Economic Analysis Division Emerging Markets Analysis

Transcription

1 Bulgaria EU EMDE* Greece FYROM Egypt Romania Cyprus Serbia Turkey Albania Cyprus Serbia Bulgaria Greece EU Turkey Albania FYROM Romania EMDE* Egypt Cyprus Greece FYROM EU Albania Serbia Bulgaria World Romania EMDE* Egypt Turkey Egypt EMDE* Serbia Romania Albania World Cyprus Bulgaria Turkey EU FYROM Greece Economic Analysis Division Emerging Markets Analysis Bi-Weekly Report 11 September 1 TURKEY The New Economic Programme is a welcome response by the Government to the recent market volatility ROMANIA The Romanian economy gained momentum in Q:1, after a weak start to the year BULGARIA The Bulgarian economy loses momentum in Q:1 NBG - Economic Analysis Division Emerging Markets Analysis Head: Michael Loufir : : mloufir@nbg.gr Analysts: Konstantinos Romanos-Louizos : romanos.louizos.k@nbg.gr Louiza Troupi : troupi.louiza@nbg.gr Athanasios Lampousis : lampousis.athanasios@nbg.gr The labour market shows signs of stagnation SERBIA The fiscal policy stance turned expansionary in 7M:1, with the - quarter rolling fiscal surplus declining by. pps y-o-y to.% of GDP FYROM Opinion polls ahead of the September th referendum show the majority are in favour of the name agreement A gradual economic recovery continued in H1:1 Labour market conditions tightened further in Q:1, supported by active labour market policies and solid economic growth 1 Real GDP Growth (%, 1F) * EMDE: Emerging Market & Developing Economies 1 ALBANIA External adjustment continued in H1:1, with the -quarter rolling current account deficit moderating to.7% of GDP in Q:1 from 7.% in Q:17 CYPRUS S&P upgraded Cyprus to investment grade (BBB-) for the first time in years 1 1 End-year Headline Inflation (%, 1F) 1 1 Cyprus raised EUR 1.bn (7.% of GDP) in Eurobond markets at a historically-low yield of.%, benefiting from its recent rating upgrade grade and a benign global backdrop Economic activity maintained its momentum in Q:1 (up.9% y-o-y) * EMDE: Emerging Market & Developing Economies Fiscal Balance (% of GDP, 1F) * EMDE: Emerging Market & Developing Economies EGYPT Customer deposits (FX-adjusted) rose by.1% in FY:17/1, underpinned by strengthening confidence in the Egyptian economy and higher EGP remuneration rates Credit to the private sector (FX-adjusted) lost momentum in FY:17/1, on the back of higher lending interest rates The CBE is likely to adopt a wait-and-see stance at its September 7 th MPC meeting Current Account Balance (% of GDP, 1F) APPENDIX: FINANCIAL MARKETS * EMDE: Emerging Market & Developing Economies Please see disclosures in page 1

2 1/7/1 //1 1//1 1//1 //1 //1 //1 /9/1 9/9/1 1/9/1 19/9/1 /9/1 1/7/1 //1 1//1 1//1 //1 //1 //1 /9/1 9/9/1 1/9/1 19/9/1 /9/1 11 September 1 Turkey The New Economic Programme (NEP) is a welcome response by the Government to the recent market volatility. Following the BB- / Ba / BB (S&P/ Moody s / Fitch) CBRT s sharp tightening of its monetary policy stance on September 11 th (a. pp hike to the 1-week repo rate, bringing total increases of 19-1 New Economic Programme (NEP) the CBRT s effective funding rate to 11. pps since end-17), aimed 17 a 1 b 19 b b 1 b at preserving foreign exchange and price stability amid heightened Nominal GDP (TRY bn),17,71,,1,7 market volatility, the Government unveiled its NEP for the period 19- GDP Growth (%) , envisaging a significant reduction of deteriorating domestic and external imbalances through a tight fiscal policy and structural reforms. The reduction imbalances will, for the first time, be at the expense of strong and stable economic growth. Specifically, The Government recognised the need for soft landing to stabilise the economy. The government expects GDP growth to decelerate from 7.% in 17 to.% in 1 and.% in 19. The envisaged slowdown in economic activity assumes softer domestic absorption, both private and public, on the back of a tighter policy mix. In our view, the 1 forecast is broadly reasonable, but the 19 projection is over-optimistic as we expect the fiscal-monetary policy mix to remain tight for longer amid a more challenging global backdrop. We see 1 USD/TRY and 1-Year Bond Yield (%) and 19 GDP growth at.% and 1.%, respectively. 7, Peak of confidence / currency crisis Fighting against runaway inflation is a priority for the Government. The, 1 NEP foresees inflation dropping from.% in 1 to 1.9% in 19. Under a continued tight policy mix and an expected mild depreciation, of the TRY by end-19, we see inflation outperforming its 1 and 19 targets, unless the Government proceeds with increases in, 19 administrative prices and/or tax hikes. We see inflation easing from, 1 19.% at end-1 to 1.% at end-19. The Government projects a sharp external rebalancing this year and, 17 next. According to the NEP, the current account deficit (CAD) will drop from.% of GDP in 17 to.7% this year and further to.% in 19, supported by the slowdown in economic activity, fiscal 1-Year Government Bond Yield (%, rhs) USD/TRY consolidation and the past years price competitiveness gains. In our view, the CAD forecast for this year appears very optimistic in view of -Year CDS and BIST-1 Index developments so far this year (the CAD reached a -year high of 7.% 1 of GDP on a 1-month rolling basis in June and the energy bill is set to 1 deteriorate further by end-year on the back of higher global oil prices). 97 We see the CAD narrowing, at a slower pace than expected in the NEP, from % of GDP in 17 to.% this year and further to.% in The Government is committed to keep the fiscal deficit in check this year and next, despite a sharp rise in interest payments and a significant slowdown in economic activity. The central government primary balance is targeted to improve from a deficit of.1% of GDP in July (on a 1-month rolling basis) to surpluses of.1% this year and.% in 19. The significant improvement in the primary balance next BIST-1 Index (', rhs) -Year Credit Swap Spread (bps, inverted) year is expected to result from revenue-enhancing and cost-saving measures (. pps and 1. pps of GDP, respectively). However, Sep. -M F -M F 1-M F almost all these projected savings will be allocated to the repayment of 1-m TRIBOR (%).... rising interest expenditure, leaving the overall fiscal deficit almost TRY/EUR unchanged between this year and next (1.9% and 1.% of GDP, Sov. Spread (, bps) respectively). In our view, the official fiscal deficit target for this year Sep. 1-W % YTD % -Y % and next will be missed, albeit by a small margin, unless further ISE 1 99, expenditure cuts are carried out F 19F Overall, the CBRT s latest move and the Government s commitment to Real GDP Growth (%) its NEP s targets should help further improve market confidence in the Inflation (eop, %) Turkish economy (see charts). Encouragingly, the latter should be Cur. Acct. Bal. (% GDP) enhanced by the forthcoming release of a quarterly report assessing Fiscal Bal. (% GDP) the results of the NEP. NBG - Emerging Markets Analysis Bi-Weekly Report 1 Inflation (%, eop) Current Account Balance (CAB, USD bn) CAB (% of GDP) Central Government (CG) Balance (% of GDP) CG Expenditure (% of GDP) CG Revenue (% of GDP) CG Primary Balance (% of GDP) CG Interest Payments (% of GDP) a: 17 Outcomes; b: 19-1 NEP Forecasts (September 1); c: 19-1 NEP Projections (September 1) Peak of confidence / currency crisis

