global economics monthly csfb 19 abril 2011

8/7/2019 Global Economics Monthly CSFB 19 Abril 2011

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ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES ARE IN THE DISCLOSURE APPENDIX. FOR OTHER

IMPORTANT DISCLOSURES, PLEASE REFER TO https://firesearchdisclosure.credit-suisse.com .

Delay but not derailGlobal Economy: Monthly Review

This month we revised down our 2011 global GDP growth expectation to 4.4%.The downward revision largely reflects the negative impact from surging oilprices and the tragedy in Japan, as well as a lower US growth forecast for thefirst half of this year. Our global inflation forecast has been revised significantlyhigher to 4.8% this year. We continue to expect monetary authority reactions tovary across different blocs of the world economy.

In the near term, we estimate that the global economy expanded at 4.0% in thefirst quarter this year, half a percentage point lower than the 4.5% growthaverage in the five years before the crisis. Global growth momentum shouldaccelerate back to 5.0% this summer.Our expectation of a mild and brief slowdown in global growth rests largely onthe assumptions of no further increase in oil prices from current levels and abrief (although perhaps sharp) output disruption and contained global supplychain interruption due to the disaster in Japan. We assess risks to these twoassumptions and the likely impact to our growth outlook.

We view further increases in oil prices from the current levels as the single mostsignificant risk factor to our outlook. We highlight the rising ratio of global oildemand to global nominal GDP and the potential non-linear impact on growthfrom oil price shocks.

Regarding the impact from the disaster in Japan, the supply chain disruptions

now look more serious than our initial reading. Nevertheless, we expect thateven a worse-than-expected disruption to global supply chains by itself wouldonly delay, but not derail, the path of recovery.

Exhibit 1: Global GDP Growth vs. Composite PMI New Orders Index

30

35

40

45

50

55

60

65

Jul98 Oct99 Jan01 Apr02 Jul03 Oct04 Jan06 Apr07 Jul08 Oct09 Jan11-6

-4

-2

0

2

4

6

8

Global Composite PMI New Orders Index, LHS

GDP, QoQ%, Ann., RHS

Forecast

Source: Markit Economics, Thomson Reuters DataStream, Credit Suisse

19 April 2011Economics Research

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

Contributors

Neal Soss+1 212 325 3335

[email protected]

Henry Mo+1 212 538 0327

[email protected]

MONTHLY REVIEW:Global economy 1-6US 7-10Japan 11-12Euro Area & UK 13-14Switzerland 15Canada 16

Australia 17-18New Zealand 19Non-Japan Asia 20-21EMEA 22-23Latam ex-Brazil 24Brazil 25-26Summary Forecast Tables 27-32



19 April 2011

Delay but not derail 2

Delay but not derailThis month we revised down our 2011 global GDP growth expectation to 4.4%, one-tenth lower than our 4.5% estimate last month. The downward revision largely reflects thenegative impact from surging oil prices and the tragedy in Japan, as well as a lower USgrowth forecast for the first half of this year. Despite the ongoing fiscal travails of a number ofsmaller European countries, the euro region remains the “steady eddy” in our forecasting

constellation, with real GDP growth holding a 3% path this year.Exhibit 2 shows our forecast history for 2011 global growth. Our forecast has been fairlyconsistent and has fluctuated narrowly around 4.4% since we first published it in December2009. The corresponding consensus estimates tend to track our forecast over this timeperiod 1 . For reference, our 2011 global growth outlook is in line with the IMF estimatepublished early this week.

In the near term, we estimate that the global economy expanded at 4.0% in the firstquarter this year, half a percentage point lower than the 4.5% growth average in the fiveyears before the crisis (Exhibit 3). Global growth momentum should accelerate back to5.0% this summer.

We note a few factors that are supportive of the ongoing recovery. Although cyclical indicators

fell back from the recent cycle highs, they generally remain at levels still consistent with solidgrowth 2 (Exhibits 3 and 4). In addition, we take further comfort from the improving labormarket condition, a key to self-sustaining growth (Exhibit 5).

Exhibit 2: CS Forecast History of 2011 Global GDPGrowth

Exhibit 3: Global GDP Growth vs. Global CompositePMI New Orders Index

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7

Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11

CS Est.

Consensus Est.

30

35

40

45

50

55

60

65

Jul98 Oct99 Jan01 Apr02 Jul03 Oct04 Jan06 Apr07 Jul08 Oct09 Jan11-6

-4

-2

0

2

4

6

8

Global Composite PMI New Orders Index, LHS

GDP, QoQ%, Ann., RHS

Forecast

Source: Consensus Economics, Thomson Reuters DataStream, Credit Suisse Source: Markit Economics, Thomson Reuters DataStream, Credit Suisse

Our expectation of a mild and brief slowdown in global growth rests largely on theassumptions of no further increase in oil prices from current levels and a brief (althoughperhaps sharp) output disruption and contained global supply chain interruption due to the

disaster in Japan.In what follows, we assess risks to these two assumptions and the

likely impact to our growth outlook.

1 County and regional consensus forecasts are taken from the Consensus Economics survey. The global aggregates are weighted byGDP valued at purchasing power parities (PPPs) as a share of world GDP.

2 For a complete round-up of the March manufacturing PMIs, please refer to Global Economics Comment: March Manufacturing PMIs:Spring is sprung dated April 1, 2011.



19 April 2011


Among the series of shocks with which the global economy has been contending, we viewfurther increase in oil prices from the current levels as the single most significant riskfactor to our outlook. Our working assumption is that oil prices would flatten out at currentlevels and start to drift downwards over the coming year on less robust growth in oil demandand subsiding fears of geopolitical supply disruption. Our commodity analysts also believethat Saudi Arabia has sufficient spare capacity to offset lost Libyan production and non-OPECsupply growth remains bullish 3.

Exhibit 4: Global Manufacturing New Orders Indexvs. Global IP Momentum

Exhibit 5: Global Composite PMI Employment Indexvs. Global Employment

202530

3540455055606570

98 99 00 01 02 03 04 05 06 07 08 09 10 11-25

-20

-15

-10

-5

0

5

10

15

New orders, lhs

IP, 3m/3m ann, rhs

Forecast

343638

404244464850525456

98 99 00 01 02 03 04 05 06 07 08 09 10-5.0

-3.5

-2.0

-0.5

1.0

2.5

PMI employment, lhs

Employment level,3m/3m% ann, rhs

Source: Markit Economics, Thomson Reuters DataStream, Credit Suisse Source: Markit Economics, Thomson Reuters DataStream, Credit Suisse

In our last monthly report Surfing the oil wave , we ascribed the oil price move from the mid-$40 range to the mid-$90 range as a fundamental demand-side response to a reboundingglobal economy, while the additional $20-or-so move since the turn of 2011 seemed to us tohave more the character of a (feared) supply shock associated with political turmoil in NorthAfrica and the Middle East. Global financial liquidity may have added a speculative dimensionto these demand and supply-side effects. We further discussed that the portion that reflectsresurgent demand should have relatively little effect on the economic growth outlook,while the part that reflects (fears of) supply disruptions seems to us more pernicious.

Exhibit 6: Brent FuturesDaily settlement price on the rolling front-month contract

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60

70

80

90

100

110

120

130

Jan-09 Apr-09 Jul-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11

Jan25 ($95.3):Egypt unrest started

Dec17 ($91.7):Tunisia unrest started

Feb14 ($103.1):Libya unrest started

Source: the BLOOMBERG PROFESSIONAL™ service, Credit Suisse

3 For detailed discussions on our oil price outlook, please refer to Commodity Forecasts Update: March 2011 and Triple Digit Oil,Raising Prices published on March 17, 2011.

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19 April 2011


We note that the ratio of global oil demand to global nominal GDP shot back up in 2011mainly because of the oil price increase (Exhibit 7). Based on our assumption for oildemand and oil prices, we expect that this ratio will rise further, nearing the local peak levelrecorded in 2008. The higher this ratio becomes, the larger the impact on growth from eachadditional dollar increase in oil prices. In other words, the global economy would be morevulnerable to further oil price shocks. The de-trended ratio tells a similar story (Exhibit 8).

Exhibit 7: World: Ratio of Oil Demand to GDP Exhibit 8: World: Ratio of Oil Demand to GDP% Percentage points; Deviation from 5-year moving average

0

1

2

3

4

5

6

7

8

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

2011 Est.

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

84 86 88 90 92 94 96 98 00 02 04 06 08 10

2011Est.

Source: EIA, IEA, IMF, Credit Suisse, Source: EIA, IEA, IMF, Credit Suisse

We continue to highlight the potential non-linear impact on growth from oil priceshocks – in that large oil price increases tend to have a visible negative impact on GDP,while small increases appear to have little effect 4. As we discussed on the same pages lastmonth, we are concerned that business and consumer confidence could deteriorate sharplyas oil prices approach some threshold level, say, the previous peak around $150. Therepercussion from fast deteriorating sentiment could amplify the impact on the real economy.In this regard, the early evidence from US consumer sentiment is not particularly encouraging.Consumer sentiment measured by both University of Michigan and the Conference Boardpulled back sharply in March, partially reflecting consumers’ increasing concerns about the

eroded income from rising energy prices (Exhibits 9 and 10). Sentiment notwithstanding, retailsales held up quite well in March, at least in the US.

Exhibit 9: US Consumer Sentiment Exhibit 10: Retail Gasoline Prices vs. US ConsumerCurrent Conditions

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90

100

110

120

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

University of Michigan

The Conference Board

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55

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-111.5

2.0

2.5

3.0

3.5

4.0

4.5

Current condition: Personal financecompared to a year ago: Worsebecause prices are higher (%, lhs)

Retail gasoline price: All grades USaverage ($/gal, rhs)

Apr to date:3.79

Source: Conference Board, University of Michigan, Credit Suisse Source: Department of Energy, University of Michigan, Credit Suisse

4 For an excellent review of this topic, please see Hamilton, James D. Nonlinearities and the Macroeconomic Effects of Oil Prices,NBER Working Paper, No. 16186, July 2010.



19 April 2011


Regarding the impact from the disaster in Japan, we expect a sharp but brief outputdisruption. Our Japan economists estimate real GDP in the first quarter to have contractedby 5.0% q/q on an annualized basis (Exhibit 11). But real GDP growth should turnmeaningfully positive in 3Q following a pick-up in the manufacturing output along withincreases in public and housing investments.

We should emphasize that risk is to the downside to this near-term growth forecast. As ourJapan economists observe, the supply chain disruptions look more serious than ourinitial reading owing to larger damages to the production equipment of leading exporters andpersistent major aftershocks which have prevented smooth factory operations. In this regard,the early evidence in the March trade data from major Asian economies is not particularlyencouraging. Imports from Japan either expanded more slowly or declined much more thanimports from the rest of the region (Exhibit 12). Our Taiwan economist commented that mostTaiwanese manufacturers only have sufficient inventories of Japan-sourced components tosupport production for the next one to two months. The risk of supply disruptions couldbecome more severe and more visible in June or July when inventories are run down.

Nevertheless, we expect that even a worse-than-expected disruption to global supplychains by itself would only delay, but not derail, the path of recovery. As wecommented in our March 18, 2011 US Economics Digest , historical experience with naturaldisasters and the economic effects is clear and one-sided. In an overwhelming majority ofcases, natural disasters tend not to have significant, long-lasting effects onsubsequent economic growth. 5 We expect no exception for the current episode. The initialshort-run drop in activity associated with the event will be restored eventually, althoughpossibly later than we currently anticipate.

Exhibit 11: Japan Real GDP Growth Exhibit 12: China/Korea/Taiwan Import Growth in Marchq/q% Annualized USD, SA, m/m%; Asia: China, Hong Kong, Indonesia, Japan, Korea, the

Philippines, Singapore, Taiwan, Thailand

-6

-4

-2

0

24

6

8

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

CS Forecasts

-25

-20

-15

-10

-5

0

5

10

15

China Korea Taiwan

Imports from the rest of Asia

Imports from Japan

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

Compared to our global growth forecast, revisions are more visible in our globalinflation forecast. We have adjusted our 2011 global inflation forecast significantly highersince October 2010 (Exhibit 13). Our current forecast for 2011 global inflation forecast is 4.8%,up sharply from the 4.2% estimate last month. To a large extent, the sharp upward revisionreflects continued strength in commodity prices, including the recent oil price shock.

5 "Catastrophic Natural Disasters and Economic Growth," Inter-American Development Bank, Eduardo Cavallo, Sebastian Galiani, IlanNoy, Juan Pantano, June 2010

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19 April 2011


Exhibit 13: CS Forecast History of 2011 Global Inflation Exhibit 14: Policy Rates Forecastsy/y% Fed funds rate; ECB repo rate; BoE bank rate; PBoC 1-year deposit rate

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

4.8

5.0

Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11

CS Est.

Consensus Est.

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1

2

3

4

5

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7

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

Forecast

PBoC

ECB

BoE

Fed

Source: Consensus Economics, Thomson Reuters DataStream, Credit Suisse Source: Thomson Reuters DataStream, Credit Suisse

We continue to expect monetary authority reactions to vary across different blocs ofthe world economy. By and large, the emerging market economies are operating at highlevels of capacity utilization and are thus prone to overheating risks. Their central bankswould be tightening policy anyway, and the oil and, more importantly, food pricedevelopments just add motivation to a policy that was in place anyway. However, increasinguncertainty about global growth may restrict them from tightening too fast. For example, ourChina economist expects that the central bank may have a brief period of policy pause,amidst uncertainties triggered by the high global oil prices, the domestic growth slowdownand better-behaved lending activities. However, we believe such a pause, if any, would be ashort-lived one, as we expect that services inflation is bound to rise as the second source ofinflation. In Europe, we have already seen the ECB respond to the combination of higherinflation and the relatively strong growth outlook that we described and expect it to continue toraise rates throughout the forecast period. The UK is likely to join it in doing so later in the

summer. Presumably, this will contain the spillover inflationary impact of the oil price increaseof the past half year. The US Federal Reserve tends to focus more on “core” rather than“headline” measures of inflation (and, famously, has the dual mandate focus on maximumsustainable employment), which suggests the Fed will try not to engage gasoline pricesdirectly, if at all possible.



