CONSENSUS FORECAST. Eastern Europe April Contributors

Transcription

1 CONSENSUS FORECAST April 1 SUMMARY CALENDAR 1 BULGARIA 17 CROATIA CZECH REP. 9 ESTONIA HUNGARY LATVIA 6 LITHUANIA 71 POLAND 77 ROMANIA 9 RUSSIA 11 SLOVAKIA 119 SLOVENIA 1 TURKEY 11 UKRAINE 17 NOTES 16 PUBLICATION DATE 1 April 1 FORECASTS COLLECTED 7 April - 1 April 1 INFORMATION AVAILABLE Up to and including 1 April 1 NEXT EDITION 1 May 1 Contributors ARNE POHLMAN Chief Economist ARMANDO CICCARELLI Head of Research RICARDO ACEVES Senior Economist RICARD TORNÉ Senior Economist OLGA COSCODAN Economist CARL KELLY Economist TERESA KERSTING Economist DIRINA MANÇELLARI Economist ANGELA BOUZANIS Economist CECILIA SIMKIEVICH Economist ROBERT HILL Economist ERIC DENIS Economist MIRIAM DOWD Editor

2 April 1 Forecast Major Economies and Real GDP, annual variation in % Consumer Prices, variation in % World United States Euro area Japan China Turkey Ukraine EU Members Baltics Croatia Estonia Latvia Lithuania Bulgaria Czech Republic Hungary Poland Romania Slovakia Slovenia Gross Domestic Product, ann. var. in % Consumer Prices, ann. var. in % World United States Euro area Japan China World United States Euro area Japan China Fiscal Balance, % of GDP Current Account, % of GDP World United States Euro area Japan China Turkey Ukraine EU Members Baltics Croatia Estonia Latvia Lithuania Bulgaria Czech Republic Hungary Poland Romania Slovakia Slovenia FocusEconomics Consensus Forecast

3 April 1 Regional outlook deteriorates REAL SECTOR Ukraine s crisis and external factors in drag on growth in Economic Growth Change in GDP forecasts More complete data confirmed that the majority of the Eastern European economies continued to grow at a moderate pace in the last quarter of 1. In the fourth quarter, regional GDP grew 1.1% year-on-year, which marked a deceleration compared to the 1.% increase observed in the previous quarter. Although the majority of economies are expanding at a rate above the regional average between % and % growth and war-hit Ukraine continue to weigh on the regional average. In Ukraine, recession deepened profoundly, with GDP growth hitting rock bottom in Q. The n economy surprisingly eked out growth in the fourth quarter (+.% year-on-year), but more recent data signal that the economy reached the brink of recession at the outset of 1. - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Note: GDP, real annual variation in %, Q1 1 - Q 16. Change in GDP Growth Forecasts 1 Hungary 1 16 Note: GDP, evolution of 1 and 16 forecasts during the last 18 months. 16 Slovenia - The Ukrainian government and pro-n separatists signed a second ceasefire known as Minsk II in February. Although early signs were not encouraging, violence decreased gradually in March and both sides made progress in moving heavy weaponry away from the conflict zone. However, many observers and analysts are skeptical regarding whether long-term peace is achievable. In fact, fighting could flare up in the coming months, which would prevent the Ukrainian economy from recovering in 1 despite the fact that the IMF extended Ukraine a lifeline when it approved a new USD 17. billion bailout package. Should the ceasefire hold, it is unlikely that the U.S. and the EU will impose tougher sanctions on. Nonetheless, the existing sanctions are likely to continue for some time, which, along with low oil prices, prompted Moscow to revise the 1 budget. The government now expects that the economy will contract and the fiscal deficit will widen this year. Romania Hungary Poland Romania Slovenia Ukraine Czech Republic Czech Republic Baltics Poland Baltics Turkey Turkey Ukraine Note: Change between April 1 and March 1 in percentage points. Source: FocusEconomics Consensus Forecast... OUTLOOK Economic prospects hampered by unresolved crisis; regional growth is seen flat Analysts participating in the FocusEconomics Consensus Forecast expect that growth in will be zero this year. This month s forecast was revised down from the.1% increase expected last month. If confirmed, this will represent the weakest economic performance in since the global financial crisis hit the region in 9. s growth prospects continued to be laden down by the unresolved crisis in Ukraine. FocusEconomics Consensus Forecast

4 April 1 The slash in the 1 regional growth forecast in April once again reflected another sizeable reduction to the GDP forecast for Ukraine and a cut to the GDP growth projections for and Turkey. These countries account for the lion s share of the regional forecast dropping into contractionary territory this month. Meanwhile, participants left growth projections unchanged for 9 of the 1 economies surveyed, while Bulgaria and Hungary were the only economies for which panelists raised their forecasts. The region is seen recovering gradually in 16, with a projected GDP growth rate of.1%. POLAND Economy firms up in Q1; 1 prospects remain stable as critical elections year progresses Recent indicators point to continued solid growth in the first months of 1. Industrial activity accelerated in February and, despite some moderation, the manufacturing PMI remained firmly entrenched in expansionary territory in March. Meanwhile, the first round of presidential elections will take place on 1 May. Recent polls point to another mandate for the ruling Civic Platform (PO) party. Although President Komorowski s approval ratings have deteriorated in recent months, he is still well ahead of Andrzej Duda, candidate for the opposition Law and Justice (PiS) party. The outcome of the parliamentary election slated for the last quarter of the year is more uncertain. Although polls suggest that opposition PiS could get the largest share of votes, it is very unlikely that the party will have enough seats to rule alone, and it is still not clear which parties would be willing to form a governing coalition led by PiS. 1 Poland Economic Growth Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Note: GDP, real annual variation in %, Q1 1 - Q 16. Change in GDP forecasts 1 16 Note: GDP, evolution of 1 and 16 forecasts during the last 18 months Poland s economic prospects remain fairly bright. Private consumption will continue to support growth this year, underpinned by labor market improvements and real wage increases. Polish exports are also expected to benefit from a strengthened German economy, which has already shown signs of a pick-up due to the ECB s quantitative easing program. Our panel of analysts expects the economy to expand.% in 1, which is unchanged from last month s forecast. For 16, the panel sees economic growth picking up to.%. (see details on page 77) RUSSIA Q GDP shows resilience, but deteriorating conditions prompt government to revise 1 budget The n economy eked out unexpected growth in the last quarter of 1, demonstrating resilience in the face of geopolitical headwinds, international sanctions, a falling ruble and lower oil prices. However, the start of 1 has brought signs of contraction as negative growth momentum has been picking up speed. In February, industrial production growth plummeted to a two-year low and exports decreased for the eighth time in the last nine months. In addition, the manufacturing and services PMIs continued to point to contraction in March and confidence among n consumers fell to the lowest level since 9 in Q1. Owing to the economic deterioration and lower tax take from the hydrocarbons sector, the Finance Ministry presented new fiscal projections for this year, which foresee a fiscal deficit of.8% of GDP. 6 - Economic Growth -6 Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Note: GDP, real annual variation in %, Q1 1 - Q 16. Change in GDP forecasts 1 16 Note: GDP, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast

5 April 1 Following lackluster economic growth in 1, the n economy is expected to take a nosedive this year, driven by lower oil prices, international sanctions and geopolitical tensions. FocusEconomics panelists see the economy contracting.% this year, which is down.1 percentage points from last month s forecast. In 16, the panel expects the economy to recover somewhat and grow a tepid.%. (see details on page 11) TURKEY 1 growth sluggish overall despite improvement in Q Turkey s economy lost steam last year, slowing from 1 s.% expansion to a.9% increase. The result was driven by sluggish private consumption and a contraction in fixed investment. More recent data for 1 paint a mixed picture of the economy. The manufacturing PMI hit an almost-six-year low in March, yet industrial production rebounded to an expansion in February. On the political front, Turkey s four major political parties presented their candidate lists to parliament on 7 April for the upcoming June general elections. The ruling Justice and Development party (AKP) has stated that their top electoral priority will be to switch from the current parliamentary system of government to a presidential system and they are hoping to win 67 of the seats in order to change the constitution. President Recep Tayyip Erdogan has been advocating that the switch will promote political stability and more rapid decision making going forward, while critics argue that it will lead to a more authoritarian-style government. 6 Turkey Economic Growth Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Note: GDP, real annual variation in %, Q1 1 - Q 16. Change in GDP forecasts 1 16 Note: GDP, evolution of 1 and 16 forecasts during the last 18 months Turkey s outlook has moderated. While the fall in oil prices should help reduce the country s current account deficit, growing uncertainty around the upcoming parliamentary elections and expectations that consumer spending will remain soft present a downside risk. FocusEconomics panelists lowered their growth projection for 1 by. percentage this month and expect the economy to expand.%. For 16, the panel sees GDP expanding.9%. (see details on page 11) UKRAINE GDP contracts drastically in Q and economic crisis carries over into 1; IMF comes to the rescue The Ukrainian economy recorded the largest contraction in five years in 1, falling by 6.8%. The drastic deterioration was driven by sharp declines in private consumption and fixed investment as a result of the military conflict between the government and pro- rebels in the east of the country. More recent data indicate that Ukraine s economic crisis has carried over into 1. Industrial production plummeted in February, hitting an over five-year low, and inflation skyrocketed further in March. The conflict has pushed the country to the brink of bankruptcy and, on 11 March, the IMF extended Ukraine a lifeline by approving a new USD 17. billion bailout package. The agreement is part of an international effort to shore up Ukraine s USD. billion financing gap for the next four years. The Ukrainian government has now entered into negotiations with debt holders in an effort to generate USD 1. billion through a debt restructuring program Ukraine Economic Growth -18 Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Note: GDP, real annual variation in %, Q1 1 - Q 16. Change in GDP forecasts 1 16 Note: GDP, evolution of 1 and 16 forecasts during the last 18 months Ukraine s prospects continue to deteriorate rapidly. Despite the IMF s aid, the country s financing woes are far from solved and FocusEconomics Consensus Forecast

