 1.5

SOEs and private sector 9.7 8.5 7.6 5.5 5.0 4.0

Short-term external debt (beginning of period) 9.5 14.5 13.5 17.3 17.7 17.1

Resident lending abroad -1.9 5.6 7.7 8.9 8.0 8.0

Currency and deposit outflows 2.0 0.5 -6.4 -4.3 -4.3 -4.3

Trade credits, unclassified items, residual -29.5 -18.7 -10.7 4.2 8.6 -1.4

Funding sources (including gross short-term borrowing) -29.5 5.8 15.3 44.2 44.8 24.1

FDI inflows 4.9 9.1 7.8 10.2 12.5 12.5


Asset (resident flows) 0.0 0.0 0.0 0.0 0.0 0.0

Equity (nonresident flows) 1.7 3.2 0.9 3.6 3.0 4.0

Debt (nonresident flows) 1.0 5.9 3.6 10.3 10.0 12.0

External borrowing (excluding short-term borrowing) -0.8 25.2 6.1 26.6 8.3 -11.6

Government 0.6 -4.4 5.6 5.5 -4.1 2.0

SOEs and private sector -1.4 29.6 0.5 21.1 12.4 -13.6

Short-term external borrowing 33.1 17.5 -3.4 13.4 1.4 -2.0

Change in net reserves (- indicates increase) -36.3 -37.6 -3.0 -6.5 10.9 7.2

Memo items:

BoT FX reserves, including forward purchases 154.1 191.7 194.7 201.2 190.2 183.0

Short-term external debt (end of period) 33.1 50.7 47.3 60.6 62.0 60.0

Total external debt 75.3 100.5 106.6 133.2 141.5 129.9

Government debt 15.4 11.0 16.6 22.1 18.0 20.0

SOEs and private sector 59.9 89.5 90.0 111.1 123.5 109.9

Actual and assumed rollover ratios (medium- and long-term debt) 1.5 1.2 1.3 1.4 1.6 1.6

Actual and assumed rollover ratios (short-term debt) 3.5 3.3 3.0 3.4 3.6 3.6

Source: Bank of Thailand, Credit Suisse

06 March 2014


Government funding needs LATIN AMERICA

ARGENTINA 2011 2012 2013 2014F

$ bn % of GDP $ bn % of GDP $ bn % of GDP $ bn % of GDP

Total borrowing requirements 33.4 7.5 41.9 8.8 45.5 9.4 41.2 11.3

Overall fiscal deficit* 7.4 1.7 12.2 2.6 11.8 2.4 10.6 2.9

Primary fiscal deficit -1.2 -0.3 0.9 0.2 4.1 0.9 2.6 0.7

Interest payments 8.6 1.9 11.3 2.4 7.7 1.6 8.0 2.2

Total amortization payments on medium- and long-term debt 25.9 5.8 29.7 6.3 33.7 7.0 30.6 8.4

Domestic debt 16.9 3.8 21.1 4.4 27.5 5.7 24.9 6.9

External debt 9.0 2.0 8.6 1.8 6.2 1.3 5.7 1.6

Funding sources 33.4 7.5 41.9 8.8 45.5 9.4 41.2 11.3

Central bank FX reserves 7.5 1.7 5.7 1.2 8.0 1.7 9.9 2.7

IFIs 2.1 0.5 2.2 0.5 2.2 0.5 2.3 0.6

International capital markets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Debt operations with public sector entities (including roll over) 23.8 5.3 34.0 7.2 35.3 7.3 29.0 8.0

*Federal government

BRAZIL 2011 2012 2013 2014F



Overall fiscal deficit 64.0 2.6 55.3 2.5 73.3 3.3 91.0 4.3

Primary fiscal deficit -77.8 -3.1 -55.1 -2.4 -42.6 -1.9 -27.2 -1.3


Debt amortization 228.8 9.2 183.1 8.1 207.1 9.2 217.4 10.2

Domestic debt 221.4 8.9 179.4 8.0 201.0 9.0 215.0 10.1

External debt 7.4 0.3 3.7 0.2 6.2 0.3 2.4 0.1

Funding sources 292.8 11.8 238.4 10.6 280.4 12.5 308.4 14.5

New privatization proceeds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Transfer of privatization proceeds from previous year 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

External bonds 1.7 0.1 3.9 0.2 0.8 0.0 2.5 0.1

IFIs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Project finance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Domestic debt issuance 291.2 11.8 234.5 10.4 279.6 12.5 305.9 14.4

CHILE 2011 2012 2013 2014F


Total borrowing requirements -2.9 -1.2 -0.8 -0.3 1.7 0.6 1.6 0.6

Overall fiscal deficit -3.2 -1.3 -1.6 -0.6 1.7 0.6 0.8 0.3

Primary fiscal deficit -4.5 -1.8 -2.9 -1.1 0.0 0.0 -0.8 -0.3



Domestic debt 0.2 0.1 0.0 0.0 0.0 0.0 0.8 0.3

External debt 0.1 0.0 0.8 0.3 0.0 0.0 0.0 0.0

Funding sources -3.0 -1.2 -0.8 -0.3 1.7 0.6 1.6 0.6

Domestic -5.0 -2.0 0.0 0.0 1.7 0.6 0.6 0.2

External* 2.0 0.8 -0.8 -0.3 0.0 0.0 1.0 0.4

*Includes resources from the Economic and Social Stabilization Fund and debt placements.

06 March 2014


Government funding needs COLOMBIA 2011 2012 2013 2014F




Primary fiscal deficit 0.4 0.1 -0.9 -0.2 0.2 0.0 -0.4 -0.1


Quasi fiscal deficit 0.0 0.0 0.0 0.0 0.5 0.1 0.6 0.2

FEPC debt** 0.0 0.0 0.0 0.0 0.0 0.0 1.6 0.4


Domestic debt 7.4 2.2 9.1 2.4 9.7 2.6 9.0 2.4

External debt 1.2 0.3 1.9 0.5 1.5 0.4 2.4 0.6

Treasury operations 4.8 1.4 3.3 0.9 0.2 0.0 0.0 0.0

Final availability 3.6 1.1 1.1 0.3 0.5 0.1 1.1 0.3

Funding sources 26.5 7.9 23.9 6.5 21.3 5.6 23.4 6.2

IFIs 1.1 0.3 0.8 0.2 1.0 0.3 2.0 0.5

External bonds 2.0 0.6 1.7 0.5 1.6 0.4 2.0 0.5

Domestic financing 15.9 4.7 14.1 3.8 15.5 4.1 14.9 3.9

Initial availability 4.4 1.3 3.6 1.0 1.1 0.3 1.8 0.5

Treasury operations 1.0 0.3 2.0 0.5 0.0 0.0 2.1 0.6

Privatizations and other 2.1 0.6 1.8 0.5 2.1 0.5 0.7 0.2

*Central government, **Fuel Price Stabilization Fund

MEXICO 2011 2012 2013 2014F




Primary fiscal deficit 7.0 0.6 8.3 0.7 4.3 0.4 15.2 1.1



Domestic debt 57.4 4.9 60.6 5.1 69.2 5.6 77.2 5.6

External debt 2.3 0.2 4.8 0.4 3.7 0.3 3.8 0.3

Funding sources 89.1 7.6 98.0 8.3 104.2 8.5 127.8 9.3

Domestic 84.4 7.2 90.9 7.7 98.4 8.0 114.0 8.3

External 4.7 0.4 7.1 0.6 5.8 0.5 13.8 1.0

PERU 2011 2012 2013 2014F**


Total borrowing requirement -2.4 -1.3 -2.5 -1.2 1.4 0.7 1.0 0.5

Overall fiscal deficit* -3.5 -2.0 -3.9 -2.0 -1.4 -0.7 -0.3 -0.2




External 0.3 0.2 0.2 0.1 0.4 0.2 0.3 0.1

Domestic 0.8 0.5 1.2 0.6 2.4 1.2 1.0 0.5

Funding sources -2.4 -1.3 -2.5 -1.2 1.4 0.7 1.0 0.5

Domestic Debt -3.4 -1.9 -3.4 -1.7 1.0 0.5 0.6 0.3

External bonds 0.0 0.0 0.5 0.3 0.0 0.0 0.0 0.0

IFIs & Paris Club 1.0 0.6 0.4 0.2 0.4 0.2 0.4 0.2

* General government, **Excluding refinancing operations with IFIs & Paris Club

06 March 2014


Government funding needs VENEZUELA 2011 2012 2013 2014F


Total borrowing requirement 41.7 13.2 49.0 12.9 46.0 12.6 29.5 10.1





External 4.7 1.5 0.7 0.2 3.3 0.9 5.5 1.9

Domestic 0.4 0.1 0.7 0.2 0.6 0.2 0.2 0.1

Funding sources 41.7 13.2 49.0 12.9 46.0 12.6 29.5 10.1

Dollar denominated debt-placements 17.6 5.6 3.0 0.8 4.5 1.2 5.0 1.7

Bolivar denominated debt placements 14.8 4.7 17.9 4.7 25.0 6.8 22.5 7.7

Public sector external assets 9.2 2.9 28.2 7.4 16.5 4.5 2.0 0.7

*Consolidation of Central Government, PDVSA, Non-Financial Public Enterprises, Venezuelan Social Security Institute and Deposit and Guarantee Fund.

Source: National authorities, Credit Suisse

06 March 2014


Government funding needs EASTERN EUROPE, MIDDLE EAST & AFRICA

CZECH REPUBLIC 2011 2012 2013 2014F



General government budget deficit ESA95 6.9 3.2 8.6 4.4 5.4 2.7 5.9 3.0

Primary deficit 3.9 1.8 5.7 2.9 2.4 1.2 3.0 1.5



CZK-denominated bonds (incl. retail securities) 5.8 2.7 6.4 3.3 6.0 3.0 7.3 3.7

FX-denominated debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Stock of T-bills at the beginning of the period 6.1 2.8 8.3 4.2 10.0 5.0 6.1 3.1

Funding sources 18.8 8.7 23.3 11.9 21.4 10.7 19.3 9.8

Bond issuance 11.5 5.3 14.1 7.2 9.5 4.8 14.0 7.1

CZK-denominated bonds (incl. retail securities) 11.4 5.3 10.6 5.4 9.5 4.8 11.0 5.6

FX-denominated bonds 0.1 0.0 3.5 1.8 0.0 0.0 3.0 1.5

Stock of T-bills at the end of the period 8.3 3.8 10.0 5.1 6.1 3.1 6.0 3.0

Other international financing (incl. EIB loans) 0.2 0.1 0.0 0.0 0.1 0.1 0.0 0.0

Change in government cash reserves (- indicates increase) 2.4 1.1 -2.7 -1.4 5.0 2.5 -0.7 -0.3

Other sources / change in public assets (- indicates increase) -3.6 -1.7 1.9 1.0 0.7 0.3 0.0 0.0

Memo item:

GDP ($bn) 216.3 196.4 199.5 197.6

HUNGARY 2011 2012 2013 2014F


Total borrowing requirements* 27.1 19.7 19.3 15.5 33.4 24.0 32.2 23.1

General government budget deficit** 7.7 5.6 2.5 2.0 3.3 2.4 5.6 4.0

Primary deficit (- indicates surplus) 1.9 1.4 -2.7 -2.2 -2.5 -1.8 -0.3 -0.2


Debt amortization and redemptions 11.4 8.3 10.1 8.1 21.1 15.2 17.5 12.5

HUF-denominated bonds (incl. retail securities) 5.9 4.3 4.0 3.2 11.3 8.1 10.4 7.4

FX-denominated debt (incl. EU/IMF repayment) 5.5 4.0 6.1 4.9 9.8 7.0 7.1 5.1


Funds used for asset purchases 2.6 1.9 na na na na na na

Additional debt reduction due to pension reform 6.8 5.0 na na na na na na

Funding sources 36.5 26.6 19.3 15.5 33.4 24.0 32.2 23.1

Bond issuance 15.3 11.1 9.7 7.8 23.9 17.2 20.0 14.3

HUF-denominated bonds (incl. retail securities) 9.5 6.9 9.7 7.8 15.1 10.9 15.0 10.7

FX-denominated bonds (incl. on domestic market) 5.8 4.2 0.0 0.0 8.8 6.3 5.0 3.6


Other international financing (incl. IFI loans) 0.0 0.0 0.0 0.0 1.0 0.7 1.0 0.7

Change in government cash reserves (- indicates increase) -0.6 -0.4 -0.5 -0.4 2.8 2.0 1.0 0.7

Other sources / change in public assets (- indicates increase) 0.5 0.4 1.1 0.9 -3.4 -2.4 0.2 0.1

Transfers from private pension funds 14.7 10.7 na na na na na na

Memo item:

GDP ($bn) 137.5 124.6 139.1 139.6

*Excluding additional debt reduction due to pension reform; **Excluding one-off transfers from pension funds to the government.

06 March 2014


Government funding needs ISRAEL 2011 2012 2013 2014F





Interest payments* 12.5 4.8 12.2 4.7 13.2 4.5 13.8 4.4


Domestic 20.7 8.0 18.2 7.1 15.2 5.2 17.9 5.7

External 1.4 0.5 3.4 1.3 3.4 1.2 1.1 0.4

Funding sources 30.1 11.6 31.7 12.3 27.7 9.5 28.5 9.1

Bond issuance 25.6 9.9 32.4 12.6 32.7 11.2 30.1 9.5

Domestic 24.1 9.3 29.4 11.4 29.2 10.0 29.0 9.2

External 1.5 0.6 3.0 1.2 3.5 1.2 1.1 0.3

Privatization 2.0 0.8 0.2 0.1 0.3 0.1 0.9 0.3

Other domestic financing 1.4 0.6 -0.1 0.0 -3.3 -1.1 -2.4 -0.8

Change in cash reserves** (- indicates increase) 1.1 0.4 -0.8 -0.3 -1.9 -0.7 0.0 0.0

Memo item:

GDP ($bn) 258.2 257.6 291.7 314.9

*Including repayment of loans to National Insurance Institute.**Positive/negative number indicates a decline/increase in the government’s cash reserves.

POLAND 2011 2012 2013 2014F


Total borrowing requirements* 62.2 12.1 55.5 11.3 56.2 10.5 47.5 8.5

General government budget deficit** 25.8 5.0 19.1 3.9 23.5 4.4 22.2 4.0

Primary deficit 11.9 2.3 5.4 1.1 9.6 1.8 7.8 1.4



PLN-denominated bonds 25.0 4.8 28.5 5.8 25.6 4.8 19.3 3.5

FX-denominated debt (incl. IFI loan repayments) 2.0 0.4 4.4 0.9 5.1 1.0 6.0 1.1


Additional debt reduction due to pension reform na na na na na na 42.5 7.6

Funding sources 62.2 12.1 55.5 11.3 56.2 10.5 90.1 16.2

Bond issuance 43.2 8.4 53.6 10.9 43.2 8.1 45.0 8.1

PLN-denominated bonds 36.3 7.0 42.6 8.7 39.9 7.5 40.0 7.2

FX-denominated bonds 6.9 1.3 11.0 2.2 3.3 0.6 5.0 0.9


Other international financing (incl. IFI loans) 3.1 0.6 1.5 0.3 3.6 0.7 0.0 0.0

Change in government cash reserves (- indicates increase) -5.6 -1.1 -3.0 -0.6 5.2 1.0 -2.5 -0.4

Other sources / change in public assets (- indicates increase) 18.0 3.5 1.4 0.3 4.2 0.8 -2.5 -0.5

Transfers from private pension funds na na na na na na 50.1 9.0

Memo item:

GDP ($bn) 515.8 489.9 533.9 556.2

*Excluding additional debt reduction due to pension reform; **Excluding one-off transfers from pension funds to the government.