19 April 2011


US: Persistent but patchyWe characterize the current economic recovery as: 1. Persistent. GDP growth has beenpositive for the last six quarters and is expected to remain so for the foreseeable future; 2Patchy. Housing is bumping along a very low bottom, and the state and local sector is stillsorting itself out, to cite two examples; and 3. Mediocre : GDP has only recently reclaimed itspre-recession peak and is about seven percentage points behind a “typical” recovery.

Exhibit 15: Recover Still Lagging History100=Prior Cyclical Peak in Real GDP, Quarters

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106

108

PriorPeak

1 2 3 4 5 6 7 8 9 10 11 12

Average of SevereRecessions: +7.3%

Average of MildRecessions: +6.6%

Current: +0.1%

Source: Bureau of Economic Analysis, Credit Suisse

We recently trimmed our GDP forecasts for the first half of 2011. Our Q1 trackingestimate stands at 2.0%. We expect 3.3% growth in Q2 (Q1 and Q2 projections were 3.5%and 3.7%, respectively, in our last monthly review). Our 2011 second half growth forecastsare unchanged (3.8% and 4.0% for Q3 and Q4, respectively). Our 2011 forecast is 3.3% on aQ4/Q4 basis (2.9% calendar year average). The 2012 projection is 4.0% (3.9%).

We think the soft GDP math for the current quarter understates the economy’sprogress. First, it’s worth remembering that the quarterly GDP growth rate is heavily

influenced by the “statistical carryover” from the prior quarter. The fourth quarter endedpoorly, particularly consumer spending, and that diminished the tailwind for the first quarterGDP arithmetic. Second, the acid test for the recovery’s sustainability – job creation – hasstrengthened noticeably over the last two months. Third, alternative measures of activitygrew strongly in Q1. ISM Survey data – for both manufacturing and service sectors – havebeen running at levels consistent with GDP growth in excess of 4%. And manufacturingindustrial production grew 9.2% annualized, matching peak growth rates for the cycle.Fourth, January’s severe weather partly “explains” weakness in some GDP components.Illustratively, January private non-residential construction outlays fell a massive 7% MoM – the largest decline in almost 20 years. We expect GDP to improve in the coming quarters,underpinned by a strengthening job market, improvement in credit conditions, easy monetarypolicy, and fiscal stimulus.

Oil prices are the most significant risk in our forecast. For the moment, we are assumingthat oil prices stabilize and eventually subside back to the $100 (Brent) zone over the second-half (consistent with our commodity team’s projections). If sustained, current levels of oil andgas futures prices would impose a $75bn-$100bn “tax” at the margin for households, or depressdisposable incomes by about ¾ - 1 ppt. this year (absorbing much of the Social Security payrolltax cut). Assuming, as our baseline forecast does, that the oil price subsides somewhat, part ofthat “tax” will be reversed, allowing for faster growth in the second half of the year. On the otherhand, if the oil price does not reverse its recent spike (or, worse yet, takes another leapupwards), we would expect to reassess our growth estimates. While this year’s shock has thepotential to slow growth, we doubt it will derail the recovery. The most recent shock still doesn’trank as severe as, say, the summer 2008 episode, or the late 1970s oil shock.

Neal Soss+1 212 325 3335

[email protected]

Jay Feldman+1 212 325 7634

[email protected]

Dana Saporta+1 212 538 3163

[email protected]

Jonathan Basile+1 212 538 1436

[email protected]

Jill Brown+1 212 325 1578

[email protected]

Henry Mo+1 212 538 0327

[email protected]

mailto:[email protected]










19 April 2011


Exhibit 16: Gauging the Oil Shock: Still Smaller Than Previous Major EpisodesOil Demand to GDP Ratio, Ppt. Deviation from 5-year Moving Average, Refiners’ Acquisition Cost of Oil

-3%

-2%

-1%

0%

1%

2%

3%

q 1 7 7

q 4 7 8

q 3 8 0

q 2 8 2

q 1 8 4

q 4 8 5

q 3 8 7

q 2 8 9

q 1 9 1

q 4 9 2

q 3 9 4

q 2 9 6

q 1 9 8

q 4 9 9

q 3 0 1

q 2 0 3

q 1 0 5

q 4 0 6

q 3 0 8

q 2 1 0

Q2: Assumes OilStays At CurrentPrice

Source: Bureau of Economic Analysis, Credit Suisse

Another risk is supply chain disruption from Japan. If Japanese production or distribution is

sufficiently impacted, certain pressure points within the global production supply chain could bevulnerable. From a US perspective, auto production looks more vulnerable than other sectors,as autos and parts make up about one-third of US imports from Japan. But any impact is likelyto be short-lived. Historical experience with natural disasters and the economic effects is clearand one-sided. In an overwhelming majority of cases, natural disasters have not had significant,discernible, long-lasting effects on subsequent economic growth.

Trend in job gains is accelerating, and looks increasingly self-sustaining. Privatepayroll growth accelerated to a 235K average clip in March and February, with broad-basedgains by industry. This is good as far as it goes, but business employment is still more thanseven million below its prior cyclical peak. Even at the faster run-rate of the last two months,private payrolls would not revisit the old peak until late 2013 – almost 2½ years from now.Meanwhile, state and local employment, already half-a-million below its previous peak, looks

set to shrink somewhat further.We expect the unemployment rate to finish 2011 at 8.5%, and 7.3% by the end of2012. Unemployment is down one full percentage point since November (now at 8.8%).Over that period, half of the decline can be attributed to faster job gains, and the otherhalf is a consequence of a slide in the labor force participation rate. If the participationrate held steady since November, unemployment would be 9.3%, not 8.8%.Unemployment benefits are not likely to be extended again. The risk is that labor forceparticipation falls even faster as jobless benefits expire – mainly because the long-termunemployed would leave the labor force, which would depress the unemployment rateeven further (although, of course, for the wrong reasons). For this reason, look for theFed to emphasize other employment statistics (employment-population ratio, job growthitself) in lieu of its usual focus on the unemployment rate.

Housing and State and Local Remain Sour Spots. Our growth outlook is softer than itotherwise might be at this stage of the cycle because of ongoing issues in the housing sectorand state and local government sector. Home construction fell sharply in February, andinventory remains at elevated levels relative to demand. Widespread negative equity andhigh foreclosure rates continue to inhibit sales and prices. Our Structured Products Researchteam estimates that nearly six million loans are currently in the delinquency pipeline (over fivetimes the historical average), which would take nearly five years to clear at today’s extendedliquidation timelines. And plans to shrink GSE balance sheets could force credit conditions inthe mortgage market to tighten. Meanwhile, state and local fiscal consolidation persists. Statesare likely to have corrected shortfalls of about $130bn for fiscal year 2011 (which ends in June).



19 April 2011


The latest projection for 2012 (from the Center on Budget and Policy Priorities) envisions a$112bn required correction to state budgets.

Moderate increase in core inflation. We expect core inflation to edge up modestly for boththis year and next (fcst: core CPI at 1.6% YoY by the end of 2011, 2.0% end of 2012). A firmingin rents is the driving factor, though ample slack in the labor market and weak unit labor costsshould keep a lid on underlying inflation. The core PCE deflator should track slighter lower thanthe core CPI because rents have a smaller weight. Meanwhile, headline inflation, however,should increase markedly in the coming months if current oil and gasoline prices are sustained.If oil doesn’t keep rising, simple extrapolation of base effects would take the CPI to about 3.7%YoY this summer, although CPI would retreat to around 1% by spring 2012.

We look for the Fed to complete its QE2 purchases and do not anticipate QE3. We seeno hike in the fed funds rate target before the second-half of 2012 .

One possible exit strategy chronology:

Q2-2011 – Fed completes $600bn large-scale asset purchase program (QE2)

Q4-2011/Q1-2012 – Fed suspends reinvestments of MBS and Agency debt proceeds,allowing for passive balance sheet shrinkage

FOMC alters “extended period” language

Q1-2012/Q2-2012 – Fed neutralizes significant fractions of excess reserves via large termreverse RPs and term deposit accounts

Q3-2012/Q4-2012 – Fed initiates hikes in IOR and in its target range for the fed funds rate

Q1-2013 – Fed begins selling MBS and perhaps Agency debt securities

Late 2013 – Fed considers selling Treasuries

Slowing, but solid profits . Corporate profit growth will likely be less rapid this year becauseproductivity growth is moderating (as it usually does at this point in a business expansion).Put another way, the recovery in the job market implies less room for corporate profit marginsto expand. We look for 8% pre-tax profit growth this year on an annual average basis, downfrom the 29% pace in 2010.

The recent deal on Federal budget cuts should not be consequential for the near-termeconomic outlook . Even though the budget authority for this year has been reduced, theactual cuts will be distributed over the next year or two. In some cases, the “cuts” are tospending that was unlikely to occur in the first place. The size of the cuts looks sufficientlysmall and sufficiently spread out that the economy is not likely to notice. Meanwhile, ourfederal budget deficit forecast for fiscal year 2011 has been raised to -$1.40trn(from -$1.34trn), as outlays have been running stronger than expected. A deficit on this scalewould be equivalent to 9.2% of GDP. Our 2012 deficit forecast is -$1.06 trillion (or 6.6% ofGDP). Expiring fiscal stimulus initiatives and an improving economy account for the narrower(but still wide) deficit projection for next year.

The political conversation in Washington has turned decisively towards dealing withlong-term deficits; even entitlements are apparently on the table. Deep philosophicaldifferences between Republicans and Democrats still exist on how to accomplish the mission.But we are hopeful that an agreement might be reached on, at least, a broad sketch of fiscal“targets,” if not detailed policy prescriptions. Meanwhile, political squabbling over the debtceiling will likely continue to be a periodic distraction for financial markets, possibly right up tothe “stroke of midnight” in early July (roughly when the Treasury Department estimates thatoptions for the funding the federal government will run out).



19 April 2011


US Economic Forecasts2011E 2012E Q4/Q4 Annual AverageQuarter-to-Quarter %

Changes at annual rates Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 09 10 11E 12E 09 10 11E Real GDP 2.0 3.3 3.8 4.0 4.0 4.0 4.0 4.0 0.2 2.8 3.3 4.0 -2.6 2.9 2.9 Consumer Spending 2.1 3.5 3.9 3.9 3.5 3.5 3.5 3.5 0.2 2.6 3.3 3.5 -1.2 1.7 3.1 3.6Residential Investment -3.3 -1.2 3.8 3.7 3.7 3.7 3.6 3.6 -13.4 -4.6 0.7 3.7 -22.9 -3.0 -2.3 3.4

Business Investment 4.7 8.6 9.4 11.9 7.7 8.4 8.5 8.6 -12.7 10.6 8.6 8.3 -17.1 5.7 8.4 9.0Equipment & Software 7.4 11.1 11.4 14.3 8.4 9.3 9.0 9.2 -4.9 16.9 11.0 9.0 -15.3 15.3 11.0 10.3Non-Res Structures -2.9 0.0 3.0 3.8 5.0 5.0 6.1 6.1 -26.5 -4.0 0.9 5.5 -20.4 -13.7 0.8 4.4

Total Government -0.7 0.8 0.2 0.2 0.6 0.7 0.7 0.6 0.8 1.1 0.1 0.6 1.6 1.0 0.4 0.5Net Exports (contr. to GDP, %) -0.9 -0.3 -0.1 -0.2 0.1 0.1 0.1 0.1 1.2 -0.6 -0.3 0.1 1.1 -0.5 -0.1 0.0Real Exports 5.1 10.8 11.7 11.4 9.9 9.7 9.9 9.6 -0.1 8.9 9.7 9.8 -9.5 11.7 8.5 10.4Real Imports 10.3 10.3 9.8 10.1 7.3 7.4 7.4 7.4 -7.2 10.9 10.1 7.4 -13.8 12.6 7.5 8.3nventories (contr. To GDP, %) 1.0 -0.1 0.0 0.0 0.2 0.2 0.2 0.2 0.5 0.4 0.2 0.2 -0.6 1.4 -0.1 0.1Nominal GDP 4.6 6.6 6.4 5.8 5.4 3.7 6.2 5.9 0.6 4.2 5.8 5.3 -1.7 3.8 5.0 5.5CPI (y/y%) 2.2 3.3 3.7 3.5 2.5 1.3 1.1 1.2 1.5 1.2 3.5 1.2 -0.3 1.6 3.2 Core CPI (y/y%) 1.1 1.3 1.4 1.6 1.6 1.7 1.8 2.0 1.7 0.6 1.6 2.0 1.7 1.0 1.4 Core PCE (y/y%) 0.8 1.0 1.2 1.4 1.5 1.5 1.7 1.8 1.7 0.8 1.4 1.8 1.5 1.3 1.1 1.6Corp. Profits w/CCadj and IVA (y/y%) 9.4 7.9 7.9 6.9 6.0 5.3 5.3 5.3 42.5 18.3 6.9 5.3 -0.4 29.2 8.0 5.5ndustrial Production 6.1 4.2 4.7 5.2 5.5 4.9 5.3 5.5 -5.5 6.3 5.0 5.3 -11.2 5.3 5.1 5.1

Unemployment Rate (qtr. Avg., %) 8.9 8.8 8.6 8.5 8.2 7.9 7.6 7.3 10.0 9.6 8.5 7.3 9.3 9.6 8.7 ederal Budget Surplus/Deficit (% GDP) ... ... ... ... ... ... ... ... ... ... ... ... -9.9 -8.9 -9.2 -6.6ederal Debt/GDP Ratio (%) ... ... ... ... ... ... ... ... ... ... ... ... 53.5 62.2 68.7 71.8

Current Account Surplus/Deficit (% GDP) ... ... ... ... ... ... ... ... ... ... ... ... -2.7 -3.2 -3.5 ...ed Funds Rate (end of pd.,%) 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 .25-.50 .50-.75 0-.25 0.-25 0-.25 .50-.75 ... ... ...ource: BEA, CBO, Credit Suisse estimates, Federal Reserve, Haver Analytics®



19 April 2011


Japan: After the quake forecast revision: downand upDevastating earthquakes and the following tsunamis that occurred on March 11 damaged thenortheast part of the country. Suspension of production at many factories, along with powershortages mainly due to the serious damage to the Fukushima nuclear power plant, led to a

sharp contraction in the level of manufacturing output. On our estimate the initial downwardimpact on industrial production was as large as 25%. As the power supply to industries hasnormalized, since the end of March production has started to recover gradually.