6 April 1 private consumption is expected to continue to suffer on the back of strict austerity measures. Moreover, a large amount of political uncertainty remains and whether the February peace agreement will result in a lasting resolution to the military conflict is still unknown. Our panelists expect GDP to contract.8% in 1, which is down.9 percentage points from last month s forecast. The panel sees the country rebounding next year and projects that GDP will expand 1.9%. (see details on page 17) INFLATION Regional inflation continues upward trend driven by higher inflation in, Ukraine and Turkey Regional inflation jumped from a revised 7.9% in January (previously reported: 7.6% year-on-year) to 8.7% in February and is likely to continue rising in the coming months. Higher inflation in, Turkey and Ukraine pushed up regional inflation, while deflationary pressures in almost all countries in the region partially mitigated the increase. While the ruble and the hryvnia have stabilized in recent days, both have lost over half of their value in annual terms, and this will continue having a negative impact on inflation. Inflation expectations are still high; FocusEconomics panelists hiked their projections for the eighth consecutive month. This month s increase was mainly the result of panelists raising the forecasts for and Ukraine. In contrast, projections for the remaining economies surveyed declined further as they are in fact on the brink of deflation. Participants to the FocusEconomics Consensus Forecast expect regional inflation to end 1 at 7.%, which is up. percentage points from last month s forecast. Forecasters participating in the FocusEconomics panel also raised their 16 inflation forecasts from the.% expected last month to the.%. Ricardo Aceves Senior Economist FocusEconomics Consensus Forecast 6

7 April 1 Gross Domestic Product, annual variation in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Turkey Poland Romania EU Members Lithuania Hungary Slovakia Latvia Baltics Czech Republic Slovenia Estonia Bulgaria Croatia Ukraine GDP Growth, Note: Gross domestic product, real annual variation in %. Sources: National statistical institutes and central banks East. Eur. Turkey Poland Czech Rep. Romania Hungary GDP per capita, EUR Bulgaria,671,8,916 6,116 6,1 6,78 7,171 Croatia 1,78 1, 1,8 1,68 1,96 11,1 11,91 Czech Republic 1,89 1,66 1,71 1,86 17,18 17,7 18,66 Estonia 1,196 1,68 1, 1,71 16,6 17,66 18,8 Hungary 1, 1,89 1,8 11, 11,7 1,89 1,8 Latvia 11,7 11,8 1, 1,897 1,7 1,6 1,6 Lithuania 11,777 1,76 1,69 1,7 1, 1,1 16,16 Poland 1,81 1,69 11,187 11,9 1,77 1,7 1,866 Romania 6,79 7,7 7,9 8,67 9,1 9,61 1, 1,88 9,76 8,1 9,1 1,1 1,697 11,9 Slovakia 1,61 1,88 1,6 1,89 1,611 16,9 17,1 Slovenia 17, 18,6 18,6 19,8 19,78,61 1,7 Turkey 8,19 7,87 9, 9,87 1,6 1,66 11,1 Ukraine,997,1 1,6 1,789 1,96,11,88 9,1 8,66 8,8 9,8 9,799 1,99 11,19 EU Members 1,19 1,6 1,91 11,9 1,8 1,18 1,99 Baltics 1,11 1,6 1,8 1,79 1,61 1,11 16,1 GDP per capita, 1 Slovenia Czech Republic Estonia Slovakia Baltics Lithuania Latvia Poland EU Members Hungary Croatia Turkey Romania Bulgaria Ukraine, 1, 1,, 17, 1, Note: GDP per capita in current EUR. Sources: National statistical institutes and central banks. 1, 1, 7,, East. Eur. Turkey Poland Czech Rep. Romania Hungary FocusEconomics Consensus Forecast 7

8 April 1 Consumption, annual variation in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Lithuania Baltics Estonia Romania Latvia Poland EU Members Turkey Hungary Slovakia Czech Republic Bulgaria Slovenia Croatia Ukraine Consumption Growth, Note: Private consumption, real annual variation in %. In Hungary, total consumption. Sources: National statistical institutes and central banks East. Eur. Turkey Poland Czech Rep. Romania Hungary Investment, annual variation in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Poland Lithuania EU Members Czech Republic Romania Slovakia Baltics Bulgaria Hungary Slovenia Turkey Latvia Estonia Croatia Ukraine Investment Growth, Note: Gross fixed investment, real annual variation in %. Sources: National statistical institutes and central banks East. Eur. Turkey Poland Czech Rep. Romania Hungary FocusEconomics Consensus Forecast 8

9 April 1 Industrial Production, annual variation in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Romania Hungary Poland Slovakia Czech Republic EU Members Turkey Estonia Bulgaria Slovenia Baltics Lithuania Latvia Croatia Ukraine Industrial Production Growth, Note: Industrial production, real annual variation in %. Sources: National statistical institutes. - East. Eur. Turkey Poland Czech Rep. Romania Hungary Retail Sales, annual variation in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Hungary Poland Bulgaria EU Members Czech Republic Slovakia Latvia Romania Retail Sales, Note: Retail sales, real annual variation in %. Sources: National statistical institutes East. Eur. Poland Czech Rep. Romania Hungary FocusEconomics Consensus Forecast 9

10 April 1 Unemployment, % of active population Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Unemployment, 1 Croatia Slovakia Bulgaria Poland Ukraine Turkey Latvia Lithuania EU Members Slovenia Baltics Hungary Czech Republic Estonia Romania Note: End-of-year unemployment rate. In the Czech Republic, Hungary, Lithuania, Romania,, Slovakia, Slovenia and Turkey, average rate. Sources: National statistical institutes and Eurostat. 9 7 East. Eur. Turkey Poland Czech Rep. Romania Hungary Fiscal Balance, % of GDP Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Estonia Baltics Latvia Lithuania Turkey Romania Czech Republic Hungary EU Members Slovakia Poland Bulgaria Slovenia Croatia Ukraine Fiscal Balance, Note: Fiscal balance in % of GDP. Forecasts for Poland reflect the pension reform law implemented in January 1. Sources: National statistical institutes and finance ministries East. Eur. Turkey Poland Czech Rep. Romania Hungary FocusEconomics Consensus Forecast 1

11 April 1 Inflation, variation of consumer prices in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Ukraine Turkey Romania Latvia Estonia Czech Republic Baltics Slovenia Croatia EU Members Slovakia Bulgaria Lithuania Hungary Poland Inflation, Note: End-of-year variation of consumer price index in %. In Hungary and Poland, annual average variation of consumer price index in %. In Estonia, Latvia, Lithuania, Slovakia and Slovenia data refer to annual average variation of harmonized index of consumer prices (HICP). Sources: National statistical institutes and central banks. - East. Eur. Turkey Poland Czech Rep. Romania Hungary Interest Rate, % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics East. Eur. Turkey Poland Czech Rep. Romania Hungary Ukraine Turkey Croatia Romania Hungary Poland EU Members Bulgaria Baltics Lithuania Latvia Slovakia Slovenia Estonia Czech Republic Interest Rate, Note: Nominal end-of-year interest rates in %. Bulgaria: Base rate. Croatia: Central Bank discount rate. Czech Republic: Central Bank -week repo rate. Estonia: ECB refinancing rate. Hungary: Central Bank base rate. Latvia: ECB refinancing rate. Lithuania: ECB refinancing rate. Poland: Central Bank reference rate. Romania: Central Bank reference rate. : Central Bank 1-week repo rate. Slovakia: ECB refinancing rate. Slovenia: ECB refinancing rate. Turkey: Central Bank 1-week repo rate. Ukraine: Central Bank discount rate. Sources: National central banks. FocusEconomics Consensus Forecast 11

