United Arab Emirates Business and economic outlook Quarterly

United Arab Emirates Business and economic outlook Quarterly update – December 2012 Final analysis by Nenad Pacek

Contents • • • • Executive summary Important facts Economic fundamentals Strategic view of the market Corporate sales and profit trends Growth trends and drivers Five-year plan and Vision 2030 Household consumption trends Gross fixed investment trends Government spending trends Currency outlook Interest rates and inflation rate outlook Forecast table

Executive summary • • • Overall corporate revenue growth in 2012 will be slightly worse than 2011, with some 85% of companies growing (with an almost equal split between those growing in single and double digits) – still one of the best in the world With fast rising competition, profit growth is coming under increasing pressure 75% of companies will grow their profits this year, but predominantly in single digits Consumer goods, food/beverages and IT companies are doing better than industrial B 2 B and pharma/health care firms this year, with all recording substantial profit pressures (except, interestingly enough, industrial B 2 B firms) Companies expect 2013 revenue growth to be slightly better in 2013 vs. 2012, but profit growth pressures could get worse as competition heats up in high growth markets – UAE will remain one of the fastest growing markets for firms Drivers of corporate and GDP growth in 2013 will be: gradually rising oil output in Abu Dhabi, a still high oil price (although price reversal is possible), (hopefully) an acceleration of government funded diversification projects in Abu Dhabi, rising tourism/services/trade in Dubai, and overall improving non-oil growth

Executive summary II • • • Real GDP growth will reach 3. 6% this year and 4. 0% next year – with an upside potential in 2013 if the high oil price continues to support Abu Dhabi diversification Considering better than expected official growth figures in the first half of 2012 in Dubai and resilient oil prices pushing Abu Dhabi up, the final outcome of 2012 real GDP growth could be even better once all revisions are made in 2013 The medium term looks very good too -- in the next three years, the main drivers of growth will be the ongoing expansion of oil production capacity in Abu Dhabi, diversification & infrastructure projects in Abu Dhabi, plus good tourism/services/trade in Dubai Reasons why UAE is growing below its potential and below pre-crisis rates: deleveraging and high upcoming debt payments in Dubai, a very slow lending recovery (just over 2% yoy), a slow real estate recovery (prices in Dubai are bottoming out after falling some 60% since the crisis), slower than planned project development in Abu Dhabi Any sharp fall in oil price could delay some of the upcoming projects in Abu Dhabi

Executive summary III • • • Dubai’s ongoing deleveraging (and further cuts in spending in 2013 -14) means that B 2 B and B 2 G sales in Dubai will continue to be weak, but we expect Abu Dhabi to gradually increase its fiscal spending and to compensate for Dubai spending cuts Recent large hotels/shopping mall construction announcements in Dubai are a welcome sign of more opportunities in the B 2 B and B 2 G, but as long as the Dubai debt story is not over, such projects will be more an exception than the rule (and companies should be aware of receivables risks) Abu Dhabi, however, will focus only on the most important projects in 2013 -15 Inflation and interest rates will remain low officially, but the inflation measurement does not capture prices for non-UAE citizens (so in reality inflation is probably higher) Companies should monitor government plans to introduce VAT and corporate tax We expect UAE oil production to rise significantly in the next 6 -7 years to reach 3. 4 -3. 6 m b/d (from 2. 7 m b/d at present) – this, together with on-going diversification/infrastructure projects are likely to keep GDP growth at 5% or better from 2014 onwards (provided there is no collapse in oil prices)

Important facts • • • Population of 7. 1 m, likely to rise by 400, 000 people every year (mostly through immigration) 3 rd largest economy in MENA after Saudi and Iran, 2 nd richest after Qatar with GDP per capita at about $55, 000 3 rd largest oil producer in OPEC 8% of the world’s proven oil reserves, of which 90% is in Abu Dhabi At current production, reserves will last 90 -100 years Currently producing 2. 7 m b/d (close to its full capacity) – production will increase to up to 3. 0 m b/d by 2016 and up to 3. 5 -3. 6 m b/d by 2018 -19 To preserve oil for exports, two new nuclear power plants for electricity generation will be built in the next few years, and there will be more solar energy investments 3. 5% of world’s gas reserves, almost all in Abu Dhabi Manufacturing is still only 15% of GDP, but this share will increase in the next five years as diversification (particularly in Abu Dhabi) accelerates Real estate represents some 13% of GDP Some mineral reserves of manganese, copper and magnesium