This month we revised our forecasts for economic growth into 2012, incorporating the likelyimpact of the earthquake and tsunamis on manufacturing activities, capital formation,consumer behavior, the trade balance and so forth, based upon the information availableduring the first two weeks after the shock. Since the initial downward shock to manufacturingoutput and personal consumption was quite substantial, we estimate real GDP in the January-March quarter (1Q) to have contracted by 5.0% q/q on an annualized basis. Looking ahead,we forecast real GDP growth to turn meaningfully positive in 3Q, following virtually zerogrowth in 2Q, anticipating a pick-up in the manufacturing output along with increases in publicand housing investments. In our revised forecast, the picture of GDP growth into 1H CY2012

is rather buoyant amid acceleration in the capital reformation and exports. While our GDPgrowth forecast for CY2011 has been revised down to 0.0% from 1.3%, reflecting downwardrevisions to growth in 1Q and 2Q, that for CY2012 has been revised up to 3.5% from 1.9%.

Latest corporate information and anecdotes, however, have suggested that risk is on thedownside on our near-term growth forecast. Although the power supply has less constrainedthe manufacturing activities, so-called supply chain disruptions look more serious than ourinitial reading owing to greater damage to the production equipment of leading exporters andto persistent major after-shocks that have prevented smooth factory operations. Anymeaningful recovery in industrial production could be delayed into autumn, in which case wemay not be able to see a rebound in GDP before 4Q CY2011.

The government is likely to announce its first emergency fiscal package soon. The size of thepackage will be around 4 trillion yen (or 0.8% of GDP), which is to be primarily financed by

reduction in discretionary spending and public pension reserves. We foresee another 4-6trillion yen package likely to be introduced by late-summer. Some expect the publicinvestment spending to reach 15-20 trillion yen (3.1%-4.2% of GDP) for the coming 12-18months, which may require a major increase in the JGB issuance. We actually do not think itlikely as the government seems keen to limit borrowing. As long as the amount of additionalJGB issuance is limited to several trillion yen for the coming 12 months, JGB underwriting bythe BOJ will not be an imminent issue.

Hiromichi Shirakawa+ 81 3 4550 7117

[email protected]

Satoru Ogasawara+81 3 4550 [email protected]

Takashi Shiono+81 3 4550 7189

[email protected]



19 April 2011


Euro Area and UK: The only way is upWe remain relatively optimistic about activity. The cyclical indicators remain at levelsthat suggest, aside from erratic influences, the euro area and UK economies aregrowing relatively strongly.

So far, the expansion has been a little unbalanced, with corporate spending very much in the

lead, but we expect it to become more balanced going forward. There are downside risks –the oil price, the cyclical indicators may roll over, policy tightening and so on – thatneed to be watched. There is also the strength of the global economy.

Inflation has risen. The pressure has come from higher commodity prices and there’sbeen no offset elsewhere. In the euro area, headline inflation could reach 3% later this yearand in the UK it could reach 4.5%. Views on growth and inflation lead to views on monetarypolicy. We have already seen the ECB respond to the combination we describe andexpect it to continue to raise rates throughout the forecast period. The UK is likely tojoin it in doing so later in the summer.

As well as exploring those issues, we look at a number of other important themes inthe European economy. We consider the oil price and how policy should – or possiblyshouldn’t – respond to it. We suggest the oil price rises – and commodity prices rise more

generally – may be associated with unchanged or lower or higher rates depending onthe circumstances . To a large extent, then, it may depend on the inclination and judgment ofthe central bank in question. In this, at least, the ECB’s assessment seems clear.

As has typically been the case recently, some of the other risks to our view involve thefinancial sector and markets. We look at how bad debts have developed in the UK housingmarket – the short answer is that they haven’t, at least not yet – and at the latest round ofbank stress tests due to be reported in June.

Given the recent request for assistance from Portugal, we highlight the differencesbetween Portugal and its larger neighbor in the so-called troubled periphery. There aregood reasons why we – and the market – remain more upbeat about the prospects for Spain.

For detailed discussions, please refer to European Economics: The only way is up published

April 13, 2011.

Christel Aranda-Hassel+44 20 7888 1383

[email protected]

Robert Barrie+44 20 7888 7536

[email protected]

Violante di Canossa+44 20 7883 4192

[email protected]

Neville Hill+44 20 7888 1334

[email protected]

Axel Lang+44 20 7883 3738

[email protected]

Giovanni Zanni+33 1 70 39 0132

[email protected]

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19 April 2011


Euro Area Economic Forecasts2011E 2012E Q4/Q4 Ann. Avg.Quarter-to-Quarter %

Changes at annual rates Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 08 09 10 11E 09 10 11E 12EReal GDP Growth

Germany 4.8 2.8 3.4 3.1 3.0 3.5 3.4 3.4 -2.0 -2.0 4.0 3.5 -4.7 3.5 3.5 3.2France 3.9 2.7 3.3 2.8 2.6 2.6 2.6 2.0 -2.0 -0.5 1.5 3.2 -2.5 1.5 2.6 2.7

Italy 1.9 2.5 2.3 2.2 1.9 1.9 1.9 1.9 -3.4 -2.9 1.5 2.2 -5.2 1.2 1.8 2.0Spain 1.7 1.6 1.7 2.1 1.8 1.9 2.1 2.1 -1.4 -3.0 0.6 1.8 -3.7 -0.1 1.3 1.9Netherlands 2.9 3.7 3.4 3.4 2.3 2.6 2.6 2.6 -1.0 -2.4 2.2 3.3 -3.9 1.8 2.8 2.8Euro Area GDP q/q ann 3.3 2.9 3.0 2.7 2.2 2.4 2.4 2.4 -2.2 -2.0 2.0 3.0 -4.0 1.7 2.5 2.5Consumer spending 1.4 1.7 1.6 2.0 2.5 2.3 2.3 2.1 -0.8 -0.4 1.1 1.7 -1.1 0.8 1.4 2.2Government spending 0.5 -0.1 0.5 0.5 1.2 1.1 1.3 1.2 2.5 1.8 0.7 0.4 2.4 0.7 0.5 0.9Investment 9.1 8.2 6.8 6.2 4.3 5.0 5.2 4.8 -6.0 -9.4 1.2 7.6 -11.2 -0.8 5.0 5.5Final domestic demand 2.7 2.6 2.4 2.5 2.6 2.6 2.7 2.5 -1.3 -1.9 1.0 2.6 -2.6 0.5 1.9 2.6Net exports (con. To GDP) -0.1 0.5 0.5 0.1 -0.4 -0.2 -0.3 0.0 -0.8 0.6 0.7 0.2 -0.9 0.9 0.6 -0.1Exports 5.4 6.9 6.9 7.0 6.4 6.4 6.1 6.1 -6.5 -5.5 11.8 6.5 -13.1 10.6 7.6 6.6Imports 6.0 6.1 6.1 7.0 7.7 7.3 7.1 6.5 -4.9 -7.0 10.4 6.3 -11.6 8.6 6.4 7.1Inventories (con. To GDP) 0.8 -0.1 0.1 0.1 0.1 0.1 0.1 0.0 -0.1 -0.7 0.3 0.2 -0.7 0.3 0.0 0.1Industrial production (y/y%) 4.6 3.0 2.9 3.0 3.2 3.4 3.4 3.4 -9.1 -7.2 6.3 3.0 -14.7 6.7 3.4 3.4

Nominal GDP (% y/y) 3.5 3.3 3.7 4.4 4.2 4.2 4.2 4.2 -0.1 -1.7 3.0 4.4 -3.1 2.5 3.7 4.2CPI (y/y%) 2.4 2.7 2.9 3.0 2.6 2.1 1.9 1.8 2.3 0.4 2.0 3.0 0.3 1.6 2.8 2.1Core CPI (y/y%) 1.1 1.3 1.3 1.5 1.7 1.7 1.7 1.8 1.9 1.1 1.1 1.5 1.4 1.0 1.3 1.7Current account (% of GDP) -0.3 -0.2 -0.1 -0.1 -0.2 -0.3 -0.4 -0.4 -1.3 0.5 -0.3 -0.1 -0.6 -0.6 -0.2 -0.3Government balance (% of GDP) … … … … … … … … … … … … -6.1 -5.6 -4.1 -3.1ECB repo rate (end period) 1.00 1.25 1.75 2.00 2.25 2.50 2.75 3.00 … … … … 1.00 1.00 2.00 3.00Source: Credit Suisse estimates, Thomson Reuters DataStream

UK Economic Forecasts2011E 2012E Q4 to Q4 Annual AverageQuarter-to-Quarter %

Changes at annual rates Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 09 10 11E 12E 09 10 11E 12E

Real GDP 2.6 5.0 2.2 2.3 2.3 2.2 2.5 2.5 -2.8 1.5 3.0 2.4 -4.9 1.3 2.3 2.5

Consumer spending 2.4 2.4 2.8 2.8 2.0 2.0 2.0 2.0 -1.1 0.2 2.6 2.0 -3.3 0.8 1.5 2.3Government 0.0 -2.0 -2.0 -2.0 -1.2 -1.2 -1.2 -1.2 -0.4 0.6 -1.5 -1.2 1.0 0.8 -0.7 -1.5Investment 16.5 8.2 8.2 8.2 8.2 8.7 8.2 8.2 -14.2 5.8 10.3 8.3 -15.4 3.0 7.5 8.3Domestic demand 1.7 4.8 2.2 2.0 2.3 2.1 2.3 2.4 -2.7 2.8 2.7 2.3 -5.5 2.4 2.4 2.4Inventories (contr to GDP) -2.2 2.6 -0.4 -0.6 0.0 -0.3 0.0 0.0 0.3 2.0 -0.2 -0.1 -1.2 1.4 0.6 -0.1Net exports (contr to GDP) 0.9 0.0 -0.1 0.2 2.3 2.1 2.3 2.4 0.1 -1.3 0.3 0.0 0.9 -1.0 -0.1 -0.1Export growth 6.1 6.6 6.6 7.0 6.1 6.6 6.6 6.6 -4.6 5.4 6.6 6.5 -10.1 5.3 7.0 6.5Import growth 2.4 5.7 6.1 5.7 5.7 5.7 5.7 5.7 -4.5 9.4 5.0 5.7 -11.9 8.5 6.8 5.8

Industrial production (y/y%) 3.2 3.2 3.8 4.1 4.1 4.1 4.1 4.1 -6.0 3.3 4.1 4.1 -10.1 2.0 3.6 4.1Nominal GDP growth 8.7 4.1 4.1 4.1 2.8 2.8 2.8 2.8 -1.7 4.2 5.2 2.8 -3.5 4.2 4.8 3.3CPI (y/y%) 4.2 4.1 4.2 4.0 2.5 2.4 2.4 2.1 2.1 3.4 4.0 2.1 2.2 3.3 4.1 2.3Current account (% GDP) … … … … … … … … ... ... ... … -1.3 -2.5 -2.5 -2.5Govt balance (% GDP) … … … … … … … … ... ... ... … -11.4 -9.9 -7.9 -6.2

BOE repo rate (end period) 0.50 0.50 0.75 1.00 1.50 1.75 2.25 2.50 ... ... ... … 0.50 0.50 1.00 2.50Source: Credit Suisse estimates, Thomson Reuters DataStream



19 April 2011


Switzerland: Economy remains in a good conditionThe economic recovery has been surprisingly strong over the past few quarters. By the end oflast year, Swiss GDP reached pre-crisis levels and the economic indicators have remainedsolid in the first months of 2011 too. Even export growth has remained surprisingly strongdespite the strength of the currency, which suggests that global growth might again be themore decisive variable in this context. However, the strong Swiss franc is affecting exporters'profit margins and a sustained overvaluation of the currency could still have a bigger impacton export performance with a lag. We thus would expect the SNB to wait for the Swiss francto depreciate against the euro before it starts to normalize its monetary policy.