06 March 2014


Government funding needs RUSSIA 2011 2012 2013 2014F


Total borrowing requirement -2.3 -0.1 22.4 1.1 26.6 1.3 12.1 0.6

Overall fiscal deficit* -14.7 -0.8 0.4 0.0 9.7 0.5 1.0 0.1




Domestic 10.9 0.6 19.5 1.0 14.8 0.7 9.0 0.5

External 1.5 0.1 2.5 0.1 2.0 0.1 2.1 0.1

Funding sources -2.3 -0.1 22.4 1.1 26.6 1.3 12.1 0.6

Bond issuance 47.1 2.5 36.2 1.8 32.8 1.5 17.6 0.9

Domestic 47.1 2.5 29.5 1.5 25.7 1.2 10.6 0.5

External 0.0 0.0 7.0 0.3 7.1 0.3 7.0 0.4

Privatization 4.3 0.2 17.6 0.9 1.3 0.1 5.5 0.3

Other domestic financing -9.9 -0.5 -2.4 -0.1 2.3 0.1 -2.1 -0.1

Other international financing -3.6 -0.2 -4.0 -0.2 -3.5 -0.2 -0.9 0.0

Change in cash reserves (- indicates increase) -40.2 -2.2 -25.1 -1.2 -6.3 -0.3 -7.9 -0.4

Including change in Reserve fund -39.9 -2.1 -23.1 -1.1 -6.3 -0.3 -7.9 -0.4

Memo item:

GDP ($bn) 1,899 2,022 2,093 1,915

*Excluding bank recapitalization

SOUTH AFRICA* 2011 2012 2013 2014F


Consolidated budget borrowing requirements 37.1 9.3 41.8 11.1 38.4 11.2 38.3 11.5




Debt amortizations 22.3 5.6 25.8 6.9 24.7 7.2 24.3 7.3

Domestic debt 2.1 0.5 3.8 1.0 2.0 0.6 3.1 0.9

T-bill stock at the end of the previous year 19.7 4.9 20.7 5.5 20.8 6.1 19.9 6.0

External debt 0.5 0.1 1.4 0.4 1.9 0.6 1.3 0.4

Funding sources 37.1 9.3 41.8 11.1 38.4 11.2 38.3 11.5

External 1.6 0.4 0.0 0.0 1.9 0.6 1.4 0.4

Domestic debt 15.8 4.0 21.1 5.6 15.7 4.6 17.0 5.1

T-bills 22.4 5.6 16.5 4.4 19.3 5.6 20.8 6.2

Net extraordinary receipts 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Change in cash reserves (- indicates increase) -2.9 -0.7 4.1 1.1 1.6 0.5 -0.9 -0.3

Memo item:

GDP ($bn), fiscal year* 400.3 375.9 341.6 333.9

*Fiscal year starting on 1 April of the year specified in the column heading.

06 March 2014


Government funding needs TURKEY 2011 2012 2013 2014F







Government bonds 52.5 6.8 46.9 5.9 65.4 7.8 53.3 6.7

External debt 6.9 0.9 6.6 0.8 4.5 0.5 5.2 0.7


Funding sources 80.8 10.4 77.9 9.9 90.9 10.8 80.0 10.0

Bond issuance 71.6 9.2 61.7 7.8 80.4 9.6 69.9 8.8

Domestic 67.3 8.7 54.6 6.9 74.3 8.9 63.4 8.0

External 4.3 0.6 7.1 0.9 6.1 0.7 6.5 0.8

T-bill issuance 0.0 0.0 2.1 0.3 0.0 0.0 0.0 0.0

Other domestic financing 9.7 1.3 11.9 1.5 14.8 1.8 10.0 1.2

Other international financing 1.3 0.2 0.5 0.1 1.0 0.1 0.2 0.0

Change in cash reserves (- indicates increase) -1.8 -0.2 1.8 0.2 -5.2 -0.6 0.0 0.0

Memo item:

GDP ($bn) 777.1 789.8 838.8 796.4

* The difference between the overall fiscal deficit figures here and the central government budget deficit figures presented in the Selected Economic Indicators table for Turkey is due to interest revenues. The government's interest revenues are included in other financing in this presentation.

UKRAINE 2011 2012 2013 2014F






Total amortization payments 5.7 3.5 7.2 4.1 8.7 4.9 6.2 4.3

Domestic debt 4.0 2.4 3.7 2.1 4.0 2.2 2.7 1.9

External debt** 1.7 1.0 3.5 2.0 4.7 2.6 3.6 2.5

Naftogaz operational deficit 2.5 1.5 3.5 2.0 2.0 1.1 1.5 1.0

Funding sources 12.6 7.7 17.1 9.8 18.2 10.2 12.8 8.9

External 3.4 2.1 4.9 2.8 6.0 3.4 3.6 2.5

Domestic financing sources, of which 7.7 4.7 11.0 6.3 11.7 6.5 5.8 4.0

Gross domestic borrowing 7.9 4.8 10.0 6.5 10.9 6.1 5.8 4.0

Drawdowns on fiscal deposits -0.2 -0.1 1.0 0.6 0.8 0.4 -0.1 -0.1

Privatization 1.4 0.9 1.2 0.7 0.5 0.3 1.2 0.8

Memo item:

GDP ($bn) 163.1 174.3 178.9 143.4

*Excluding bank recapitalization costs. **Net of central bank's repayments to the IMF.

06 March 2014


Government funding needs NON-JAPAN ASIA

CHINA 2011 2012 2013 2014F







Domestic 397.8 5.5 414.1 5.0 427.4 4.6 501.0 5.0

External 0.3 0.0 0.3 0.0 0.4 0.0 0.4 0.0

Funding sources 478.1 6.6 541.7 6.6 616.4 6.7 674.8 6.7

Domestic 478.1 6.6 541.7 6.6 616.4 6.7 674.8 6.7

Memo items:

GDP ($bn) 7,295.0 8,260.0 9,246.5 10,048.9

Average exchange rate (USDCNY) 6.5 6.3 6.2 6.1

HONG KONG 2011 2012 2013 2014F


Total borrowing requirement -9.3 -3.7 -8.1 -3.1 -1.5 -0.6 -2.4 -0.8

Overall fiscal deficit -9.4 -3.8 -8.3 -3.2 -1.5 -0.6 -2.4 -0.8




Domestic 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

External 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Government bond program 0.2 0.1 0.2 0.1 0.0 0.0 0.0 0.0

Funding sources -9.3 -3.7 -8.1 -3.1 -1.5 -0.6 -2.4 -0.8

Drawdown on fiscal reserves -9.4 -3.8 -8.3 -3.2 -1.5 -0.6 -2.4 -0.8

Domestic debt issuance 0.2 0.1 0.2 0.1 0.0 0.0 0.0 0.0

Memo items:

Fiscal reserves (year-end, $bn) 84.3 92.7 94.2 96.6

GDP ($bn) 248.0 261.2 272.1 287.4

Average exchange rate (USDHKD) 7.8 7.8 7.8 7.8

INDIA* 2011 2012 2013 2014F



General Government fiscal deficit (incl. disinvestment proceeds) 152.0 8.1 132.4 7.2 132.7 7.1 146.7 7.2

o/w Central government fiscal deficit (incl. disinvestment proceeds) 107.0 5.7 89.3 4.8 86.0 4.6 95.8 4.7

Primary fiscal balance 49.2 2.6 32.4 1.8 29.9 1.6 32.6 1.6



Funding sources 207.0 11.0 190.0 10.3 193.0 10.3 205.0 10.1

Domestic 197.0 10.5 175.0 9.5 180.0 9.6 185.0 9.1

Debt issuance 172.0 9.2 160.0 8.7 165.0 8.8 170.0 8.3

Others(1) 25.0 1.3 15.0 0.8 15.0 0.8 15.0 0.7

Foreign Borrowings(2) 10.0 0.5 15.0 0.8 13.0 0.7 20.0 1.0

Memo items:

GDP ($bn) 1876 1844 1869 2038

Average exchange rate (USDINR) 47.9 54.4 60.5 63.3

Disinvestment proceeds(3) 0.8 0.0 6.0 0.3 4.0 0.2 4.0 0.2

* Fiscal year beginning April. For instance, 2010 is April 2010 to March 2011. (1) 'Others' includes small savings, state provident funds and changes in cash. (2) Foreign borrowings are net of repayments. (3) The central government has decided to include proceeds from disinvestments as revenue in calculating the fiscal deficit. Proceeds are to be used to fund certain social sector schemes that lead to capital formation. This is effective from 2009.

06 March 2014


Government funding needs INDONESIA 2011 2012 2013 2014F




Primary fiscal deficit -1.0 -0.1 5.6 0.6 7.5 0.9 6.0 0.7


Amortization 12.0 1.4 14.0 1.6 15.0 1.8 16.0 1.9

Loans 7.0 0.8 7.0 0.8 8.0 1.0 8.0 1.0

Securities 5.0 0.6 7.0 0.8 7.0 0.8 8.0 1.0

Funding sources 21.6 2.6 30.3 3.4 33.0 3.9 35.0 4.2

Loans 8.1 1.0 8.6 1.0 8.0 1.0 8.0 1.0

Program loans 3.0 0.4 3.5 0.4 3.5 0.4 3.5 0.4

Project loans 5.1 0.6 5.1 0.6 4.5 0.5 4.5 0.5

Bond Issuances 16.0 1.9 23.0 2.6 26.0 3.1 28.0 3.4

Of which: foreign 3.0 0.4 2.5 0.3 2.0 0.2 2.0 0.2

Standby loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Change in other assets (-indicates increase) -2.5 -0.3 -1.3 -0.1 -1.0 -0.1 -1.0 -0.1

Memo items:

GDP ($bn) 845.4 876.9 836.3 835.4

Average exchange rate (USDIDR) 8,776 9,384 10,863 12,075

KOREA 2011 2012 2013 2014F




Primary deficit -9.1 -0.8 -10.6 -0.9 0.1 0.0 -0.7 -0.1



Domestic 51.6 4.6 54.5 4.7 59.4 5.0 63.2 4.9

External 4.8 0.4 4.4 0.4 4.5 0.4 4.6 0.4

Funding sources 73.2 6.6 75.6 6.6 75.8 6.3 79.4 6.1

Domestic 67.7 6.1 70.6 6.1 70.8 5.9 74.2 5.7

External 5.5 0.5 5.0 0.4 5.0 0.4 5.2 0.4

Memo items:

GDP ($bn) 1114.8 1,148.0 1,198.6 1,295.5

Average exchange rate (USDKRW) 1,108.0 1,108.4 1,094.2 1,055.2

MALAYSIA 2011 2012 2013 2014F







Domestic 15.3 5.5 12.3 4.1 14.3 4.5 12.1 3.7

External 1.9 0.7 1.9 0.6 1.9 0.6 1.8 0.6

Funding sources 30.6 11.0 27.8 9.2 28.7 9.1 25.3 7.8

Domestic bonds issuance 29.5 10.6 26.9 8.9 25.4 8.0 19.0 5.9

External loans 2.0 0.7 1.8 0.6 1.7 0.5 1.3 0.4

Change in cash (- indicates increase) -1.0 -0.4 -0.8 -0.3 1.5 0.5 4.9 1.5

Memo items:

GDP ($bn) 279.0 303.5 316.6 324.9

Average exchange rate (USDMYR) 3.06 3.09 3.17 3.35

06 March 2014


Government funding needs PHILIPPINES 2011 2012 2013 2014F







Domestic 7.0 3.1 9.0 3.6 9.2 3.4 5.6 2.0

External 3.4 1.5 3.0 1.2 3.5 1.3 2.8 1.0

Funding sources 14.9 6.6 18.0 7.2 18.3 6.7 15.4 5.5

External borrowing 6.6 2.9 5.5 2.2 3.5 1.3 3.7 1.3

Program and project loans 1.1 0.5 2.0 0.8 1.4 0.5 1.4 0.5

Bonds and other inflows 2.7 1.2 3.3 1.3 2.2 0.8 2.3 0.8

Domestic borrowing 8.3 3.7 8.3 3.3 10.9 4.0 8.5 3.0

Privatization receipts 0.0 0.0 0.2 0.1 0.2 0.1 0.2 0.1

Change in cash (- indicates increase) 0.0 0.0 4.0 1.6 3.7 1.4 3.1 1.1

Memo items:

GDP ($bn) 224.8 250.2 272.0 282.5

Average exchange rate (USDPHP) 43.3 42.2 42.4 45.3

TAIWAN 2011 2012 2013 2014F





Interest payments 0.8 0.2 -0.1 0.0 -0.8 -0.2 -1.0 -0.2


Domestic 7.8 1.7 5.4 1.1 5.4 1.1 5.4 1.1

External 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Funding sources 11.0 2.4 16.9 3.6 18.0 3.7 19.0 3.8

Domestic 11.0 2.4 16.9 3.6 18.0 3.7 19.0 3.8

External 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Memo items:

GDP ($bn) 463.5 473.1 491.4 499.0

Average exchange rate (USDTWD) 29.5 29.7 29.1 29.8

THAILAND* 2011 2012 2013 2014F



Overall fiscal deficit** 9.3 2.7 10.0 2.7 12.3 3.2 11.3 3.0



Funding sources 9.3 2.7 10.0 2.7 12.3 3.2 11.3 3.0

Net domestic borrowing 8.9 2.6 5.3 1.5 7.2 1.9 18.1 4.7

Net foreign borrowing 0.0 0.0 0.3 0.1 0.5 0.1 1.5 0.4

Change in cash (- indicates increase) 0.4 0.1 4.4 1.2 4.6 1.2 -8.3 -2.2

Memo items:

GDP ($bn) 346.4 366.0 382.6 382.2

Average exchange rate (USDTHB) 30.8 31.1 31.1 33.5

*Fiscal year ending September; **Including the principal payments on outstanding debts.

Source: National authorities, Credit Suisse

06 March 2014


Quarterly and annual forecasts As of 5 Mar 2014

2013E 2014F Q4/Q4 Annual average

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 12 13E 14F 15F 12 13E 14F 15F

Global Real GDP (y/y) 2.4 3.6 3.4 3.5 2.9 3.2 3.6 3.7 2.8 3.3 3.4 3.8 3.1 2.9 3.3 3.8

IP (y/y) 3.2 2.7 3.9 4.2 4.2 3.8 4.7 4.8 2.1 3.5 4.4 4.4 2.6 2.5 4.1 4.4

Inflation (y/y) 2.8 2.7 3.0 2.9 3.1 3.4 3.3 3.6 2.9 2.9 3.6 3.3 3.3 3.0 3.3 3.3

DM Real GDP (y/y) 1.2 2.3 2.5 1.9 2.0 1.7 2.4 2.4 0.6 2.0 2.1 2.2 1.4 1.2 2.1 2.3

Inflation (y/y) 1.5 1.3 1.4 1.2 1.2 1.6 1.5 1.7 1.8 1.2 1.7 1.6 1.9 1.3 1.5 1.5

US Real GDP (q/q ann) 1.1 2.5 4.1 2.4 1.6 3.1 2.8 3.1 2.0 2.5 2.6 3.0 2.8 1.9 2.6 3.0

IP (y/y) 4.1 1.2 2.5 5.5 2.3 5.6 4.7 4.7 2.8 3.3 4.3 4.1 3.6 2.6 3.9 4.4

Inflation (y/y) 1.7 1.4 1.5 1.2 1.3 1.6 1.6 1.8 1.9 1.2 1.8 1.8 2.1 1.5 1.6 1.8

Japan Real GDP (q/q ann) 4.8 3.9 1.1 0.6 5.0 -3.9 2.0 1.6 -0.3 2.7 1.1 0.3 1.4 1.6 1.3 0.7

IP (y/y) 2.3 6.2 7.0 7.6 18.6 -9.4 2.8 2.2 -5.9 5.8 3.1 0.0 0.6 -0.9 5.7 0.1

Inflation ex. fresh food (y/y) -0.3 0.0 0.7 1.1 1.3 2.9 2.5 2.4 -0.1 1.1 2.4 1.5 -0.1 0.4 2.3 1.0

Euro Area Real GDP (q/q ann) -0.8 1.3 0.6 1.1 1.2 1.5 1.8 1.7 -1.0 0.5 1.5 1.8 -0.6 -0.4 1.3 1.7

IP (y/y) 1.6 2.8 -0.1 1.3 2.4 2.6 3.1 3.1 -3.3 1.4 2.7 3.3 -2.5 -0.7 2.0 3.3

Inflation (y/y) 1.9 1.4 1.3 0.8 0.7 1.0 0.8 1.2 2.2 0.8 1.2 1.2 2.5 1.4 0.9 1.2

UK Real GDP (q/q ann) 1.1 2.9 3.4 2.9 2.9 3.0 3.1 2.8 0.2 2.7 2.9 2.3 0.3 1.8 3.0 2.5

Inflation (y/y) 2.8 2.7 2.7 2.1 1.7 1.9 1.8 2.1 2.7 2.1 2.1 2.5 2.8 2.6 1.9 2.6

EM Real GDP (q/q ann) 3.9 5.1 4.5 5.2 3.9 5.0 5.0 5.2 5.1 4.7 4.8 5.6 4.9 4.7 4.7 5.4