3 F Q:1 Q:1 Q:11 Q:11 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:17 Q:17 Q:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:17 Q:17 Q:17 Q:17 Q1:1 Q:1 11 September 1 Romania BBB- / Baa / BBB- (S&P / Moody s / Fitch) Contribution Rates to Annual Real GDP Growth (pps) Private Consumption Public Consumption GFCF Change in Stocks Net Exports GDP (%, y-o-y) Private Consumption & Net Wages (real terms, y-o-y % change) Private Consumption (lhs) Real GDP Growth, Budget Deficit, Current Account Deficit & Inflation Budget Deficit (% of GDP) Current Account Deficit (% of GDP) Real GDP Growth (y-o-y % change) Inflation (y-o-y % change, aop) Net Wages (rhs) The Romanian economy gained momentum in Q:1, after a weak start to the year. On a sequential basis, GDP increased by a solid 1.% q-o-q s.a. in Q:1 following no change in Q1:1. Nevertheless, due to strong base effects, the annual pace of economic expansion remained broadly flat at.1% y-o-y in Q:1, significantly lower than in H1:17 (up.9% y-o-y). Albeit easing, private consumption remains the main engine of growth in Q:1. Against the backdrop of rising inflation (up.% y-o-y in Q:1 against.7% in Q1:1 and just 1.% on average in FY:17) and somewhat weaker consumer confidence, growth in private consumption decelerated slightly in Q:1 (to.% y-o-y from.% in Q1:1). Note that, albeit having slowed significantly from the doubledigit rates seen last year, growth in private consumption still remains solid, reflecting tight labour market conditions (the LFS unemployment rate currently stands at a historical low of.%) and the loose incomes policy. Regarding the latter, public wages rose by % in January, with certain sub-sectors receiving another % increase in March. The impact of the loose incomes policy on disposable income has been moderated, however, by the shift in the bulk of the social security contributions burden onto employees as of the beginning of the year. Worryingly, fixed investment activity fell sharply in Q:1 (down.% y-o-y against a rise of.% in Q1:1), with the (-quarter rolling) investment-to-gdp ratio falling to a low of.% from a pre-crisis high of.%. The decline in fixed investment was more than offset, however, by the sharp increase in inventories (incl. statistical discrepancies, adding a sizeable.7 pps to overall growth in Q:1). The latter was the main factor behind a large drag of net exports on overall growth in Q:1 (subtracting as much as. pps of GDP against.1 pps in Q1:1). Economic activity is set to remain strong in H:1, supported by stronger investment activity. Fixed investment should rebound during the remainder of the year, driven by the public sector (the budget sees public investment rising by. pps of GDP y-o-y in H:1, due, inter alia, to better absorption of EU funds). At the same time, private consumption should continue to expand at a solid pace (comparable with that observed in H1:1), helped by a further easing in incomes policy (pensions rose by 1.% in July). Reflecting the economic imbalances, net exports could remain a drag on growth, albeit less compared with FY:17. Overall, in view of the weaker-thanexpected H1:1 outcome, we revise down our FY:1 GDP forecast to.% (from.% previously), still well above its long-term potential of.%. All said, the economy appears to be overheating, with GDP growth well above its long-term potential (of c..%) for a th consecutive year and the current account deficit up sharply (to a projected.7% of GDP in Sep. -M F -M F 1-M F FY:1 from a low of.% in FY:1). At the same time, fiscal policy 1-m ROBOR (%).1... remains expansionary (the budget deficit is projected to widen to.% RON/EUR.... of GDP in FY:1 -- above the critical EU threshold of.% -- from Sov. Spread (, bps) % in FY:17 and a low of 1.% in FY:1). Against this backdrop, the NBR appears to be significantly behind the Sep. 1-W % YTD % -Y % BET-BK 1, curve. Our Taylor rule estimates suggest that rates should be raised F 19F to.% from.% currently to address these challenges. However, Real GDP Growth (%) the authorities are reluctant to proceed with aggressive rate hikes, Inflation (eop, %) especially in the context of limited or no tightening by other central Cur. Acct. Bal. (% GDP) banks in the region. Overall, we expect the NBR to tighten its stance Fiscal Bal. (% GDP) gradually, raising its key rate by another bps in FY:1 (following bps in 9M:1) and by 7 bps in FY:19. NBG - Emerging Markets Analysis Bi-Weekly Report