Economic fundamentals • The Abu Dhabi Investment Authority (a sovereign wealth fund) is the second largest in the world, with an estimated $630+bn • Other sovereign wealth funds in the UAE such as the Abu Dhabi Investment Council, IPIC, Investment Corporation of Dubai and others hold about $200 bn • Abu Dhabi has very little debt (it is a net creditor) and despite recent troubles with Dubai it will continue to offer some kind of support – in return for more political control and control over Dubai’s economic assets • 79 -81% of all UAE government revenue comes from hydrocarbons, but diversification investments in the next decade will reduce this dependence • Dubai’s debt of some $117 bn is bigger than the emirate’s GDP (by about 40%) and will need to be reduced in the near term • Deleveraging will hurt growth and domestic demand in Dubai (particularly in B 2 B and B 2 G) – only when debt drops to 60 -70% of GDP is Dubai likely to return to its growth potential, and this will take years • At the country level, both the current account and the budget are in a surplus

Economic fundamentals II • • We estimate that the external debt for UAE will fall to 42 -45% of GDP this year (it is below the high-risk benchmark of 70% of GDP), but this could be an underestimation considering unreliable data related to non-bank debts Considering large assets held by Abu Dhabi sovereign wealth funds and their upcoming payment schedules, there are limited debt-related risks in the federation (foreign assets are at least six times larger than Dubai’s debts) UAE government debt is likely to fall in the coming years from about 38% of GDP today (still low by international standards) and this should enable at least Abu Dhabi to continue with it substantial spending programs in the next few years However, the recent slowdown of projects point to potential concerns about remaining debt problems in Dubai and the usual conservative stance of Abu Dhabi rulers Dubai faces debt repayments of almost $50 bn between 2014 -2016 According to the latest central bank release, forex reserves reached just over $50 bn and now cover just under three months of imports (under normal circumstances this would be a bit insufficient, but sovereign wealth funds de facto compensate) UAE now needs oil prices at $85 -90 to balance its budget

Strategic view of the market • • • Companies see UAE as an important market and sales growth is mostly good/very good Short-term enthusiasm is the best among B 2 C firms, but medium term enthusiasm is biggest among B 2 B and B 2 G firms, which are looking at planned diversification projects in Abu Dhabi B 2 C firms like the fact that the population will continue to grow by 400, 000 p. a. There has been some disappointment about delayed or cancelled projects in Abu Dhabi in the last two years, but we expect diversification spending to accelerate in the next three-four years Livelier activity in Dubai, due to stronger tourism, services and trade, is likely to continue Hopes are high that Abu Dhabi will be a growth engine in the next few years and executives are bullish about planned spending around the so called Five-year Plan (see later) Companies dependent on government spending are also operating at below pre-crisis growth rates – the Dubai government is cutting spending and Abu Dhabi is contributing 18% less to the federal budget – but overall government spending in Abu Dhabi is expected to help sales growth in 2013 -14 (although Abu Dhabi will be more selective in how it spends money now) Many firms are making sure now that they have enough resources in Abu Dhabi to follow opportunities and build key relationships with decision-makers Competition is on the rise very quickly, including from emerging market multinationals

Corporate sales and profit trends -- 2011 • • • Business was strong for the vast majority of companies in 2011: 97% of firms reported growth and over 50% of companies grew in double digits (20% of these in excess of 20%) This was the best result on aggregate of any market in MEA 2011 was stronger on aggregate than 2010 The second half of 2011 largely exceeded expectations, but not necessarily in Abu Dhabi where a number of projects were put on hold as the government reviewed spending priorities Profit growth was slightly worse than revenue growth but still robust compared to most markets around the world