Inflation (y/y) 4.3 4.1 4.7 4.8 5.2 5.3 5.3 5.6 4.2 4.8 5.6 5.2 4.7 4.8 5.2 5.2

NJA Real GDP (q/q ann) 5.3 6.0 6.3 6.4 6.0 6.0 6.3 6.4 6.7 6.1 6.2 6.8 6.1 6.1 6.2 6.7

Inflation (y/y) 3.4 2.9 3.7 3.8 4.2 4.1 4.0 4.4 3.4 3.8 4.4 4.2 4.2 4.1 4.1 4.2

China Real GDP (q/q ann) 6.1 7.4 9.1 7.4 6.1 7.4 7.8 7.8 7.9 7.7 7.4 7.9 7.7 7.7 7.3 7.9

IP (y/y) 9.5 9.8 10.0 9.6 5.6 10.9 10.9 9.9 10.0 10.0 9.4 9.5 10.1 9.7 10.0 10.3

Inflation (y/y) 2.4 2.4 2.8 2.9 2.9 3.1 2.9 3.5 2.1 2.9 3.5 3.6 2.6 2.6 3.0 3.5

India* Real GDP (q/q ann) 7.9 3.9 2.0 5.1 10.8 5.1 4.4 4.8 4.7 4.7 6.2 6.8 4.6 4.8 6.0 6.3

Inflation (y/y) 6.7 4.8 6.6 7.0 8.5 7.5 8.4 8.2 7.3 7.0 8.2 6.8 10.2 9.5 8.0 7.0

EEMEA Real GDP (q/q ann) 1.2 2.3 1.5 3.9 -0.1 1.3 2.7 2.9 1.3 2.4 1.7 3.6 2.9 2.2 2.2 3.4

Inflation (y/y) 5.2 5.0 5.1 4.8 4.9 5.5 5.2 5.5 5.2 4.8 5.5 5.0 4.8 4.7 4.9 4.7

Russia Real GDP (q/q ann) -1.0 -0.4 0.8 4.5 -1.2 0.4 3.2 2.4 1.5 1.3 1.2 3.8 3.4 1.3 1.3 3.1

Inflation (y/y) 7.1 7.2 6.4 6.4 6.3 6.7 6.5 6.3 6.5 6.4 6.3 5.5 5.1 6.8 6.4 5.5

Turkey Real GDP (q/q ann) 6.2 8.4 3.5 2.8 1.2 0.0 2.0 3.2 1.5 5.2 1.6 3.2 2.2 4.3 2.2 3.1

Inflation (y/y) 7.2 7.0 8.3 7.5 7.8 8.1 6.8 7.7 6.8 7.5 7.7 7.1 8.9 7.5 7.6 6.8

LATAM Real GDP (q/q ann) 1.3 4.3 1.1 1.9 0.2 4.9 2.5 2.8 3.0 2.1 2.8 2.9 3.0 2.6 2.2 3.1

Inflation (y/y) 6.4 7.4 7.8 8.4 9.0 9.4 9.8 10.1 6.1 8.4 10.1 9.0 6.2 7.3 9.4 9.3

Brazil Real GDP (q/q ann) 0.0 7.5 -2.1 2.8 0.3 5.7 -0.6 2.3 1.8 2.0 1.9 2.5 1.0 2.3 1.8 2.5

Inflation (y/y) 6.4 6.6 6.1 5.8 5.6 5.6 6.3 6.3 5.6 5.8 6.3 5.6 5.4 6.2 5.9 5.9

Mexico Real GDP (q/q ann) 0.8 -2.7 3.9 0.7 0.8 6.0 4.3 5.2 3.2 0.7 4.1 4.3 3.9 1.1 2.8 4.5

Inflation (y/y) 3.7 4.5 3.4 3.7 4.1 3.8 4.2 4.0 4.1 3.7 4.0 3.8 4.1 3.8 4.0 3.7

Note: IMF PPP weights are used to compute regional and global aggregate figures. *Annual figures for India are on a fiscal year basis.

Source: Credit Suisse estimates, Thomson Reuters DataStream, Haver Analytics®

06 March 2014


Summary macroeconomic data for developed countries: Real GDP

2008 2009 2010 2011 2012 2013E 2014F 2015F

Nominal GDP ($bn) (1) Real GDP growth (% year on year)

2013E 2014F 2015F

US 16,724 17,438 18,391 -0.3 -2.8 2.5 1.8 2.8 1.9 2.6 3.0

Canada 1,825 1,887 1,978 1.2 -2.7 3.4 2.5 1.7 2.0 2.2 2.3

Euro area 12,485 12,995 13,520 0.3 -4.4 1.9 1.6 -0.6 -0.4 1.3 1.7

Austria 418 440 463 0.9 -3.5 1.9 2.9 0.7 0.4 1.4 2.0

Belgium 507 528 548 1.0 -2.8 2.3 1.8 -0.1 0.2 1.6 1.7

Finland 260 274 289 0.3 -8.5 3.4 2.8 -1.0 -1.4 0.3 1.6

France 2,739 2,863 2,989 -0.2 -3.1 1.6 2.0 0.0 0.3 1.3 1.8

Germany 3,593 3,747 3,900 0.8 -5.1 3.9 3.4 0.9 0.5 2.0 2.2

Greece 243 248 260 -0.2 -3.1 -4.9 -7.1 -6.4 -3.7 -0.7 1.6

Ireland 221 232 244 -2.2 -6.4 -1.1 2.2 0.2 0.4 1.8 2.5

Italy 2,068 2,148 2,229 -1.2 -5.5 1.7 0.6 -2.6 -1.9 0.7 1.2

Luxembourg 61 64 69 -0.7 -5.6 3.1 1.9 -0.2 2.1 1.9 1.9

Netherlands 801 830 859 1.8 -3.7 1.5 1.0 -1.3 -0.8 1.1 1.3

Portugal 219 227 236 0.0 -2.9 1.9 -1.3 -3.2 -1.4 1.5 1.4

Spain 1,356 1,394 1,435 0.9 -3.8 -0.2 0.1 -1.6 -1.2 1.0 1.7

Norway 516 527 544 1.5 -1.4 1.7 2.5 3.3 2.1 2.0 2.3

Sweden 552 579 615 -0.8 -5.0 6.3 3.0 1.3 1.5 3.0 3.0

United Kingdom 2,490 2,627 2,762 -0.8 -5.2 1.7 1.1 0.3 1.8 3.0 2.5

Switzerland 646 672 692 2.2 -1.9 3.0 1.8 1.0 2.0 2.0 1.8

Japan 5,007 5,229 5,373 -1.0 -5.5 4.7 -0.6 1.4 1.6 1.3 0.7

Australia 1,488 1,459 1,514 2.4 1.5 2.6 2.4 3.8 2.3 2.3 2.2

New Zealand 181 189 196 -0.9 -1.4 2.0 1.9 2.6 2.7 3.4 2.8

Emerging Markets(2) 26,354 27,077 29,222 5.9 2.8 8.0 6.4 4.9 4.7 4.7 5.4

Latin America(2) 5,190 4,928 5,113 4.3 -1.4 6.2 4.5 3.0 2.6 2.2 3.1

EEMEA(2) 5,994 5,849 6,155 4.3 -4.2 5.2 5.4 2.9 2.2 2.2 3.4

Emerging Asia(2) 15,170 16,300 17,954 7.1 6.5 9.4 7.3 6.1 6.1 6.2 6.7

(1) IMF World Economic Outlook projections as of October 2013. (2) Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures.

Source: Thomson Reuters DataStream, Consensus Economics, European Commission, IMF, National Statistical Offices, Credit Suisse

06 March 2014


Summary macroeconomic data for developed countries: Inflation

2008 2009 2010 2011 2012 2013E 2014F 2015F

Nominal GDP ($bn) (1) HICP/CPI inflation (% year on year, annual average)

2013E 2014F 2015F

US 16,724 17,438 18,391 3.8 -0.3 1.6 3.1 2.1 1.5 1.6 1.8

Canada 1,825 1,887 1,978 2.4 0.3 1.8 2.9 1.5 0.9 1.4 1.4

Euro area 12,485 12,995 13,520 3.3 0.3 1.6 2.7 2.5 1.4 0.9 1.2

Austria 418 440 463 3.2 0.4 1.7 3.6 2.6 2.1 1.8 1.5

Belgium 507 528 548 4.5 0.0 2.3 3.4 2.6 1.2 1.1 1.1

Finland 260 274 289 3.9 1.6 1.7 3.3 3.2 2.2 1.3 0.9

France 2,739 2,863 2,989 3.2 0.1 1.7 2.3 2.2 1.0 1.1 1.6

Germany 3,593 3,747 3,900 2.8 0.2 1.1 2.5 2.2 1.6 1.0 1.4

Greece 243 248 260 4.2 1.4 4.7 3.1 1.0 -0.9 -0.4 0.5

Ireland 221 232 244 3.1 -1.7 -1.6 1.2 1.9 0.5 0.7 0.9

Italy 2,068 2,148 2,229 3.5 0.8 1.6 2.9 3.3 1.3 0.8 1.0

Luxembourg 61 64 69 4.1 0.0 2.8 3.7 2.9 1.7 1.4 1.6

Netherlands 801 830 859 2.2 1.0 0.9 2.5 2.8 2.6 1.1 1.0

Portugal 219 227 236 2.7 -0.9 1.4 3.6 2.8 0.4 0.6 0.9

Spain 1,356 1,394 1,435 4.1 -0.2 2.0 3.1 2.4 1.5 0.3 0.9

Norway 516 527 544 3.8 2.2 2.4 1.3 0.7 2.1 2.1 2.0

Sweden 552 579 615 3.5 -0.3 1.3 2.6 0.9 0.0 0.4 2.3

United Kingdom 2,490 2,627 2,762 3.6 2.2 3.3 4.5 2.8 2.6 1.9 2.6

Switzerland 646 672 692 2.4 -0.5 0.7 0.2 -0.7 -0.2 0.2 1.0

Japan(2) 5,007 5,229 5,373 1.4 -1.3 -0.7 -0.3 -0.1 0.4 2.3 1.0

Australia 1,488 1,459 1,514 4.4 1.8 2.9 3.3 1.8 2.4 2.3 1.9

New Zealand 181 189 196 4.0 2.1 2.3 4.0 1.1 1.1 1.9 2.2


Latin America(3) 5,190 4,928 5,113 8.2 5.3 6.8 7.1 6.0 8.2 10.1 8.8

EEMEA(3) 5,994 5,849 6,155 10.2 6.4 6.1 5.8 4.7 4.5 5.2 4.7

Emerging Asia(3) 15,170 16,300 17,954 3.6 4.2 5.3 5.2 4.1 3.8 4.3 4.1

(1) IMF World Economic Outlook projections as of October 2013. (2) Inflation ex. fresh food. (3) Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures.

Source: Thomson Reuters DataStream, Consensus Economics, European Commission, IMF, National Statistical Offices, Credit Suisse

06 March 2014


Summary macroeconomic data for developed countries: Current account balance

2008 2009 2010 2011 2012 2013E 2014F 2015F

Nominal GDP ($bn) (1) Current account balance (% of GDP)

2013E 2014F 2015F

US 16,724 17,438 18,391 -4.6 -2.6 -3.0 -3.0 -2.7 -2.3 -2.2 -2.2

Canada 1,825 1,887 1,978 0.1 -2.9 -3.5 -2.8 -3.4 -3.1 -3.1 -2.8

Euro area(2) 12,485 12,995 13,520 -1.5 -0.2 0.0 0.1 1.4 2.2 2.0 2.1

Austria(2) 418 440 463 4.9 2.7 3.4 1.6 1.6 2.8 3.1 3.5

Belgium(2) 507 528 548 -1.3 -0.6 1.9 -1.1 -2.0 -2.2 -0.9 -0.6

Finland(2) 260 274 289 2.6 1.8 1.5 -1.5 -1.7 -0.8 -1.2 -0.7

France(2) 2,739 2,863 2,989 -1.7 -1.3 -1.3 -1.8 -2.2 -1.6 -1.5 -1.4

Germany(2) 3,593 3,747 3,900 6.2 6.0 6.3 6.2 7.0 7.3 7.5 7.3

Greece(2) 243 248 260 -14.9 -11.2 -10.1 -9.9 -2.4 0.7 1.0 1.2

Ireland(2) 221 232 244 -5.6 -2.3 1.1 1.2 4.4 6.8 6.6 6.9

Italy(2) 2,068 2,148 2,229 -2.9 -2.0 -3.5 -3.1 -0.4 0.8 1.3 1.2

Luxembourg(2) 61 64 69 5.4 7.3 7.7 6.6 6.6 6.7 7.1 5.4

Netherlands(2) 801 830 859 4.3 5.2 7.4 9.5 9.4 10.6 10.0 10.8

Portugal(2) 219 227 236 -12.6 -10.9 -10.6 -7.0 -2.0 0.5 1.5 1.6

Spain(2) 1,356 1,394 1,435 -9.6 -4.8 -4.5 -3.8 -1.1 0.7 2.3 2.8

Norway(2) 516 527 544 15.9 11.7 11.9 13.5 14.4 10.6 10.9 11.3

Sweden(2) 552 579 615 9.0 6.3 6.3 6.1 6.0 6.2 6.2 5.9

United Kingdom 2,490 2,627 2,762 -0.9 -1.4 -2.7 -1.5 -3.7 -3.8 -3.5 -3.0

Switzerland 646 672 692 2.1 10.5 14.8 9.0 9.6 12.3 11.5 12.5

Japan 5,007 5,229 5,373 3.3 2.9 3.7 2.0 1.1 0.7 -0.3 0.3

Australia 1,488 1,459 1,514 -4.3 -4.2 -2.8 -2.2 -3.8 -4.0 -4.3 -4.5

New Zealand 181 189 196 -7.9 -2.2 -2.3 -2.9 -4.1 -3.9 -4.9 -6.0


Latin America (3) 5,190 4,928 5,113 -0.8 -0.5 -0.9 -1.1 -1.6 -2.5 -2.6 -2.8

EEMEA(3) 5,994 5,849 6,155 2.5 0.8 1.4 2.6 2.6 1.3 1.1 0.5

Emerging Asia(3) 15,170 16,300 17,954 5.5 3.9 3.1 1.4 1.3 1.8 1.8 1.7

(1) IMF World Economic Outlook projections as of October 2013. (2) European Commission estimates. (3) Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures.