4 Q: Q: Q:9 Q:9 Q:1 Q:1 Q:11 Q:11 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:17 Q:17 Q:1 Q: Q: Q:9 Q:9 Q:1 Q:1 Q:11 Q:11 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:1 Q:17 Q:17 Q:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:17 Q:17 Q:17 Q:17 Q1:1 Q1:1 11 September Bulgaria BB+ / Baa / BBB- (S&P / Moody s / Fitch) Contribution Rates to Annual Real GDP Growth (pps) Private Consumption GFCF Net Exports Private Consumption & Consumer Confidence Public Consumption Change in Inventories Real GDP (y-o-y % change) Private Consumption (y-o-y % change, lhs) Consumer Confidence (rhs) Labour Market Indicators (-quarter m.a.) Employment Rate (%, lhs) Participation Rate (%, lhs) Unemployment Rate (%, rhs, inverted scale) Sep. -M F -M F 1-M F Base Interest Rate (%) BGN/EUR Sov. Spread (, bps) Sep. 1-W % YTD % -Y % SOFIX E 1F 19F Real GDP Growth (%) Inflation (eop, %) Cur. Acct. Bal. (% GDP) Fiscal Bal. (% GDP) The Bulgarian economy loses momentum in Q:1. On a sequential basis, GDP rose by a solid.% q-o-q s.a. in Q:1, a slower pace compared with the past quarters. As a result, the annual pace of economic expansion eased to.% y-o-y in Q:1 from.% in Q1:1, bringing H1:1 growth to.% against.7% in H1:17. A boost to private consumption helped moderate the impact of weaker net exports in Q:1. Despite the stagnation in the labour market (see below), private consumption strengthened in Q:1 (up.7% y-o-y against.% in Q1:1), on the back of stronger consumer confidence and wealth effects (housing prices and the stock market have gained 1% and % in real terms, respectively, over the past years). At the same time, fixed investment activity slowed in Q:1 (up by a still solid.% y-o-y against 1.% in Q1:1), despite higher public investment (up. pps of GDP y-o-y). This deterioration was more than offset, however, by the rise in inventories (adding. pps of GDP to overall growth in Q:1 against a drag of.9 pps in Q1:1). Worryingly, strong domestic demand combined with weaker demand from Bulgaria s non-eu trade partners (especially Turkey and Russia) led to a sharp deterioration in net exports (subtracting.7 pps of GDP from overall growth in Q:1 against just. pps in Q1:1). GDP growth set to pick up in H:1, driven by investment. Looking ahead, fixed investment is due to strengthen, in line with favourable domestic liquidity conditions (the loan-to-deposit ratio stands at 77%), low interest rates and better absorption of EU funds. This improvement should more than compensate for the eventual slowdown in private consumption, due to weaker employment growth. At the same time, despite weak external demand from Bulgaria s non-eu trade partners, the drag from net exports on overall growth should moderate gradually, in view of favourable terms of trade. All said, we see FY:1 GDP growth flat at.% -- above its long-term potential of c..%. The labour market shows signs of stagnation. The unemployment rate fell by. pps y-o-y to a low of.% in Q:1, marking the 1 th consecutive quarter of decline. This time, however, the improvement in the unemployment rate came on the back of the drop in the number of unemployed seeking work, as suggested by the easing participation rate (down. pps y-o-y to.%), rather than higher employment. Indeed, following a strong rise in the past years (at a CAGR of 1.9%), employment fell slightly in Q:1 (down.% y-o-y). Nevertheless, the employment rate rose marginally (up. pps y-o-y to.%), in line with the drop in the working age population (down.% y-o-y). In this context, wage pressures persisted (up.% y-o-y in real terms for a nd consecutive quarter in Q:1 against 7.% in FY:17). Note that, albeit slowing, real wage growth still surpasses productivity gains (c..% p.a. over the past years). Structural problems cloud the outlook for the labour market. Long-term unemployment remains high (% of people have been unemployed for 1 months or more in Bulgaria -- the nd highest in the EU after Greece), reflecting labour market rigidities, skills mismatches and poor activation policies. At the same time, the labour force is shrinking due to migration and ageing. In this context, we expect labour market conditions to improve at a much slower pace, with employment rising by a weak.% on average in FY:1 (against an increase of.% in FY:17) and the unemployment rate falling to.% in FY:1 (from.% in FY:17 and 7.% in FY:1). Concomitantly, wage pressures are set to persist in FY:1. However, this is not a major cause for concern. Indeed, with total hourly costs being one-sixth of the EU- average, competitiveness remains strong as reflected in the large current account surplus (see table). NBG - Emerging Markets Analysis Bi-Weekly Report

5 11 September 1 The fiscal policy stance turned expansionary in 7M:1, with the Serbia -quarter rolling fiscal surplus declining by. pps y-o-y to.% BB / Ba / BB (S&P / Moody s / Fitch) of GDP. The cumulative consolidated fiscal surplus moderated by. pps y-o-y to 1.1% of GDP in 7M:1, reflecting both lower revenue and Consolidated Fiscal Balance (% of GDP) higher expenditure. Indeed, overall revenue declined on an annual 17 7M:17 7M:1 1 1F basis in 7M:1, due to a deterioration in: i) VAT revenue (by. pps of Budget NBG GDP y-o-y in 7M:1), reflecting the postponement of refund payments Revenue..... (of RSD 1bn, or.% of GDP) to January 1; and ii) personal Tax Revenue income tax (down.1 pp of GDP y-o-y), due to the negative impact PIT from the drop in the non-taxable salary (by RSD.k to RSD 1.k as CIT of January 1, with an estimated cost of. pps of GDP in FY:1). VAT Excises Note, however, that the revenue performance was supported by the Customs increase in social contributions (up. pps of GDP y-o-y in 7M:1), in Other taxes line with the improvement in (formal) employment and increasing Soc. Contrib wages (reinforced by the 1% rise in the minimum wage). Non-Tax Rev On the other hand, the rise in spending in 7M:1 resulted from: Grants i) higher capital expenditure (up. pps of GDP y-o-y), in view of the Expenditure country s large infrastructure needs; and ii) a rise in personnel Current Exp expenditure (up by. pps of GDP y-o-y), partly due to the targeted Personnel % hike in public sector wages (with a fiscal impact of. pps of Goods & Services GDP in FY:1). The rise in outlays in 7M:1 was, however, held back Subsidies by lower interest payments (down. pps of GDP y-o-y), due to the Social Assist o/w Pensions decline in public debt, lower interest rates and a stronger RSD. Other A weaker-than-budgeted expansionary fiscal stance in sight this Int. Payments year. The 1 Budget envisages an expansionary fiscal stance, Capital Exp targeting a fiscal deficit of.7% of GDP pps above the FY:17 Activated Guarant outcome. Net Lending In our view, the y-t-d performance and recent trends suggest that the Fiscal Balance deficit is set to overperform its target (of.7% of GDP), for a th Primary Balance successive year, by a wide margin. In fact, we expect a neutral fiscal stance during the rest of the year, following an expansionary fiscal Contributions to Public Debt (pps of GDP) stance in 7M:1. Specifically, we foresee overall revenue weakening 1 by. pps of GDP y-o-y in -1M:1, due to: i) weaker non-tax 77 1 revenue, reflecting large once-offs in 17; ii) weaker corporate 7 income tax that reached a record high in 17; and iii) a milder boost 71 from collection efficiency (that supported the revenue performance in FY:17). On the other hand, we expect expenditure to decline by. pps of GDP y-o-y in -1M:1 (after a slight rise by. pps of GDP 9 y-o-y in 7M:1), despite the above-mentioned public sector wage hikes - and a % increase in pensions (with a fiscal impact of. pps of GDP Other (rhs) Exchange Rate Depreciation (rhs) - in FY:1). The decline in expenditure in -1M:1 should result from Real Interest Rate (rhs) the continued drop in interest payments, lower social assistance Real GDP Growth (rhs) -1 7 Primary Deficit (rhs) outlays (following the sharp decline in the unemployment rate), a base Public Debt (lhs) Change in Gross Public Debt (rhs) -1 effect from a (once-off) pension and public sector wage bonuses (of F 19F.% of GDP at end-17), as well as lower net lending (reflecting the ongoing restructuring of SOEs) and the continued public sector employment ban. Sep. -M F -M F 1-M F Overall, we see the FY:1 fiscal balance posting a surplus (for a nd 1-m BELIBOR (%) RSD/EUR consecutive year) of.% of GDP -- overperfoming its deficit target of Sov. Spread (1, bps) % of GDP and resulting in a fiscal impulse of. pps of GDP (for the first time in years). Should our FY:1 fiscal deficit forecast Sep. 1-W % YTD % -Y % materialise, the public debt-to-gdp ratio would decline further for a rd BELEX successive year to (a 7-year low of) 7.% of GDP from.% in F 19F FY:17 and a 1-year high of 7.% at end-1. The drop in the public Real GDP Growth (%) debt should be supported by: i) the repayment of a USD 1.bn Inflation (eop, %) Eurobond (or.% of GDP), maturing in November that is not Cur. Acct. Bal. (% GDP) expected to be rolled over; and ii) the early repayment of the EUR Fiscal Bal. (% GDP) mn (.% of GDP) London Club debt in June. NBG - Emerging Markets Analysis Bi-Weekly Report