Although capacity utilization has risen notably, inflation pressure has remained very subduedso far. While the inflation rate surged to 1.0% in March, a main reason for the jump was atemporary statistical effect. The component "clothing and footwear" was not covered in themonth of March in the past and this has now been changed. The associated effects addedroughly 0.6 percentage points after winter sales ended. Overall, we still believe that the risksfor price stability will remain moderate, but anticipate a rising trend in inflation. This should bemanifested primarily in the headline inflation rate, as a result of climbing oil prices. However,we expect to see an increase in the core inflation rate as well, particularly since thedampening effect of the strong Swiss franc will likely diminish in the coming quarters.

The ECB's first interest rate hike in April did not leave any noticeable impact on the EUR/CHFexchange rate. Still, higher interest rates in Europe essentially remain a welcome factor in theSNB view of monetary policy. SNB Governing Board Member Jean-Pierre Danthine recentlysaid that an interest rate hike by the ECB expands the monetary policy maneuvering room forthe SNB. While our main scenario remains that the SNB will hike interest rates in December,we highlight the risk that an earlier move would become increasingly realistic should the CHFweaken notably in the near future.

Switzerland Economic Forecasts2011E 2012E Q4/Q4 Annual AverageQuarter-to-Quarter %

Changes at annual rates Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 09 10 11E 12E 09 10 11E 12E

Real GDP 1.4 1.1 0.3 2.1 4.1 1.7 2.2 1.6 0.3 3.1 1.2 2.4 -1.9 2.6 1.9 2.2Consumer Spending 2.8 1.3 1.9 1.5 1.6 1.7 2.3 0.7 2.0 1.4 1.9 1.6 1.0 1.7 1.7 1.7Government 1.0 -0.4 1.7 1.7 1.8 -0.4 1.7 1.7 2.5 -1.3 1.0 1.2 1.6 -1.6 1.5 1.2Investment -6.4 -0.8 3.6 18.3 -11.5 -1.2 3.4 18.7 -0.4 6.3 3.3 1.8 -4.9 4.6 3.5 1.8Domestic Demand 0.4 1.0 2.3 5.3 -2.0 1.2 2.6 4.9 1.5 2.2 2.2 1.6 -0.3 2.0 2.2 1.6Exports -0.5 12.7 6.6 7.6 -3.5 12.7 6.6 7.6 1.8 3.7 6.5 5.7 -8.7 9.3 3.5 5.7Imports 3.8 9.0 3.3 -3.7 14.3 3.7 2.5 -2.9 -0.6 6.0 3.0 4.2 -5.4 6.7 4.5 4.5CPI (y/y%) 0.6 1.0 1.2 1.6 1.4 1.5 2.2 2.2 -0.2 0.3 1.6 2.2 -0.5 0.7 1.1 1.8Three-Month LIBOR Target Rate 0.25 0.25 0.25 0.50 0.75 1.00 1.25 1.50 … … … … … … … …

Source: Credit Suisse estimates, Thomson Reuters DataStream

Fabian HellerPrivate Bank Analyst

+41 44 332 90 [email protected]



19 April 2011


Canada: Pause extendedSeptember Instead of May. The BoC’s pause is likely to extend until the September meetingversus our prior May call. The BoC was not as hawkish as we thought at its April meeting withno shift in policy guidance to indicate a near-term rate move. The number one reason, in ourview, was “the persistent strength of the Canadian dollar [which] could create even greaterheadwinds for the Canadian economy.” The currency is doing the BoC’s job for now.

Timing the BoC. By September, the BoC will have another Business Outlook Survey (July) togauge capacity pressures and the output gap and Q2 GDP data (August) under its belt. Our Q2GDP forecast is above the BoC’s expectation (2.0%) and would reduce excess supply (closethe output gap) more quickly than the BoC expects against its 1.8% potential growth rate.

Cycling Through the Year. Our 2011 Canadian GDP profile looks more cyclical than before.Front-loaded growth should give way to a slower profile mid-year because of our H1 USgrowth downgrade and supply disruptions in the auto sector (Exhibit 2), before speeding uplater in the year (assuming the disruptions aren’t for an extended period). We upgraded Q1(to 4.5% from 4.0%), lowered Q2 (to 2.8% from 3.4%) and Q3 (to 3.0% from 3.4%) and raisedQ4 (to 3.8% from 3.6%).

Exhibit 17: Auto Output Before And… Exhibit 18: …After The Japan DisasterSeasonally adjusted by Credit Suisse Seasonally adjusted by Credit Suisse

Canada Auto Outputin thousands of units

70

90

110

130

150

170

190

210

230

'08 '09 '10 '11

Dec

Jan

Canada Auto Outputin thousands of units

70

90

110

130

150

170

190

210

230

'08 '09 '10 '11

Jan

Apr

Sources: Ward’s, Credit Suisse. Automakers’ schedule in blue. Sources: Ward’s, Credit Suisse. Automakers’ schedule in blue.

2012 Downgrade Still Above Potential. We lowered our 2012 GDP profile (3.3% perquarter from prior 3.7% per quarter) because of the strength in the Canadian dollar. Despitethe downgrade, excess supply should move to excess demand next year because our 3.3%forecast is above the BoC’s 2.0% potential growth rate.

On Target Sooner. We expect core CPI inflation to reach the BoC’s 2% target in Q1 2012,one quarter before the BoC’s expectation.

Above Target and Rate Hikes Continue. Core CPI inflation should run above target overthe balance of 2012, and we look for the overnight rate to increase 100 basis points in 2012after the 75 basis points we anticipate in the second half of 2010.

Canada Economic Forecast2011 2012 Q4/Q4 Annual Average

Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 09 10 11E 12E 09 10 11E 12EReal GDP (ann. QoQ%) 4.5 2.8 3.0 3.8 3.3 3.3 3.3 3.3 -1.1 3.2 3.5 3.3 -2.5 3.1 3.2 3.3CPI (YoY%) 2.4 2.9 2.5 2.9 2.8 2.4 2.4 2.4 0.8 2.3 2.9 2.4 0.3 1.8 2.7 2.5Core CPI (YoY%) 1.2 1.4 1.6 1.8 2.0 2.1 2.2 2.2 1.6 1.6 1.8 2.2 1.8 1.7 1.5 2.1BoC overnight rate (end-pd., %) 1.00 1.00 1.25 1.75 2.00 2.25 2.50 2.75 0.25 1.00 1.75 2.75 … … … …Sources: Statistics Canada, Bank of Canada, Credit Suisse. ‘E’ is estimated.

Jonathan Basile+1 212 538 1436

[email protected]



19 April 2011


Australia: Contemplating the currencyRBA summer holiday: It’s nice to have a floating currency doing the work for you

As the RBA remains dormant, lying in wait for a spark in consumer activity and inflation, thestory of the month is without question one of currency appreciation. To its credit, our FXstrategy team has remained steadfast in its above consensus call on the AUD, and in the

latest FX Monthly: Carry on in Spring , our strategists upgraded their AUD currency forecaststo 1.10 over the next 12 months. Over the month, the AUD started off over parity (at 1.01) tothe USD, dropped to a low of 0.97 during the height of the Japanese crisis, and then ralliedback strongly to print a fresh post-float high of 1.0584. This strong gain in the currency,coupled with the upward revision to our currency forecast, strengthens another dimension inthe path for policy, and means that some of the heavy lifting is being done for the RBA.

In last month’s publication we noted that the RBA is unlikely to tighten policy until late in the3Q, due to caution displayed by consumers, and the continued content displayed bypolicymakers in their actions to date. We now concede that should our upgraded currencyforecasts hold, the risk of two additional tightenings this calendar year is diminishing. Thecurrency is assisting the central bank, and as a result, we have altered our expected path forpolicy. Coupled with this rise in the currency, the near-term disruption from the Japanesecrisis and near-term cooling in global IP momentum offer the RBA some additional degrees offreedom to sit “tight” for the time being. We now forecast just one rate rise this calendar year.The hiking cycle is now delayed, but not derailed.

That said, this adjustment in forecast reflects the strength of the currency and a near-termcooling in Global IP momentum, rather than a faltering in our staunch view on the medium-term strength of the Australian economy. Indeed, with all due respect, despite some near-term disruptions to trade, the Japanese crisis is likely to be a net positive from Australia’sperspective. Australia stands ready to export energy substitutes (namely thermal coal andLNG) for lost nuclear capacity. Furthermore, during the rebuilding phase, we anticipate anincreased Japanese demand for Australia’s iron ore. Japan is Australia’s second largesttrading partner after all. See After the Quake: Implications for Commodity Markets .

The data highlight for the month was again the employment report, this time for March. The

report again surprised on the high side of expectations (see AUD Rates Update: Labour market ‘full’ steam ahead ). There were another 38k jobs created in March, and again, full-time employment rose an impressive 32k (up 4%yoy). Over the year, 98% of jobs createdhave been full-time. When married with the rising monthly hours worked (up 4%yoy), theuptick in wages growth (also up 4%yoy) highlights the acceleration in the aggregate paycheck.See Exhibits 19 and 20. A supportive development for the Aussie battler (consumer). Theemployment report helped catapult the currency towards, and eventually through, 1.05 to hitits post-float high of 1.0584. The tightening labor market continues to support our view thatthe RBA will eventually have to tighten policy further.

RBA Forecasts and Credit Suisse Estimates for Cash RateFebruary Statement on Monetary Policy

Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13GDP growth 3.1 2¾ 3¼ 4¼ 3¾ 4 4Non-farm GDP growth 3.2 2½ 3¼ 4¼ 3¾ 4 4CPI inflation 3.1 2.7 2¾ 2¾ 2¾ 3 3Underlying inflation 2¾ 2¼ 2¼ 2¾ 2¾ 3 3RBA cash rate* 4½ 4¾ 4¾ 5 5½ 5¾ 6RBA Technical assumptions include A$ at US$1.00, TWI at 74, WTI crude oil price at US$96 per barrel and Tapis crude oil price atUS$103 per barrelSource: RBA, *Credit Suisse forecast of the cash rate trajectory

Jarrod KerrInterest Rates Research

Director65 6212 2078

[email protected]

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19 April 2011


Exhibit 19: Employment Growth Remains Strong Exhibit 20: Surge in Full-Time EmploymentUnemployment rate at 4.9%. Full-time hours worked up 4.5%yoy.

-1

0

1

2

3

4

5

6

05 06 07 08 09 10 113.0

3.5

4.0

4.5

5.0

5.5

6.0Employment %mom%yoyUnemployment rate (rhs)NAIRU

%

Capacityconstraint

NAIRU

%

-6

-4

-2

0

2

4

6

00 02 04 06 08 10-12

-8

-4

0

4

8

12

F/T Hours Worked (lhs)

P/T Hours Worked (rhs)

%yoy %yoyMove to part-time in tough times

Source: ABS, Credit Suisse Source: ABS, Credit Suisse



19 April 2011


New Zealand: Narrow avoidance of recessionWhile the December 2010 quarter GDP outturn showing growth of 0.2% q/q indicated that theNZ economy had narrowly avoided a technical recession, the underlying profile for theeconomy continued to remain patchy and relatively subdued. In particular, in terms of theannual rate of growth for the December 2010 quarter, activity eased back to a modestincrease of 0.8% y/y, down from the 1.5% y/y rise recorded over the previous quarter. Interms of the composition of activity, the largest positive contribution came from growth ininvestment expenditure, a rise in exports, together with an increase in stocks. In contrast,negative contributions were recorded from a sharp rise in imports combined with weakness inresidential investment. Unsurprisingly consumption spending remained subdued ashousehold deleveraging continued over the quarter. Looking ahead, we estimate that thenegative impact of the February 22 earthquake in Canterbury will result in quarterly real GDPfalling by around 0.1%-0.2% over the March 2011 quarter. Moreover, for the calendar 2011year we forecast the NZ economy to increase by a modest and below-trend rate of growth ofonly 1.1%. Nevertheless, looking further ahead the pace of growth for the economy isexpected to begin to pick up from around the third quarter of 2011. In particular, underpinningthe forecast acceleration in growth rates over the second half of this year and the building ofmomentum in 2012 is projected to be a combination of:

• continued strength in commodity prices and trading partner growth rates,• supportive monetary policy settings,

• the Rugby World Cup, and

• the initiation of the Canterbury earthquake rebuild.

Largely reflecting the substantial stimulatory effect of the Canterbury earthquakereconstruction, economic growth is expected to peak in excess of 4.0% over the calendar2012 year.

Exhibit 21: NZ GDP Forecasts

-4

-2

0

2

4

6

8

Mar-95 Mar-98 Mar-01 Mar-04 Mar-07 Mar-10 Mar-13

QoQ% changeYoY% change

Fcst

Source: Statistics NZ, First NZ Capital

Chris GreenDirector, Economics & Strategy

First NZ Capital+64 9 302 5509

[email protected]

New Zealand Economic Forecast2009 2010 2011E 2012E

Real GDP (ann avg % change) -2.1 1.5 1.1 4.1CPI (ann % change) 2.1 2.3 4.3 2.7Current Account (% of GDP) -2.8 -2.9 -0.9 -5.1Policy Rate (end-year) 2.50 3.00 2.50 4.25

Source: First NZ Capital



19 April 2011


Non-Japan Asia: Continued price pressuresSome changes have been made to our China macro forecasts since the last monthly review.We have revised down China’s 2011 growth forecast mildly to 9.1% (from 9.2%) to reflect aslower, yet solid, growth momentum this year. Some anecdotal evidence, much of it fromconsumption and transportation, is showing signs of an emerging growth risk. The softer-than-usual pick-up in March PMI indices also warrants caution. Along with the uncertaintyposted by rising crude oil prices on the global economy, we think Beijing may become moreconcerned about growth and may take a temporal pause on its monetary "normalization"process (see " China: Downside risk on growth emerging" , 4 April).