Source: Thomson Reuters DataStream, ECB, Eurostat, OECD, IMF, National Statistical Offices, Credit Suisse

06 March 2014


Summary macroeconomic data for developed countries: Fiscal balance

2008 2009 2010 2011 2012 2013E 2014F 2015F

Nominal GDP ($bn) (1) Fiscal balance (% of GDP)

2013E 2014F 2015F

US 16,724 17,438 18,391 -4.2 -11.7 -10.4 -9.8 -8.3 -5.4 -4.1 -3.7

Canada 1,825 1,887 1,978 -0.3 -4.5 -4.9 -3.7 -3.4 -3.4 -2.9 -2.3

Euro area 12,485 12,995 13,520 -2.1 -6.4 -6.2 -4.1 -3.7 -2.9 -2.4 -2.1

Austria 418 440 463 -1.0 -4.1 -4.5 -2.4 -2.5 -1.7 -1.7 -1.5

Belgium 507 528 548 -1.1 -5.6 -3.9 -3.9 -4.1 -2.8 -2.5 -2.2

Finland 260 274 289 4.3 -2.7 -2.8 -1.0 -2.2 -2.0 -2.0 -1.7

France 2,739 2,863 2,989 -3.3 -7.6 -7.1 -5.3 -4.8 -4.3 -3.7 -3.5

Germany 3,593 3,747 3,900 -0.1 -3.1 -4.2 -0.8 0.1 -0.1 0.0 0.2

Greece 243 248 260 -9.9 -15.6 -10.8 -9.6 -9.0 -13.1 -2.0 -1.0

Ireland 221 232 244 -7.4 -13.7 -30.6 -13.1 -8.1 -7.3 -4.5 -3.0

Italy 2,068 2,148 2,229 -2.7 -5.4 -4.3 -3.7 -2.9 -3.0 -2.5 -2.0

Luxembourg(2) 61 64 69 3.2 -0.7 -0.8 0.1 -0.6 -0.9 -1.0 -2.7

Netherlands 801 830 859 0.5 -5.6 -5.1 -4.3 -4.1 -3.1 -3.3 -3.0

Portugal 219 227 236 -3.7 -10.2 -9.9 -4.3 -6.5 -4.5 -4.0 -3.0

Spain 1,356 1,394 1,435 -4.5 -11.1 -9.6 -9.6 -10.6 -6.5 -5.7 -5.0

Norway(2) 516 527 544 18.8 10.5 11.1 13.6 13.9 13.5 13.1 12.9

Sweden(2) 552 579 615 2.2 -1.0 0.0 0.0 -0.4 -1.2 -1.5 -0.7

United Kingdom 2,490 2,627 2,762 -4.6 -3.7 -3.5 -2.8 -3.3 -3.4 -3.4 -3.5

Switzerland 646 672 692 2.0 0.8 0.3 0.5 0.8 0.4 0.2 0.5

Japan(3) 5,007 5,229 5,373 -3.2 -9.5 -8.6 -8.9 -8.7 -8.0 -7.1 -5.7

Australia (4) 1,488 1,459 1,514 -2.1 -4.2 -3.4 -2.9 -1.2 -2.2 -1.8 -1.5

New Zealand 181 189 196 3.0 -2.1 -3.3 -9.2 -4.4 -2.1 -0.4 0.3

Emerging Markets(5) 26,354 27,077 29,222 -0.5 -4.4 -2.8 -1.9 -2.0 -2.5 -2.5 -2.3

Latin America (5) 5,190 4,928 5,113 -0.6 -3.1 -2.6 -2.6 -2.7 -3.1 -3.6 -3.1

EEMEA(5) 5,994 5,849 6,155 4.0 -6.5 -3.4 0.7 0.5 -0.5 -0.4 -0.5

Emerging Asia(5) 15,170 16,300 17,954 -2.2 -4.0 -2.7 -2.6 -2.7 -3.0 -2.9 -2.7

(1) IMF World Economic Outlook projections as of October 2013. (2) European Commission estimates. (3) Fiscal year, general government (central + local + social security), special factors adjusted. (4) Commonwealth budget. (5) Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures.

Source: Thomson Reuters DataStream, European Commission, OECD, IMF, National Statistical Offices, Credit Suisse

06 March 2014


Summary macroeconomic data for developed countries: Government debt

2008 2009 2010 2011 2012 2013E 2014F 2015F

Nominal GDP ($bn) (1) Gross government debt (% of GDP)

2013E 2014F 2015F

US(2) 16,724 17,438 18,391 58.7 72.9 81.5 85.2 88.6 89.9 90.6 89.4

Canada 1,825 1,887 1,978 71.3 81.3 83.1 83.5 85.3 87.1 85.6 84.9

Euro area 12,485 12,995 13,520 70.1 79.9 85.6 87.9 92.6 95.5 95.9 95.4

Austria 418 440 463 63.8 69.2 72.3 72.8 74.0 74.6 74.3 73.7

Belgium 507 528 548 89.2 95.7 95.7 98.0 99.8 99.8 100.5 100.0

Finland 260 274 289 33.9 43.5 48.7 49.2 53.6 57.2 60.4 62.0

France 2,739 2,863 2,989 68.2 79.2 82.4 85.8 90.2 93.9 96.1 97.3

Germany 3,593 3,747 3,900 66.8 74.5 82.5 80.0 81.0 79.6 77.3 74.5

Greece 243 248 260 112.9 129.7 148.3 170.3 156.9 177.3 177.0 171.9

Ireland 221 232 244 44.2 64.4 91.2 104.1 117.4 122.3 120.3 119.7

Italy 2,068 2,148 2,229 106.1 116.4 119.3 120.7 127.0 132.7 133.7 132.4

Luxembourg(3) 61 64 69 14.4 15.5 19.5 18.7 21.7 24.5 25.7 28.7

Netherlands 801 830 859 58.5 60.8 63.4 65.7 71.3 74.3 75.3 75.6

Portugal 219 227 236 71.7 83.7 94.0 108.2 124.1 129.4 126.6 125.8

Spain 1,356 1,394 1,435 40.2 54.0 61.7 70.5 86.0 94.3 98.9 103.3

Norway(3) 516 527 544 48.2 43.0 43.0 28.4 29.6 27.4 26.4 24.9

Sweden(3) 552 579 615 38.8 42.6 39.4 38.6 38.2 41.9 42.6 41.7

United Kingdom 2,490 2,627 2,762 55.4 73.0 79.1 85.1 88.3 90.9 92.6 93.8

Switzerland 646 672 692 50.4 49.7 48.5 48.7 49.1 48.1 46.8 45.9

Japan(4) 5,007 5,229 5,373 191.8 210.2 216.1 231.8 241.6 245.1 247.6 251.0

Australia(5) 1,488 1,459 1,514 13.9 19.5 23.6 27.1 32.4 34.4 36.4 37.8

New Zealand 181 189 196 16.9 23.4 27.9 36.2 38.2 36.7 35.8 33.3


Latin America (6) 5,190 4,928 5,113 44.3 47.0 43.9 43.6 44.6 44.7 47.9 47.9

EEMEA(6) 5,994 5,849 6,155 23.4 28.3 28.6 27.8 27.6 27.9 27.8 28.0

Emerging Asia(6) 15,170 16,300 17,954 46.1 53.2 52.5 51.2 52.3 54.0 53.2 53.2

(1) IMF World Economic Outlook projections as of October 2013. (2) Fiscal year, general government. (3) European Commission estimates. (4) Fiscal year, general government (central + local + social security), special factors adjusted. (5) OECD estimates. (6) Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures.

Source: Thomson Reuters DataStream, European Commission, OECD, IMF, National Statistical Offices, Credit Suisse

06 March 2014



2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Nominal GDP ($bn) Real GDP growth (% year on year)

2013E 2014F 2015F

LATIN AMERICA 5,189.9 4,928.0 5,112.9 5.8 4.3 -1.4 6.2 4.5 3.0 2.6 2.2 3.1

Argentina 482.4 363.1 323.3 8.7 6.8 0.9 9.2 8.9 1.9 4.7 -0.3 -0.5

Brazil 2,240.0 2,135.0 2,175.0 6.1 5.2 -0.3 7.5 2.7 1.0 2.3 1.8 2.5

Chile 279.5 262.0 283.1 5.2 3.3 -1.0 5.8 5.9 5.6 4.0 3.8 4.0

Colombia 379.1 377.5 412.4 6.9 3.5 1.7 4.0 6.6 4.2 4.2 4.5 4.9

Mexico 1,235.7 1,286.1 1,422.4 3.1 1.4 -4.7 5.1 4.0 3.9 1.1 2.8 4.5

Peru 206.6 213.5 232.7 8.9 9.8 0.9 8.8 6.9 6.3 5.0 5.5 5.8

Venezuela 366.6 290.9 264.0 8.8 5.3 -3.2 -1.5 4.2 5.6 1.6 -0.5 1.0

EEMEA 5,994.1 5,848.8 6,155.2 6.6 4.3 -4.2 5.2 5.4 2.9 2.2 2.2 3.4

Czech Republic 199.5 197.6 207.5 5.7 3.1 -4.5 2.5 1.8 -1.0 -1.1 2.5 2.5

Hungary 139.1 139.6 140.8 0.1 0.9 -6.8 1.1 1.6 -1.7 1.2 1.9 1.5

Israel 291.7 314.9 329.9 6.9 5.0 0.9 5.5 4.6 3.3 3.5 3.5 3.5

Kazakhstan 219.0 234.0 251.8 8.7 3.3 1.2 7.3 7.5 5.0 4.6 5.6 6.0

Poland 533.9 556.2 598.4 6.8 5.1 1.6 3.9 4.5 1.9 1.6 2.8 3.3

Russia 2,093.2 1,915.2 1,951.0 8.5 5.2 -7.8 4.5 4.3 3.4 1.3 1.3 3.1

Saudi Arabia 745.3 796.3 847.4 6.0 8.4 1.8 7.4 8.6 5.8 3.8 4.4 4.6

South Africa 350.3 328.3 349.1 5.7 3.5 -1.3 3.2 3.5 2.4 1.9 2.8 3.4

Turkey 838.8 796.4 884.4 4.7 0.7 -4.8 9.2 8.8 2.2 4.3 2.2 3.1

Ukraine 178.9 143.3 145.0 7.9 2.3 -14.8 4.1 5.2 0.2 0.0 -4.0 2.5

United Arab Emirates 404.4 427.1 449.8 3.2 3.2 -4.8 1.7 3.9 4.4 4.1 3.1 3.9

EMERGING ASIA 15,169.8 16,299.8 17,954.2 10.7 7.1 6.5 9.4 7.3 6.1 6.1 6.2 6.7

China 9,246.5 10,048.9 11,157.4 14.2 9.6 9.1 10.3 9.2 7.7 7.7 7.3 7.9

Hong Kong 272.1 287.4 302.6 6.4 2.1 -2.3 6.8 4.5 1.5 2.9 3.4 3.8

India (1) 1,862.1 2,030.0 2,272.7 9.3 6.7 8.6 9.3 6.2 4.6 4.8 6.0 6.3

Indonesia 836.3 842.3 927.0 6.3 6.0 4.6 6.2 6.5 6.3 5.8 5.0 5.3

Korea 1,198.6 1,295.5 1,364.5 5.1 2.3 0.3 6.3 3.6 2.0 2.8 3.3 3.6

Malaysia (2) 316.6 324.9 347.8 6.3 4.6 -1.5 7.4 5.1 5.6 4.7 5.3 4.7

Philippines 272.0 282.5 311.8 6.6 4.2 1.1 7.6 3.9 6.8 7.2 7.0 6.8

Singapore 295.8 307.3 328.7 9.0 1.7 -0.6 15.1 6.0 1.9 4.1 4.0 5.0

Taiwan 487.2 497.5 519.1 6.0 0.7 -1.8 10.7 4.1 1.5 2.1 3.2 3.5

Thailand 382.6 383.5 422.7 4.9 2.5 -2.2 7.8 0.1 6.4 2.9 2.0 4.5

Emerging Markets 26,353.7 27,076.6 29,222.3 8.8 5.9 2.8 8.0 6.4 4.9 4.7 4.7 5.4

EM nominal GDP according to the IMF ($bn) (3) 17,126.2 20,455.5 19,568.5 23,295.6 27,194.7 28,687.9 29,802.2 31,452.7 33,808.8

EM nominal GDP as a share of global nominal GDP (%) (3) 30.4 33.1 33.4 36.4 38.4 39.7 40.6 40.9 41.6

EM PPP GDP according to the IMF ($bn) (3) 31,299.8 33,679.0 34,781.9 37,846.5 40,786.3 43,392.1 45,913.6 48,974.4 52,592.9

EM PPP GDP as a share of global PPP GDP (%) (3) 46.4 47.7 49.3 50.4 51.4 52.2 53.0 53.7 54.4

Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures. The data for India are for fiscal years.

(1) Revised GDP series with base 2004-05. All historical ratios expressed as % of GDP may appear smaller since the revised GDP values in the new series (with base year of 2004) are higher. (2) Real GDP from 2001 has been rebased to 2000 = 100. (3) Based on GDP data (historical and forecast) from the IMF’s latest World Economic Outlook. We have amended the group of countries that the IMF classifies as emerging markets to include the Czech Republic, Hong Kong, Israel, Korea, Singapore and Taiwan; note that the IMF’s group of emerging markets countries includes many (typically small) economies that are not included in the table above.

Source: the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, IMF World Economic Outlook, IHS Global Insight, Credit Suisse

06 March 2014



1Q 13 2Q 13 3Q 13 4Q 13E 1Q 14F 2Q 14F 3Q 14F 4Q 14F 1Q 15F


2013E 2014F 2015F

LATIN AMERICA 5,189.9 4,928.0 5,112.9 1.3 4.3 1.1 1.9 0.2 4.9 2.5 2.8 2.0

Argentina 482.4 363.1 323.3 8.5 9.0 -0.7 -5.2 0.3 0.3 2.3 -1.0 -3.5

Brazil 2,240.0 2,135.0 2,175.0 0.0 7.5 -2.1 2.8 0.3 5.7 -0.6 2.3 2.9

Chile 279.5 262.0 283.1 3.3 1.3 5.4 0.5 3.3 5.3 8.7 0.9 -0.6

Colombia 379.1 377.5 412.4 0.9 8.6 4.5 7.5 -1.9 9.5 5.1 2.0 1.6

Mexico 1,235.7 1,286.1 1,422.4 0.8 -2.7 3.9 0.7 0.8 6.0 4.3 5.2 3.1

Peru 206.6 213.5 232.7 5.4 4.0 4.9 6.4 4.4 6.1 8.4 8.1 5.6

Venezuela 366.6 290.9 264.0 -5.5 6.8 0.0 7.1 -6.9 -2.3 0.0 0.9 1.4

EEMEA 4,844.4 4,625.5 4,857.9 1.2 2.3 1.5 3.9 -0.1 1.3 2.7 2.9 3.2

Czech Republic 199.5 197.6 207.5 -5.1 1.0 0.9 6.6 1.6 2.0 2.0 2.0 2.8

Hungary 139.1 139.6 140.8 3.6 1.7 3.6 2.4 1.6 1.6 1.6 1.6 1.6

Israel 291.7 314.9 329.9 2.2 4.6 2.1 2.3 2.9 3.3 3.8 3.8 3.5

Kazakhstan 219.0 234.0 251.8 3.2 4.5 4.1 7.4 5.3 5.7 3.6 6.6 5.7

Poland 533.9 556.2 598.4 1.6 2.4 2.8 2.4 2.8 2.8 3.2 3.2 3.2

Russia 2,093.2 1,915.2 1,951.0 -1.0 -0.4 0.8 4.5 -1.2 0.4 3.2 2.4 2.4

South Africa 350.3 328.3 349.1 0.8 3.2 0.7 3.8 2.9 2.8 2.8 2.8 3.7

Turkey 838.8 796.4 884.4 6.2 8.4 3.5 2.8 1.2 0.0 2.0 3.2 4.1

Ukraine 178.9 143.3 145.0 4.1 -1.2 -3.9 4.1 -16.5 0.8 0.0 3.2 4.1

NON-JAPAN ASIA 15,169.8 16,299.8 17,954.2 5.3 6.0 6.3 6.4 6.0 6.0 6.3 6.4 6.7

NJA ex-China 5,923.3 6,250.8 6,796.8 4.3 4.5 3.1 5.3 5.9 4.3 4.5 4.8 5.4

NJA ex-China and India 4,061.2 4,220.8 4,524.1 1.5 5.0 4.0 5.5 2.1 3.7 4.7 4.9 3.3

China 3,678.6 3,837.4 4,101.4 6.1 7.4 9.1 7.4 6.1 7.4 7.8 7.8 7.8

Hong Kong 9,246.5 10,048.9 11,157.4 2.0 2.4 2.8 4.5 3.3 3.1 -1.6 5.0 6.2

India 272.1 287.4 302.6 7.9 3.9 2.0 5.1 10.8 5.1 4.4 4.8 8.1

Indonesia 1,862.1 2,030.0 2,272.7 5.5 5.4 5.3 6.7 4.3 3.9 4.8 6.1 5.2

Korea 836.3 842.3 927.0 3.4 4.5 4.3 3.7 3.2 2.4 2.3 2.8 3.1

Malaysia 1,198.6 1,295.5 1,364.5 -1.0 5.5 7.0 9.1 2.4 4.5 4.9 5.3 5.7

Philippines 316.6 324.9 347.8 9.4 6.2 5.2 6.1 8.2 7.4 7.4 7.0 6.6

Singapore 272.0 282.5 311.8 1.5 14.9 0.3 6.1 -0.4 5.3 5.7 5.7 5.3

Taiwan 295.8 307.3 328.7 -2.4 4.1 0.3 7.3 2.8 2.8 3.2 2.0 3.2

Thailand 487.2 497.5 519.1 -8.2 2.3 5.8 2.4 -9.0 4.7 13.8 9.9 -5.4

Emerging Markets 382.6 383.5 422.7 3.9 5.1 4.5 5.2 3.9 5.0 5.0 5.2 5.3

EM ex-China 25,204.0 25,853.2 27,925.0 2.6 3.8 2.1 4.0 2.6 3.7 3.5 3.8 3.9

EM ex-China and India 15,957.5 15,804.3 16,767.6 1.4 3.8 2.2 3.7 0.7 3.3 3.3 3.5 2.8

Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures.