6 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:17 Q:17 Q:17 Q:17 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:17 Q:17 Q:17 Q:17 Q1:1 Q:1 H1:1 H:1 H1:1 H:1 H1:1 H:1 H1:1 H:1 H1:17 H:17 H1:1 11 September 1 F.Y.R.O.M. BB- / NR / BB (S&P / Moody s / Fitch) Opinion polls ahead of the September th referendum show the majority are in favour of the name agreement. The Government must now secure a turnout of more than % -- needed for the validation of the vote. The acceptance of the new name, the Republic Contributions to Annual Real GDP Growth (pps) of North Macedonia (RNM), in the forthcoming referendum will pave 1 1 the way for constitutional revisions in RNM (i.e. removing anything deemed as expressing irredentist ambitions over Greece s northern province of Macedonia) before the ratification of the name agreement by Greece s Parliament in Q1:19. The successful completion of the agreement will allow RNM to begin negotiations for - - EU membership and join NATO. - - A gradual economic recovery continued in H1:1. Economic - - activity expanded by 1.% y-o-y in H1:1 following a weak rise of - -.7% in H:17 and a contraction of -.7% in H1:17. The improved growth performance in H1:1 was mainly driven by strong external demand. Indeed, net exports contributed. pps to Private Consumption Gross Capital Formation Government Consumption Net Exports headline growth in H1:1, reflecting a strong export performance (up GDP (y-o-y %) 1.% y-o-y), mainly on the back of a buoyant production in the Labour Market Indicators country s industrial zones, and a subdued increase in imports (up.% y-o-y), in line with weaker domestic demand. On the other hand, gross capital formation (GCF, including gross fixed capital formation, changes in inventories and statistical discrepancies) was the only drag on headline growth in H1:1, subtracting a sizeable. pps. We estimate the decline in GCF in H1:1 to have resulted mainly from a sharp drop in public investment. In fact, fiscal accounts show that capital spending declined by c. % y-o-y in H1:1, due not only to unsupportive base effects, but also to delays in the clearance of administrative obstacles to the resumption of country s key infrastructure projects. Looking ahead, we expect GDP growth to strengthen further during Unemployment Rate (%, rhs) Employment Rate (%, lhs) the rest of the year (up.% y-o-y in H:1 from 1.% in H1:1), Participation Rate (%, lhs) mainly on the back of firming domestic demand. The latter should result mainly from: i) stronger economic confidence, stemming from Overall Economy Nominal/Real Wages 7 (y-o-y % change) 7 the Government s commitment to secure a starting date for EU accession talks next year; ii) a rebound in public investment; iii) a more accommodative monetary policy; and, iv) stronger real disposable income, benefiting from subdued inflation and tighter labour market conditions. Overall, we see FY:1 real GDP growth at.% -- well above the FY:17 outcome of.%. Labour market conditions tightened further in Q:1, supported by active labour market policies and solid economic growth. The 1 1 unemployment rate declined by 1. pps y-o-y to a historical low of 1.1% in Q:1, exclusively due to an increase in the employment rate (up. pps y-o-y to.9%). Importantly, employment continued to grow at a solid pace in Q:1 (up.1% y-o-y), benefiting from Nominal Real country s improved economic prospects and continued governmentsubsidised Sep. -M F -M F 1-M F employment programmes. Against this backdrop, wage pressures intensified in Q:1, with nominal wages rising sharply by.% y-o-y (following rises of.9% in Q1:1 and.1% in Q:17), mainly reflecting a significant hike to the minimum wage (up 19% to MKD 1k or c. EUR -- effective from Sep. 1-W % YTD % -Y % September 17). Looking ahead, with the support of a strong rebound in economic F 19F activity during the rest of the year (see above), the unemployment rate is set to moderate to 1.% in FY:1 from.% in FY:17. Moreover, an unsupportive base effect from September (see above) should limit nominal wage growth to.7% in FY:1 -- still above the FY:17 outcome of.%. NBG - Emerging Markets Analysis Bi-Weekly Report 1-m SKIBOR (%) MKD/EUR Sov. Spread (1. bps) MBI 1, Real GDP Growth (%) Inflation (eop. %) Cur. Acct. Bal. (% GDP) Fiscal Bal. (% GDP)