Meanwhile, China's CPI inflation remains elevated (5.4% y/y in March). We have revised upChina’s 2011 average inflation forecast since the last monthly review to 5.6% (from 5.3%) inanticipation of the rise in services inflation. The important landmarks to watch on China'sinflation in the coming months are: (1) how high CPI inflation would peak in mid-year; (2) howquickly it would moderate after peaking; and (3) whether monetary "normalization" wouldcontinue in 2H11. Our view is that inflation would rise further and break through 6% y/y by mid-year, trend down only moderately to 5.2% y/y by year-end, and that the PBoC would continuenormalizing monetary conditions after seeing the persistent price pressure in 2H11 (see "China:Medium-intensity and persistent inflation," 18 March). We maintain our view that the PBoC

would raise the required reserves ratio by another 50bp and raise interest rates by another135bp-150bp for the remainder of the year. Rising global crude oil prices would have a slow butnegative effect on China's inflation and growth outlook. Retail fuel prices have recently beenraised by over 5% in April, while pressure on an upward adjustment on power tariffs arelooming. Besides China, we have also revised up our Taiwan CPI inflation forecast in 2011 toreflect the pressure from higher global commodity prices and stronger domestic demand.

We have made some important changes to our Indian economic projections, effectively takingon board the estimated impact of the surge in oil prices over recent months (see " India: The impact of oil ", 4 April). The country is obviously a fairly sizeable net importer of oil and relatedproducts. We now expect wholesale price inflation, India's key price measure, to average7.6% in the fiscal year 2011/12, rising to a local peak around 9.5% in July/August beforedropping to 6% by March 2012. At the same time we have shaved our GDP growth forecast

for 2011/12 to 7.5% from 7.7% previously. Our new numbers put us at the top of theconsensus range for inflation and the bottom of the range for growth. We continue to expecttwo more 25bp repo and reverse repo rate hikes from the Reserve Bank of India, but expectthe central bank to switch from a tightening to an easing bias as the year progresses. Indeed,we wouldn't rule out the possibility of a rate cut before the current fiscal year is out.

Other than in Vietnam, where we have further upped our 2011 year average inflation forecastto 14.8% from 13.6%, there are no forecast changes of significance to mention in South EastAsia. Nevertheless, the oil price increase, if sustained, clearly presents upside risks toinflation in most countries and downside risks to growth.

Christiaan Tuntono+852 2101 7409

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Robert Prior-Wandesforde+65 6212 3707

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19 April 2011


Non-Japan Asia Economic Forecasts

2009 2010 2011E 2012E 2009 2010 2011E 2012E 2009 2010 2011E 2012E

China 9.1 10.3 9.1 9.0 -0.7 3.3 5.6 4.8 5.9 5.2 4.2 3.4

Hong Kong -2.7 6.8 5.0 4.8 0.5 2.4 5.0 5.7 5.8 5.3 4.3 3.3

India 7.5 8.4 7.5 7.5 3.6 8.8 7.6 5.1 -2.8 -3.4 -3.2 -2.3

Indonesia 4.6 6.1 6.0 5.5 4.8 5.1 7.5 6.0 1.9 0.9 1.2 0.9Korea 0.2 6.1 4.4 4.3 2.8 3.0 4.8 3.3 3.9 2.8 1.0 1.6Malaysia -1.7 7.2 5.6 5.8 0.6 1.6 3.0 2.8 16.5 11.4 10.7 10.4Philippines 1.1 7.3 4.6 5.0 3.3 3.8 5.4 4.5 5.5 5.0 4.9 4.7

Singapore -0.8 14.5 5.2 4.8 0.6 2.8 4.4 1.6 17.8 22.2 23.8 24.5Taiwan -1.9 10.8 4.4 4.5 -0.9 1.0 2.4 2.8 11.3 8.6 7.0 6.3Thailand -2.3 7.8 4.6 4.8 -0.8 3.3 3.8 3.1 8.3 4.6 2.3 2.2

GDP (y/y%) CPI (y/y%, annual average) Current account (% of GDP)

Source: Credit Suisse

China Economic Forecasts(% y/y) 2009 2010 2011F 2012F

GDP 9.6 9.1 10.3 9.1Real private consumption 8.7 9.6 9.7 9.6Real gross fixed capital formation 10.2 19.3 10.2 9.5Foreign direct investment ($ bn) 108.3 94.1 105.7 98.0CPI inflation (yav) 5.9 -0.7 3.3 5.6One-year lending rate (%, ye) 5.31 5.31 5.81 7.66M2 money supply (ye) 17.8 27.6 19.7 16.0Exports ($ bn) 1,430.7 1,201.6 1,577.9 1,789

% yoy 17.2 -16.0 31.3 13.4Imports ($ bn) 1,132.6 1,005.9 1,394.8 1,612

% yoy 18.5 -11.2 38.7 15.6Trade balance ($ bn) 298.1 195.7 183.1 176.7Current account balance ($ bn) 426.1 297.1 306.2 298.4

as a % of GDP 9.4 5.9 5.2 4.2USDRMB exchange rate (ye) 6.82 6.83 6.62 6.35

Source: National Bureau of Statistics, Credit Suisse, Thomson Reuters DataStream



19 April 2011


Emerging Europe, Middle East, and AfricaGrowth momentum in the EMEA region remains strong. The annualized three-monthIP growth rate in the region has been running around 10% since December 2010, up fromabout 2.4% in August 2010 and 7.0% in November 2010. The manufacturing PMI data forFebruary and March for the region suggest that the sequential IP growth will likelymaintain its strength in the coming period. The forward-looking new orders component ofthe region’s PMI was broadly stable in March, although the export orders have declinedsomewhat, possibly driven by a modest decline in the euro area’s new orders.

Exhibit 22 : EMEA* IP level

Exhibit 23: EMEA Mfg PMI, New ordersPMI, Export orders PMI and EZ neworders PMI

June 2008 = 100

84

88

92

96

100

Feb-08 Feb-09 Feb-10 Feb-11

20

25

30

35

40

45

50

55

60

Mar-08 Mar-09 Mar-10 Mar-11

Mfg PMINew ordersExport orders*Eurozone new orders

*The eight countries weighted by their industrial shares of 2010nominal GDP are Czech Republic, Hungary, Poland, Romania,Russia, South Africa, Turkey and Ukraine; seasonally and workday-adjusted index.

Source: Haver Analytics®, Statistics Office, Credit Suisse

Note: We weight the PMIs for Czech Republic, Hungary, Poland,Russia, South Africa and Turkey by their industrial shares of GDP in2010.

*Excludes South Africa

Source: PMI Premium

We forecast that the regional real GDP growth rate will edge modestly higher to4.7 % in 2011 from 4.5% in 2010 6. This expectation is mainly driven by a projected pick-up in Russia’s real GDP growth rate to 4.7% this year from 4.0% in 2010. We expect thehigh oil prices to offset to a large extent the recent downside surprise in investmentspending in Russia and do not see a significant upside risk to our 2011 real GDP growthforecast at present. However, the high oil prices pose some upside risks to our real GDPgrowth forecasts for the region’s other oil producers. We revised higher our 2011 real GDPgrowth forecast for the region’s second largest economy, Turkey, to 6.1% from 4.8%previously, following the upside surprise in this country’s real GDP growth rate in 2010(8.9%, compared to our forecast of 8.5%).

The region’s year-on-year headline inflation edged modestly lower to 6.1% in

February from 6.3% in January. This was driven by the decline in headline inflation inRussia, Turkey and Poland – the region’s three largest economies. In Russia and Poland,the decline in headline inflation in February was driven by a slowdown in core and energyinflation while the decline in Turkey was driven by slowing food and energy inflation, whichoffset the pick-up in core inflation.

6 Regional aggregate figures quoted in the text weighted by country GDP valued at market exchange rates.

Berna Bayazitoglu+44 20 7883 3431

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Natig Mustafayev+44 20 7888 1065

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19 April 2011


Food price inflation in the region has stabilized around 9.0% y/y since October. Foodprice inflation in the region picked up from as low as 2.8% y/y in May 2010 to 9.1% y/y inOctober 2010 and reached 9.4% y/y in January, before slowing modestly to 9.2% y/y inFebruary. The slowdown in February was, however, driven entirely by the slowing foodprice inflation in Turkey. Food price inflation was stable at 15.3% in Russia in February,while it continued to increase in most other EMEA countries.

The year-on-year pace of energy price increases have been above 10% in the EMEAregion since December. We note that domestic gasoline prices in the region’s top eighteconomies are liberalized (unlike many countries in Latin America and non-Japan Asia),although other components of local energy prices, such as domestic electricity and gasprices, are subject to government-controlled pricing in some of these countries. Consistentwith this observation, our statistical analysis suggests that it takes between one and threemonths for the global oil price shocks to pass through to local energy prices in thesecountries. We think that the oil price shock since December is feeding into domestic fuelprices in the EMEA region just about now. (Please see EMEA: Feeding headline inflation and EMEA: Adding fuel to the fire , both published 7 March, for further details.)

Core inflation in the EMEA region remained unchanged at 3.4% y/y in Februaryfollowing a modest uptrend between October and January. Core inflation in the regiontroughed in October-November at about 3.0% y/y. The 3.4% y/y in February is just belowthe 3.5% y/y recorded in July 2010.

Exhibit 24: Inflation developments in EMEA* Exhibit 25: Contributions to headline inflation in EMEA*% year-on-year change Pps, with the exception of headline inflation

0

2

46

8

10

12

14

16

18

Feb-09 Aug-09 Feb-10 Aug-10 Feb-11

Headline CPIFoodEnergyCore

0

2

4

6

8

10

12

Feb-09 Aug-09 Feb-10 Aug-10 Feb-11

Alcohol and tobaccoEnergyFoodCoreHeadline CPI

* Calculated using data for the Czech Republic, Hungary, Israel, Poland, Romania, Russia,South Africa and Turkey weighted by their 2010 nominal US$ GDP.Note: Core inflation is calculated by excluding food and nonalcoholic beverages, energy,tobacco and alcohol from the CPI baskets.Source: Eurostat, national authorities, Credit Suisse

* Calculated using data for the Czech Republic, Hungary, Israel, Poland, Romania, Russia,South Africa and Turkey weighted by their 2010 nominal US$ GDP.Note: Core inflation is calculated by excluding food and nonalcoholic beverages, energy,tobacco and alcohol from the CPI baskets.Source: Eurostat, national authorities, Credit Suisse

Over the last month, we revised our policy rate forecast for Russia. We now expectthe Central Bank of Russia to hike the deposit rate by 50bps to 3.50% in the remainder of

this year, instead of the 75bps we forecast earlier. We continue to expect policy rate cutsonly in Hungary and Romania this year, by 50bps to 5.50% in Hungary and 25bps to6.00% in Romania.



19 April 2011


Latin America: All in all, still a positive story for 2011Our regional real GDP growth forecast for 2011 is unchanged at 4.4%, while our forecastfor 2012 is at 4.4%, up slightly from 4.3% last month. In 2010, real GDP growth in LatinAmerica averaged 6.4%. The projected slowdown in 2011 versus 2010 is explained mainlyby expectations of lower growth in the largest economies, Brazil and Mexico, where weproject that real GDP growth will average 4.2% and 4.4%, respectively, down from 7.5%(Brazil) and 5.5% (Mexico) last year. We estimate that the output gap has closed or willclose in 2011 in most countries under coverage, including Argentina, Brazil, Peru, Chileand Mexico.

We project that regional consumer price inflation will be 6.7% by year-end 2011, comparedto 6.7% in 2010 and to our previous forecast of 6.6% one month ago. We project modestincreases in inflation in 2011 in most of the countries we cover. One exception is Mexico,where a strong currency and government intervention in the setting of gasoline prices arehelping keep inflation in check. We project that inflation in Mexico will fall from 4.4% atyear-end 2010 to 3.7% at the end of 2011. Argentina and Venezuela are the only countriesunder our coverage where we project double-digit inflation at 10.8% and 28.4%,respectively. In fact, we project that Venezuela will likely have the highest inflation readingin 2011 of all the emerging market countries we cover globally. Most central banks in the

region have started reducing the monetary policy stimulus in recent months. We think thatin the balance of the year, the most aggressive ones on this front will be Chile, Colombiaand Peru.

We continue to project that fiscal and external imbalances will remain modest in 2011. Atthe regional level, we forecast a current account deficit of 1.4% of GDP in 2011, versus adeficit of 1.1% of GDP in 2010. On the fiscal front we project a fiscal deficit of 2.4% ofGDP in 2011 compared with a deficit of 2.5% of GDP in 2010. We are projecting a smallincrease in the government debt-to-GDP ratio at the regional level from 45.5% in 2010 to46.6% in 2011, which is still below the recent peak of 50.0% posted in 2009. Total foreigndebt-to-GDP ratios are also modest in 2010 and 2011, according to our projections, at20.4% and 17.0% of GDP, respectively. These include debt owed by both the public andprivate sectors.

On the political front, investor attention in the next few weeks will likely be focused on the upcoming runoff election in Peru on 5 June between Ollanta Humala and Keiko Fujimori.While we expect it to be a tight race, Humala seems to have the upper hand over Fujimoriat this stage. Financial markets’ reaction has been adverse to the prospect of a Humalavictory. The Peruvian sol is trading at the weakest level since December 2010, at a timewhen many other currencies in the region have strengthened. The equity market is theworst performing in the region, dropping by 22% in local terms year to date, while countryrisk indicators have also worsened. Investors are mainly concerned that, if Humala wins,there may be room for higher taxes on key sectors of the economy (mining), a potentialweakening of the fiscal rule and of the central bank’s independence, and greater stateintervention in various sectors of the economy.