Corporate sales and profit trends in 2010 -2011, including expectations about 2012 as expressed in Dec 2011

Corporate sales and profit trends 2012 -2013, based on Dec 2012 survey, aggregate results of all sectors • Overall revenue growth in 2012 will be slightly worse than 2011, with some 85% of companies growing (with an almost equal split between those growing in single and double digits) • As competition has picked up, profit growth has come under increasing pressure this year • Some 75% of companies will grow their profits this year, but predominantly in single digits • Revenue growth expectations for 2013 are better than 2012 • Profit growth expectations for 2013 are also better, but there is a greater proportion of companies expecting only single digit profit growth • Companies should however be aware that competition is particularly tough in growth markets as most companies prioritize them for business expansion – profit margin pressures are likely to rise in the coming years

Corporate sales and profit trends, Dec 2012 survey compared to June 2012 survey

Consumer goods -- sales and profit trends for 2012 and expectations for 2013 • Consumer goods companies had an excellent 2011, growing between 10% to over 30% (depending on market penetration), helped by the recovery of Dubai retail and tourism • Over 90% of consumer goods firms will grow their revenues this year with the majority recording double digit growth • But profit growth has become more challenging than in 2011 with almost 25% of firms expecting no profit growth (rising competition, continued investment in expanding business are reasons cited for this trend) • Expectations for 2013 are stronger than 2012 results with all firms expecting top line growth • Companies are also more optimistic about profit growth in 2013 although this sounds too optimistic considering massive competitive pressures currently building up in the market

Food/beverages -- sales and profit trends for 2012 and expectations for 2013 • Food/beverage firms did well in 2011 – 50% grew in double digits, 25% by over 30% • Profit growth was weaker than revenues last year • Some 90% of companies will grow their revenues in 2012, but mostly in single digits • But only 70% will grow their profits – rising competition in this sector is also affecting margins • Expectations for 2013 are stronger for both revenue and profit growth although with rising competition profit margin pressures will probably just get worse in the coming years

Industrial B 2 B – sales and profit trends for 2012 and expectations for 2013 • • Industrial companies in the B 2 B segment had a mixed 2011, but all reported growth either in modest single digits or decent double digits Despite strong headline growth in Abu Dhabi and stronger growth in Dubai, industrial firms will record weaker revenue growth in 2012 than in 2011 Postponement of projects in Abu Dhabi and sluggish industrial growth in Dubai are among the key factors behind weaker revenue growth Only 70% of companies will grow their revenues this year, mostly in single digits Profit growth this year will be better than revenue growth Revenue growth expectations for 2013 are positive but modest – all firms expect only single digit growth Expectations for profit growth are slightly worse and more mixed (see upcoming charts) More companies are now thinking of more manufacturing presence in MENA

Pharma/health care – sales and profit trends for 2012 and expectations for 2013 • Pharma/healthcare firms had a strong 2011 – over 50% grew revenues in double digits, some 40% grew in high single digits • 2012 revenue growth is still very good but some 25% of companies report inability to grow top line this year • At the same time, over 60% will grow revenues in double digits this year • There are rising profit growth pressures this year with almost 40% expecting only flat profits vs. 2011 • Expectations for 2013 are significantly better for revenue growth and moderately better for profit growth

IT sector – sales and profit trends for 2012 and expectations for 2013 • • • In 2011, most IT companies were growing in low single digits This trend has largely continued in 2012 – all IT firms will grow revenues this year but predominantly in single digits But as IT firms continue to chase a limited amount of opportunities and competition is picking up strongly, profit growth this year is not as good as revenue growth Revenue growth expectations for 2013 are better than 2012 results However, companies expect continued profit growth pressures to continue during 2013 Like for the industrial B 2 B segment, IT firms hope that there will be more projects in Abu Dhabi next year but there is a level of uncertainty about actual Abu Dhabi spending (despite recently approved spending priorities) and still unquantified amounts that Abu Dhabi might use to help Dubai repay its debts in the next couple of years