7 Q:9 Q1:1 Q:1 Q:11 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:17 Q:1 Q:9 Q1:1 Q:1 Q:11 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:17 Q:1 Q:9 Q1:1 Q:1 Q:11 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:17 Q:1 11 September 1 Albania B+ / B1 / NR (S&P / Moody s / Fitch) External adjustment continued in H1:1, with the -quarter rolling current account deficit (CAD) moderating to.7% of GDP in Q:1 from 7.% in Q:17. The CAD declined by.9 pps y-o-y to.% of GDP in H1:1, due to a narrower trade deficit (by as much as 1. pp of Current Account Balance GDP y-o-y in H1:1), reflecting both a strong export performance, as (-Quarter Rolling, % of GDP) well as lower investment-related imports. 1 1 In fact, exports continued to record double-digit growth (up.% y-o-y, in EUR terms in H1:1 compared with a rise of 11.7% in FY:17), reflecting: i) a recovery in exports of construction material and metals, supported by rising metal prices; as well as ii) a rebound in oil and -1-1 electricity exports (mainly to Spain), after consecutive years of sharp decline. Note that electricity exports rose sharply in H1:1, in line with - - electricity production, due to abundant rainfall, following a drought Transfers Income Balance - Services Balance - throughout FY:17. Trade Balance On the other hand, imports rose at a slower pace (up.% y-o-y in Current Account Balance - Current Account Balance (Excluding Energy) - H1:1, compared with an increase of 9.% in FY:17), despite the rebound in private consumption. The slowdown in imports can be attributed to lower imports related to energy projects (namely TAP and Capital & Financial Account Balance the Statkraft/Devoll hydropower projects) -- contributing 1. pps of (-Quarter Rolling, % of GDP) 1 FDI 1 GDP to the FY:1 CAD against. pps in FY:17, according to the IMF 1 Portfolio Investments 1 -- as the largest part of TAP was completed in FY:17. 1 Other investments (excl. IMF) 1 The capital and financial account (CFA) surplus, excluding IMF 1 IMF 1 disbursements, narrowed slightly in H1:1, but fully covered the 1 1 CAD. The CFA surplus (excluding the disbursement of the last two tranches from the IMF, totalling EUR 7.mn, or.% of GDP, in H1:17) declined by. pps y-o-y (to.7% of GDP) in H1:1. The deterioration reflects (net) portfolio outflows (of.9% of GDP) in H1:1 against inflows (of 1.% of GDP) in H1:17 attracted by a spike in - Capital and Financial Account Balance - domestic paper yields. On a positive note, (net) FDIs strengthened (up - Capital and Financial Account Balance (excl. IMF) -. pps y-o-y reaching.% of GDP in H1:1), covering 1% of the H1:1 CAD. Moreover, the disbursement of the first tranche of EUR 11mn (.9% of GDP) of a total loan of EUR 1mn from the EBRD to Overall Balance the state-owned electricity producer, KESH, broadly offset net deposit (-Quarter Rolling, % of GDP) outflows from commercial banks (of c. 1.% of GDP in H1:1). Although the CFA surplus more than covered the CAD, the overall 1 1 balance turned negative (-.% of GDP in H1:1), due to (unusual) large negative net errors and omissions (-1.% of GDP, likely reflecting unclassified imports). As a result, FX reserves declined (by EUR mn, or.% of GDP in H1:1) to a still comfortable level of EUR.bn, covering an adequate. months of GNFS imports. -1 The CAD is set to widen marginally in H:1, but will be fully -1 Errors & Omissions covered through large FDI and concessional loans. The expected Capital & Financial Account Balance Current Account Balance slight deterioration in H:1 (by c.. pps of GDP y-o-y) -- reversing ⅓ Overall Balance - Overall Balance (excluding IMF) - of the H1:1 gains -- should occur despite: i) lower investment-related imports, following the completion of high import-content energy projects; and ii) lower electricity imports on an annual basis in H:1, following a drought-related spike in H:17. The deterioration should Sep. -M F -M F 1-M F 1-m TRIBOR (mid, %) result mainly from stronger consumption-related imports and higher ALL/EUR repatriation of profits and dividends. Overall, we expect the CAD to Sov. Spread (bps) continue on its downward trend, for a th consecutive year, narrowing to a 1-year low of.% of GDP in FY:1 from 7.% in FY:17. Stock Market Sep. 1-W % YTD % -Y % Regarding financing, we expect the FY:1 external financing gap to reach EUR 79.mn (.% of GDP). This gap should be largely covered F 19F by a modest drawdown in FX reserves (c. EUR 7mn). However, FX Real GDP Growth (%)..... reserves would increase should the Government proceed with the Inflation (eop, %) expected issuance of a new 7-year Eurobond (of EUR.bn or.9% Cur. Acct. Bal. (% GDP) of GDP) by end-year, amid still favourable global market conditions Fiscal Bal. (% GDP) and the country s bright economic prospects. NBG - Emerging Markets Analysis Bi-Weekly Report