12 April 1 Exchange Rates vs. USD, annual variation in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Ukraine Bulgaria Croatia Czech Republic Turkey Hungary Romania Baltics Estonia Slovakia Latvia Slovenia Lithuania EU Members Poland Exchange Rates vs. USD, Note: Annual variation of national currencies versus USD in %. Positive number means currency is losing value against USD. Regional aggregates provided only as indicative information. Sources: Central banks and Thomson Reuters. - East. Eur. Turkey Poland Czech Rep. Romania Hungary Current Account Balance, % of GDP Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Slovenia Hungary Slovakia Croatia Bulgaria Czech Republic EU Members Lithuania Romania Estonia Baltics Poland Ukraine Latvia Turkey Current Account Balance, Note: Current account balance as % of GDP. Sources: National statistical institutes and central banks East. Eur. Turkey Poland Czech Rep. Romania Hungary FocusEconomics Consensus Forecast 1

13 April 1 Exports, annual variation in % Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics Turkey Poland Czech Republic Slovenia EU Members Ukraine Slovakia Latvia Bulgaria Hungary Romania Baltics Lithuania Croatia Estonia Export Growth, Note: Nominal annual variation in % of merchandise exports in EUR. Data for, Turkey and Ukraine originally reported in USD, calculated using EUR/USD exchange rate. Sources: National statistical institutes and central banks East. Eur. Turkey Poland Czech Rep. Romania Hungary Imports, annual variation in % Import Growth, Turkey Bulgaria Poland Croatia Czech Republic Czech Republic Slovenia Estonia EU Members Hungary Latvia Latvia Lithuania Slovakia Poland Bulgaria Romania Hungary Romania Slovakia Lithuania Slovenia Baltics Turkey Croatia Ukraine Ukraine EU Members Estonia Baltics Note: Nominal annual variation in % of merchandise imports in EUR. Data for, Turkey and Ukraine originally reported in USD, calculated using EUR/USD exchange rate. Sources: National statistical institutes and central banks East. Eur. Turkey Poland Czech Rep. Romania Hungary FocusEconomics Consensus Forecast 1

14 April 1 International Reserves, months of imports Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Turkey Ukraine EU Members Baltics International Reserves, 1 Croatia Bulgaria Romania Poland Turkey EU Members Hungary Czech Republic Ukraine Lithuania Note: International reserves as months of imports. Sources: Central banks. 1 East. Eur. Turkey Poland Czech Rep. Romania Hungary External Debt, % of GDP External Debt, Ukraine Bulgaria Latvia Croatia Slovenia Czech Republic Croatia Estonia Hungary Hungary Latvia Slovakia Lithuania Bulgaria Poland EU Members Romania Lithuania Poland Slovakia Czech Republic Slovenia Turkey Ukraine Romania Turkey EU Members Baltics Note: External debt as % of GDP. Sources: National statistical institutes, central banks and finance ministries. 6 East. Eur. Turkey Poland Czech Rep. Romania Hungary FocusEconomics Consensus Forecast 1

15 Calendar April 1 Economic Release Calendar Date Country Event 1 April Poland Central Bank Meeting 1 April Bulgaria March Consumer Prices 1 April Croatia March Consumer Prices 1 April Poland March Consumer Prices 1 April March Industrial Production (**) 17 April Slovakia March Consumer Prices April Hungary April GKI-Erste Economic Sentiment Index (**) April Poland March Industrial Production (**) April Poland April Business Confidence (**) 1 April Hungary Central Bank Meeting 1 April Lithuania March Industrial Production 1 April March Merchandise Trade (**) April Turkey Central Bank Meeting April Turkey April Consumer Confidence April Ukraine March Industrial Production April Ukraine Central Bank Meeting April Czech Republic April Economic Sentiment April Poland March Retail Sales (**) April Turkey April Business Confidence 9 April Croatia March Industrial Production April Estonia March Industrial Production April Latvia Q1 1 National Accounts (*) April Lithuania Q1 1 National Accounts (*) April Central Bank Meeting April Slovenia April Consumer Prices 1 May Czech Republic April HSBC Manufacturing PMI May Poland April HSBC Manufacturing PMI May Turkey April HSBC Manufacturing PMI May Turkey April Consumer Prices May Latvia March Industrial Production May Poland Central Bank Meeting May April HSBC Manufacturing PMI 6 May Romania Central Bank Meeting (*) 6 May April Consumer Prices (**) 7 May Czech Republic March Industrial Production 7 May Czech Republic Central Bank Meeting 7 May Hungary March Industrial Production (*) 7 May April HSBC Services PMI 7 May Ukraine April Consumer Prices 8 May Bulgaria March Industrial Production 8 May Estonia April Consumer Prices 8 May Hungary April Consumer Prices 8 May Slovenia March Industrial Production (*) Preliminary estimate. (**) Approximate date. FocusEconomics Consensus Forecast 1

16 April 1 Economic Release Calendar Date Country Event 8 May Turkey March Industrial Production 11 May Lithuania April Consumer Prices 1 May Czech Republic April Consumer Prices 1 May Estonia Q1 1 National Accounts (*) 1 May Latvia April Consumer Prices 1 May Slovakia March Industrial Production 1 May Turkey March Balance of Payments (*) Preliminary estimate. (**) Approximate date. FocusEconomics Consensus Forecast 16

17 Bulgaria April 1 Bulgaria Bulgaria LONG-TERM TRENDS -year averages Population (million): GDP (EUR bn): GDP per capita (EUR):,88,9 6,791 GDP growth (%): Fiscal Balance (% of GDP): Public Debt (% of GDP) Inflation (%): Current Account (% of GDP): External Debt (% of GDP): Outlook improves The economy picked up pace last year, recording the strongest expansion since 11 on the back of an acceleration in domestic demand. However, weak demand from the Eurozone, Bulgaria s largest trading partner, and spillover effects from the sanctions imposed on have limited further growth. Meanwhile, Bulgaria s state-owned National Electricity Company (NEK) signed an agreement on 8 April with two U.S. power companies, which will allow NEK to save BGN 1. billion in costs going forward. Bulgaria s government has been struggling to reduce NEK s large deficit while containing politically-sensitive electricity prices. A series of protests, in part over rising electricity bills, led to the toppling of the government in February 1. Bulgaria s outlook has strengthened slightly. An expected pick-up in demand from the Euro area should boost exports this year, while lower oil prices will support private consumption. FocusEconomics Consensus Forecast panelists see the economy expanding 1.% in 1, which is up.1 percentage points from last month s forecast. In 16, the panel expects the economy to pick up speed and grow.%. Consumer prices fell.% in February, which was above January s 1.% drop. The slump in prices for oil and commodities is expected to keep inflationary pressures muted this year. Panelists expect consumer prices to rise.% in 1, which is down. percentage points from last month s forecast. For 16, panelists see inflation rising to 1.%. Angela Bouzanis Economist Industrial Production variation in % 1 % REAL SECTOR Industrial production accelerates in February In February, industrial output expanded.% over the same month last year in working-day adjusted terms, according to the National Statistical Institute. The figure was above January s 1.% increase. February s gain was the largest in 9 months and largely reflected an improvement in mining and quarrying. On a month-on-month basis, industrial production fell a seasonally-adjusted.6% in February, which was below the 1.7% expansion recorded in the previous month. Average growth in industrial production fell from January s 1.6% to 1.% in February. - Year-on-year Annual average -1 Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes of working-day adjusted and annual average variation of industrial production index in %. Source: National Statistical Institute (NSI). FocusEconomics Consensus Forecast participants see industrial production expanding.% in 1, which is up.1 percentage points from last month s Consensus. For 16, panelists see industrial output growing.%. FocusEconomics Consensus Forecast participants expect GDP to expand 1.% in 1, which is up.1 percentage points from last month s Consensus. In 16, panelists see the economy growing.%. MONETARY SECTOR Drop in consumer prices moderates in February In February, consumer prices rose.18% over the previous month, which contrasted January s.8% fall. According to the National Statistical Institute, FocusEconomics Consensus Forecast 17

18 Bulgaria April 1 Inflation Consumer Price Index 1.. increases in consumer prices were recorded in health, communications and education, as well as in food and non-alcoholic beverages... %.. % Consumer prices fell.% year-on-year in February (January: -1.% yoy). February s figure marked the 19th consecutive drop in consumer prices. Annual average consumer prices fell 1.1%, which was slightly less than January s 1.% drop Month-on-month (left scale) Year-on-year (right scale) Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 FocusEconomics Consensus Forecast participants expect inflation to end 1 at.%, which is down. percentage points from last month s forecast. For 16, panelists expect inflation of 1.%. Note: Year-on-year and month-on-month variation of consumer price index in %. Source: National Statistical Institute (NSI). FocusEconomics Consensus Forecast 18