Corporate sales and profit trends for 2012, based on Dec 2012 survey, by sector

Sales and profit growth expectations for 2013, based on Dec 2012 survey, by sector

Growth trends and drivers • • • Between 2005 and 2008 annual real GDP growth was among the best in the world, averaging 11%, driven by strong hydrocarbon earnings and the Dubai credit-fuelled boom After -4. 8% in 2009, growth was just 1. 3% in 2010 but accelerated to 4. 2% in 2011 Real GDP growth will reach 3. 6% this year and 4. 0% next year – with an upside potential in 2013 if the high oil price continues to support Abu Dhabi diversification Considering better than expected official growth figures in the first half of 2012 in Dubai and resilient oil prices pushing Abu Dhabi up, the final outcome of 2012 real GDP growth could be even better once all revisions are made in 2013 In the best case, revised figures could show over 4% growth this year Drivers of corporate and GDP growth in 2013 will be: gradually rising oil output in Abu Dhabi, the still high oil price (although price reversal is possible considering rampant speculation with oil futures), (hopefully) an acceleration of government funded diversification projects in Abu Dhabi, rising tourism/services in Dubai, overall improving non-oil growth (including rising manufacturing capacities), strong consumer confidence, infrastructure investments in the northern Emirates, foreign trade (mainly in Dubai where it accounts for 1/3 of GDP), and logistics

Growth trends and drivers II • The reasons UAE is growing below its potential and below pre-crisis rates: deleveraging and high upcoming debt payments in Dubai, very slow lending recovery (just over 2% yoy), slow real estate recovery (prices in Dubai are bottoming out after falling some 60% during the crisis), and slower than planned project development in Abu Dhabi • Any sharp fall in the oil price could delay some of the upcoming projects in Abu Dhabi • In 2014 we expect GDP growth to be close to 5. 0% and then to accelerate to over 5. 0% once more oil production starts (as overall Abu Dhabi oil production capacity increases – see Important facts) • This increase in oil production, plus an expected acceleration of the most important diversification and infrastructure projects (mainly in Abu Dhabi) will be the principal drivers of 5%+ growth for the UAE in the medium term • As Dubai deleverages from high debts, it will start contributing much more to overall growth, but probably not before 2015/16 (its contribution is now mainly through rising services, tourism, and trade)

Growth trends and drivers III • Revised and newly released figures show that real GDP growth in Abu Dhabi was over 6% and this year growth could reach up to 5% • In Dubai real GDP expanded by 4% in the first half of 2011 • These are some of the best numbers in the world overall and explain good to very good performance for many multinationals this year • Abu Dhabi accounts for some 60% of UAE’s GDP, a percentage that is likely to rise in the next 3 -5 years as Dubai grows below potential (and cuts spending) and Abu Dhabi grows faster than the UAE average (as spending accelerates) • The shift of most spending last year away from capital/development activities and into more immediate social needs such as salaries in the public sector and various subsidies for the Emiratis, helped B 2 C firms • This was also one of the reasons for delays in some of the capital projects • But at least in Abu Dhabi this is likely to change – we expect a gradual acceleration of spending in the next 2 to 3 years

Growth trends and drivers IV • • • Dubai will take much longer to achieve higher growth since output from its construction industry is below pre-crisis levels and debt still has to be restructured Fiscal spending cuts in Dubai will hurt growth in the Emirate in the next two years and act as a drag overall on UAE growth Dubai plans to balance its budget by 2014 – total budget spending will fall over 10% this year (after falling 5% last year) and project spending will drop to its lowest level since 2007, to a low AED 6 bn Federal spending (less than one fifth of all government spending in UAE) was down last year as Abu Dhabi paid 18% less into the federal budget (amid a big review of its spending priorities) Public spending in Dubai will stay under pressure until 2016 at least (until Dubai reduces its large government and quasi-government debts to 60 -70% of GDP) New government fees/taxes in Dubai may become a necessity given the government’s limited scope to raise revenues – it may have to start selling off some family silver too (or like Nakheel, perhaps use assets to guarantee debts)