06 March 2014


Summary macroeconomic data: Inflation

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

CPI inflation (%, December to December)

LATIN AMERICA 6.1 8.2 5.3 6.8 7.1 6.0 8.2 10.1 8.8

Argentina 8.5 7.2 7.7 10.9 9.5 10.8 10.9 30.4 24.9

Brazil 4.5 5.9 4.3 5.9 6.5 5.8 5.9 6.2 5.5

Chile 7.8 7.1 -1.4 3.0 4.4 1.5 3.0 3.5 3.0

Colombia 5.7 7.7 2.0 3.2 3.7 2.4 1.9 3.1 3.4

Mexico 3.8 6.5 3.6 4.4 3.8 3.6 4.0 4.0 3.8

Peru 3.9 6.7 0.2 2.1 4.7 2.6 2.9 2.9 2.9

Venezuela 22.5 31.9 26.9 27.4 29.0 19.5 52.7 43.5 37.0

EEMEA 9.4 10.2 6.4 6.1 5.8 4.7 4.5 5.2 4.7

Czech Republic 5.5 3.3 0.5 2.3 2.8 2.4 1.4 1.7 2.2

Hungary 7.4 3.4 5.4 4.6 4.1 5.0 0.4 3.1 3.4

Israel 3.4 3.8 3.9 2.7 2.2 1.6 1.8 1.4 1.7

Kazakhstan 18.8 9.5 6.2 8.0 7.4 6.0 5.0 8.3 4.7

Poland 4.2 3.3 3.8 2.9 4.5 2.4 0.7 2.0 2.3

Russia 11.9 13.3 8.8 8.8 6.1 6.6 6.5 6.3 5.4

Saudi Arabia 6.5 9.0 4.2 5.4 4.2 3.6 3.0 3.0 3.1

South Africa 7.4 9.0 6.3 3.5 6.1 5.7 5.4 5.9 5.8

Turkey 8.4 10.1 6.5 6.4 10.4 6.2 7.4 7.7 7.2

Ukraine 16.6 22.3 12.3 9.1 4.6 -0.2 0.5 7.2 6.2

United Arab Emirates na na -0.3 1.7 0.2 0.6 1.4 2.6 2.5

EMERGING ASIA 6.0 3.6 4.2 5.3 5.2 4.1 3.8 4.3 4.1

China 6.5 1.2 1.9 4.6 4.1 2.5 2.5 3.5 3.6

Hong Kong 3.8 2.1 1.3 3.0 5.7 3.7 4.3 3.4 3.6

India 7.6 8.0 11.8 9.7 9.4 10.4 8.3 8.0 6.5

Indonesia 6.6 9.8 4.8 5.1 5.4 4.3 8.0 4.8 5.0

Korea 3.6 4.1 2.8 3.0 4.2 1.4 1.1 2.6 2.7

Malaysia 2.4 4.5 1.0 2.1 3.0 1.2 3.2 2.8 3.5

Philippines 3.7 7.8 4.4 3.6 4.2 2.6 4.1 3.2 3.7

Singapore 3.7 5.5 -0.5 4.6 5.5 4.3 1.5 2.7 2.9

Taiwan 3.3 1.3 -0.2 1.0 2.0 1.6 0.3 2.6 1.9

Thailand 3.2 0.4 3.5 3.0 3.5 3.6 1.7 2.8 3.0

Emerging Markets 6.7 6.0 4.8 5.7 5.6 4.6 4.7 5.5 5.0


Source: the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, IHS Global Insight, Credit Suisse

06 March 2014


Summary macroeconomic data: Wage inflation

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Nominal wage (%, December to December)

LATIN AMERICA 8.4 10.4 8.3 9.2 11.1 11.2 10.0 10.5 9.7

Argentina (1) 20.6 22.3 19.7 19.7 27.7 26.9 26.5 30.0 25.0

Brazil (2) 7.7 10.5 7.6 9.9 9.6 10.1 8.7 8.9 8.0

Chile (3) 7.3 8.5 6.4 3.6 5.9 6.4 5.7 5.3 5.0

Colombia (4) 5.1 5.5 4.6 5.3 3.6 4.4 4.0 4.5 4.5

Mexico (5) 4.3 4.5 4.5 4.6 4.5 4.5 4.3 4.5 4.7

Peru (6) 1.5 8.4 0.0 0.5 13.4 14.7 4.3 1.7 4.9

Venezuela (7) 20.6 25.0 21.2 22.3 31.0 28.8 28.8 29.3 27.6

EEMEA 20.0 12.7 7.1 12.1 13.1 10.0 9.3 8.2 7.8

Czech Republic 7.2 7.9 3.4 2.2 2.5 2.7 1.0 2.0 3.0

Hungary 8.0 7.4 0.5 1.3 5.2 4.7 3.3 5.0 6.0

Israel 4.3 0.1 1.7 4.8 3.3 4.5 3.0 3.0 3.5

Kazakhstan (8) 28.1 16.2 14.2 15.6 16.9 11.5 6.9 7.0 7.0

Poland 9.1 10.5 4.2 3.6 4.9 3.5 2.7 3.0 3.5

Russia 30.2 15.3 10.2 15.6 18.2 11.9 12.2 9.3 8.0

South Africa (9) 7.2 12.5 15.5 9.8 6.8 6.6 8.2 8.3 7.7

Turkey (10) 14.7 10.6 -1.9 15.8 15.7 15.6 14.4 14.0 14.0

Ukraine 31.2 19.5 11.6 17.7 16.2 10.6 5.7 5.3 5.7

EMERGING ASIA 13.1 12.3 7.5 11.0 10.7 10.1 7.2 5.2 5.6

China (11) 18.5 16.9 11.6 13.3 14.4 11.9 9.0 5.8 6.0

Hong Kong 2.6 3.4 -1.0 2.5 6.0 2.0 3.3 2.4 2.6

Indonesia (12) 4.2 7.6 5.3 12.2 3.4 20.4 5.0 6.0 5.0

Korea 5.9 3.1 -0.7 6.1 -0.7 -0.9 0.2 2.3 4.4

Malaysia (13) 7.3 2.9 -4.3 11.8 7.8 7.8 7.7 7.0 7.0

Philippines (14) 4.5 5.3 2.2 3.4 6.0 4.7 2.2 2.4 4.0

Singapore 6.2 5.4 -2.7 5.6 6.0 2.3 4.3 5.0 6.0

Taiwan 1.7 0.2 -2.0 1.8 1.5 0.1 0.5 3.1 5.2

Thailand (15) 3.0 10.2 -2.5 6.5 7.5 12.1 10.0 5.0 5.0



(1) Weighted average of wages in the formal and informal private sector, and the public sector. (2) Average annual growth in nominal wages. (3) General compensation index (includes fringe benefits) (4) Wages for manufacturing workers. (5) Contractual wage increases at a national level in the public and private sectors (excludes fringe benefits). (6) Minimum wage (7) Public and private sector wages (8) Annual average of monthly average wages in the economy. (9) Based on remuneration per worker, index 2000=100. (10) For the private manufacturing sector for 2004 and 2005; gross earnings index (2010=100) for the overall industrial sector for the period after 2006. (11) Data are from the official average wage index published by the NBS which include the basic wages of government civil servants and staffs and workers of large SOEs, but exclude their allowances and the wages of township and village enterprises and private enterprises. We do not think the series accurately reflects the extent of wage increases in China. (12) For the manufacturing sector. (13) Salaries and wages in the manufacturing sector. (14) Nominal minimum wage in the non-agricultural sector. Figures from 2005 onwards also include cost of living allowance and daily equivalent of 13th month pay. (15) From Labor Force Survey: Average Monthly Wage in the private sector.

Source: the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, IMF World Economic Outlook, IHS Global Insight, Credit Suisse

06 March 2014


Summary macroeconomic data: Current account balance

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F


LATIN AMERICA 0.4 -0.8 -0.5 -0.9 -1.1 -1.6 -2.5 -2.6 -2.8

Argentina 2.8 2.1 3.6 0.4 -0.5 0.0 -0.9 -1.0 -0.8

Brazil 0.1 -1.7 -1.5 -2.2 -2.1 -2.4 -3.6 -3.4 -3.6

Chile 4.1 -3.2 2.0 1.5 -1.3 -3.5 -4.5 -4.5 -3.7

Colombia -2.9 -2.8 -2.1 -3.1 -2.9 -3.3 -3.6 -3.7 -3.6

Mexico -1.4 -1.8 -0.9 -0.3 -1.0 -1.2 -1.8 -2.3 -3.0

Peru 1.4 -4.2 -0.6 -1.7 -1.9 -3.3 -4.9 -4.6 -3.6

Venezuela 6.9 10.2 0.7 3.7 7.7 2.9 2.3 1.7 1.5

EEMEA 1.8 2.5 0.8 1.4 2.6 2.6 1.3 1.1 0.5

Czech Republic -4.4 -2.1 -2.4 -3.8 -2.8 -2.4 -1.0 -1.2 -1.3

Hungary -7.3 -7.2 -0.2 0.2 0.5 0.9 1.9 1.1 0.5

Israel 2.6 1.0 3.6 3.1 1.3 0.3 1.2 1.6 2.1

Kazakhstan -6.9 4.7 -3.7 2.9 5.1 5.1 3.9 3.1 3.2

Poland -6.2 -6.6 -4.0 -5.1 -5.0 -3.7 -1.5 -2.0 -2.5

Russia 6.0 6.2 4.0 4.7 5.2 4.0 1.6 1.6 1.1

Saudi Arabia 22.5 25.5 4.9 12.7 23.7 22.4 19.0 17.7 13.6

South Africa -7.0 -7.2 -4.0 -2.0 -2.3 -5.2 -5.7 -7.0 -6.4

Turkey -5.8 -5.5 -2.0 -6.2 -9.7 -6.1 -7.7 -5.7 -5.6

Ukraine -4.1 -7.1 -1.5 -2.4 -6.3 -8.2 -9.0 -8.8 -7.4

United Arab Emirates 7.6 7.1 3.1 2.5 14.6 17.3 12.8 8.2 7.5

EMERGING ASIA 6.7 5.5 3.9 3.1 1.4 1.3 1.8 1.8 1.7

China 10.1 9.3 4.9 4.0 1.9 2.3 2.0 2.3 2.4

Hong Kong 12.4 15.0 9.6 6.6 4.8 1.3 2.3 3.0 3.3

India -1.3 -2.3 -2.8 -2.7 -4.2 -4.7 -2.2 -2.6 -2.9

Indonesia (1) 2.4 0.0 2.0 0.7 0.2 -2.8 -3.3 -2.8 -2.3

Korea 2.1 0.3 3.9 2.9 2.3 4.2 5.9 4.8 4.2

Malaysia 15.4 17.1 15.5 11.1 11.0 6.1 3.7 3.3 4.2

Philippines 4.8 2.1 5.6 4.5 3.2 2.8 4.0 2.7 1.9

Singapore 26.0 15.2 17.6 26.6 24.0 18.1 17.0 16.1 16.2

Taiwan 8.9 6.9 11.4 9.3 9.0 10.7 11.8 10.8 10.2

Thailand 5.9 0.6 8.3 4.6 1.2 -0.4 -0.7 1.8 2.0



(1) Balance of payments numbers from 2004 onwards have been revised; exports & imports include credits & debits on net income, respectively, in 2000-03.


06 March 2014


Summary macroeconomic data: Exports

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Exports of goods and services (% of GDP)

LATIN AMERICA 22.6 22.5 19.5 20.9 22.2 22.0 21.8 23.9 24.3

Argentina 25.4 25.2 21.7 22.2 22.4 20.2 20.2 27.2 30.7

Brazil 13.5 13.8 11.1 10.9 11.9 12.5 12.6 13.7 14.2

Chile 44.8 42.0 37.1 37.6 37.7 33.9 32.2 35.4 34.1

Colombia 16.5 17.5 16.2 15.8 18.8 18.0 17.4 18.7 18.4

Mexico 27.7 28.1 27.3 29.8 31.2 32.6 32.4 33.0 31.9

Peru 29.1 27.3 24.0 25.5 28.7 25.7 23.1 24.0 25.6

Venezuela 31.2 30.8 18.2 28.6 30.0 26.1 26.3 33.6 36.2

EEMEA 39.7 41.3 36.9 38.4 41.1 41.4 40.9 42.4 41.9

Czech Republic 68.3 64.7 59.7 67.9 73.7 78.3 79.9 81.9 80.7

Hungary 80.8 81.3 77.3 84.7 91.3 94.3 96.1 95.5 94.6

Israel 40.6 38.5 33.2 35.0 35.5 36.2 32.4 30.3 30.5

Kazakhstan 49.4 57.2 42.0 44.0 44.4 46.3 49.9 44.3 41.5

Poland 40.8 40.0 39.4 42.2 45.1 46.7 49.2 50.9 52.6

Russia 30.3 31.5 28.2 29.2 30.3 29.4 28.3 30.7 30.4

Saudi Arabia 60.0 62.1 47.1 49.7 56.2 54.4 52.1 50.5 47.3

South Africa 31.5 35.9 27.3 28.4 30.6 29.9 31.2 29.6 27.8

Turkey 22.4 24.2 23.6 21.5 23.7 26.1 25.0 28.5 28.2

Ukraine 44.7 47.7 47.7 54.0 54.5 51.7 47.7 57.7 59.6


EMERGING ASIA 45.2 45.1 36.7 39.8 40.1 38.6 38.2 38.1 37.6

China 38.4 35.0 26.7 29.2 28.6 27.2 26.3 25.4 24.1

Hong Kong 207.3 208.8 191.2 219.4 225.5 225.5 230.0 238.2 249.0

India 20.6 23.7 20.3 22.3 23.9 24.3 26.2 27.2 27.9

Indonesia (1) 30.3 30.5 24.7 24.6 26.2 24.1 23.7 24.2 23.3

Korea 44.1 56.5 52.0 54.2 58.0 58.0 57.1 54.3 53.7

Malaysia 106.2 99.5 91.4 93.7 91.6 87.5 81.9 83.0 81.8

Philippines 39.7 33.4 28.9 32.5 28.6 25.9 24.9 25.3 24.5

Singapore 216.7 232.4 194.0 201.8 201.3 196.7 195.2 197.5 197.6

Taiwan 71.2 72.9 62.3 73.4 76.2 73.9 73.1 74.4 75.1

Thailand 68.6 75.8 68.5 71.4 78.2 75.3 72.7 75.8 73.9



(1) Balance of payments numbers from 2004 onwards have been revised; exports & imports include credits & debits on net income, respectively, in 2000-03.