19 Economic Indicators 1-19 Bulgaria April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 6,9 7,6 7,1 7,9 7,7 6,1 6,61 7, 7,79 8,18 GDP (USD bn) GDP per capita (EUR),899,7,6,671,8,916 6,116 6,1 6,78 7,171 GDP (EUR bn) GDP (BGN bn) Economic Growth (Nominal GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual variation in %) Retail Sales (annual variation in %) Unemployment (% of active population, eop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %) Inflation (CPI, annual variation in %, eop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual var. in %, eop) Base Rate (%, eop) Year Bond Yield (%, eop) Stock Market (SOFIX ann. var. in %) Exchange Rate (BGN per USD, eop) Exchange Rate (BGN per EUR, eop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) International Reserves (EUR bn) International Reserves (months of imports) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq s.a. var. in %) Inflation (CPI, annual variation in %, eop) Exchange Rate (BGN per USD, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Retail Sales (annual variation in %) Unemployment (% of active population) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Exchange Rate (BGN per USD, eop) FocusEconomics Consensus Forecast 19

20 Real Sector Gross Domestic Product and Fiscal Balance Bulgaria April 1 1 Real GDP -19 var. in % Real GDP Q1 1-Q 16 var. in % Economic Growth and Fiscal Balance 1 - Bulgaria World GDP 1 evolution of forecasts 1 Maximum Consensus Minimum Unemployment % of active pop. 1 Bulgaria -1 World Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts 1 Maximum Consensus Minimum 6 Fiscal Balance % of GDP Real GDP Fiscal Balance variation in % % of GDP Individual Forecasts Alpha Bank Capital Economics Citigroup Global Mkts Deutsche Bank Economic Policy Institute EIU Eurobank Frontier Strategy Group ING JPMorgan KBC National Bank of Greece OTP Bank Oxford Economics Raiffeisen Research United Bulgarian Bank UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts IMF (Oct. 1) Euro. Comm. (Feb. 1) Bulgaria Bulgaria Unemployment evolution of fcst 8 Fiscal Balance evolution of fcst General: Long-term chart period from to 19 unless otherwise stated. All real sector data are from the National Statistical Institute (NSI) and the Bulgarian National Bank (BNB). Forecasts based on FocusEconomics Consensus Forecast GDP, annual variation in %. Source: BNB and NSI. Quarterly GDP (not seasonally adjusted), year-on-year variation in %. Source: BNB and NSI. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. Unemployment, % of active population. Source: BNB. 6 Balance of non-financial public sector as % of GDP. Source: BNB. 7 Unemployment, evolution of 1 and 16 forecasts during the last 18 months. 8 Balance of non-financial public sector as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast

21 Bulgaria April 1 Monetary and External Sector Inflation and Current Account Balance 9 Inflation - 19 in % 1 Inflation Q1 1-Q 16 var. in % Consumer Price Index and Current Account Balance 1 Bulgaria Inflation 1 evolution of fcst 1 Maximum Consensus Minimum -1 - Q1 1 Q1 1 Q1 1 Q1 1 Q Inflation 16 evolution of fcst 1 Current Account % of GDP 1 Current Account evol. of fcst Bulgaria Maximum Consensus Minimum CPI Current Account variation in % % of GDP Individual Forecasts Alpha Bank Capital Economics Citigroup Global Mkts Deutsche Bank Economic Policy Institute EIU Eurobank Frontier Strategy Group ING JPMorgan KBC National Bank of Greece OTP Bank Oxford Economics Raiffeisen Research United Bulgarian Bank UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts IMF (Oct. 1) Euro. Comm. (Feb. 1) Bulgaria General: Long-term chart period from to 19 unless otherwise stated. All monetary and external sector data are from the National Statistical Institute (NSI) and the Bulgarian National Bank (BNB). European Commission forecasts refer to annual average harmonized inflation. See below for details. Government forecasts refer to average of period harmonized inflation. See below for details. Forecasts based on FocusEconomics Consensus Forecast. 9 Inflation, annual variation of consumer price index (CPI) in % (eop). Source: NSI. 1 Quarterly inflation, annual variation of consumer price index (CPI) in % (eop). Source: NSI. 11 Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. 1 Current account balance as % of GDP. Source: BNB. 1 Current account balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 1

22 Fact Sheet Bulgaria April 1 General Data Official name: Republic of Bulgaria Capital: Sofia (1.m) Other cities: Plovdiv (.7m) Varna (.m) Area (km): 11,879 Population (million, 1 est.): 7. Population density (per km, 1): 6. Population growth rate (%, 1 est.): -.8 Life expectancy (years, 1 est.): 7. Illiteracy rate (%, 11): 1.6 Language: Bulgarian Measures: Metric System Time: GMT+ Bulgaria in the Region Population %-share in Poland 1.% Ukraine 1.% Other 1.8% Turkey.9% Bulgaria 1.9% 8.8% GDP %-share in Czech Republic.7% Poland 1.% Other 18.% Turkey 18.1% Bulgaria 1.%.6% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants): 6.9 Telephones - mobile cellular (per 1 inhabit.): 1 Internet Users (per 1 inhabitants):.1 Broadband Subscriptions (per 1 inhabitants): 19. Energy (1) Primary Energy Production (trillion Btu): Primary Energy Consumption (trillion Btu): 78 Electricity Generation (billion kw-h):.7 Electricity Consumption (billion kw-h): 1. Oil Supply (thousand bpd):. Oil Consumption (thousand bpd): 91 CO Emmissions (million metric tons): 8.8 Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 68 Railways (km):,1 Roadways (km): 19,1 Waterways (km): 7 Chief Ports: Burgas, Varna Trade Structure - Primary markets share in % Political Data Prime Minister: Boiko Borisov Last elections: October 1 Next elections: 18 Central Bank President: Ivan Iskrov Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: Baa Stable S&P: BB+ Stable Fitch Ratings: BBB- Stable Other 8.% Romania 8.% Italy 8.7% Turkey 9.1% Exports Germany 1.% Other EU- 7.% Romania 6.6% Other.9% Italy 6.7% Primary products share in % Imports Germany 11.%.9% Other EU % Strengths Receiver of large amounts of EU funds EU membership shields economy against financial crises Weaknesses Lack of structural reforms in key sectors Large external imbalances Fixed exchange rate restricts monetary policy Popular discontent on the state of the economy. Mineral Fuels 1.% Food 1.7% Ores & Metals 17.7% Other.1% Exports Manufact. Products 8.% Mineral Fuels.% Ores & Metals 9.6% Food 9.% Other.% Imports Manufact. Products.8% FocusEconomics Consensus Forecast

23 Croatia April 1 Croatia Croatia LONG-TERM TRENDS -year averages Population (million):... GDP (EUR bn):.. 7. GDP per capita (EUR): 1,6 1,1 11,9 GDP growth (%): Fiscal Balance (% of GDP): Public Debt (% of GDP): Inflation (%):.6..1 Current Account (% of GDP): External Debt (% of GDP): Outlook stable That Croatia has been stuck in recession for six years now mainly reflects structural weaknesses such as a costly public sector, low business competitiveness and a rigid labor market. However, the pace of contraction has softened gradually in recent years and, in Q 1, GDP expanded for the first time in over three years, albeit timidly. The expansion was mainly due to solid growth in exports. Recent indicators send mixed signals: while industrial production rebounded in February, unemployment remained high. Meanwhile, Finance Minister Boris Lalovac urged banks and holders of Swiss franc-denominated loans to resume talks aimed at finding a model for converting about 6 thousand loans into euros. The value of the loans is estimated at almost 8% of GDP. Talks on the subject had begun in February after the government decided to freeze the exchange rate of the kuna against the Swiss franc for all franc-indexed consumer loans for one year to ease the burden on local borrowers. FocusEconomics Consensus Forecast panelists expect that the Croatian economy will emerge from recession this year and expand a mild.%, which is unchanged from last month s projection. For 16, the panel expects GDP growth to pick up to 1.%. Consumer prices fell.% in annual terms in February, which marked a softer decline than January s record-drop of.9%. Panelists expect inflation to average.% in 1. For 16, they project that inflation will rise to 1.%. Teresa Kersting Economist Industrial Production variation in % 6.. %. Year-on-year Annual average REAL SECTOR Industrial production rebounds in February In February, industrial output rose.% over the same month last year in working-day adjusted terms, contrasting January s.9% drop. The increase reflected a turnaround in manufacturing. Conversely, the mining and quarrying as well as the electricity, gas and steam sectors performed worse than in January. On a monthly basis, industrial production increased.% in seasonallyadjusted terms in February, contrasting January s.% decline. The overall trend improved as annual average growth in industrial production inched up from January s.7% to.8% in February Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year and annual average variation of industrial production index in %. Source: Croatian Bureau of Statistics (CBS). FocusEconomics Consensus Forecast panelists expect industrial production to expand 1.% in 1, which is down.1 percentage points from last month s estimate. In 16, the panel sees industrial production growth at.%. The Central Bank sees the economy exiting recession and expanding.% in 1. FocusEconomics panelists expect GDP to rise.% in 1, which is unchanged from last month s estimate. In 16, the panel expects economic growth to accelerate to 1.%. FocusEconomics Consensus Forecast