8 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:1 Q:1 Q:1 Q:1 Q1:17 Q:17 Q:17 Q:17 Q1:1 Q:1 /11/1 /1/1 11//1 1//1 1//1 1/7/1 9//1 1/1/1 7/1/1 /1/17 17//17 //17 //17 1//17 /1/17 /11/17 11/1/1 //1 1//1 1//1 /7/1 1/9/1 9/ /9 9/9 /1 9/1 /11 9/11 /1 9/1 /1 9/1 /1 9/1 /1 9/1 /1 9/1 /17 9/17 /1 9/1 11 September 1 Cyprus BBB- / Ba / BB+ (S&P / Moody s / Fitch) Moody's Aa A1 A Baa1 7 7 Baa Baa Ba1 Ba Ba B1 B B Caa1 Caa Foreign Currency LT Debt Rating September / September 1 Non-Investment Grades Investment Grades Moodys S&P Fitch EUR.% Yield (%) Contributions to Annual Real GDP Growth (pps) GFCF Net Exports Government Consumption Change in Stocks & Stat. Discrepancies Private Consumption GDP (y-o-y %, rhs) S&P/Fitch 1, 9, 9, AA-, A+, A 7, A- BBB+ 7, BBB, BBB-, BB+, BB BB-, B+, B, B-, CCC+, CCC,, Sep. -M F -M F 1-M F 1-m EURIBOR (%) EUR/USD Sov. Spread (. bps) 7 Sep. 1-W % YTD % -Y % CSE Index F 19F Real GDP Growth (%)..... Inflation (eop. %) Cur. Acct. Bal. (% GDP) Fiscal Bal. (% GDP) S&P upgraded Cyprus to investment grade (BBB-) for the first time in years. The move was motivated by the Government s recent measures to reduce the banking sector s non-performing assets through the carve-out of Cyprus Cooperative Bank s (CCB, the second largest bank) NPLs (which is set to contribute largely to the reduction of the banking sector s NPE ratio to % this year from 1% in 17, according to the agency) and amendments in the insolvency & foreclosure frameworks. In addition, the agency expects solid GDP growth rates and fiscal prudence to continue in the medium term, helping the public debt-to-gdp ratio to resume its downward trend in 19, following a temporary rise this year due to the government s issuance of bonds to CCB (worth EUR.bn or 1.% of GDP). However, S&P changed the outlook from positive to stable, stressing the positive macroeconomic prospects are clouded by high public and private debt, as well as elevated, albeit declining, stocks of NPLs. Importantly, the country s return to investment grade allows access to international capital markets on more favourable terms and makes government securities usable as collateral in Eurosystem credit operations and the ECB s asset purchasing programme. Cyprus raised EUR 1.bn (7.% of GDP) in Eurobond markets at a historically-low yield of.%, benefiting from its recent rating upgrade and a benign global backdrop. Cyprus issued a 1-year EUR 1.bn (7.% of GDP) Eurobond at a yield of.% (19 bps over the German benchmark and 1 bps over mid-swaps), as part of its EUR 9.bn Euro Medium Term Note programme. Importantly, the issue was more than five times oversubscribed (inducing the government to raise % more than initially planned), achieving the lowest yield ever paid by the country for such maturity in Eurobond markets. Recall that in October 1 -- six months before exiting the -year economic adjustment programme -- the island had issued a 1- year Eurobond (EUR 1.bn) at a yield of.%. The improved yield of the new issue was supported by country s return to investment grade by S&P a few days earlier (see above) and, to a lesser extent, favourable global market conditions. The new bond proceeds will largely be used to repay more expensive outstanding debt maturing in 1 and 19. Economic activity maintained its momentum in Q:1 (up.9% y-o-y). The annual pace of economic expansion stood at a solid.9% y-o-y in Q:1, unchanged from Q1:1, and down slightly from an upwardly-revised.% in FY:17 (from.9%). Gross fixed capital formation (GFCF) was the main driver of growth in Q:1 (contributing 7. pps to headline growth), on the back of higher mostly-imported (net) investments in shipping. Moreover, private consumption remained strong (adding. pps to overall growth), as it continued to benefit from higher real disposable income, in line with subdued inflation and tightening labour market conditions. On the other hand, net exports were a drag on Q:1 GDP growth, exclusively due to higher imports (up 1.7% y-o-y), reflecting stronger domestic demand and higher imports of ships. Looking ahead, we expect GDP growth to decelerate slightly in H:1 to.7% y-o-y from.9% in H1:1, bringing the FY:1 outcome to a still robust.%. The deceleration should reflect a slowdown in private consumption and tourist activity. The former will be driven by increased household debt servicing, in line with banks more aggressive debt recovery following legislative changes, while the latter will be affected by a reduction in tourist arrivals from Russia and the UK (main source countries), due to higher competition from Turkey and Egypt. NBG - Emerging Markets Analysis Bi-Weekly Report 7

9 :1/1 1:1/1 :1/1 :1/1 1:1/1 :1/1 :1/1 1:1/1 :1/1 :1/1 1:1/1 :1/17 :1/17 1:1/17 :17/1 :17/1 1:17/1 :1/19 1:9/1 1:1/11 1:11/1 1:1/1 1:1/1 1:1/1 1:1/1 1:1/17 9:17/1 1:9/1 1:1/11 1:11/1 1:1/1 1:1/1 1:1/1 1:1/1 1:1/17 1:17/1 11 September 1 Egypt B / B / B (S&P / Moody s / Fitch) Loans to the Private Sector and Customer Deposits (y-o-y % change) Loans Loans (adj. for FX variations) Deposits Deposits (adj. for FX variations) NPL Ratio and NPL Coverage Ratio (%) NPL Ratio (%, lhs) NPL Coverage Ratio (%, rhs) Policy Rates and Inflation (%) Headline inflation Overnight Lending Rate 1-week Repo Rate Overnight Deposit Rate Sep. -M F -M F 1-M F O/N Interbank Rate (%) EGP/USD Sov. Spread (. bps) Sep. 1-W % YTD % -Y % HERMES 1 1, /1 1/1 1/17 17/1E 1/19F Looking ahead, despite a still negative output gap and continued fiscal consolidation, we do not expect the CBE to resume its cycle of monetary policy loosening, started last February (with a total cut of bps of its key interest rates), until the ongoing emerging market volatility subsides. NBG - Emerging Markets Analysis Bi-Weekly Report Real GDP Growth (%)..... Inflation (eop. %) Cur. Acct. Bal. (% GDP) Fiscal Bal. (% GDP) Customer deposits (FX-adjusted) rose by.1% in FY:17/1, underpinned by strengthening confidence in the Egyptian economy and higher EGP remuneration rates. Adjusted for FX fluctuations, growth in customer deposits accelerated slightly to a multi-year high of.1% y-o-y at end-17/1 (June 1) from.% at end-1/17, reaching.% of GDP. The strong performance of (FX-adjusted) overall deposits was supported by strengthening confidence in the domestic economy following the solid implementation of the loan agreement with the IMF and a more attractive remuneration of deposits (average interest rates on 1 to months, to months and 7 to 1 months EGP-denominated deposits rose by.1,.7 and.7 pps y-o-y, respectively, to 1.9%, 1.% and 1.1% in FY:17/1). A recovery in workers remittances from abroad and tourist receipts also contributed to the strong performance of overall deposits (FXadjusted). Indeed, workers remittances increased by c. % y-o-y to an all-time high of USD 1.9bn (.7% of GDP) in 1M:17/1, continuing on the upward trend started in Q:1/17, when the Central Bank floated the domestic currency. Moreover, tourist receipts rose by an estimated 1% y-o-y to a 7-year high of USD 9.bn (.9% of GDP) in FY:17/1, due not only to more competitive prices (the EGP had depreciated against the USD by c. 1% y-o-y in FY:17/1 and c..% since the flotation), but also to the removal of travel bans and/or warnings by key source countries following a significant improvement in security conditions. Credit to the private sector (FX-adjusted) lost momentum in FY:17/1, on the back of higher lending interest rates. Adjusted for FX movements, lending growth eased to 1.% y-o-y at end-17/1 from 17.% a year earlier. The deceleration in (FX-adjusted) overall lending was mainly due to a further increase of already prohibitive lending interest rates (average rates on up to 1 months EGP-denominated loans rose by. pps y-o-y to 19.% in FY:17/1) arising from a tighter monetary policy stance. As a result, bank liquidity conditions eased further, with the loan-to-deposit ratio declining to.7% at end-17/1 from 9% a year earlier. Looking ahead, lending activity is set to re-accelerate, mainly supported by banks ample liquidity (see above), good asset quality metrics (see chart) and a strong capital base (the capital adequacy ratio reached a multi-year high of 1.% at end-17/1), as well as a brighter economic outlook. The CBE is likely to adopt a wait-and-see stance at its September 7 th MPC meeting. We expect the CBE to maintain its overnight deposit, 1-week repo, and overnight lending rates unchanged at 1.7%, 1.%, and 17.7%, respectively, at its September 7 th MPC meeting, in its efforts to dampen depreciation pressures on the EGP and anchor inflation expectations. Note that amid a broader global sell-off in emerging markets, foreign holdings of Egyptian T-bills had declined by c. % to EGP 9bn (c. USD 1bn) from March to July and the EGP has lost c. % of its value against the USD since end-march. Moreover, headline inflation accelerated to 1.% y-o-y in August after having eased to 1.% in July from a -month high of 1.% in June, reflecting the implementation of a new series of subsidy cuts (through price increases) in mid-june.