Growth trends and drivers V • The UAE is considering introducing VAT, and possibly even some form of corporate tax (although special zones are likely to be excluded if the tax is introduced) • Some investors are also waiting for new rules (law in the making) that will allow full ownership of certain sectors that have until now been closed for majority stakes • Despite recently acceptable growth rates, the Federation is in the middle of a phase of more moderate, less leveraged growth (compared to 2006 -07) • Growth will be dependent on public spending in Abu Dhabi and this will in turn depend on oil prices – as long as they are above $75 -80, the UAE should be able to keep up acceptable spending levels and come close to balancing its budget • Lending is starting to grow, but is unlikely to expand more than 2. 0 -2. 2% this year as banks are cautious and many European banks are lending less than before (meanwhile, domestic banks are gaining market share against European and other foreign banks which are deleveraging at home and rebalancing balance sheets)

Growth trends and drivers VI • Banks now have enough liquidity and they report strong capital ratios (13%+), but non-performing loans are still high at up to 15% in Dubai and up to 10% in Abu Dhabi (and may yet rise further) – this partly explains low credit growth • Lending is also unlikely to accelerate in 2013, especially with new central bank rules coming up on March 1 which limit lending to state-linked companies • Banks are still exposed to the struggling real estate sector, with prices in some areas down 50 -60% from their peak (prices are gently bottoming out now) • Many creditors are reportedly still unable to recover their money from various government or quasi-government organisations • The UAE comes 151 st globally for “resolving insolvency” issues, according to the World Bank’s annual Doing Business In rankings • Some banks that are owed money are now considering legal action, but options are limited – the local law does not allow creditors to seize assets and many banks fear they will endanger their relationship with the rulers if they start legal proceedings

Five-year plan and Vision 2030 • The Abu Dhabi economic development plan, entitled Vision 2030, aims to accelerate economic growth (particularly non-oil related) • It aims to achieve this by building a sustainable, diversified economy producing non-oil and knowledge-based exports • Companies are proactively chasing opportunities linked to this plan, but there have been delays as spending has temporarily shifted to more social programs, and many projects have been postponed • Executives in multinational companies are hopeful that projects will accelerate in the coming quarters • Opportunities will increasingly exist in the areas of petrochemicals, renewable energy, water, electricity, transportation infrastructure (Khalifa port, new airport, roads, rail, etc), basic industries (like plastics), manufacturing, aerospace, IT, semiconductors, tourism, logistics, communications, media, and various financial services

Five-year plan and Vision 2030 II • • • This plan should result in Abu Dhabi reaching 6% growth rates after 2012, which will help drive sales growth in the UAE (although if oil prices fall sharply, some projects may be subject to further delays In the next three years, Abu Dhabi plans to spend around $200 bn on various projects, but still some 60% of that spending is supposed to come from the private sector – this could be a challenge and is a risk to the headline figure The plan has seen the creation of three Industrial Cities of Abu Dhabi (ICAD I, II and III) — business-friendly industrial zones/cities each with specific areas of industrial focus Plans for several more such cities are in the pipeline Many companies are already looking at setting up regional manufacturing at the sites (some sections are already up-and-running and construction is on-going) This is one of the most ambitious and hopefully realistic economic diversification programs in the world, and should offer major sales opportunities for companies (many firms are now looking at increasing local presence to make sure they do not miss opportunities as they arise in the coming years)

Household consumption trends • Household consumption in the UAE steadily picked up during 2011 and 2012 (see previous slides on corporate sales and profit growth) • A good part of the recent increase was driven by an almost 10% increase in tourism inflows in Dubai in the first half of the year • Household spending increased 4. 3% last year, but our corporate survey shows that the vast majority of multinational companies grew faster than that (see earlier slides) • Retail and wholesale spending in Dubai is currently growing almost 4% yoy • Consumer spending has been heavily driven by purchases of cars, various household goods, and tourism • We expect household spending to grow by another 4. 5% in 2012 and in 2013 • Federal employee salaries rose between 35% and 100% last year and this has marginally supported sales growth throughout 2012