Latin America Economic ForecastsGDP (y/y%) CPI (y/y%, annual average) Current account (% of GDP)

2009 2010 2011E 2012E 2009 2010 2011E 2012E 2009 2010 2011E 2012EArgentina 0.9 9.0 6.0 4.0 6.3 10.5 10.8 12.5 3.7 1.3 1.0 0.5Brazil -0.6 7.5 4.2 5.0 4.9 5.0 6.6 5.4 -1.5 -2.3 -2.2 -2.7Chile -1.5 5.3 5.8 5.0 1.6 1.4 3.6 3.6 2.6 -0.1 -1.8 -2.2Colombia 1.5 4.3 4.3 4.4 4.2 2.2 3.3 3.6 -2.2 -3.2 -2.5 -2.6Mexico -6.1 5.5 4.4 3.5 5.3 4.2 3.6 3.5 -0.7 -0.5 -0.8 -1.2Peru 0.9 8.8 6.5 6.0 3.0 1.5 2.3 2.7 0.2 -1.5 -0.5 -1.9Venezuela -3.3 -1.4 1.5 2.5 28.6 29.1 27.7 28.2 2.6 6.2 9.1 5.1

Source: Credit Suisse, Thomson Reuters DataStream ; Regional aggregate figures quoted in the text weighted by country GDP valued at market exchange rates.

Alonso Cervera+1 212 538 2351

[email protected]

Casey Reckman+1 212 325 5570

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Lorraine White+1 212 538 4311

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19 April 2011


Brazil: Increasing uncertainty regarding inflationconvergence towards the targetSmaller tightening cycle, despite the recurrent higher-than-expected inflation .Current inflation figures have been consistently above market expectations because of thespillover of inflationary pressures initially concentrated in food prices to other groups (e.g.,

services and administered prices). Recently, we revised our forecast for 2011 IPCAinflation from 5.4% to 6.3%. Despite the more negative inflation outlook, we have reducedour forecast for further increases in the Selic rate in 2011 from 175bps to 25bps, with anadditional hike only in April and maintenance of the Selic rate at 12.00% from April to theend of the year, compared with the previous projection of 13.50%. This revision was dueto a more benign reading of the balance of risks for inflation by the Monetary PolicyCommittee (Copom). The March Inflation Report suggests a greater probability that thetightening cycle will be shorter in duration and of a lesser magnitude than we hadprojected previously. Despite the continued uptrend of inflation, the Copom reading is thatthe inflationary scenario for 2012 will become more favorable toward the end of this yearafter market players realize that macroprudential measures will be effective in containingdemand and reducing inflation. The more unfavorable inflation dynamics in 2011 and apossibly lower rate hike this year raise the probability of inflation failing to converge to thecenter of the target range in the relevant forecast horizon. However, we have a differentview. We think inflation will remain very high and the central bank will need to resume themonetary tightening, increasing the Selic rate to 14.00% at YE 2012.

Early signs of an economic activity rebound in Q1 2011. Coincident indicators suggesta high probability that economic activity accelerated in Q1 2011 versus previous quarters.Industrial production grew 0.2% m/m in January and 1.9% m/m in February, seasonallyadjusted). Data available so far suggest stable industrial production in March. In thisscenario, industrial production will have grown 0.9% q/q in Q1 2011, after havingcontracted 0.5% q/q in Q3 2010 and remaining stable in Q4 2010. Accordingly, we expectGDP to have grown slightly more than 1.0% q/q in Q1 2011, more than the growths of0.4% q/q in Q3 2010 and 0.7% q/q in Q4 2010. This result is in line with our GDP growthprojection of 4.2% in 2011 and should interrupt the downward trend of market projections

for GDP growth this year.We have reduced our forecast for the current-account deficit to 2.2% of GDP in2011 . The higher commodity prices led us to revise our forecast for 2011 exports $229.9billion to $250 billion in 2011, increasing the expectation for the trade balance from$3.5 billion to $23.6 billion in 2011 and for current account deficit from $74.1 billion (3.1%of GDP) to $54.9 billion (2.2% of GDP) in 2011. Despite the significant increase in servicesexpenditures and much stronger growth in quantum imports versus exports, we expect thecurrent account deficit to decrease in 2011 versus the 2.3% of GDP figure in 2010. In thefinancial account, we have revised our forecast for foreign direct investments in 2011 from$48.5 billion in 2010 to $60 billion and our projection for medium- and long-termdisbursements in 2011 from $49.9 billion to $56.6 billion. We reduced our expectation forportfolio investments inflow in 2011, from $26 billion to $11 billion for equity investments

and from $15.0 billion to an outflow of $2.0 billion in fixed-income securities. The revisionsmade in our projections substantially raised our forecast for international reserves, from$310 billion to $344 billion in 2011 (versus $320.9 billion in April 8). We maintain ourexpectation that the FX rate will be R$1.60/US$ at the end of this year, but the recentappreciation suggests that a stronger currency is becoming increasingly likely.

Rising probability of fiscal target fulfillment in 2011 . The public sector primary balanceaccumulated in the last 12 months increased from 2.8% in January to 2.9% in February.Part of this increase was related to the surplus of R$2.5 billion of the central government,versus a primary deficit of R$0.7 billion in February 2010. Higher central government resultwas explained by the combination of higher tax revenues (growth of 9.8% y/y) and a

Nilson Teixeira+55 11 3841 6288

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19 April 2011


deceleration in discretionary expenditures (from 26.3% y/y in January to 5.6% y/y inFebruary). In our view, the significant deceleration in government expenditures suggeststhat Budget Directive issued in February, establishing R$50.1 billion in sequesters for theyear, has already resulted in a preliminary restriction of the spending of the centralgovernment. We expect the government to fulfill the primary balance target of 3.0% ofGDP in 2011.

Brazil Economics Forecast2008 2009 2010E 2011E 2012E

Real GDP growth (%) 5.2 -0.6 7.5 4.2 5.0

Household Consumption (%) 5.7 4.2 7.0 4.7 5.0

Government Consumption (%) 3.2 3.9 3.3 1.9 3.0

Gross fixed capital formation (%) 13.6 -10.3 21.9 10.5 14.0

Exports (%) 0.5 -10.2 11.5 8.7 10.0

Imports (%) 15.4 -11.5 36.2 24.2 22.0

CPI inflation (%) 5.9 4.3 5.9 5.3 5.3

FX rate – end-period (R$/US$) 2.34 1.74 1.66 1.60 1.80

Target Selic interest rate – end-period (%) 13.75 8.75 10.75 13.50 11.00

Total nominal balance (% of GDP) -2.0 -3.3 -2.6 -2.6 -2.4

Total primary balance (% of GDP) 3.4 2.0 2.8 3.0 2.6

Net public-sector debt (% of GDP) 38.5 42.8 40.4 38.7 37.7

Trade balance (US$ bn) 24.8 25.3 20.3 23.6 10.8

Current account balance (% of GDP) -1.7 -1.5 -2.3 -2.2 -2.7

Foreign direct investment - FDI (US$ bn) 45.1 25.9 48.5 60.0 55.0

Central bank gross FX reserves (US$ bn) 193.8 238.5 288.6 344.0 356.0Source: IBGE, Central Bank of Brazil, Trade Ministry, Credit Suisse estimates, Thomson Reuters DataStream



19 April 2011

Summary Macroeconomic Data: GDPReal GDP, y/y%

2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012EDeveloped MarketUS 2.5 3.6 3.1 2.7 2.1 0.4 5.0 2.9 2.9 4.0Canada 1.9 3.1 3.0 2.8 2.2 0.5 -2.5 3.1 3.2 3.3Euro area 0.8 1.9 1.7 3.1 2.8 0.3 -4.0 1.7 2.5 2.5

Austria 0.7 2.6 2.8 3.5 3.7 2.2 -3.9 2.1 3.2 3.0Belgium 0.8 3.1 2.0 2.7 2.8 0.8 -2.7 2.1 2.7 2.8Finland 2.1 4.1 3.0 4.4 5.3 1.0 -8.3 3.1 4.3 3.5France 1.1 2.3 2.0 2.4 2.3 0.1 -2.5 1.5 2.6 2.7Germany -0.2 0.7 0.9 3.6 2.8 0.7 -4.7 3.5 3.5 3.2Greece 5.9 4.4 2.3 5.2 4.3 1.0 -2.0 -4.4 -2.5 1.1Ireland 4.4 4.6 6.0 5.3 5.6 -3.6 -7.6 -1.0 1.0 1.5Italy 0.1 1.4 0.8 2.1 1.4 -1.3 -5.2 1.2 1.8 2.0Luxembourg 1.5 4.4 5.4 5.0 6.6 1.4 -3.7 2.0* 2.8* 3.2*Netherlands 0.3 2.2 2.0 3.4 3.9 1.9 -3.9 1.8 2.8 2.8Portugal -0.9 1.6 0.8 1.4 2.4 0.0 -2.5 1.4 -0.5 0.9Spain 3.1 3.3 3.6 4.0 3.6 0.9 -3.7 -0.1 1.3 1.9

Norway 1.0 4.1 4.4 4.5 5.4 1.6 -1.1 2.2 2.8 3.0Sweden 2.5 3.7 3.1 4.6 3.4 -0.8 -5.3 5.3 4.4 3.0United Kingdom 2.8 3.0 2.2 2.8 2.7 -0.1 -3.3 0.8 1.5 2.3

Switzerland -0.2 2.5 2.6 3.6 3.6 1.9 -1.9 2.6 1.9 2.2Japan 1.4 2.7 1.9 2.0 2.4 -1.2 -6.3 3.9 0.0 3.5Australia 3.2 3.6 3.2 2.6 4.8 2.2 1.2 2.8 2.9** 3.7**New Zealand 4.2 4.4 3.3 1.0 2.9 -0.2 -2.1 1.5 1.1 4.1Emerging MarketArgentina 8.8 9.0 9.2 8.5 8.7 6.8 0.9 9.2 6.0 4.0Brazil 1.1 5.7 3.2 4.0 6.1 5.2 -0.6 7.5 4.2 5.0Chile 3.9 6.0 5.6 4.6 4.6 3.7 -1.5 5.3 5.8 5.0Colombia 3.9 5.3 4.7 6.7 6.9 3.5 1.5 4.3 4.3 4.4Mexico 1.4 4.1 3.2 5.2 3.3 1.5 -6.1 5.5 4.4 3.5Peru 4.0 5.0 6.8 7.7 8.9 9.8 0.9 8.8 6.5 6.0Venezuela -7.8 18.3 10.3 9.9 8.2 4.8 -3.3 -1.4 1.5 2.5Czech Republic 3.6 4.5 6.3 6.8 6.1 2.5 -4.1 2.3 2.6 3.0Hungary 4.2 4.9 3.5 4.0 1.0 0.6 -6.3 1.2 3.3 3.9Israel 1.5 5.0 5.1 5.3 5.4 4.2 0.8 4.6 4.2 4.4Poland 3.9 5.3 3.6 6.2 6.8 5.1 1.7 3.8 4.0 4.0

Russia 7.3 7.2 6.4 8.2 8.5 5.2 -7.8 4.0 4.7 5.2Saudi Arabia 7.7 5.3 5.6 3.2 2.0 4.2 0.6 3.8 5.7 4.9South Africa 2.9 4.6 5.3 5.6 5.6 3.6 -1.7 2.8 4.0 4.4Turkey 5.3 9.4 8.4 6.9 4.7 0.7 -4.8 8.9 6.1 4.0Ukraine 9.6 12.1 2.7 7.3 7.9 2.1 -15.1 4.2 4.5 5.0UAE 11.9 15.6 13.1 13.0 6.2 7.4 -3.0 2.3 4.7 5.3China 10.0 10.1 10.4 11.6 14.2 9.6 9.1 10.3 9.1 9.0Hong Kong 3.0 8.5 7.1 7.0 6.4 2.3 -2.7 6.8 5.0 4.8India *** 8.5 7.5 9.5 9.7 9.2 6.7 7.5 8.4 7.5 7.5Indonesia 4.8 5.0 5.7 5.5 6.3 6.0 4.6 6.1 6.0 5.5Korea 2.8 4.6 4.0 5.2 5.1 2.3 0.2 6.1 4.4 4.3Malaysia 5.8 6.8 5.3 5.8 6.3 4.6 -1.7 7.2 5.6 5.8Philippines 4.9 6.4 5.0 5.4 7.1 3.7 1.1 7.3 4.6 5.0Singapore 4.6 9.2 7.4 8.7 8.8 1.5 -0.8 14.5 5.2 4.8Taiwan 3.7 6.2 4.7 5.4 6.0 0.7 -1.9 10.8 4.4 4.5Thailand 7.1 6.3 4.6 5.1 5.0 2.5 -2.3 7.8 4.6 4.8Vietnam 7.3 7.8 8.4 8.2 8.5 6.3 5.3 6.8 6.2 6.5

Note: * European Commission estimates; ** Consensus estimates from Consensus Economics1

Revised GDP series with base 2004-05. All historical ratios expressed as % of GDP may appearsmaller 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.