06 March 2014


Summary macroeconomic data: Fiscal balance

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

General government fiscal balance (% of GDP) LATIN AMERICA

-0.7 -0.6 -3.1 -2.6 -2.6 -2.7 -3.1 -3.6 -3.1

Argentina 1.1 0.8 -1.6 0.2 -2.3 -3.5 -3.3 -3.7 -3.4

Brazil -2.8 -2.0 -3.3 -2.5 -2.6 -2.5 -3.3 -4.3 -3.7

Chile 7.8 4.1 -4.2 -0.4 1.3 0.6 -0.6 -0.6 -0.3

Colombia -1.0 0.1 -2.4 -3.3 -1.8 0.4 -1.4 -1.3 -1.4

Mexico (1) 0.0 -0.1 -2.2 -2.8 -2.5 -2.8 -2.6 -3.5 -3.2

Peru 2.8 2.4 -1.5 -0.1 1.9 2.0 0.7 0.2 0.8

Venezuela (2) -2.6 -3.5 -8.7 -10.4 -11.6 -12.5 -11.5 -8.2 -6.5

EEMEA 3.0 4.0 -6.5 -3.4 0.7 0.5 -0.5 -0.4 -0.5

Czech Republic (3) -0.7 -2.7 -5.8 -4.7 -3.2 -4.4 -2.7 -3.0 -3.0

Hungary (4) -5.1 -3.7 -4.6 -4.3 -5.6 -2.0 -2.4 -4.0 -3.0

Israel 0.4 -2.0 -4.9 -3.5 -3.1 -3.9 -3.1 -3.0 -3.0

Kazakhstan (5) 4.4 1.8 -1.4 2.6 3.3 1.8 1.7 1.5 1.7

Poland (4) -1.9 -3.7 -7.5 -7.9 -5.0 -3.9 -4.4 -4.0 -3.5

Russia 6.0 4.8 -7.0 -4.1 1.5 0.4 -0.6 -0.5 -0.1

Saudi Arabia 11.3 29.8 -5.4 4.4 11.6 13.6 7.4 8.4 6.6

South Africa (6) 0.9 -1.1 -6.5 -4.3 -3.7 -4.3 -4.0 -4.2 -4.0

Turkey (7) -1.2 -1.9 -4.9 -3.2 -1.0 -1.7 -1.0 -1.6 -1.9

Ukraine (8) -2.0 -3.2 -6.2 -5.5 -2.7 -3.7 -4.3 -3.5 -2.6

United Arab Emirates 7.3 9.3 -16.7 -5.9 6.4 5.8 5.4 4.7 3.2

EMERGING ASIA -0.5 -2.2 -4.0 -2.7 -2.6 -2.7 -3.0 -2.9 -2.7

China 0.6 -0.4 -2.3 -1.7 -1.1 -1.5 -2.0 -1.7 -1.6

Hong Kong 7.7 0.1 1.6 4.2 3.8 3.2 0.6 0.8 -0.3

India (9) -4.0 -8.3 -9.4 -6.8 -8.1 -7.2 -7.1 -7.2 -7.0

Indonesia (10) -1.3 -0.1 -1.6 -0.7 -1.1 -1.9 -2.2 -2.3 -2.0

Korea (11) 1.9 -0.3 -2.7 -0.8 -0.4 -0.2 -1.0 -0.9 -0.5

Malaysia (12) -3.7 -4.8 -7.0 -5.6 -4.8 -4.5 -3.9 -3.5 -3.0

Philippines -1.5 -1.3 -3.7 -3.5 -2.0 -2.4 -2.0 -2.5 -2.2

Singapore 2.8 0.1 -0.3 0.3 1.2 1.7 1.1 -0.3 0.3

Taiwan (13) -0.4 -0.9 -4.5 -3.3 -2.2 -2.4 -2.6 -2.7 -2.8

Thailand (14) -1.6 -1.0 -5.7 -0.9 -2.7 -2.7 -2.5 -2.0 -1.5

Emerging Markets 0.3 -0.5 -4.4 -2.8 -1.9 -2.0 -2.5 -2.5 -2.3


(1) Narrow definition that excludes off-balance expenditures. (2) Consolidation of Central Government, PDVSA, Non-Financial Public Enterprises, Venezuelan Social Security Institute and Deposit and Guarantee Fund for 2005-2009; preliminary consolidation of central government and PDVSA 2010-2011. (3) Consolidated fiscal accounts of the broadly defined general government on an accrual basis. (4) Consolidated fiscal accounts of the broadly defined general government on an accrual basis; excluding one-off transfers from pension funds to the government budget. (5) Consists of the state budget and the National Oil Fund. (6) Data for fiscal years starting 1 April. Se lected data refer to the government’s consolidated fiscal balances from 2009. (7) The definition of the consolidated government comprises the central government, extra-budgetary funds, state-owned enterprises, social security institutions and the Unemployment Insurance Fund. The data for government spending and gross debt are for the central government. (8) Excluding impact of bank recapitalization and transfers to Naftogaz. Estimate for 2011 expenditure includes 0.8% of GDP of additional allocations for settlement of VAT arrears accumulated in 2010. (9) Prior to 2006 and again effective from 2009, these estimates include revenue from disinvestments (in line with government methodology). (10) Refers to central government. (11) Includes Grain Securities, Seoul Metro bonds, National Housing Bonds, Seoul Metro Subway Bonds, and Industrial Finance Debentures. (12) Refers to the federal government’s financial position. The government assumed an average oil price of $85 per barrel for 2011 in its 2011 budget. (13) General government statistics as interpreted by the Taiwan government. (14) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September.


06 March 2014


Summary macroeconomic data: Government expenditure

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

General government expenditure (% of GDP)

LATIN AMERICA 29.6 30.1 31.8 31.4 32.3 33.7 34.6 35.7 36.2

Argentina 31.4 32.8 36.6 37.9 40.4 43.6 44.9 46.8 46.5

Brazil (1) 36.4 35.8 36.6 36.2 37.1 37.9 38.3 39.2 38.8

Chile 17.8 20.1 23.2 21.9 21.4 21.4 21.3 21.4 21.0

Colombia 34.1 32.5 35.3 34.4 33.4 33.5 36.0 36.1 37.9

Mexico 21.8 23.4 25.5 25.1 25.0 27.0 28.8 30.7 32.8

Peru 18.1 18.9 20.5 20.3 19.1 19.7 21.1 21.4 21.4

Venezuela (2) 35.5 35.6 33.3 31.6 39.5 42.0 40.9 39.4 38.5

EEMEA 34.3 35.0 40.1 37.7 35.9 35.8 36.5 36.8 36.9

Czech Republic (3) 42.5 41.2 44.7 43.8 43.2 44.5 43.2 44.0 44.0

Hungary (4) 50.7 49.2 51.5 49.9 50.0 48.6 50.1 52.0 52.0

Israel 31.1 30.4 30.2 29.3 28.9 28.7 28.6 28.9 28.6

Kazakhstan (5) 26.4 33.9 31.7 30.5 30.0 29.1 28.5 29.0 29.5

Poland (4) 42.2 43.2 44.6 45.4 43.4 42.2 41.8 42.0 42.0

Russia 34.2 34.3 41.3 37.9 36.5 36.6 38.2 38.8 39.0

Saudi Arabia 29.9 26.7 37.1 33.1 32.9 31.7 33.1 33.2 33.0

South Africa (6) 26.1 30.8 33.5 32.0 32.0 32.7 33.0 32.7 32.5

Turkey (7) 33.3 33.8 37.3 34.8 32.3 33.6 33.7 34.6 35.2

Ukraine 43.8 47.4 48.4 51.1 43.2 43.1 43.6 41.1 40.6


EMERGING ASIA 18.5 19.7 21.1 20.4 20.8 21.5 21.6 21.8 22.0

China 18.7 19.9 22.4 22.4 23.1 24.2 24.6 24.9 25.0

Hong Kong 14.6 18.5 17.6 17.0 18.8 18.5 20.5 18.3 19.9

India 14.3 15.8 15.6 15.2 14.5 13.9 13.5 13.6 13.8

Indonesia (8) 19.2 19.9 16.7 16.2 17.5 18.1 18.4 18.0 17.7

Korea 28.0 29.6 31.0 27.7 28.1 28.8 29.2 29.8 30.0

Malaysia (9) 25.4 26.4 30.3 25.7 25.9 26.7 26.0 25.3 25.5

Philippines 16.7 16.5 17.7 16.9 16.0 16.8 17.0 17.5 17.5

Singapore 12.1 14.5 14.9 14.3 14.2 14.1 14.2 14.6 15.0

Taiwan (10) 17.7 18.6 21.4 18.9 19.1 19.6 19.4 19.6 19.6

Thailand (11) 19.0 17.9 21.7 18.0 20.4 20.0 20.1 19.7 19.5



(1) Total government expenditures; includes interest payments. (2) Consolidation of Central Government, PDVSA, Non-Financial Public Enterprises, Venezuelan Social Security Institute and Deposit and Guarantee Fund for 2005-2009; preliminary consolidation of central government and PDVSA 2010-2011. (3) Consolidated fiscal accounts of the broadly defined general government on an accrual basis. (4) Consolidated fiscal accounts of the broadly defined general government on an accrual basis; excluding one-off transfers from pension funds to the government budget. (5) Consists of the state budget and the National Oil Fund. (6) Data for fiscal years starting 1 April. Se lected data refer to the government’s consolidated fiscal balances from 2009. (7) The definition of the consolidated government comprises the central government, extra-budgetary funds, state-owned enterprises, social security institutions and the Unemployment Insurance Fund. The data for government spending and gross debt are for the central government. (8) Refers to central government. (9) Refers to the federal government ’s financial position. The government assumed an average oil price of $85 per barrel for 2011 in its 2011 budget. (10) General government statistics as interpreted by the Taiwan government. (11) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September.


06 March 2014


Summary macroeconomic data: Government debt

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Consolidated gross government debt (% of GDP)

LATIN AMERICA 44.9 44.3 47.0 43.9 43.6 44.6 44.7 47.9 47.9

Argentina (1) 71.1 57.4 61.7 53.7 47.5 46.6 42.8 55.3 60.7

Brazil (2) 58.0 57.4 60.9 53.4 54.2 58.6 57.2 60.0 61.0

Chile (3) 3.9 4.9 5.8 8.6 11.1 11.9 12.3 12.4 12.4

Colombia 43.8 42.6 45.1 46.1 42.9 40.5 39.7 38.5 36.6

Mexico (4) 33.4 38.6 39.2 38.0 39.1 38.7 41.8 43.4 41.4

Peru 28.5 25.9 26.0 23.5 21.4 19.7 19.2 17.9 17.1

Venezuela (5) 26.3 18.8 24.7 35.1 36.2 36.5 40.3 47.5 44.9

EEMEA 23.7 23.4 28.3 28.6 27.8 27.6 27.9 27.8 28.0

Czech Republic (6) 27.9 28.7 34.6 38.4 41.4 46.2 46.1 46.4 46.8

Hungary (7) 67.0 73.0 79.8 82.1 82.1 79.8 77.8 78.4 78.6

Israel 74.6 73.1 75.4 71.5 69.9 68.2 67.3 67.2 67.1

Kazakhstan 7.7 8.8 13.7 15.7 18.1 19.6 12.7 14.0 14.7

Poland (7) 45.0 47.1 50.9 54.9 56.2 55.6 57.8 51.6 52.3

Russia 7.4 6.1 7.8 7.9 8.2 9.3 9.5 9.8 9.8

Saudi Arabia 17.1 12.2 14.0 8.5 5.4 3.6 2.7 2.8 2.8

South Africa (8) 27.6 27.3 32.8 36.2 39.8 42.7 45.8 47.0 48.9

Turkey 39.6 40.0 46.3 43.1 40.0 37.6 37.2 35.0 32.9

Ukraine 11.6 14.8 35.4 46.5 37.0 37.4 41.3 53.8 59.6


EMERGING ASIA 46.5 46.1 53.2 52.5 51.2 52.3 54.0 53.2 53.2

China (9) 41.9 41.3 53.1 54.3 51.8 53.5 56.2 54.8 55.4

Hong Kong (10) 1.2 1.0 0.7 0.6 0.6 0.5 0.5 0.5 0.5

India 71.4 72.2 70.8 66.0 65.6 65.8 65.5 64.8 64.0

Indonesia (11) 34.1 29.3 31.4 26.4 23.6 23.3 23.0 24.5 24.2

Korea (12) 36.3 36.2 39.5 39.4 40.9 42.1 43.8 42.7 41.1

Malaysia (13) 40.1 39.8 50.8 51.2 52.0 53.5 54.8 55.4 54.8

Philippines 53.9 54.7 54.8 52.3 50.7 51.5 53.3 52.0 52.0

Taiwan (14) 40.9 43.4 48.4 48.3 49.7 50.9 51.8 52.8 53.9

Thailand (15)( 16) 38.3 37.3 45.2 42.6 42.3 42.9 45.5 45.7 45.8



(1) Debt data assume that Paris Club debt remains in arrears. (2) Figures related to the Central Bank's new methodology. (3) Excludes debt of the central bank (4) Includes all contingent liabilities associated with IPAB, Pidiregas, FARAC, financial intermediation and other debtor support programs. (5) Central government, regional governments, PDVSA; does not include liabilities of other public institutions such as the Central bank, National Development Bank, Foreign Trade Bank, Industrial Bank of Venezuela and Andean Region Development Bank. (6) Consolidated fiscal accounts of the broadly defined general government on an accrual basis. (7) Consolidated fiscal accounts of the broadly defined general government on an accrual basis; excluding one-off transfers from pension funds to the government budget. (8) Data for fiscal years starting 1 April. Selected data refer to the government’s consolidated fiscal balances from 2009. (9) Includes Treasury bonds, foreign state debt owed by the State Council, and local government bonds. (10) Also includes debt issued under the Government Bond Program. Excludes debt guaranteed by the government. (11) Refers to central government. (12) Includes social security funds (13) Refers to the federal government’s financial position. The government assumed an average oil price of $85 per barrel for 2011 in its 2011 budget. (14) General government statistics as interpreted by the Taiwan government. (15) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September. (16) Includes central government, non-financial SOEs and financial institution development fund.


06 March 2014


Summary macroeconomic data: Foreign debt

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Total foreign debt (% of GDP)

LATIN AMERICA 21.7 19.6 23.0 22.8 22.0 23.3 24.5 27.5 27.3

Argentina 54.2 43.6 43.4 36.9 33.0 31.1 30.4 41.8 44.7

Brazil (1) 17.6 15.9 17.1 16.4 16.3 19.5 21.8 24.0 23.9

Chile 30.8 35.6 41.7 38.8 39.3 43.9 46.9 52.1 47.9

Colombia 21.5 19.0 22.7 22.4 22.8 21.4 22.8 23.5 22.1

Mexico 12.3 11.8 18.5 18.8 18.0 19.1 19.3 19.5 18.3

Peru 30.9 27.5 27.6 28.4 27.2 29.5 29.2 29.4 28.1

Venezuela 24.4 20.8 24.9 39.3 35.1 31.2 33.0 41.4 45.4

EEMEA 42.5 38.3 49.2 45.0 40.6 43.6 44.1 46.9 46.0

Czech Republic 41.9 36.7 44.9 47.4 43.6 51.9 50.1 50.6 48.2

Hungary 130.0 144.5 189.4 162.2 152.2 162.8 140.2 137.2 131.4

Israel 51.9 41.5 45.3 46.5 40.8 37.6 35.1 32.5 31.4

Kazakhstan 92.3 82.5 100.5 81.7 71.1 62.5 59.7 56.4 55.6

Poland 54.9 46.4 65.0 67.5 62.7 74.6 69.3 66.5 61.8

Russia 35.7 28.9 38.2 32.1 28.7 31.2 34.3 38.4 39.0

Saudi Arabia 17.5 15.3 20.0 17.1 13.0 11.3 11.5 11.2 10.9

South Africa 26.4 27.4 29.0 30.5 29.3 37.2 43.2 48.8 48.4

Turkey 38.7 38.2 43.7 39.9 39.2 42.9 45.9 50.3 47.1

Ukraine 55.9 56.7 90.9 91.4 77.4 77.5 76.3 98.4 105.4


EMERGING ASIA 18.5 16.6 17.5 17.0 17.0 17.3 17.3 16.3 15.1

China 11.1 8.6 8.6 9.2 9.5 8.9 8.4 7.4 6.4

Hong Kong 41.3 22.9 37.1 44.2 50.7 51.3 49.1 47.3 46.6

India 18.1 18.3 19.1 18.6 18.4 21.1 22.6 21.7 20.2

Indonesia 32.7 30.4 32.1 28.5 26.7 28.8 31.6 32.4 30.3

Korea 31.8 34.2 41.6 35.6 35.8 36.0 34.4 31.6 29.9

Malaysia 30.4 30.6 35.2 29.9 28.2 27.6 26.8 26.8 26.8

Philippines 37.1 31.3 32.6 30.1 26.9 24.1 21.7 19.8 17.0

Taiwan 24.0 22.6 21.7 23.7 26.4 26.3 27.2 28.1 28.2

Thailand 28.1 27.6 28.5 30.4 31.2 36.4 37.0 34.0 33.0



(1) Included intercompany loans.