Household consumption trends II and corporate opinions • • Companies also expect positive population trends (through immigration) to support consumer goods sales: the population is expected to grow by 400, 000 every year in the next 5 -7 years Some support for household spending could come from recent banking regulations which enable household borrowers to extend maturities on existing loans (and with that, reduce their monthly debt burdens) The government has also stepped in to pay off defaulted loans for some Emirati citizens and this will help the B 2 C segment at the margins “ 2012 is another year when we will grow almost 10%, top line has been very consistent and I have no doubt that UAE will be one of our best performing markets in MEA again in 2013. However, my Gulf director points out how an ongoing rise in new competitive pressures is impacting our bottom line. It is a very difficult market share battle out there, but luckily the pie is growing so there is enough for everyone. But we do not want to be complacent. We have just run an internal workshop on improving marketing excellence in MEA as well as reviewing how to put more manufacturing in the region. At the moment, we import too much and transport costs are making us less competitive. ” MEA regional director, food/beverages multinational

Gross fixed investment trends • • • Business activity was recently reported to be at a one-year high and this is beginning to spill over into slightly more corporate spending (mainly in Abu Dhabi) so far this year Last year, capital spending and investments were hit by a number of project delays in Abu Dhabi, but still on aggregate gross fixed investment increased by over 11% in 2011 (less than firms expected but still very respectable compared to other markets around the world) The Abu Dhabi government conducted a large audit last year and decided to partially scale down its original spending plan, focusing only on the critical items This review has disappointed many companies that were hoping to benefit in 2011 But critical projects are still likely to provide very nice growth opportunities for companies in the next few years and we expect a good 2013 for companies too (B 2 B firms have under-performed other sectors so far in 2012) We expect significantly stronger inflows of foreign direct investment in the next few years, which will drive corporate spending

Gross fixed investment trends II and corporate opinions • • • FDI inflows are likely to reach between $7. 0 and $8. 5 bn p. a. in the next three years Even in Dubai, FDI flows are getting stronger this year by about 7% Companies should expect aggregate corporate spending growth of 7. 5% in 2012, but growth rates are likely to accelerate as of 2013 and should reach 9% However, a major drop in oil prices would reduce spending on some planned infrastructure and diversification projects: this is the risk to this growth scenario “Below my secret expectations and just on budget this year. That is the summary of what was an acceptable single digit growth year. We are aiming for higher single digit growth rate in 2013 budget. I do expect profit pressures to rise. We have several medium sized European players who have come here for the first time, we have two new Asian competitors and one from Turkey. This is clearly a threat and we are monitoring competition more carefully than ever before. And because we learned it the hard way in the past, we do not underestimate anyone anymore. ” Regional director, B 2 B industrial multinational

Government spending trends • • To avoid massive debt overhangs in the future (following debt repayment problems in Dubai), the authorities have created new debt rules that limit government borrowing in the future with explicit state guarantees for any state-linked enterprises (in the past lenders assumed there would be debt guarantees, but they were only implicit) The UAE budget will remain in surplus again next year Government spending in UAE is likely to grow in the next years, but may fluctuate due to oil price changes, any shifts in social spending priorities, and any changes in Abu Dhabi opinion about what is critical to build and what is not Still, in the next few years the vast majority of government spending growth will be in Abu Dhabi (Abu Dhabi currently accounts for almost 80% of total UAE spending) In Dubai, government spending (which is less than a fifth of total Abu Dhabi spending) will drop again in 2012 after shrinking by an estimated 11% in the last two years We expect that the federal government is likely to keep providing spending injections into the economy (particularly up to $2 bn into the poorer northern Emirates), and this will also support growth in the next two years The new federal budget is prioritizing social spending, education and health