24 Croatia April 1 Inflation Consumer Price Index 1. Month-on-month (left scale) Year-on-year (right scale). % 6.. % MONETARY SECTOR Consumer prices record lower annual decline in February In February, consumer prices rose.% over the previous month, contrasting January s.6% drop and marking the largest increase since September of last year. According to the Croatian Bureau of Statistics (CBS), the print mainly reflected higher prices for food and non-alcoholic beverages, furnishing and household equipment as well as housing, water, electricity, gas and other fuels Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year and month-on-month variation of consumer price index in %. Source: Croatian Bureau of Statistics (CBS)... In annual terms, consumer prices declined.% in February, coming in above January s.9% decrease, which had represented the steepest drop on record. The overall trend stabilized as annual average consumer prices decreased.% in February, matching January s result. Meanwhile, the core consumer price index, which does not include more volatile categories such as fresh food and energy, was unchanged over the previous month, coming in above January s.7% decline. Core inflation rose 1.% in annual terms, exceeding January s.8% increase. FocusEconomics Consensus Forecast panelists expect that inflation will average.% in 1, which is down. percentage points from last month s forecast. For 16, the panel sees inflation at 1.%. FocusEconomics Consensus Forecast

25 Economic Indicators 1-19 Croatia April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 1,19 1,9 1,1 1,8 1,78 1,6 1,86 11,6 1,68 1,6 GDP (USD bn) GDP per capita (EUR) 1,9 1,1 1,78 1,78 1, 1,8 1,68 1,96 11,1 11,91 GDP (EUR bn) GDP (HRK bn) Economic Growth (Nominal GDP, ann. var. in % Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (% of active population, eop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M1 in %) Inflation (CPI, annual variation in %, aop) Inflation (Core, annual variation in %, aop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, eop) CNB Discount Rate (%, eop) Stock Market (variation of CROBEX in %) Exchange Rate (HRK per USD, eop) Exchange Rate (HRK per USD, aop) Exchange Rate (HRK per EUR, eop) Exchange Rate (HRK per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual var. in %) Merchandise Imports (annual var. in %) International Reserves (EUR bn) International Reserves (months of imports) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Inflation (CPI, annual variation in %, aop) Exchange Rate (HRK per USD, eop) Exchange Rate (HRK per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Unemployment (% of active population) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Exchange Rate (HRK per USD, eop) Exchange Rate (HRK per EUR, eop) FocusEconomics Consensus Forecast

26 Real Sector Gross Domestic Product and Fiscal Balance Croatia April 1 1 Real GDP - 19 var. in % 1 - Croatia -1 World 1 1 GDP 1 evolution of forecasts 1 Maximum Consensus Minimum -1 Unemployment % of active pop. Real GDP Q1 1-Q 16 var. in % Economic Growth and Fiscal Balance - Croatia World - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts 1 Maximum Consensus Minimum -1 6 Fiscal Balance % of GDP Real GDP Fiscal Balance variation in % % of GDP Individual Forecasts Capital Economics Citigroup Global Mkts Deutsche Bank EIU Erste Bank Frontier Strategy Group ING Institute of Econ., Zagreb Intercapital JPMorgan Kopint-Tárki OTP Bank Oxford Economics Raiffeisen Research Splitska Banka UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts Central Bank (Dec. 1) IMF (Oct. 1) Euro. Comm. (Feb. 1). 1. Croatia Croatia Unemployment evolution of fcst Fiscal Balance evolution of fcst General: Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Croatian Bureau of Statistics (CBS). Forecasts based on FocusEconomics Consensus Forecast. 1 GDP, annual variation in %. Quarterly GDP (not seasonally adjusted), year-on-year variation in %. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. Unemployment, % of active population. 6 Balance of consolidated general government as % of GDP. 7 Unemployment, evolution of 1 and 16 forecasts during the last 18 months. 8 Balance of consolidated general government as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 6

27 Croatia April 1 Monetary and External Sector Inflation and Exchange Rate 9 Inflation in % Inflation evolution of forecast 1 Croatia Exchange Rate HRK per EUR 1 Interest Rate in % Consumer Price Index and Exchange Rate Interest Rate evolution of fcst Croatia Current Account % of GDP Prices (CPI) Exchange Rate variation in % HRK per EUR Individual Forecasts Capital Economics Citigroup Global Mkts Deutsche Bank EIU Erste Bank Frontier Strategy Group ING Institute of Econ., Zagreb Intercapital JPMorgan Kopint-Tárki OTP Bank Oxford Economics Raiffeisen Research Splitska Banka UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts IMF (Oct. 1) Euro. Comm. (Feb. 1) Croatia HRK per EUR evolution of fcst Current Account evol. of fcst General: Long-term chart period from to 19 unless otherwise stated. All monetary and external sector data are from the Croatian Bureau of Statistics (CBS) and the Croatia National Bank (HNB, Hrvatska Narodna Banka). See below for details. European Commission forecasts refer to annual average harmonized inflation. Forecasts based on FocusEconomics Consensus Forecast. 9 Inflation, annual variation of consumer price index (CPI) in % (aop). Source: CBS. 1 Interest rate, CNB Repo Rate in % (eop). Source: CNB. 11 Inflation, evolution of 1 and 16 forecasts during the last 18 months. 1 Interest rate, evolution of 1 and 16 forecasts during the last 18 months. 1 Exchange rate, HRK per EUR (eop). Source: Thomson Reuters. 1 Current account balance as % of GDP. Source: HNB. 1 Exchange rate, evolution of 1 and 16 forecasts during the last 18 months. 16 Current account balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 7

28 FOCUSECONOMICS Fact Sheet Croatia April 1 General Data Official name: Republic of Croatia Capital: Zagreb (1.1 m) Other cities: Split (. m) Rijeka (.1 m) Area (km): 6,9 Population (million, 1 est.):. Population density (per km, 1): 7.6 Population growth rate (%, 1 est.): -.1 Life expectancy (years, 1 est.): 76. Illiteracy rate (%, ): 1.1 Language: Croatian Measures: Metric system Time: GMT+1 Croatia in the Region Population %-share in Poland 1.% Ukraine 1.% Other 17.% Turkey.% Croatia 1.% 8.8% GDP %-share in Czech Republic.7% Poland 11.% Other 17.% Turkey 18.1% Croatia 1.% 7.1% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants): 6.8 Telephones - mobile cellular (per 1 inhabit.): 11 Internet Users (per 1 inhabitants): 66.7 Broadband Subscriptions (per 1 inhabitants): 1. Energy (1) Primary Energy Production (trillion Btu): 18 Primary Energy Consumption (trillion Btu): Electricity Generation (billion kw-h): 1. Electricity Consumption (billion kw-h): 19.6 Oil Supply (thousand bpd):.1 Oil Consumption (thousand bpd): 8 CO Emmissions (million metric tons):. Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 69 Railways (km):,7 Roadways (km): 9,1 Waterways (km): 78 Chief Ports: Rijeka, Split Trade Structure - Primary markets share in % Political Data Prime Minister: Zoran Milanović Last elections: December 11 Next elections: February 16 Central Bank Governor: Boris Vujčić Other 8.% Exports Other EU % Italy 1.9% China 7.1% Other.9% 7.6% Imports Other EU % Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: Ba1 Negative S&P: BB Stable Fitch Ratings: BB Stable Slovenia 8.8% Germany 1.6% Slovenia.9% Germany 1.9% Primary products share in % Italy 16.7% Strengths Inflation relatively contained Competitive tourism industry EU accession promotes economic development.. Weaknesses Elevated external debt ratio High unemployment levels Lack of reforms in the judiciary system Mineral Fuels 1.7% Ores & Metals.% Food 11.9% Other.% Exports Manufact. Products 66.% Mineral Fuels 1.% Food 11.% Other.9% Imports Manufact. Products 6.9% FocusEconomics Consensus Forecast 8