06 March 2014


Summary macroeconomic data: Exchange rates

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Exchange rate (end-year)

LATIN AMERICA

Argentina (per USD) 3.15 3.45 3.80 3.98 4.30 4.92 6.52 11.45 13.75

Brazil (per USD) 1.77 2.34 1.74 1.67 1.88 2.04 2.35 2.60 2.60

Chile (per USD) 498.10 638.50 507.45 468.00 521.46 479.20 525.45 570.00 550.00

Colombia (per USD) 2,018 2,250 2,043 1,908 1,938 1,770 1,930 2,036 2,020

Mexico (per USD) 10.87 13.54 13.08 12.37 13.97 12.87 13.09 13.00 12.50

Peru (per USD) 2.98 3.11 2.88 2.82 2.70 2.57 2.79 2.86 2.84

Venezuela (per USD) (1) 2.15 2.15 2.15 4.30 4.30 4.30 6.30 12.93 19.79

EEMEA

Czech Republic (per EUR) 26.50 26.90 26.40 25.00 25.60 25.10 27.50 27.50 27.50

Hungary (per EUR) 252.00 266.00 271.00 279.00 315.00 291.00 300.00 315.00 320.00

Israel (per USD) 3.85 3.80 3.78 3.55 3.82 3.73 3.47 3.55 3.55

Kazakhstan (per USD) 120.30 120.77 148.46 147.50 146.50 150.44 153.00 182.50 181.50

Poland (per EUR) 3.60 4.15 4.11 3.96 4.47 4.08 4.15 4.10 4.00

Russia (against basket) 29.62 34.66 36.12 35.50 36.50 34.80 38.50 42.00 43.50

Saudi Arabia (per USD) 3.75 3.75 3.75 3.75 3.75 3.75 3.75 3.75 3.75

South Africa (per USD) 6.81 9.53 7.38 6.63 8.09 8.48 10.52 11.50 11.50

Turkey (against basket) (2) 1.44 1.83 1.83 1.80 2.18 2.07 2.54 2.60 2.65

Ukraine (per USD) 5.05 7.82 8.05 7.94 8.04 8.05 8.24 12.28 10.76

United Arab Emirates (per USD) 3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67

EMERGING ASIA

China (per USD) 7.29 6.82 6.83 6.62 6.35 6.23 6.07 6.04 5.98

Hong Kong (per USD) 7.78 7.75 7.76 7.77 7.78 7.75 7.75 7.80 7.80

India (per USD) 40.36 51.23 45.50 44.99 50.88 54.28 62.00 64.00 64.00

Indonesia (per USD) 9,419 10,950 9,400 8,991 9,068 9,670 12,189 12,100 12,000

Korea (per USD) 938.20 1,258 1,168 1,139 1,153 1,064 1,055 1,055 1,055

Malaysia (per USD) 3.31 3.46 3.43 3.06 3.17 3.06 3.28 3.38 3.38

Philippines (per USD) 41.40 47.49 46.36 43.89 43.93 41.19 44.41 45.50 44.80

Singapore (per USD) 1.45 1.48 1.40 1.31 1.30 1.22 1.27 1.29 1.30

Taiwan (per USD) 32.42 33.15 32.28 30.55 30.30 29.04 29.72 29.90 29.90

Thailand (per USD) 29.58 34.68 33.20 30.09 31.00 30.60 32.70 33.50 33.80

Emerging Markets

(1) Expressed in strong bolivares for all years; 2014 and 2015 forecasts represent a weighted average exchange rate across official FX markets (CENCOEX, SICAD 1 and SICAD 2). (2) The basket exchange rate is the average of USDTRY and EURTRY exchange rates. Our forecasts for USDTRY are derived from our basket exchange rate forecasts and the previous month's EURUSD average.


06 March 2014


Summary macroeconomic data: Interest rates

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Interest rate (end-year, %)

LATIN AMERICA 9.35 11.41 7.11 8.03 8.37 6.92 7.54 7.85 8.37

Argentina - Central bank's 7 day repo rate 10.30 13.00 11.50 11.50 11.50 11.50 11.50 11.50 11.50

Brazil - Selic interest rate 11.25 13.75 8.75 10.75 11.00 7.25 10.00 10.75 12.00

Chile - Monetary policy rate 6.00 8.25 0.50 3.25 5.25 5.00 4.50 3.50 3.50

Colombia - Reference rate 9.50 9.50 3.50 3.00 4.75 4.25 3.25 4.50 5.00

Mexico - Reference rate 7.50 8.25 4.50 4.50 4.50 4.50 3.50 3.50 3.50

Peru - Reference rate 5.00 6.50 1.25 3.00 4.25 4.25 4.00 4.00 4.50

Venezuela - 90 day deposit rate 10.89 17.60 15.00 15.00 14.50 14.55 14.73 14.50 14.50

EEMEA 7.83 8.59 5.16 4.44 4.58 4.39 3.90 5.14 5.47

Czech Republic - 2-week repo rate 3.50 2.25 1.00 0.75 0.75 0.05 0.05 0.05 0.25

Hungary - 2-week deposit rate 7.50 10.00 6.00 5.75 7.00 5.75 3.00 2.70 4.00

Israel - Base rate 4.00 2.50 1.00 2.00 2.75 1.75 1.00 0.50 1.50

Kazakhstan - Refinancing rate (1) 11.00 10.50 7.00 7.00 7.50 5.50 5.50 5.50 5.50

Poland - 1-week reference rate 5.00 5.00 3.50 3.50 4.50 4.25 2.50 2.50 3.50

Russia - 1-week repo rate 6.00 9.00 6.00 5.00 5.25 5.50 5.50 6.50 6.00

Saudi Arabia - 3-month deposit rate 4.79 2.89 1.33 0.74 0.69 0.92 0.95 0.88 1.32

South Africa - Repo rate 11.00 11.50 7.00 5.50 5.50 5.00 5.00 6.50 7.50

Turkey - 1-week repo rate (2) 16.73 15.64 7.11 6.50 5.75 5.50 4.50 10.00 11.00

Ukraine - Discount rate 8.00 12.00 10.25 7.75 7.75 7.50 6.50 6.50 6.50

United Arab Emirates - 3-month deposit rate 5.14 2.82 2.40 2.22 1.72 1.42 0.97 0.97 1.70

EMERGING ASIA 4.80 2.77 2.36 4.35 5.26 4.16 5.06 5.43 5.55

China - 3-month interbank rate 4.43 1.90 1.83 4.62 5.47 3.91 5.30 5.80 5.95

Hong Kong - 3-month HIBOR 3.45 0.95 0.13 0.30 0.30 0.40 0.40 0.40 0.80

India - Reverse repo rate (3) 6.00 3.50 3.50 5.75 7.50 6.50 7.00 7.75 7.75

Indonesia - Overnight rate (4) 8.00 9.25 6.50 6.50 6.00 5.75 7.50 6.50 6.50

Korea - Overnight base rate 5.00 3.00 2.00 2.50 3.25 2.75 2.50 2.50 2.50

Malaysia - Overnight policy rate (5) 3.50 2.50 2.00 2.75 3.00 3.00 3.00 3.25 3.50

Philippines - Overnight borrowing rate 5.45 5.86 4.00 4.00 4.50 3.50 3.50 3.50 4.00

Singapore - 3-month SIBOR 2.38 1.00 0.69 0.44 0.38 0.38 0.40 0.50 0.80

Taiwan - Overnight rate 2.08 0.87 0.11 0.25 0.40 0.40 0.40 0.40 0.40

Thailand - Overnight repo rate (6) 3.25 2.75 1.25 2.00 3.25 2.75 2.25 2.00 2.50



(1) The central bank 1-month deposit rate equals half of the refinancing rate and until the banking crisis in the summer of 2007 represented a more effective policy instrument. (2) One-week repo rate has been the central bank's policy rate since 18 May 2010 but it has temporarily lost relevance between late 2010 and early 2014. (3) The RBI uses a mix of instruments, such as the repo rate, reverse repo rate, CRR (cash reserve ratio), etc. (4) BI changed its policy target from 1m SBI rate to overnight rate in 2008. (5) BNM changed the policy rate from the intervention rate to the overnight rate in May 2004. (6) Through 2006, the policy rate was the 14-day repo rate.


06 March 2014


Summary macroeconomic data: Interest rates

2Q 13 3Q 13 4Q 13 1Q 14F 2Q 14F 3Q 14F 4Q 14F 1Q 15F 2Q 15F

Interest rate (end-quarter, %)

LATIN AMERICA 6.98 7.27 7.53 7.76 7.75 7.81 7.85 8.34 8.34

Argentina - Central bank's 7 day repo rate 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50

Brazil - Selic interest rate 8.00 9.00 10.00 10.75 10.75 10.75 10.75 12.00 12.00

Chile - Monetary policy rate 5.00 5.00 4.50 3.75 3.50 3.50 3.50 3.50 3.50

Colombia - Reference rate 3.25 3.25 3.25 3.25 3.25 4.00 4.50 5.00 5.00

Mexico - Reference rate 4.00 3.75 3.50 3.50 3.50 3.50 3.50 3.50 3.50

Peru - Reference rate 4.25 4.25 4.00 4.00 4.00 4.00 4.00 4.00 4.00

Venezuela - 90 day deposit rate 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50

EEMEA 4.55 4.46 4.44 6.03 6.08 6.13 5.92 6.04 6.05

Czech Republic - 2-week repo rate 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05

Hungary - 2-week deposit rate 4.25 3.60 3.00 2.70 2.70 2.70 2.70 3.00 3.00

Israel - Base rate 1.25 1.00 1.00 0.75 0.50 0.50 0.50 0.50 0.50

Kazakhstan - Refinancing rate (1) 5.50 5.50 5.50 5.50 5.75 5.75 5.50 5.50 5.50

Poland - 1-week reference rate 2.75 2.50 2.50 2.50 2.50 2.50 2.50 3.00 3.50

Russia - 1-week repo rate 5.50 5.50 5.50 7.00 7.00 7.00 6.50 6.50 6.25

South Africa - Repo rate 5.00 5.00 5.00 5.50 6.00 6.50 6.50 7.00 7.50

Turkey - 1-week repo rate (2) 4.50 4.50 4.50 10.00 10.00 10.00 10.00 10.00 10.00

Ukraine - Discount rate 7.00 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.50

EMERGING ASIA 5.12 4.82 5.36 4.91 5.23 5.18 5.22 5.26 5.40

China - 3-month interbank rate 5.44 4.67 5.56 4.64 5.23 5.09 5.11 5.09 5.35

Hong Kong - 3-month HIBOR 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40

India - Reverse repo rate (3) 7.25 7.50 7.75 8.00 8.00 8.25 8.50 8.75 8.75

Indonesia - Overnight rate (4) 6.00 7.25 7.50 7.50 7.50 7.00 6.50 6.50 6.50

Korea - Overnight base rate 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50

Malaysia - Overnight policy rate (5) 3.00 3.00 3.00 3.00 3.25 3.25 3.25 3.25 3.25

Philippines - Overnight borrowing rate 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50

Singapore - 3-month SIBOR 0.38 0.42 0.40 0.45 0.45 0.50 0.50 0.50 0.60

Taiwan - Overnight rate 0.39 0.39 0.39 0.40 0.40 0.40 0.40 0.40 0.40

Thailand - Overnight repo rate (6) 2.50 2.50 2.25 2.00 2.00 2.00 2.00 2.00 2.00


Aggregates for regions and total emerging markets are weighted by IMF’s PPP based GDP figures.

(1) The central bank 1-month deposit rate equals half of the refinancing rate and until the banking crisis in the summer of 2007 represented a more effective policy instrument. (2) The monetary policy committee changed the definition of the policy rate on 18 May 2010 to the one-week repo rate from central bank’s overnight borrowing rate previously. (3) The RBI uses a mix of instruments, such as the repo rate, reverse repo rate, CRR (cash reserve ratio), etc. (4) BI changed its policy target from 1m SBI rate to overnight rate in 2008. (5) BNM changed the policy rate from the intervention rate to the overnight rate in May 2004. (6) Through 2006, the policy rate was the 14-day repo rate.


06 March 2014


Summary macroeconomic data: Domestic credit

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Domestic credit (% of GDP)

LATIN AMERICA 57.3 58.4 62.6 59.6 61.6 65.8 68.8 70.9 72.4

Argentina 28.5 24.4 28.0 29.2 31.3 37.3 42.8 42.1 39.3

Brazil 97.4 102.1 107.2 99.5 104.0 113.1 117.0 121.3 124.6

Chile 69.7 78.0 76.0 71.1 76.0 79.5 81.0 79.5 80.2

Colombia 34.8 35.6 37.2 39.8 41.0 44.0 44.8 46.8 48.9

Mexico 33.3 31.7 35.4 34.8 34.6 33.2 34.5 35.9 37.4

Peru 18.9 16.2 20.3 21.8 21.1 21.8 21.3 21.6 22.5

Venezuela 32.2 28.6 32.9 27.6 30.8 40.1 48.5 50.8 50.2

EEMEA 46.1 50.5 57.4 57.9 56.9 57.8 61.3 64.5 67.0

Czech Republic 59.0 63.5 67.5 69.8 74.3 78.2 79.2 80.6 82.3

Hungary 77.1 86.9 87.3 87.7 82.6 73.7 69.7 69.3 71.7

Israel 88.3 89.4 84.6 85.3 86.3 82.3 80.1 78.1 74.8

Kazakhstan 41.0 54.2 57.7 49.6 47.7 46.5 52.0 56.4 58.0

Poland 46.3 59.9 61.4 63.5 66.1 63.8 67.0 68.4 69.9

Russia 23.9 24.4 34.1 37.7 39.7 42.6 46.8 52.0 55.8

Saudi Arabia 38.2 38.2 45.8 39.2 34.1 36.3 40.1 42.7 44.8

South Africa 92.3 95.7 91.4 87.5 86.0 88.4 86.3 86.1 85.7

Turkey 49.7 51.7 61.9 68.0 66.6 69.5 77.1 79.9 82.7

Ukraine 61.1 82.1 88.3 84.4 74.2 73.5 78.4 84.1 90.5


EMERGING ASIA 105.9 105.6 118.6 120.4 121.6 128.0 134.1 137.2 136.5

China 127.8 120.8 141.8 146.3 145.4 155.1 163.0 167.1 163.5

Hong Kong 125.7 122.6 165.1 196.2 207.5 202.8 227.7 230.6 233.1

India 73.0 79.4 82.5 82.3 83.0 84.9 88.0 90.3 94.1

Indonesia 28.8 26.3 26.1 24.9 26.5 28.5 29.9 30.7 32.3

Korea 101.8 112.3 112.1 103.1 103.6 103.4 105.0 107.6 111.1

Malaysia 113.4 115.3 137.0 126.7 128.0 133.6 136.6 136.0 135.4

Philippines 45.9 49.1 51.2 49.7 52.0 50.9 51.9 55.0 60.2

Singapore 111.4 126.9 131.0 126.5 136.1 146.9 157.5 159.7 156.7

Taiwan 139.4 146.3 149.1 146.6 153.3 154.2 160.2 164.3 167.0

Thailand 105.0 107.6 113.7 113.4 125.6 131.2 138.0 136.1 133.3



Source: IMF International Financial Statistics, the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, IHS Global Insight, Credit Suisse

06 March 2014


Summary macroeconomic data: Domestic credit to the private sector

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Domestic credit to the private sector (% of GDP)

LATIN AMERICA 31.6 34.4 35.7 36.3 38.7 41.8 44.4 46.6 48.8

Argentina 14.5 13.7 13.5 14.6 16.6 18.5 20.1 19.0 17.3

Brazil (1) 43.4 49.5 52.1 53.9 58.2 64.1 67.8 71.9 76.5

Chile 54.4 60.3 60.4 56.9 58.6 61.4 62.6 62.1 63.2

Colombia 31.9 32.2 30.8 33.6 35.8 38.7 40.4 42.6 44.4

Mexico 22.7 23.4 24.1 23.8 24.8 25.4 27.0 28.9 30.6

Peru 22.1 26.7 27.3 28.0 30.4 31.8 35.6 37.6 39.6

Venezuela 22.8 20.8 22.9 18.6 20.4 25.1 29.0 29.4 29.1

EEMEA 44.7 49.2 52.1 50.4 50.6 51.9 55.5 58.3 60.7

Czech Republic 46.3 50.6 52.0 53.1 55.6 56.9 58.9 59.9 61.2

Hungary 62.6 69.2 69.5 69.1 65.6 56.3 52.1 51.3 53.0

Israel 49.9 50.5 44.6 44.3 43.6 40.2 39.2 38.1 36.7

Kazakhstan 58.9 49.6 53.1 43.0 37.6 34.0 37.4 38.0 41.4

Poland 41.0 51.2 52.8 54.7 58.1 57.1 58.1 59.3 60.6

Russia 39.3 43.5 47.5 44.9 47.7 51.0 55.3 60.6 64.3

Saudi Arabia 35.8 36.6 44.0 37.6 32.9 34.9 38.5 40.4 42.5

South Africa 86.5 87.8 82.2 78.0 75.5 77.7 76.5 76.4 76.0

Turkey 29.3 31.8 36.0 43.9 49.3 54.1 64.1 66.8 69.2

Ukraine 57.4 73.5 73.6 66.5 56.5 54.5 56.5 60.3 63.9


EMERGING ASIA 90.5 90.5 103.0 104.6 104.7 109.7 114.7 117.3 118.1

China 107.5 103.7 127.2 129.9 127.0 133.7 140.0 142.4 141.1

Hong Kong 140.0 140.6 154.8 192.2 208.8 218.8 233.8 247.5 259.8

India 55.0 56.9 57.0 57.2 57.1 58.6 60.5 62.3 65.5

Indonesia 25.5 26.6 25.0 26.1 28.6 31.4 34.1 35.3 37.1

Korea 99.6 108.8 107.4 100.8 101.7 100.5 104.0 108.6 114.2

Malaysia 105.3 100.7 118.3 114.1 122.1 128.5 124.5 123.9 123.3

Philippines 31.0 29.9 30.4 29.9 31.9 33.4 35.8 39.9 45.5

Singapore 86.6 99.6 98.9 97.5 107.4 117.3 130.0 133.1 131.8

Taiwan 124.1 130.1 131.1 129.5 135.9 137.8 144.2 149.0 152.6

Thailand 102.6 105.3 111.1 110.2 122.1 128.9 136.2 136.2 133.5



(1) Includes bank lending to individuals and private corporate debt (debentures and bank loans to the sector).