Source: © 2011 Thomson Reuters Limited , the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, Consensus Economics, European Commission, Credit Suisse



19 April 2011

Summary Macroeconomic Data: InflationHICP/CPI, y/y%, annual average

2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012EDeveloped MarketsUS 2.3 2.7 3.4 3.2 2.9 3.8 -0.3 1.6 3.2 1.5Canada 2.7 1.9 2.2 2.0 2.1 2.4 0.3 1.8 2.7 2.5Euro area 2.1 2.1 2.2 2.2 2.1 3.3 0.3 1.6 2.8 2.1Austria 1.3 1.9 2.1 1.7 2.2 3.2 0.4 1.7 3.1 2.2Belgium 1.5 1.9 2.5 2.3 1.8 4.5 0.0 2.3 2.9 2.3Finland 1.3 0.1 0.8 1.3 1.6 3.9 1.6 1.7 3.1 2.2France 2.2 2.3 1.9 1.9 1.6 3.2 0.1 1.7 1.7 1.5Germany 1.0 1.8 1.9 1.8 2.3 2.7 0.2 1.2 2.8 2.4Greece 3.4 3.0 3.5 3.3 3.0 4.2 1.3 4.7 3.2 0.9Ireland 4.0 2.3 2.2 2.7 2.9 3.1 -1.7 -1.6 1.4 1.0Italy 2.8 2.3 2.2 2.2 2.0 3.5 0.8 1.6 2.8 2.3Luxembourg 2.5 3.2 3.8 3.0 2.7 4.1 0.0 2.8 3.1 2.0Netherlands 2.2 1.4 1.5 1.7 1.6 2.2 1.0 0.9 2.5 2.0Portugal 3.3 2.5 2.1 3.0 2.4 2.7 -0.9 1.4 3.3 1.7Spain 3.1 3.1 3.4 3.6 2.8 4.1 -0.2 2.0 2.5 1.8

Norway 2.5 0.5 1.5 2.3 0.7 3.8 2.2 2.4 1.5 1.7

Sweden 1.9 0.4 0.5 1.4 2.2 3.5 -0.3 1.3 2.5 2.1United Kingdom 1.4 1.3 2.1 2.3 2.3 3.6 2.2 3.3 4.1 2.3Switzerland 0.6 0.8 1.2 1.1 0.7 2.4 -0.5 0.7 1.1 1.8Japan** -0.3 -0.1 -0.1 0.1 0.0 1.5 -1.3 -1.0 0.0 0.1Australia 2.8 2.3 2.7 3.5 2.3 4.4 1.8 2.8 3.1* 2.9*New Zealand 1.8 2.3 3.0 3.4 2.4 4.0 2.1 2.3 4.3 2.7Emerging MarketsArgentina 14.9 4.4 9.6 10.9 8.8 8.6 6.3 10.4 10.8 12.5Brazil 14.7 6.6 6.9 4.2 3.6 5.7 4.9 5.0 6.6 5.2Chile 2.8 1.1 3.1 3.4 4.4 8.7 1.6 1.4 3.6 3.6Colombia 7.1 5.9 5.0 4.3 5.5 7.0 4.2 2.2 3.3 3.6Mexico 4.5 4.7 4.0 3.6 4.0 5.1 5.3 4.2 3.6 3.5Peru 2.3 3.7 1.6 2.0 1.8 5.8 3.0 1.5 2.3 2.7Venezuela 31.1 21.7 16.0 13.7 18.7 31.5 28.6 29.1 27.7 28.2

Czech Republic 0.1 2.8 1.8 2.5 2.9 6.4 1.0 1.5 1.8 1.9Hungary 4.7 6.8 3.6 3.9 7.9 6.1 4.2 4.9 3.4 3.5Israel 0.7 -0.4 1.3 2.1 0.5 4.6 3.3 2.7 4.0 2.9Poland 0.8 3.5 2.1 1.0 2.5 4.2 3.5 2.6 4.0 2.5Russia 13.7 10.9 12.7 9.7 9.0 14.1 11.7 6.9 10.0 7.1Saudi Arabia 0.6 0.4 0.6 2.3 4.1 9.9 5.1 5.4 6.0 5.6South Africa 5.4 -1.2 2.0 3.1 6.0 9.9 7.1 4.3 4.6 5.2Turkey 25.3 8.6 8.2 9.6 8.8 10.4 6.3 8.6 5.5 6.5Ukraine 5.2 9.0 13.5 9.1 12.8 25.2 15.9 9.4 9.3 9.5UAE 3.1 5.0 6.2 9.3 11.1 12.3 1.6 0.9 4.4 5.3China 1.2 3.9 1.8 1.5 4.8 5.9 -0.7 3.3 5.6 4.8Hong Kong -2.6 -0.4 0.9 2.0 2.0 4.3 0.5 2.4 5.0 5.7India *** 5.5 6.5 4.4 6.5 4.8 8.1 3.6 9.2 7.6 5.1Indonesia 6.8 6.1 10.5 13.1 6.4 9.8 4.8 5.1 7.5 6.0

Korea 3.5 3.6 2.8 2.2 2.5 4.7 2.8 3.0 4.8 3.3Malaysia 1.1 1.5 3.1 3.6 2.0 5.4 0.6 1.6 3.0 2.8Philippines 3.5 6.0 7.7 6.3 2.8 9.3 3.3 3.8 5.4 4.5Singapore 0.5 1.7 0.5 1.0 2.1 6.6 0.6 2.8 4.4 1.6Taiwan -0.2 1.6 2.3 0.6 1.8 3.5 -0.9 1.0 2.4 2.8Thailand 1.8 2.8 4.5 4.6 2.2 5.5 -0.8 3.3 3.8 3.1Vietnam 3.2 7.7 8.3 7.4 8.3 23.1 7.0 6.2 13.6 8.2

Source: Thomson Reuters DataStream, Consensus Economics, European Commission, the BLOOMBERG PROFESSIONAL™ service, National Statistical Offices , Credit Suisse

Note: * Consensus estimates from Consensus Economics; ** Core CPI; *** WPI inflation



19 April 2011

Summary Macroeconomic Data: Current Account BalanceAs % of GDP

2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012EDeveloped Markets US -4.7 -5.3 -5.9 -6.0 -5.2 -4.9 -2.7 -3.2 -3.5 ...Canada 1.2 2.3 1.9 1.4 0.8 0.4 -2.9 -3.1 -2.0 ...Euro area 0.3 0.8 0.1 -0.1 0.1 -1.5 -0.6 -0.6 -0.2 -0.3Austria 1.7 2.2 2.2 2.8 3.5 4.9 2.9 3.0 3.5 4.1Belgium 4.1 3.5 2.6 2.0 1.6 -1.8 0.4 1.4 2.0 2.0Finland 4.8 6.2 3.4 4.2 4.3 2.9 2.3 3.1 1.6 1.4France 0.7 0.5 -0.5 -0.6 -1.0 -1.9 -1.9 -2.1 -3.4 -3.5Germany 1.9 4.7 5.0 6.2 7.4 6.2 5.6 5.7 4.6 4.3Greece -6.5 -5.8 -7.6 -11.2 -14.4 -14.7 -11.0 -10.5 -8.0 -6.5Ireland 0.0 -0.6 -3.5 -3.6 -5.3 -5.6 -3.0 -0.7 1.5 2.7Italy -1.3 -0.9 -1.7 -2.6 -2.4 -2.9 -2.1 -3.5 -2.7 -2.4Luxembourg 8.1 11.9 11.5 10.4 10.1 5.3 6.9 8.4 9.4 9.9Netherlands 5.6 7.6 7.4 9.3 6.7 4.4 4.9 7.7 6.8 7.9Portugal -6.5 -8.4 -10.4 -10.7 -10.1 -12.6 -10.9 -9.9 -8.0 -6.7Spain -3.5 -5.3 -7.4 -9.0 -10.0 -9.6 -5.2 -4.5 -3.8 -3.6

Norway 12.3 12.7 16.3 17.2 14.1 17.8 13.1 12.9 -- --Sweden 7.0 6.6 6.8 8.4 9.2 8.8 7.0 6.3 6.5 6.1United Kingdom -1.6 -2.1 -2.6 -3.4 -2.6 -1.6 -1.3 -2.5 -2.5 -2.5Switzerland 13.3 13.4 14.0 15.1 9.0 2.0 8.3 11.0 10.7 ...Japan 3.2 3.7 3.6 3.9 4.8 3.2 2.8 3.5 2.9 3.0Australia* -5.2 -6.0 -5.6 -5.3 -6.2 -4.5 -4.4 -2.3 -1.9 -2.6New Zealand -3.8 -5.7 -7.9 -8.3 -8.1 -8.8 -2.8 -2.9 -0.9 -5.1Emerging MarketsArgentina 6.4 2.1 2.9 3.7 2.8 2.2 3.7 1.3 1.0 0.5Brazil 0.8 1.8 1.6 1.3 0.1 -1.8 -1.5 -2.3 -2.2 -2.7Chile -1.1 2.2 1.2 4.9 4.5 -1.5 2.6 -0.1 -1.8 -2.2Colombia -1.0 -0.8 -1.3 -1.6 -2.9 -2.9 -2.2 -3.2 -2.5 -2.6Mexico -1.0 -0.7 -0.6 -0.5 -0.9 -1.5 -0.7 -0.5 -0.8 -1.2Peru -1.5 na 1.4 3.1 1.3 -3.7 0.2 -1.5 -0.5 -1.9Venezuela 14.2 13.8 17.6 14.4 8.0 12.0 2.6 6.2 9.1 5.1Czech Republic -6.3 -5.2 -1.3 -2.5 -3.3 -0.6 -1.1 -3.7 -3.1 -3.5Hungary -7.7 -8.3 -7.4 -7.5 -7.0 -7.2 -0.6 2.1 0.5 0.6Israel 0.5 1.8 3.2 13.8 2.9 0.8 3.6 3.1 1.8 0.4Poland -2.5 -4.0 -1.2 -2.8 -4.8 -4.8 -2.2 -3.4 -4.0 -3.9Russia 8.2 10.1 11.1 9.6 6.0 6.2 4.0 5.1 7.1 5.4Saudi Arabia 10.8 19.7 28.5 27.8 24.3 27.8 7.1 14.4 22.8 21.7South Africa -1.0 -3.0 -3.5 -5.3 -7.0 -7.1 -4.1 -2.8 -4.3 -4.8Turkey -2.5 -3.7 -4.6 -6.1 -5.9 -5.7 -2.3 -6.6 -7.1 -6.3Ukraine 6.5 10.4 3.1 -1.5 -4.1 -7.1 -1.5 -1.9 -2.7 -3.0United Arab Emirates 8.6 10.0 17.7 20.6 9.5 8.8 3.9 14.9 21.4 17.2China 2.8 3.5 7.0 9.0 10.6 9.4 5.9 5.2 4.2 3.4Hong Kong 10.4 9.5 11.3 12.1 12.4 14.3 5.8 5.3 4.3 3.3India ** 2.3 -0.3 -1.2 -1.0 -1.4 -2.4 -2.8 -3.4 -3.2 -2.3Indonesia *** 3.4 0.6 0.1 3.0 2.4 0.0 1.9 0.9 1.2 0.9

Korea 1.9 4.5 2.2 1.5 2.1 0.3 3.9 2.8 1.0 1.6Malaysia 12.1 12.1 15.0 16.7 15.9 17.5 16.5 11.7 10.6 10.1Philippines 0.4 1.9 2.0 4.5 4.9 2.2 5.5 5.0 4.9 4.7Singapore 22.8 17.1 21.3 24.2 26.7 18.5 17.8 22.2 23.8 24.5Taiwan 9.8 5.8 4.8 7.0 8.4 6.3 11.3 8.6 7.0 6.3Thailand 3.4 1.7 -4.3 1.1 5.9 0.8 8.3 4.6 2.3 2.2Vietnam -4.9 -2.1 -1.1 -0.3 -9.8 -10.3 -8.6 -6.9 -6.4 -5.8

Source: Thomson Reuters DataStream , ECB, Eurostat, OECD, BLOOMBERG PROFESSIONAL™ service, National Statistical Offices, Credit Suisse; * OECD estimates ** Fiscal year beginningin April. *** Balance of payments numbers from 2004 onwards have been revised; exports and imports include credits and debits on net income, respectively, in 2000-03.