29 Czech Republic April 1 Czech Rep. Czech Republic LONG-TERM TRENDS -year averages Population (million): GDP (EUR bn): GDP per capita (EUR): 1,1 1,19 17,79 GDP growth (%):... Fiscal Balance (% of GDP): Public Debt (% of GDP):.1.1. Inflation (%):..8.1 Current Account (% of GDP): External Debt (% of GDP): Outlook stable After two years in recession, the Czech Republic returned to growth last year. The latest economic indicators suggest that the country remains on solid footing: industrial production picked up and unemployment moderated in February. In addition, the Manufacturing PMI and economic sentiment continue to point to expansion, even though the latter edged down for a third consecutive month in March. Prime Minister Bohuslav Sobotka said in April that the Czech Republic should set a specific date for adopting the euro as its currency and supported as nearest possible date, even though the three-party governing coalition has not actually agreed on switching currency. FocusEconomics Consensus Forecast panelists expect the Czech Republic to grow at a robust pace this year. The panel projects that GDP will expand.% in 1, which is unchanged from last month s estimate. For 16, the panel foresees growth of.7%. Inflation inched up from.1% in February to.% in March, the highest reading in four months. Nevertheless, inflation remains below the lower bound of the Central Bank s target range. At its 6 March monetary policy meeting, the Bank kept the two-week repo rate on hold at.% for the 19th consecutive meeting. The panel expects inflation of.% in 1, which is down. percentage points from last month s estimate. For 16, panelists foresee inflation of 1.7%. Teresa Kersting Economist Purchasing Managers Index 6 REAL SECTOR Manufacturing PMI inches up in March In March, the manufacturing Purchasing Managers Index (PMI), elaborated by HSBC in collaboration with Markit, increased slightly from February s.6 to 6.1. As a result, the manufacturing PMI moved a bit further above the -threshold, where it has been since May 1. March s slight improvement mainly reflects that new orders and, to a lesser extent, employment, purchasing activity and stocks of purchases all grew at a slightly faster pace than in the previous month. Conversely, output growth slowed slightly, resulting in a faster increase in backlogs. Input prices registered their first increase in three months, however output prices remained broadly unchanged over the previous month. Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: HSBC Manufacturing Purchasing Managers Index (PMI). A reading above indicates an expansion in business activity while a value below points to a contraction. Source: HSBC and Markit. HSBC/Markit commented that, [t]he Czech manufacturing sector has seen strong growth throughout the first three months of the year [ ]. This boost [ ] lends support to the CNB s view that economic growth will accelerate gradually following a slowdown in late-1. PMI output data for February and March suggest that the.% official year-on-year growth rate of industrial output seen in January (adjusted for calendar effects) will be broadly maintained. Moreover, a wider European recovery in 1, hinted at recently by the strong March reading from the Flash Eurozone PMI, should provide further support to FocusEconomics Consensus Forecast 9

30 Czech Republic April 1 Czech manufacturing growth. Meanwhile, both PMI price indicators continue to signal a lack of inflationary pressures. The Czech National Bank expects the economy to expand.6% in 1 and.% in 16. FocusEconomics Consensus Forecast panelists expect the economy to expand.% in 1, which is unchanged over the previous month s projection. For 16, the panel sees GDP increasing.7%. Industrial Production variation in % 1 % - Year-on-year Annual average -1 Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes and annual average variation of industrial production index in %. Source: Czech Statistical Office (CSO). REAL SECTOR Industry picks up in February In February, industrial production grew.% over the same month last year, coming in above the.8% expansion observed in January. According to the Statistical Office, February s expansion mainly came on the back of increased manufacture of vehicles as well as of electricity, gas, steam and air conditioning supply. A sequential comparison shows that industrial production accelerated from a.% rise in January to a.7% increase in February. The trend continued to moderate as annual average growth in industrial production edged down from.7% in January to.% in February, which marked the lowest rate in nine months. FocusEconomics Consensus Forecast panelists expect industrial output to expand.% in 1, which is unchanged from last month s forecast. For 16, panelists expect industrial output to expand.%. Economic Sentiment Index Economic sentiment Business confidence Consumer confidence 7 Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Economic Sentiment Indicator is a weighted average of confidence indicators in industry, construction, trade, selected services and consumer confidence indicator. =1. Source: Czech Statistical Office (CSO). OUTLOOK Economic sentiment recedes slightly in March The economic sentiment indicator published by the Czech Statistics Office (CSO) inched down from February s 9. to 9.1 in March. March s print represents a third consecutive drop, after sentiment had followed a continuous upward trend in previous months and reached an over-six-year high in December. March s reading reflects a mild moderation in business sentiment, whereas consumer confidence remained unchanged. As a result, the index moved a bit further below its 1-point long-term average. Business sentiment edged down from February s 9. points to 9.9 points in March, the lowest print in five months. The moderation was driven by declining confidence in the services and trade sectors. Conversely, confidence improved in the industry sector and remained unchanged in the construction sector. FocusEconomics panelists see fixed investment increasing.1% in 1, which is unchanged from last month s projection. For 16, panelists expect investment to expand.%. Consumer confidence remained at February s 1.7 points. According to the survey, consumers of the overall economic situation, unemployment, their own financial situation and their saving capacity was unchanged compared to the previous month. However, households worries about price increases rose compared to February. FocusEconomics panelists expect private consumption to expand.% in 1, which is unchanged from last month s projection. For 16, the panel sees private consumption growing.%. FocusEconomics Consensus Forecast

31 Czech Republic April 1 Inflation Consumer Price Index.6 Month-on-month (left scale) Year-on-year (right scale).. % %. MONETARY SECTOR Inflation inches up in March In March, consumer prices rose.1% over the previous month, coming in slightly below the.% increase registered in February. According to the Czech Statistical Office, March s increase mainly reflects higher prices for transport as well as for alcoholic beverages and tobacco. In March, annual headline inflation inched up from January s.1% to.%, the highest reading in four months. The reading fell slightly short of the.% rise that the market had expected. Inflation remains well below the Czech National Bank s (CNB) target range of 1.% to.% Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Month-on-month and year-on-year variation of consumer price index in %. Source: Czech Statistical Office (CSO). The CNB expects consumer prices to drop.1% on average in 1. FocusEconomics Consensus Forecast panelists forecast that inflation will average.% in 1, which is down. percentage points from last month s Consensus. For 16, panelists expect inflation to rise to 1.7%. MONETARY SECTOR Central Bank leaves rate on hold for 19th consecutive meeting At its 6 March monetary policy meeting, the Czech National Bank (CNB) kept the two-week repo rate on hold at.% for the 19th consecutive meeting. The Central Bank also reaffirmed its commitment to intervene in the foreign exchange market in order to keep the Czech koruna at close to CZK 7. per EUR until the end of 16. The floor for the exchange rate was set in November 1. Monetary Policy Rate in % %.. Jan-1 Jan-11 Jan-1 Jan-1 Jan-1 Jan-1 Note: -week repo rate in %. Source: Czech National Bank (CNB). According to the Bank, the Czech economy slowed down slightly more than expected in the final quarter of 1, due to the fact that inventories performance was worse than expected. Conversely, the remaining GDP components performed better than forecast. The Bank expects GDP growth to speed up gradually toward.% in 16, sustained by stronger external demand, accommodative monetary policy conditions, the effect of low oil prices, and a recovery in public investment. As for the labor market, the Bank pointed out that recent indicators sent mixed signals: while the share of unemployed persons dropped faster than forecast, wage growth was below expectations. Regarding price developments, the Central Bank stressed that inflation was close to but above zero in February and noted that the risks to the Bank s current inflation forecast were anti-inflationary. While the Central Bank restated that it will tolerate a temporary decrease in inflation, it also reiterated that it might change the level of the exchange rate cap to ensure that inflation converges toward the target rate in the longer term, pointing out that the probability of such a move had increased compared to the previous meeting, owing to the increased anti-inflationary risks to the inflation outlook. The next monetary policy meeting is scheduled for 7 May. For 1, FocusEconomics Consensus Forecast panel participants see the two-week repo rate at.%. Analysts expect the Czech koruna to trade at CZK 7.6 per EUR at the end of 1. For 16, the panel expects the twoweek repo rate to be.18% and see the koruna trading at CZK 7.1 per EUR. FocusEconomics Consensus Forecast 1

32 Economic Indicators 1-19 Czech Republic April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 19,9 1,6 19,68 19,71 19, 16,8 16,77 18,,,16 GDP (USD bn) GDP per capita (EUR) 1,96 1,1 1,17 1,89 1,66 1,71 1,86 17,18 17,7 18,66 GDP (EUR bn) GDP (CZK bn),9,,8,86,66,8,78,788,, Economic Growth (Nom. GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (% of active population, aop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %) Inflation (CPI, annual variation in %, aop) Inflation (Core, annual variation in %, aop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, eop) Week Repo Rate (%, eop) Month PRIBOR (%, eop) Year Bond Yield (%, eop) Stock Market (variation of PX- in %) Exchange Rate (CZK per USD, eop) Exchange Rate (CZK per USD, aop) Exchange Rate (CZK per EUR, eop) Exchange Rate (CZK per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) International Reserves (EUR bn) International Reserves (months of imports) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq variation in %) Inflation (CPI, annual variation in %, aop) Week Repo Rate (%, eop) Month PRIBOR (%, eop) Year Bond Yield (%, eop) Exchange Rate (CZK per USD, eop) Exchange Rate (CZK per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Unemployment (% of active population) Economic Sentiment Index ( = 1) HSBC Manufacturing PMI (-threshold) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Exchange Rate (CZK per USD, eop) Exchange Rate (CZK per EUR, eop) Merchandise Exports (annual variation in %) FocusEconomics Consensus Forecast