10 11 September 1 FOREIGN EXCHANGE MARKETS, SEPTEMBER TH 1 Against the EUR Currency SPOT 1-week %change 1-month %change YTD %change* 1-year %change Year- Low Year- High -month Forward rate** -month Forward rate** 1-month Forward rate** % change* % change* Albania ALL Brazil BRL Bulgaria BGL China CNY Egypt EGP FYROM MKD India INR Romania RON Russia RUB Serbia RSD S. Africa ZAR Turkey YTL Ukraine UAH US USD JAPAN JPY UK GBP * Appreciation (+) / Depreciation (-) ** Forward rates have been calculated using the uncovered interest rate parity for Brazil, China, Egypt, India and Ukraine Currencies against the EUR (September th 1) ALL BRL BGL CNY EGP 1-week % change 1-month % change YTD % change MKD INR RON RUB RSD ZAR TRY UAH USD JPY GBP Depreciation Appreciation NBG - Emerging Market Research Bi-Weekly Report 9

11 11 September 1 MONEY MARKETS, SEPTEMBER TH 1 Albania Brazil Bulgaria China Cyprus Egypt FYROM India Romania Russia Serbia Turkey S. Africa Ukraine EU US O/N T/N S/W Month Month Month Month Year *For Bulgaria, the Base Interest Rate (BIR) is reported. For Egypt, the O/N Interbank Rate is reported. LOCAL DEBT MARKETS, SEPTEMBER TH 1 Albania Brazil Bulgaria China Cyprus Egypt FYROM India Romania Russia Serbia Turkey S. Africa Ukraine EU US -Month Month Month Year Year Year Year Year Year Year Year *For Albania. FYROM and Ukraine primary market yields are reported CORPORATE BONDS SUMMARY, SEPTEMBER TH 1 Currency Rating S&P / Moody s Maturity Amount Outstanding (in million) Bid Yield Gov. Spread Asset Swap Spread Bulgaria Bulgaria Energy Hld.7% '1 EUR NA/NA // South Africa FirstRand Bank Ltd.% ' USD BBB-/Baa // FirstRand Bank Ltd.% ' EUR NA/NA /1/ Arcelik AS.7% '1 EUR BB+/NA 1/9/1. 1 Garanti Bank.% ' USD NA/Ba 1/9/ Turkiye Is Bankasi % ' USD NA/B /1/ 1, 1. 1,1 9 Turkey Vakifbank.7% ' USD NA/Ba /1/ 1. 7 TSKB.% ' USD NA/Ba 1/1/ Petkim.7% ' USD NA/B1 /1/. KOC Holding.% ' USD BB+/Ba1 1// CREDIT DEFAULT SWAP SPREADS. SEPTEMBER TH 1 Albania Brazil Bulgaria China Cyprus Egypt FYROM India Romania Russia Serbia Turkey S. Africa Ukraine -Year Year NBG - Emerging Market Research Bi-Weekly Report 1

12 11 September 1 EUR-DENOMINATED SOVEREIGN EUROBOND SUMMARY. SEPTEMBER TH 1 Currency Rating S&P / Moody s Maturity Amount Outstanding (in million) Bid Yield Gov. Spread Asset Swap Spread Albania.7% ' EUR B+/B1 1/11/ Bulgaria.% ' EUR NA/NA 1/1/ 1. 7 Bulgaria.% ' EUR BBB-/Baa // 1,. -11 Bulgaria.9% ' EUR BBB-/Baa /9/ 1,9. 1 Bulgaria.% '7 EUR BBB-/Baa //7 1, 1. 7 Bulgaria.1% ' EUR BBB-/Baa // Cyprus.% ' EUR BBB-/Ba //. 7 Cyprus.7% ' EUR NA/Ba // 1,. 1 7 Cyprus.7% ' EUR NA/Ba /7/ 1, Cyprus.7% ' EUR NA/Ba 7// Cyprus.% ' EUR NA/Ba /11/ 1, FYROM.7% ' EUR BB-/NA 1/1/ FYROM.97% '1 EUR BB-/NA /7/ FYROM.% ' EUR BB-/NA /7/. FYROM.7% ' EUR BB-/NA 1/1/.1 1 Romania.% ' EUR BBB-/BBB- 1/9/,.1 Romania.% ' EUR BBB-/BBB- // 1, Romania.7% '7 EUR BBB-/BBB- 19//7, Turkey.1% ' EUR NR/Ba 11// 1,. 1 Albania.7% ' Bulgaria.% ' EUR-Denominated Eurobond Spreads (September th 1) Bulgaria.% ' Bulgaria.9% ' Bulgaria.% '7 1-week change 1-month change YTD change Bulgaria.1% ' Cyprus.% ' Cyprus.7% ' Cyprus.7% ' Cyprus.7% ' Cyprus.% ' FYROM.7% ' FYROM.97% '1 FYROM.% ' FYROM.7% ' Romania.% ' Romania.% ' Romania.7% '7 Turkey.1% ' Tightening Widening NBG - Emerging Market Research Bi-Weekly Report 11