Currency outlook • The currency peg to the dollar will stay • With very low inflation, there is no danger of abandoning the peg in the near future • During the high inflation period of 2007 -08, real appreciation of the local currency was a problem – but it is not anymore • The UAE, at least at this stage, will not be joining the planned monetary union within the Gulf Cooperation Council • The monetary union is probably several years away, if it ever happens • Scepticism about the monetary union in the Gulf has grown since the Eurozone troubles began • There is a chance that the UAE will rejoin the idea at a later stage, but this is not certain • UAE will continue to participate in the upcoming Gulf Cooperation Council (GCC) talks about a bigger political union (under the pretext of the Iran threat), and within those talks the idea of a full GCC monetary union could again be resurrected

Interest rates and inflation rate outlook • • Central bank played an important role in preventing a deeper recession in 2009 and in helping the country back to its current growth path It injected emergency liquidity into banks, cut interest rates, provided guarantees for interbank lending and issued guarantees for bank deposits This is one of the reasons why the recession in 2009 was relatively short Interest rates will remain low in 2013, but they will be high for businesses and household loans The Repo is still at 1. 0% and the liquidity support facility at 1. 5% Inflation will remain low officially, but the measurement does not capture prices for non-UAE citizens (so in reality inflation is probably higher) Inflation was just 0. 9% on average in 2011 and remains subdued, though there are variations by Emirate: prices are currently down 2. 2% yoy in Dubai, up 0. 8% in Abu Dhabi and are 0. 5% for the UAE as a whole We expect inflation in 2012 to average 0. 8% across UAE and to rise to 1. 3% in 2013

UAE - forecast table – selected indicators 2009 2010 2011 2012 2013 2014 Real GDP growth, % -4. 8* 1. 3* 4. 2 3. 6 4. 0 4. 8 1. 8 3. 2 4. 3 4. 5 5. 0 Gross fixed investment, % -6. 0 4. 0 11. 6 7. 5 9. 0 11. 0 Government spending, % 16 9. 0 6. 0 4. 0 5. 5 3. 67 3. 67 Inflation rate, % (average) 1. 6 1. 0 0. 9 0. 8 1. 3 2. 3 Budget balance, % of GDP -13. 0 -2. 1 6. 0 4. 0 3. 0 2. 9 Current-account balance, % of GDP 3. 0 3. 1 9. 2 6. 8 4. 4 4. 5 Household consumption, % Exchange rate vs. $ (average) * recent official downward revisions

© 2012 CEEMEA Business Group* CEEMEA Business Group currently works with senior leaders of over 320 large multinational companies operating in the Central Eastern Europe, Middle East and Africa regions, helping them understand economic and business outlooks globally, regionally and at country levels. Regional and global executives also receive regular advice and updates on best practices for expansion and success in emerging markets. Executive members of the CEEMEA Business Group can also attend regular peer group meetings held throughout Europe and in Dubai. Source: GSA Global Success Advisors Gmb. H and CEEMEA Business Group research Basic data sources come from central banks, own intelligence network, CEEMEA Business Group corporate survey, governments and other public sources. Interpretation, views, forecasts, business quotes and business outlooks by GSA Global Success Advisors Gmb. H and CEEMEA Business Group. This material is provided for information purposes only. It is not a recommendation or advice of any investment or commercial activity whatsoever. Global Success Advisors and CEEMEA Business Group accept no liability for any commercial losses incurred by any party acting on information in these materials. Contact: Nenad Pacek, President and Founder, GSA Global Success Advisors Gmb. H; Co-founder, CEEMEA Business Group M: +43 676 646 0607 E: nenad. pacek@globalsuccessadvisors. eu www. ceemeabusinessgroup. com *a joint venture between DT-Global Business Consulting Gmb. H, Address: Keinergasse 8/33, 1030 Vienna, Austria, Company registration: FN 331137 t and GSA Global Success Advisors Gmb. H, Hoffeldstraße 5, 2522 Oberwaltersdorf, Austria Company registration: FN 331082 k