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Marcus Svedberg Chief Economist, East Capital

Global Economic Outlook. Marcus Svedberg Chief Economist, East Capital. The setting. Global growth is being revised down ,.. … and uncertainties over Eurozone debt linger . Eastern Europe will slow down due to weak external demand , but …

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Marcus Svedberg Chief Economist, East Capital

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  1. Global Economic Outlook Marcus Svedberg Chief Economist, East Capital

  2. The setting • Global growth is beingrevised down,.. … and uncertaintiesover Eurozonedebtlinger. • Eastern Europewillslow down duetoweakexternaldemand, but… …domesticdemandremains strong and few major economicimbalances. Outlook: economicslowdownand financialrecovery

  3. Global growth is being revised down Downward revision process: the latestforecasttendsto be the mostbearish Source: IMF Real GDP Growth (% annualchange)

  4. Eurozone debt issue towards a solution? The “big bazooka” or grand plan is being delayed and watered down but is nevertheless being pushed through? The focus is shifting from GreecetowardsItaly and the otherlargeeconomies • Greece: agreement that Athens is insolvent with “voluntary” haircuts for the banks • Banks: ”mandatory” recapitalization by next summer • Sovereign bonds: to be protected by a leveraged bailout fund (EFSF) • Eurozonegovernance: more integration, coordination, and oversight

  5. Eastern Europe affected by Eurozone EEis negatively affected by the problems in the Eurozone, but the transmission mechanisms differ • Trade: exporters hurt as demand weakens • Banks: bankingsectorsdominated by Western banks • Capital: financing of current account deficits and external debt • Sentiment: anythingEuropean or financialhit by deterioating sentiment

  6. EE growth is being revised down The mostintegratedeconomiesrevised down the most Source: EBRD Real GDP Growth (yoychange)

  7. Domestic demand remains strong in EE Consumption and investment remain strong in the largest economies • Consumption is still buoyant in the large economies • Retailtrade is booming as Russians, Polesand Turks are shopping • Investment activityremains strong or is evenaccelerating • The private sector is investing in new equipment and the public sector is buildinginfrastructure • Credit growth is perhaps too rapid • Credits aregrowing by 12%, 24% and 38% respectively in Poland, Russia and Turkey

  8. Glimpsing into 2012 Assuming the grand EZ plan is being delayed and watered down but nevertheless pushed through… …next year will be characterized by a worldwide economic slowdown and financial recovery. The political attention will be dominated by elections and regime changes. • Slow growth in most DMs and slowdown in EMs in 2012 and EE is no exception • Financialrecovery and reduced market volatilityaftersubsequentEurozone deals • Market reboundpossible as the economic slowdown is offset by financial recovery • Elections or regime changes in half of the G20 members; presidential elections in Russia and Turkey

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