13 11 September 1 USD-DENOMINATED SOVEREIGN EUROBOND SUMMARY. SEPTEMBER TH 1 Currency Rating S&P / Moody s Maturity Amount Outstanding (in million) Bid Yield Gov. Spread Asset Swap Brazil 1.7% ' USD NA/Ba 1/1/ Brazil.7% '1 USD NA/Ba /1/1, Brazil.7% ' USD NA/Ba //. 1 Egypt.7% ' USD B/B 9// 1,.1 11 Egypt.7% ' USD NA/B 1/11/ 1,. Egypt.7% ' USD B/B 11//.9 Egypt 7.% ' USD NA/B 1/11/ 1,.7 7 Egypt.7% ' USD B/B // 1,. 9 7 Egypt.% '7 USD NA/B 1/1/7. 1 Romania.7% ' USD BBB-/BBB- // 1, Romania.7% ' USD BBB-/BBB- /1/ 1, Romania.1% ' USD BBB-/BBB- /1/ 1,. 1 Russia 1.7% ' USD BBB-/Ba1 //,. 19 Russia.7% ' USD BBB-/Ba1 1/9/ 1,. 1 Serbia.7% ' USD BB/Ba // 1, Serbia 7.% '1 USD BB/Ba /9/1, S. Africa.7% ' USD BB/Baa 1/9/,.7 S. Africa.% '1 USD BB/Baa // Turkey 7.% ' USD NR/Ba //,.7 7 Turkey 7.7% ' USD NR/Ba //, Turkey 11.7% ' USD NR/Ba 1/1/ 1, 7.9 Turkey.% ' USD NR/Ba 1// 1, Turkey.7% '1 USD NR/Ba 1/1/1, 7. 9 Ukraine 7.7% ' USD B-/Caa 1/9/ 1,. 7 Spread Brazil 1.7% ' USD-Denominated Eurobond Spreads (September th 1) Brazil.7% '1 Brazil,7% ' Egypt.7% ' Egypt.7% ' Egypt.7% ' Egypt 7.% ' Egypt.7% ' Egypt.% '7 Romania.7% ' Romania.7% ' Romania.1% ' Russia 1.7% ' Russia.7% ' Serbia.7% ' Serbia 7.% '1 S. Africa.7% ' S. Africa.% '1 Turkey 7% ' Turkey 7.7% ' Turkey 11.7% ' Turkey % ' Turkey.7% '1 Ukraine 7.7% ' 1-week change 1-month change YTD change Tightening Widening NBG - Emerging Market Research Bi-Weekly Report 1

14 11 September 1 Level 1-week % change STOCK MARKETS PERFORMANCE. SEPTEMBER TH 1 1-month % change Local Currency Terms EUR Local Currency EUR Local Currency EUR Terms Terms terms terms terms YTD % change 1-year % change Year- Low Year- High YTD % change % change % change Brazil (IBOV) 77, ,9, Bulgaria (SOFIX) China (SHCOMP), ,, Cyprus (CSE GI) Egypt (HERMES) 1, , 1, F.Y.R.O.M (MBI), ,, India (SENSEX), ,, Romania (BET-BK) 1, ,7 1, Russia (RTS), ,17, Serbia (BELEX-1) South Africa (FTSE/JSE) 7, ,7 1, Turkey (ISE 1) 9, , 11, Ukraine (PFTS) MSCI EMF 1, , MSCI EAFE 1, ,9, Greece (ASE-General) Germany (XETRA DAX) 1, ,77 1, UK (FTSE-1) 7, ,7 7, USA (DJ INDUSTRIALS), ,19, USA (S&P ), ,, Brazil (IBOV) Bulgaria (SOFIX) Equity Indices (September th 1) China (SHCOMP) Cyprus (CSE GI) Egypt (HERMES) F.Y.R.O.M (MBI-1) 1-week % change 1-month % change YTD % change India (SENSEX) Romania (BET-BK) Russia (MICEX1) Serbia (BELEX 1) South Africa (FTSE/JSE) Turkey (ISE-1) Ukraine (PFTS) MSCI EMF MSCI EAFE Greece (ASE-General) Germany (DAX) UK (FTSE-1) USA (DJ INDUSTRIALS) USA (S&P ) Loss Gain NBG - Emerging Market Research Bi-Weekly Report 1

15 11 September 1 DISCLOSURES: This report has been produced by the Economic Analysis Division of the National Bank of Greece, which is regulated by the Bank of Greece, and is provided solely for the information of professional investors who are expected to make their own investment decisions without undue reliance on its contents, i.e. only after effecting their own independent enquiry from sources of the investors sole choice. The information contained in this report does not constitute the provision of investment advice and under no circumstances is it to be used or considered as an offer or an invitation to buy or sell or a solicitation of an offer or invitation to buy or sell or enter into any agreement with respect to any financial asset, service or investment. Any data provided in this report has been obtained from sources believed to be reliable but have to be not been independently verified. Because of the possibility of error on the part of such sources, National Bank of Greece does not guarantee the accuracy, timeliness or usefulness of any information. The National Bank of Greece and its affiliate companies, its representatives, its managers and/or its personnel or other persons related to it, accept no liability for any direct or consequential loss arising from any use of this report. The final investment decision must be made by the investor and the responsibility for the investment must be taken by the investor. This report is not directed to, nor intended for distribution to use or used by, any person or entity that is a citizen or resident of or located in any locality, state, country or other jurisdiction where such a distribution, publication, availability or use would be contrary to any law, regulation or rule. The report is protected under intellectual property laws and may not be altered, reproduced or redistributed, to any other party, in whole or in part, without the prior written consent of National Bank of Greece. NBG - Emerging Markets Analysis Bi-Weekly Report 1