33 Real Sector Gross Domestic Product Czech Republic April 1 1 Real GDP -19 var. in % Real GDP Q1 1-Q 16 var. in % Real GDP growth in % - Czech Republic -1 World 1 1 GDP 1 evolution of forecasts 1 1 % % % Maximum Consensus Minimum GDP 1 Panelist Distribution - Czech Republic World - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts 1 Maximum Consensus Minimum Individual Forecasts 1 16 BofA Merrill Lynch..1 Capital Economics.. Citigroup Global Mkts.7. Credit Agricole..8 Credit Suisse 1.8. CSOB / Patria Finance.. Danske Bank..1 DekaBank.1.6 Deutsche Bank.6. EIU.9.8 Erste Bank.6. Experian.6.1 Frontier Strategy Group 1.8. Goldman Sachs..8 HSBC..7 ING.. J&T Banka.. JPMorgan.. Komerční Banka..7 Nomura.1. Oxford Economics.8.9 Raiffeisen Research.. UBS.. UniCredit..7 WIIW.. Minimum 1.8. Maximum.. Median..7 Consensus..7 History days ago..7 6 days ago..8 9 days ago..8 Additional Forecasts Central Bank (Feb. 1).6. IMF (Oct. 1).. European Commission (Feb. 1)..6 % 1% % < >. Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Czech Statistical Office (CSO). Forecasts are based on FocusEconomics Consensus Forecast. 1 GDP, real annual variation in %. Quarterly GDP (seasonally adjusted), year-on-year variation in %. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. GDP, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast

34 Real Sector Additional forecasts Czech Republic April 1 Consumption and Investment Consumption Investment variation in % variation in % Individual Forecasts BofA Merrill Lynch Capital Economics.... Citigroup Global Mkts....7 Credit Agricole Credit Suisse CSOB / Patria Finance...9. Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian..6.. Frontier Strategy Group Goldman Sachs HSBC ING J&T Banka JPMorgan Komerční Banka Nomura Oxford Economics..6.. Raiffeisen Research..1.. UBS.... UniCredit.... WIIW.... Minimum Maximum Median.... Consensus...1. History days ago days ago days ago Consumption variation in % 1 Czech Republic Consumption evolution of fcst Investment variation in % 1-1 Czech Republic Investment evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Czech Statistical Office (CSO). Forecasts are based on FocusEconomics Consensus Forecast. 6 Private consumption, annual variation in %. 7 Private consumption, evolution of 1 and 16 forecasts during the last 18 months. 8 Gross fixed investment, annual variation in %. 9 Gross fixed investment, evolution of 1 and 16 forecasts during the last 18 months... FocusEconomics Consensus Forecast

35 Real Sector Additional forecasts Czech Republic April 1 Industry and Unemployment 1 Industry variation in % Industry Unemployment variation in % % of active pop. Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse CSOB / Patria Finance Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING J&T Banka JPMorgan Komerční Banka Nomura Oxford Economics Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Czech Republic Industry evol. of forecasts Unemployment % of active pop. 1 1 Czech Republic Unemployment evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Czech Statistical Office (CSO) and the Czech Ministry of Labor and Social Affairs (MPSV). Forecasts are based on FocusEconomics Consensus Forecast. 1 Industrial production, annual variation in %. Source: CSO. 11 Industrial production, evolution of 1 and 16 forecasts during the last 18 months. 1 Unemployment, % of active population. Source: MPSV. Historical data and forecasts are consistent with the new methodology. 1 Unemployment, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast

36 Czech Republic April 1 Real Sector Additional forecasts Fiscal Balance and Public Debt Fiscal Balance Public Debt % of GDP % of GDP Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse CSOB / Patria Finance Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING J&T Banka JPMorgan Komerční Banka Nomura Oxford Economics Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Fiscal Balance % of GDP Czech Republic Fiscal Balance evol. of forecasts Public Debt % of GDP Czech Republic Public Debt evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from Eurostat. Forecasts are based on FocusEconomics Consensus Forecast. 1 General government balance as % of GDP. 1 General government balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. 16 Public debt as % of GDP. 17 Public debt as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 6

37 Monetary Sector Inflation Czech Republic April 1 18 Inflation - 19 in % 1 1 Inflation 1 evolution of fcst 1 Maximum Consensus Minimum -1 Inflation 1 Panelist Distribution 6% % Czech Republic Inflation Q1 1-Q 16 in % 1 1 Inflation 16 evolution of fcst Czech Republic Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Maximum Consensus Minimum Inflation annual variation of consumer price index in % Individual Forecasts 1 16 BofA Merrill Lynch Capital Economics. 1. Citigroup Global Mkts Credit Agricole Credit Suisse - - CSOB / Patria Finance.8. Danske Bank..1 DekaBank.8.6 Deutsche Bank. 1.9 EIU. 1. Erste Bank. 1.6 Experian - - Frontier Strategy Group.7 1. Goldman Sachs. 1. HSBC ING. 1.7 J&T Banka. 1. JPMorgan. 1.9 Komerční Banka.. Nomura Oxford Economics. 1.9 Raiffeisen Research. 1.7 UBS. 1.7 UniCredit. 1.6 WIIW. 1. Minimum Maximum.8.6 Median. 1.7 Consensus. 1.7 History days ago days ago days ago Additional Forecasts Central Bank (Feb. 1) IMF (Oct. 1) 1.9. Euro. Comm. (Feb. 1).8 1. % % < > 1.8 Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the Czech Statistical Office (CSO). Forecasts are based on FocusEconomics Consensus Forecast. 18 Inflation, annual variation of consumer price index (CPI) in % (aop). 19 Quarterly inflation, annual variation of consumer price index (CPI) in % (aop). Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. Inflation, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 7

38 Monetary Sector Interest Rate Czech Republic April 1 Interest Rate - 19 in % 1 Int. Rate 1 evolution of fcst Interest Rate 1 Panelist Distribution 1% Czech Republic 1 1 Maximum Consensus Minimum. Interest Rate Q1 1-Q 16 in % 1 6 Int. Rate 16 evolution of fcst 1 8 Czech Republic Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Maximum Consensus Minimum Interest Rate -Week Repurchase Rate Individual Forecasts 1 16 BofA Merrill Lynch.. Capital Economics.. Citigroup Global Mkts.. Credit Agricole.. Credit Suisse.. CSOB / Patria Finance.. Danske Bank. - DekaBank.. Deutsche Bank.. EIU - - Erste Bank - - Experian - - Frontier Strategy Group - - Goldman Sachs.. HSBC.. ING.. J&T Banka.. JPMorgan.. Komerční Banka..7 Nomura..7 Oxford Economics - - Raiffeisen Research..1 UBS.. UniCredit.. WIIW - - Minimum.. Maximum..7 Median.. Consensus..18 History days ago..6 6 days ago..8 9 days ago.. 8% 6% % % % < >. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the Czech National Bank (CNB). Forecasts are based on FocusEconomics Consensus Forecast. Interest rate, Central Bank -Week Repo Rate in % (eop). Quarterly interest rate, Central Bank -Week Repo Rate in % (eop). Interest rate, evolution of 1 forecasts during the last 18 months. 6 Interest rate, evolution of 16 forecasts during the last 18 months. 7 Interest rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 8

39 Monetary Sector Exchange Rate Czech Republic April 1 8 Exchange Rate CZK per EUR 9 Exchange Rate CZK per EUR Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 CZK per EUR 1 evol. of fcst 1 CZK per EUR 16 evol. of fcst 1 Maximum Maximum Consensus Consensus Minimum Minimum Nov Feb May Aug Nov Feb CZK per EUR 1 Panelist Distribution 6% Exchange Rate CZK per EUR Individual Forecasts 1 16 BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse CSOB / Patria Finance Danske Bank 7. - DekaBank Deutsche Bank EIU - - Erste Bank - - Experian - - Frontier Strategy Group - - Goldman Sachs. 8. HSBC ING 7.. J&T Banka JPMorgan 7. - Komerční Banka Nomura Oxford Economics Raiffeisen Research UBS UniCredit WIIW Minimum 7.. Maximum. 9. Median Consensus History days ago days ago days ago % % % < > 9. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from Thomson Reuters. Forecasts based on FocusEconomics Consensus Forecast. 8 Exchange rate, CZK per EUR (eop). 9 Quarterly exchange rate, CZK per EUR (eop). Exchange rate, evolution of 1 forecast during the last 18 months. 1 Exchange rate, evolution of 16 forecast during the last 18 months. Exchange rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 9