Source: IMF International Financial Statistics, the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, IHS Global Insight, Credit Suisse

06 March 2014


Summary macroeconomic data: Fixed investment

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Fixed investment (% of GDP)

LATIN AMERICA 21.5 22.7 21.3 21.9 22.6 22.7 22.6 22.7 23.1

Argentina 22.6 23.1 20.6 22.8 24.5 22.8 23.0 22.5 22.2

Brazil 17.4 19.1 18.1 19.5 19.3 18.2 18.4 18.3 18.6

Chile 21.6 24.7 21.9 23.3 25.2 26.8 27.2 27.2 27.2

Colombia 23.9 25.2 23.7 24.5 27.2 28.0 28.2 30.2 32.0

Mexico 22.3 23.1 22.0 21.2 22.0 22.1 21.8 22.2 22.7

Peru 23.5 27.1 24.4 27.7 27.1 29.3 29.6 29.7 30.5

Venezuela 34.6 33.7 31.9 30.3 30.4 35.5 33.2 32.2 31.9

EEMEA 23.4 23.7 20.7 21.7 21.7 21.1 21.4 21.2 21.3

Czech Republic 27.0 26.8 24.7 24.5 24.1 23.6 22.6 23.4 23.6

Hungary 22.1 22.6 21.5 19.2 18.2 17.8 18.2 18.4 18.8

Israel 19.5 19.8 18.2 18.5 20.4 20.4 19.6 19.8 19.7

Kazakhstan 30.0 26.8 26.7 31.9 33.5 34.9 35.5 35.9 36.2

Poland 21.7 22.6 22.0 21.1 21.9 21.1 20.7 21.7 22.9

Russia 24.2 25.4 18.7 21.8 21.0 20.6 21.4 20.3 20.0

Saudi Arabia 23.7 22.8 25.8 24.5 22.7 22.3 23.3 23.5 23.6

South Africa 20.1 23.1 21.5 19.2 18.8 18.9 20.1 20.2 20.5

Turkey 21.4 19.9 16.9 18.9 21.8 20.3 20.5 20.0 20.5

Ukraine 28.2 27.9 17.4 20.8 20.7 18.3 14.1 14.0 14.5


EMERGING ASIA 33.5 34.6 37.5 37.9 37.5 38.2 38.4 38.1 38.4

China 39.1 40.8 46.0 45.9 44.8 46.0 46.9 46.0 45.9

Hong Kong 20.4 22.4 22.1 22.3 23.5 24.8 24.8 25.2 26.1

India 33.7 33.5 33.3 34.3 34.9 33.7 32.6 33.6 35.2

Indonesia 24.9 27.7 31.1 32.0 31.9 32.7 31.7 30.5 29.7

Korea 28.5 29.3 29.1 28.6 27.1 26.1 26.4 26.1 25.9

Malaysia 23.2 21.4 23.0 22.6 22.4 25.8 26.6 27.8 28.6

Philippines 19.9 19.7 19.0 20.5 19.6 20.3 21.1 21.9 22.6

Singapore 23.8 26.6 25.9 23.9 23.9 25.5 23.9 23.6 24.6

Taiwan 22.0 21.1 18.9 21.3 20.8 19.7 20.1 19.8 19.5

Thailand 22.3 22.1 20.5 20.8 21.4 22.8 21.7 22.3 24.0




06 March 2014


Summary macroeconomic data: FX reserves

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Central bank gross non-gold FX reserves ($bn)

LATIN AMERICA 399.9 442.6 486.7 569.8 668.6 720.7 714.1 712.9 767.3

Argentina 44.7 44.8 46.0 49.7 43.2 40.0 28.2 20.2 13.4

Brazil 179.4 192.8 237.4 287.1 350.4 369.6 356.2 338.0 378.0

Chile 16.9 23.2 25.4 27.9 42.0 41.7 41.1 41.9 42.8

Colombia 20.6 23.3 24.6 28.3 31.9 36.9 43.0 45.5 46.7

Mexico 87.1 95.1 99.6 120.3 144.0 160.4 175.5 195.5 210.2

Peru 26.9 30.3 32.0 42.6 47.1 62.2 64.1 66.0 70.8

Venezuela 24.2 33.1 21.7 14.0 9.9 9.9 6.0 5.8 5.5

EEMEA 1,146 1,204 1,222 1,341 1,458 1,638 1,735 1,731 1,800

Czech Republic 34.5 36.7 41.2 41.9 39.7 44.3 55.8 61.0 61.0

Hungary 24.0 33.8 44.1 44.8 48.6 44.5 46.4 46.4 46.4

Israel 28.6 42.5 60.6 70.9 74.9 75.9 81.8 85.0 91.0

Kazakhstan 15.8 17.9 20.6 25.6 25.2 22.1 25.7 34.0 43.0

Poland 63.0 59.3 75.9 88.8 92.2 103.4 102.2 102.2 102.2

Russia 466.8 411.8 416.6 443.6 453.9 486.6 469.6 434.6 455.0

Saudi Arabia (1) 300.9 437.9 405.3 440.4 535.2 647.6 716.7 741.2 773.3

South Africa 29.6 30.6 35.3 38.2 42.6 44.0 44.8 40.5 40.0

Turkey 73.3 71.0 70.7 80.7 78.5 99.9 110.9 104.0 104.0

Ukraine 32.0 30.8 25.6 33.3 30.4 22.6 18.8 20.7 21.8


EMERGING ASIA 2,938 3,311 4,040 4,696 5,109 5,313 5,784 6,043 6,413

China 1,524 1,942 2,389 2,830 3,159 3,252 3,680 3,901 4,221

Hong Kong 152.7 182.5 255.8 268.7 285.4 317.3 340.9 366.9 394.5

India 299.7 242.4 261.1 282.5 267.4 266.4 270.0 265.0 260.0

Indonesia 55.0 49.6 63.6 92.9 106.5 108.8 96.4 100.0 105.0

Korea (2) 262.1 201.1 269.9 291.5 306.3 326.9 341.4 349.7 356.7

Malaysia (3) 101.1 91.2 95.4 104.9 132.0 138.1 133.3 126.4 123.4

Philippines (3) 30.2 33.2 38.8 55.4 67.3 73.5 76.2 75.0 77.0

Singapore (3) 162.7 174.0 187.6 225.5 237.5 259.1 272.9 279.8 284.8

Taiwan (2) 265.6 287.0 343.4 376.8 380.5 397.9 411.6 424.6 436.3

Thailand (3) 85.2 108.7 135.5 167.5 167.4 173.3 161.3 154.0 154.0

Emerging Markets 4,484 4,958 5,749 6,607 7,236 7,672 8,232 8,487 8,980

Aggregates for regions and total emerging markets represent the sums of individual country data. The data for India are for fiscal years.

(1) Net foreign assets of the Saudi Arabian Monetary Authority. (2) Central bank forex reserves minus monetary authorities’ other liabilities. (3) Not including forward FX purchases.


06 March 2014


Summary macroeconomic data: FX reserves

2007 2008 2009 2010 2011 2012 2013E 2014F 2015F

Central bank gross non-gold FX reserves (% of GDP)

LATIN AMERICA 11.8 11.2 13.2 12.8 12.9 14.0 13.8 14.5 15.0

Argentina 17.1 13.7 15.0 13.5 9.7 8.4 5.8 5.6 4.1

Brazil 13.1 11.7 14.6 13.4 14.2 16.4 15.9 15.8 17.4

Chile 9.8 12.9 14.7 12.8 16.7 15.5 14.7 16.0 15.1

Colombia 9.9 9.6 10.5 9.9 9.5 10.0 11.3 12.1 11.3

Mexico 8.4 8.6 11.1 11.4 12.3 13.5 14.2 15.2 14.8

Peru 25.0 23.8 25.1 27.7 26.7 31.1 31.0 30.9 30.4

Venezuela 10.5 10.5 6.6 5.9 3.1 2.6 1.6 2.0 2.1

EEMEA 28.1 24.4 30.6 28.3 26.2 28.5 28.9 29.6 29.2

Czech Republic 19.0 16.2 20.7 21.1 18.4 22.6 28.0 30.9 29.4

Hungary 17.6 21.9 34.8 35.1 35.3 35.7 33.4 33.2 33.0

Israel 16.3 19.9 29.5 30.6 29.0 29.5 28.0 27.0 27.6

Kazakhstan 15.0 13.4 17.9 17.3 13.5 10.9 11.7 14.5 17.1

Poland 14.8 11.2 17.6 18.9 17.9 21.1 19.1 18.4 17.1

Russia 35.9 24.8 34.1 29.1 23.9 24.1 22.4 22.7 23.3

Saudi Arabia (1) 72.4 84.3 94.5 83.6 79.9 88.2 96.2 93.1 91.3

South Africa 10.4 11.2 12.3 10.5 10.5 11.5 12.8 12.3 11.5

Turkey 11.3 9.7 11.5 11.0 10.1 12.7 13.2 13.1 11.8

Ukraine 22.3 17.2 22.5 26.0 18.6 13.0 10.5 14.4 15.0


EMERGING ASIA 38.7 38.2 44.2 42.5 39.4 37.7 38.1 37.1 35.7

China 43.6 43.0 47.8 47.4 43.3 39.4 39.8 38.8 37.8

Hong Kong 73.7 83.4 120.3 118.0 115.1 121.5 125.3 127.6 130.4

India 24.1 19.8 19.1 16.5 14.2 14.4 14.5 13.1 11.4

Indonesia 12.7 9.7 11.8 13.1 12.6 12.4 11.5 11.9 11.3

Korea (2) 25.0 21.6 32.5 28.8 27.5 28.5 28.5 27.0 26.1

Malaysia (3) 54.1 41.0 49.4 42.3 45.8 45.5 42.1 38.9 35.5

Philippines (3) 20.2 19.1 23.0 27.7 29.9 29.4 28.0 26.6 24.7

Singapore (3) 91.3 91.4 98.6 96.6 87.2 91.1 92.2 91.1 86.7

Taiwan (2) 67.6 71.7 91.0 88.0 82.1 84.1 84.5 85.3 84.0

Thailand (3) 32.2 39.5 51.4 52.6 48.9 47.4 42.2 40.2 36.4



(1) Net foreign assets of the Saudi Arabian Monetary Authority. (2) Central bank forex reserves minus monetary authorities’ other liabilities. (3) Not including forward FX purchases.


GLOBAL FIXED INCOME AND ECONOMIC RESEARCH Dr. Neal Soss

Global Head of Economics and Demographics Research (212) 325 3335

[email protected]

Ric Deverell Global Head of Fixed Income and Economics Research

+44 20 7883 2523 [email protected]

ECONOMICS AND DEMOGRAPHICS RESEARCH

GLOBAL / US ECONOMICS

Dr. Neal Soss

(212) 325 3335

[email protected]

Jay Feldman

(212) 325 7634

[email protected]

Dana Saporta

(212) 538 3163

[email protected]

Isaac Lebwohl

(212) 538 1906

[email protected]

Axel Lang

(212) 538 4530

[email protected]

Xiao Cui

(212) 538 2511

[email protected]

LATIN AMERICA (LATAM) ECONOMICS

Alonso Cervera

Head of Latam Economics

52 55 5283 3845

[email protected]

Mexico, Chile

Casey Reckman

(212) 325 5570

[email protected]

Argentina, Venezuela

Daniel Chodos

(212) 325 7708

[email protected]

Latam Strategy


(212) 325 4245

[email protected]

Colombia, Peru

Di Fu

(212) 538 4125

[email protected]

Omar Rodriguez

+52 55 5283 8995

[email protected]

BRAZIL ECONOMICS

Nilson Teixeira

Head of Brazil Economics

55 11 3701 6288

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Daniel Lavarda

55 11 3701 6352

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Iana Ferrao

55 11 3701 6345

[email protected]

Leonardo Fonseca

55 11 3701 6348

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Paulo Coutinho

55 11 3701-6353

[email protected]

EURO AREA / UK ECONOMICS

Neville Hill

Head of European Economics

44 20 7888 1334

[email protected]

Christel Aranda-Hassel

44 20 7888 1383

[email protected]

Giovanni Zanni

44 20 7888 6827

[email protected]

Violante di Canossa

44 20 7883 4192

[email protected]

Steven Bryce

44 20 7883 7360

[email protected]

Mirco Bulega

44 20 7883 9315

[email protected]

EASTERN EUROPE, MIDDLE EAST AND AFRICA (EEMEA) ECONOMICS

Berna Bayazitoglu

Head of EEMEA Economics

44 20 7883 3431

[email protected]

Turkey

Sergei Voloboev

44 20 7888 3694

[email protected]

Russia, Ukraine, Kazakhstan

Carlos Teixeira

27 11 012 8054

[email protected]

South Africa

Gergely Hudecz

33 1 7039 0103

[email protected]

Czech Republic, Hungary, Poland

Alexey Pogorelov

7 495 967 8772

[email protected]

Russia, Ukraine, Kazakhstan

Natig Mustafayev

44 20 7888 1065

[email protected]

EM and EEMEA cross-country analysis

Nimrod Mevorach

44 20 7888 1257

[email protected]

EEMEA Strategy, Israel

JAPAN ECONOMICS NON-JAPAN (NJA) ECONOMICS

Hiromichi Shirakawa

Head of Japan Economics

81 3 4550 7117

[email protected]

Takashi Shiono

81 3 4550 7189

[email protected]

Dong Tao

Head of NJA Economics

852 2101 7469

[email protected]

China


65 6212 3707

[email protected]

Regional, India, Indonesia, Australia

Christiaan Tuntono

852 2101 7409

[email protected]

Hong Kong, Korea, Taiwan

Dr. Santitarn Sathirathai

65 6212 5675

[email protected]

Regional, Malaysia, Thailand

Michael Wan

65 6212 3418

[email protected]

Singapore, Philippines

Weishen Deng

852 2101 7162

[email protected]

China

GLOBAL DEMOGRAPHICS & PENSIONS RESEARCH

Dr. Amlan Roy

Head of Global Demographics

44 20 7888 1501

[email protected]

Sonali Punhani

44 20 7883 4297

[email protected]

Angela Hsieh

44 20 7883 9639

[email protected]

mailto:[email protected]




Disclosure Appendix

Analyst Certification The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

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Emerging Markets Bond Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate. Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.

Corporate Bond Fundamental Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will be a top performer in its sector. Outperform: Indicates an above-average total return performer within its sector. Bonds in this category have stable or improving credit profiles and are undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expected to outperform on a total-return basis. These bonds may possess price risk in a volatile environment. Market Perform: Indicates a bond that is expected to return average performance in its sector. Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or they may be stable credits that, we believe, are overvalued or rich relative to the sector. Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector. Restricted: In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated: Credit Suisse Global Credit Research or Global Leveraged Finance Research covers the issuer but currently does not offer an investment view on the subject issue. Not Covered: Neither Credit Suisse Global Credit Research nor Global Leveraged Finance Research covers the issuer or offers an investment view on the issuer or any securities related to it. Any communication from Research on securities or companies that Credit Suisse does not cover is a reasonable, non-material deduction based on an analysis of publicly available information.

Corporate Bond Risk Category Definitions In addition to the recommendation, each issue may have a risk category indicating that it is an appropriate holding for an "average" high yield investor, designated as Market, or that it has a higher or lower risk profile, designated as Speculative, and Conservative, respectively.

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