19 April 2011

Summary Macroeconomic Data: Fiscal BalanceAs % of GDP

2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012EDeveloped Markets US ** -3.5 -3.6 -2.6 -1.9 -1.2 -3.2 -9.9 -8.9 -9.2 -6.6Canada 0.8 0.1 1.0 0.9 0.6 -0.4 -3.6 -2.8 -1.5 ...Euro area -3.1 -2.9 -2.5 -1.4 -0.6 -2.0 -6.1 -5.6 -4.1 -3.1

Austria -1.4 -4.4 -1.7 -1.5 -0.4 -0.5 -3.5 -4.6 -3.5 -3.0Belgium -0.1 -0.3 -2.8 0.2 -0.3 -1.3 -6.0 -4.3 -3.5 -2.5Finland 2.4 2.3 2.7 4.0 5.2 4.2 -2.5 -2.8 -1.3 -1.0France -4.1 -3.6 -2.9 -2.3 -2.7 -3.3 -7.5 -7.5 -5.7 -4.5Germany -4.0 -3.8 -3.3 -1.6 0.3 0.1 -3.0 -3.3 -2.0 -1.5Greece -5.6 -7.5 -5.2 -5.7 -6.4 -9.4 -15.4 -10.5 -8.0 -6.5Ireland 0.4 1.4 1.6 2.9 0.0 -7.3 -11.8 -11.6 -9.5 -8.0Italy -3.5 -3.5 -4.3 -3.4 -1.5 -2.7 -5.3 -4.5 -3.5 -2.5Luxembourg 0.5 -1.1 0.0 1.4 3.7 3.0 -0.7 -1.8* -1.3* -1.2*Netherlands -3.1 -1.7 -0.3 0.5 0.2 0.6 -5.4 -5.2 -3.5 -2.0Portugal -3.0 -3.4 -5.9 -4.1 -2.8 -2.9 -9.3 -8.6 -4.6 -3.1Spain -0.2 -0.3 1.0 2.0 1.9 -4.2 -11.1 -9.2 -6.0 -4.5

Norway 7.3 11.1 15.1 18.5 17.7 19.3 9.9 -- -- --Sweden -1.0 0.6 2.2 2.3 3.6 2.2 -0.9 -0.9* -0.1* 1.0*United Kingdom -3.4 -3.4 -3.4 -2.7 -2.7 -5.0 -11.4 -9.9 -7.9 -6.2Switzerland -1.4 -1.2 0.1 1.7 1.8 2.0 0.4 0.5 0.3 0.6Japan*** -8.4 -6.6 -5.0 -3.5 -3.0 -3.2 -9.5 -9.4 -9.7 -9.3Australia **** 1.4 1.1 1.4 1.5 1.7 0.4 -4.0 -3.3 -1.7 -0.4New Zealand 3.3 3.8 4.6 4.4 3.4 3.1 -2.1 -3.3 -9.0 -4.4Emerging MarketsArgentina 0.9 3.7 2.1 1.9 1.1 0.9 -1.6 -0.2 -1.4 -0.6Brazil -5.2 -2.9 -3.6 -3.6 -2.8 -2.0 -3.3 -2.5 -2.6 -2.4Chile -0.5 2.1 4.6 7.7 8.2 4.3 -4.5 -0.3 -0.3 -0.7Colombia -3.4 -1.6 -2.1 -2.4 -1.7 -0.6 -2.9 -3.9 -3.6 -3.3Mexico1 -0.6 -0.2 -0.1 0.1 0.0 -0.1 -2.3 -2.8 -2.6 -2.0Peru -1.6 -1.1 -0.5 1.8 3.1 2.1 -2.1 -0.4 -0.8 -0.5Venezuela 0.2 2.5 4.1 -1.5 -2.6 -3.5 -8.8 -5.0 -3.7 -6.5Czech Republic 2 -6.6 -2.9 -3.6 -2.6 -0.7 -2.7 -5.8 -4.7 -4.5 -3.5Hungary 4 -7.2 -6.4 -7.9 -9.4 -5.0 -3.7 -4.5 -4.3 -2.9 -2.9Israel -5.1 -3.5 -1.8 -0.4 0.4 -2.1 -5.2 -3.8 -3.0 -2.1Poland 2 -6.3 -5.4 -4.1 -3.6 -1.9 -3.7 -7.2 -7.9 -5.7 -5.2Russia 7 2.0 4.3 9.0 8.4 6.0 4.9 -6.3 -3.6 -0.7 -0.4Saudi Arabia 9.8 11.4 18.4 21.0 12.2 32.5 -6.2 7.9 15.7 11.9South Africa 8 -2.3 -1.5 -0.3 0.7 0.9 -1.2 -6.6 -5.1 -4.6 -4.1Turkey 9 na -4.1 -0.6 0.0 -1.2 -1.9 -4.9 -3.2 -1.8 -1.0Ukraine 10 -0.5 -4.4 -2.4 -1.4 -2.0 -3.2 -6.2 -5.6 -3.5 -2.5United Arab Emirates -4.5 -0.4 7.8 11.7 9.1 12.1 -2.3 2.5 11.9 11.3China -2.2 -1.3 -1.2 -0.8 0.6 -0.4 -2.3 -1.6 -2.0 -1.9Hong Kong -3.2 1.7 1.0 4.0 7.7 0.1 1.6 4.1 0.2 1.4India11 -8.3 -7.2 -6.5 -5.4 -5.0 -8.7 -9.5 -7.4 -7.6 -7.1Indonesia 12 -1.7 -1.0 -0.5 -0.9 -1.3 -0.1 -1.6 -0.6 -1.0 -1.0Korea 13 1.5 1.3 1.6 1.5 1.9 -0.3 -2.7 -0.8 0.8 1.4Malaysia 14 -5.2 -4.4 -4.2 -3.5 -3.7 -4.8 -7.0 -5.4 -5.4 -4.1Philippines -4.6 -3.9 -2.8 -1.2 -1.6 -1.3 -3.9 -3.7 -3.4 -3.3Singapore -1.1 -0.1 0.7 0.0 2.8 -0.3 -0.3 -0.1 0.0 0.3Taiwan 15 -2.7 -2.8 -0.5 -0.6 -0.3 -0.3 -2.2 -0.9 -0.5 -0.1Thailand 16 -0.2 -0.2 0.3 -0.7 -1.6 -1.0 -5.7 -0.9 -3.7 -2.2

Vietnam 17 -0.8 -4.9 -4.9 -5.0 -5.6 -4.6 -7.0 -5.7 -5.0 -4.8Source: Thomson Reuters DataStream, European Commission, OECD, the BLOOMBERG PROFESSIONAL™ service, National Statistical Office s, Credit Suisse

* European Commission estimates; ** Fiscal year, federal government; *** Fiscal year, general government (central + local + social security), special factors adjusted; **** OECD estimates.

(1) Narrow definition that excludes off-balance expenditures. (2) ESA95 represents consolidated fiscal accounts of the general government on an accrual basis, while the central governmentbalance has a narrower definition and is reported on a cash basis. (4) ESA95 represents consolidated fiscal accounts of the general government on an accrual basis, including one-off transfersfrom pension funds to the government budget as revenues. The central government balance has a narrower definition and is reported on a cash basis. (7) Net of bank recapitalization costs. (8)Data for fiscal years starting 1 April. Selected data refer to the government’s consolidated fiscal balances from 2009. (9) The definition of the consolidated government comprises the centralgovernment, extra-budgetary funds, state-owned enterprises, social security institutions and the Unemployment Insurance Fund. (10) Excluding impact of bank recapitalization and transfers toNaftogaz. Estimate for 2011 expenditure includes 0.8% of GDP of additional allocations for settlement of VAT arrears accumulated in 2010. (11) Prior to 2006 and again effective from 2009, theseestimates include revenue from disinvestments (in line with government methodology). (12) Refers to central government. (13) General government statistics as interpreted by the Koreagovernment. (14) 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. (15) General governmentstatistics as interpreted by the Taiwan government. (16) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September. (17) General governmentstatistics as interpreted by the Vietnam government.



19 April 2011

Summary Macroeconomic Data: Government DebtAs % of GDP

2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012EDeveloped Markets US 51.0 52.6 53.0 53.1 52.4 56.7 71.0 79.5 86.0 88.9Canada 40.9 38.3 35.0 32.2 29.9 29.0 34.0 34.9 34.9 ...Euro area 69.2 69.6 70.3 68.7 66.4 70.1 79.5 84.0 86.5 87.8

Austria 65.5 64.8 63.9 62.1 59.3 62.5 67.5 70.0 72.0 73.3Belgium 98.5 94.2 92.1 88.1 84.2 89.6 96.2 98.0 100.5 102.1Finland 44.5 44.4 41.7 39.7 35.2 34.1 43.8 49.0 51.1 53.0France 62.9 64.9 66.4 63.7 63.8 67.5 78.1 83.0 86.8 89.8Germany 63.9 65.8 68.0 67.6 64.9 66.3 73.4 76.0 75.9 75.2Greece 97.4 98.6 100.0 106.1 105.0 110.3 126.8 140.0 150.2 156.0Ireland 31.0 29.7 27.4 24.8 25.0 44.3 65.5 97.0 107.0 114.3Italy 104.4 103.9 105.9 106.6 103.6 106.3 116.0 119.0 120.2 119.9Luxembourg 6.1 6.3 6.1 6.7 6.7 13.6 14.5 18.2 19.6 20.9Netherlands 52.0 52.4 51.8 47.4 45.3 58.2 60.8 65.0 66.6 67.3Portugal 55.9 57.6 62.8 63.9 62.7 65.3 76.1 83.0 88.8 92.4Spain 48.7 46.2 43.0 39.6 36.1 39.8 53.2 64.0 69.7 73.0

Norway 44.3 45.6 44.5 55.4 52.6 50.2 44.1 -- -- --Sweden 51.7 50.3 50.4 45.0 40.0 38.2 41.9 39.9 38.9 37.5United Kingdom 39.0 40.9 42.5 43.4 44.5 52.1 68.2 77.8 82.6 84.7

Switzerland 55.1 54.6 52.7 47.2 43.4 40.9 38.8 38.2 37.0 35.6Japan ** 173.6 182.4 190.4 187.6 188.1 196.7 216.1 221.9 229.5 234.2Australia *** 18.3 16.6 16.1 15.3 14.3 13.6 19.2 23.6 25.9 26.8New Zealand 27.3 24.9 23.0 21.0 17.9 17.2 23.5 28.3 35.0 36.5Emerging MarketsArgentina1 147.0 130.9 88.5 81.6 71.1 57.4 61.6 48.7 44.0 40.4Brazil2 61.7 56.7 56.7 56.4 58.0 57.4 62.0 55.0 56.0 57.2Chile3 13.0 10.7 7.3 5.3 4.1 5.2 6.2 9.8 10.0 9.3Colombia 58.6 53.2 50.8 47.5 43.7 42.8 45.1 45.5 45.4 45.5Mexico4 38.3 35.0 33.8 33.6 33.7 38.8 40.4 37.7 36.9 36.2Peru 47.1 44.4 37.8 33.0 29.7 24.0 26.7 23.4 21.1 21.3Venezuela 55.7 42.3 34.9 25.6 26.7 19.0 24.9 34.8 32.5 29.9Czech Republic 29.8 30.1 29.7 29.4 29.0 30.0 35.3 38.5 41.2 42.5Hungary6 58.4 59.1 61.8 65.7 66.1 72.3 78.4 80.2 74.0 73.8Israel 96.7 94.6 91.5 82.3 75.7 75.5 78.7 77.9 77.3 77.0Poland7 47.1 45.7 47.1 47.7 45.0 47.1 50.9 55.4 58.8 61.6Russia 33.0 23.9 14.1 9.2 7.4 6.0 7.6 8.3 8.0 7.9Saudi Arabia 84.0 65.4 40.2 27.4 18.5 13.3 16.1 13.6 10.1 9.3South Africa8 34.9 34.6 32.7 30.2 27.8 27.1 33.0 36.4 39.2 41.7Turkey9 na 56.6 51.1 45.6 39.6 40.0 46.3 42.9 40.6 38.9Ukraine 26.1 22.9 21.0 16.0 13.2 15.5 31.6 39.2 40.7 40.4UAE 6.6 8.4 9.2 10.1 9.7 15.1 24.2 22.4 20.7 19.1China10 19.8 18.4 17.7 16.6 19.3 16.5 18.2 18.7 18.1 17.6Hong Kong11 0.0 2.0 1.8 1.5 1.2 1.0 1.2 2.0 2.4 2.4India 84.5 83.6 81.2 77.0 75.5 76.1 72.0 71.1 70.0 70.0Indonesia12 66.6 54.7 47.0 39.5 34.2 29.5 31.3 31.5 31.3 31.0Korea13 21.4 25.3 29.8 33.8 36.3 36.2 39.4 38.6 34.5 30.8Malaysia14 47.8 45.7 43.8 42.2 41.5 41.4 53.3 52.6 50.7 49.5Philippines 77.7 80.5 71.8 66.4 55.8 56.9 57.2 55.3 53.6 52.2Singapore 0.0 na na na na na na na na naTaiwan15 46.5 47.4 50.6 47.9 43.5 46.2 49.8 45.5 43.2 40.4Thailand16,17 50.7 49.5 47.3 42.0 38.3 37.3 45.2 42.6 44.3 44.1Vietnam18 36.6 33.9 35.7 33.7 32.0 34.1 40.7 41.0 40.0 39.0

Source: Thomson Reuters DataStream, European Commission, OECD, BLOOMBERG PROFESSIONAL™ service, National Statistical Offices , Credit Suisse* Fiscal year; ** Fiscal year, general government (central + local + social security), special factors adjusted; *** OECD estimates(1) Debt data assumes that Paris Club debt starts to be repaid in 2011. (2) Figures related to the Central Bank's new methodology. (3) Excludes debt of the central bank. (4) Includes all contingentliabilities associated with IPAB, Pidiregas, FARAC, financial intermediation and other debtor support programs. (5) For the consolidated government, which is a broader definition than the budget sectorthat includes Economic Authorities. (6) ESA95 represents consolidated fiscal accounts of the general government on an accrual basis, including one-off transfers from pension funds to the governmentbudget as revenues. The central government balance has a narrower definition and is reported on a cash basis. (7) ESA95 represents consolidated fiscal accounts of the general government on anaccrual basis, while the central government balance has a narrower definition and is reported on a cash basis. (8) Data for fiscal years starting 1 April. Selected data refer to the government’sconsolidated fiscal balances from 2009. (9) The definition of the consolidated government comprises the central government, extra-budgetary funds, state-owned enterprises, social security institutionsand the Unemployment Insurance Fund. (10) Includes Treasury bond and foreign state debt owed by the State Council only. 2010F level is estimated to be 50.3% if include local government’s affiliateddebt. (11) Also includes debt issued under the Government Bond Program. Excludes debt guaranteed by the government. (12) Refers to central government. (13) General government statistics asinterpreted by the Korea government. (14) 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. (15) Generalgovernment statistics as interpreted by the Taiwan government. (16) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September. (17) Includes centralgovernment, non-financial SOEs and financial institution development fund. (18) General government statistics as interpreted by the Vietnam government.



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global economics monthly csfb 19 abril 2011

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