40 External Sector Current Account and Trade Balance Czech Republic April 1 Current Account and Trade Balance Current Account Trade Balance % of GDP EUR bn Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse CSOB / Patria Finance Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING J&T Banka JPMorgan Komerční Banka Nomura Oxford Economics Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Current Account % of GDP Trade Balance EUR bn 18 1 Czech Republic Current Account evol. of fcst Trade Balance Exports Imports Trade Balance evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Czech National Bank (CNB). Forecasts based on FocusEconomics Consensus Forecast. Current account balance, as % of GDP. Current account balance, evolution of 1 and 16 forecasts during the last 18 months. Trade balance, exports and imports, in EUR. 6 Trade balance, evolution of 1 and 16 forecasts during the last 18 months. 8 7 FocusEconomics Consensus Forecast

41 External Sector Exports and Imports Czech Republic April 1 Exports and Imports Exports Imports EUR bn EUR bn Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse CSOB / Patria Finance Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING J&T Banka JPMorgan Komerční Banka Nomura Oxford Economics Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Exports variation in % - Czech Republic Exports evolution of fcst Imports variation in % Czech Republic Imports evol. of forecasts 1 1 Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Czech National Bank (CNB). Forecasts based on FocusEconomics Consensus Forecast. 7 Exports, annual variation in %. 8 Exports, evolution of 1 and 16 forecasts during the last 18 months. 9 Imports, annual variation in %. Imports, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 1

42 External Sector Additional forecasts Czech Republic April 1 International Reserves and External Debt Int. Reserves External Debt EUR bn EUR bn Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse CSOB / Patria Finance Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING J&T Banka JPMorgan Komerční Banka Nomura Oxford Economics Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Int. Reserves months of imports 11 Czech Republic Int. Reserves evolution of fcst 1 16 External Debt % of GDP 7 Czech Republic External Debt evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Czech National Bank (CNB). Forecasts are based on FocusEconomics Consensus Forecast. 1 International reserves, months of imports. International reserves, evolution of 1 and 16 forecasts during the last 18 months. External debt as % of GDP. External debt, evolution of 1 and 16 forecasts during the last 18 months. 9 8 FocusEconomics Consensus Forecast

43 FOCUSECONOMICS Czech Republic April 1 Fact Sheet General Data Official name: Czech Republic Capital: Prague (.m) Other cities: Brno (1.m) Ostrava (1.m) Area (km): 78,867 Population (million, 1 est.): 1. Population density (per km, 1): 1 Population growth rate (%, 1 est.):. Life expectancy (years, 1 est.): 78. Illiteracy rate (%, 11): 1. Language: Czech Measures: Metric system Time: GMT+1 Czech Republic in the Region Population %-share in Poland 1.% Ukraine 1.% Other 1.6% Turkey.9% Czech Republic.9% 8.9% GDP %-share in Romania.6% Poland 1.6% Other 1.% Turkey 18.% Czech Republic.7% 6.% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants): 18.7 Telephones - mobile cellular (per 1 inhabit.): 11 Internet Users (per 1 inhabitants): 7.1 Broadband Subscriptions (per 1 inhabitants): 17. Energy (1) Primary Energy Production (trillion Btu): 1,6 Primary Energy Consumption (trillion Btu): 1,7 Electricity Generation (billion kw-h): 81.9 Electricity Consumption (billion kw-h): 6. Oil Supply (thousand bpd): 1. Oil Consumption (thousand bpd): 19 CO Emmissions (million metric tons): 91. Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 18 Railways (km): 9,69 Roadways (km): 1,671 Waterways (km): 66 Chief Ports: Děčín, Prague Trade Structure Primary markets share in % Political Data Prime Minister: Bohuslav Sobotka Last elections: -6 October 1 Next elections: 17 Central Bank President: Miroslav Singer Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: A1 Stable S&P: AA- Stable Fitch Ratings: A+ Stable Poland 6.% Other.% Slovakia 9.1% Exports Germany 1.8% Other EU- 7.% China 6.% Slovakia 7.% Other 19.% Poland 7.7% Primary products share in %.% Imports Germany 9.% Other EU- 7.6% Strengths European Union membership mitigates external shocks Highly educated work force FDI supports high value-added exports.. Weaknesses Economy dependent on European demand Ageing population Infrastructure behind its western peers Manufact. Products 87.% Exports Other 1.% Mineral Fuels 9.9% Food.7% Other 6.% Imports Manufact. Products 78.1% FocusEconomics Consensus Forecast

44 Estonia April 1 Estonia Estonia LONG-TERM TRENDS -year averages Population (million): GDP (EUR bn): GDP per capita (EUR): 1,8 1,18 17,7 GDP growth (%):.8..6 Fiscal Balance (% of GDP): Public Debt (% of GDP): Inflation (%):..9. Current Account (% of GDP): Outlook stable Estonia s economy expanded.% in Q 1, mainly driven by an acceleration in private consumption and government spending. Q s reading was the strongest since Q1 1. Momentum seems to have been carried over in the first quarter of this year, as industrial production accelerated in February. Meanwhile, in the political arena, Prime Minister Taavi Roivas Reform Party allied with the leftist Social Democrats and the conservative Pro Patria-Res Publica Union (IRL) party. The new three-party coalition is comprised exclusively of pro-western parties. The elections were characterized by rampant tensions between pro-n and pro-western parties; a quarter of Estonia s population is of n ethnicity and fears of increased pressure from Moscow reached a new peak. Estonia is expected to post healthy growth this year, although geopolitical tensions between the European Union and will continue to create uncertainty in various sectors of the economy. Domestic demand will continue to be the main driver of the economy this year, supported by increased wages and historically-low energy prices. FocusEconomics panelists see GDP expanding.% in 1, which is unchanged from last month s forecast. The panel expects GDP growth to accelerate to.7% in 16. Harmonized consumer prices declined.% annually in February (January: -.% year-on-year). FocusEconomics Consensus Forecast panelists expect HICP inflation to pick up both this year and the next, averaging.% in 1 and 1.9% in 16. Eric Denis Economist Gross Domestic Product variation in % 1 8 % Q1 11 Q1 1 Q1 1 Q1 1 Q1 1 Note: Year-on-year changes of GDP in %. Source: Statistics Estonia and FocusEconomics Consensus Forecast. REAL SECTOR GDP accelerates in Q; posts moderate growth in full year 1 GDP increased.% in Q over the same period of the previous year according to the revised data Statistics Estonia (SE) published on 11 March. The reading was revised up a notch from the.7% expansion reported in the flash estimate and represented an acceleration over the.% increase recorded in Q. Q s expansion, which was the strongest since Q1 1, was mainly driven by an acceleration in private consumption and government spending. Investment also improved somewhat compared to the strong contraction tallied in the previous quarter. On the domestic side, growth in private consumption increased.8% in Q, which represented an improvement compared to the.% tallied in Q. Government consumption accelerated from a.9% increase in Q to a significant.% expansion in Q, which marked the highest result since Q 8. Meanwhile, gross fixed investment declined 7.1% in Q, which was a less pronounced contraction than the 9.8% fall observed in Q. FocusEconomics Consensus Forecast

45 Estonia April 1 On the external side, exports of goods and services jumped from a.8% increase in Q to a 6.% expansion in Q, which marked the highest reading in six quarters. Meanwhile, import growth jumped from Q s.9% to.9% in Q. Since imports accelerated more than exports, the external sector s net contribution to overall economic growth decreased from 1.7 percentage points in Q to.1 percentage points in Q. In seasonally- and working-day adjusted terms, GDP increased 1.1% quarteron-quarter in Q, which was notably above the mild.% expansion tallied in the third quarter. In the full year 1, GDP expanded.1%, which represented an improvement compared to the 1.6% increase registered in 1, but was still far below the results in the three prior years. The Central Bank expects GDP growth to reach.1% in 1 and.% in 16. FocusEconomics Consensus Forecast participants see the economy growing.% in 1, which is unchanged from last month s estimate. In 16, economic growth is expected to increase to.7%. Industrial Production variation in % 1 8 % - Year-on-year Annual average -8 Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes and annual average growth of industrial production index in %. Source: Statistics Estonia and FocusEconomics calculations. REAL SECTOR Industrial production accelerates in February In February, industrial production increased a working-day adjusted.% over the same month of last year, which came in well above the mild 1.9% rise tallied in January. According to Statistics Estonia, February s solid expansion reflected improvements in the manufacturing and energy sectors. Conversely, production in the mining sector declined compared to the same month of the previous year. A month-on-month assessment shows that industrial output rebounded from a.7% drop in January to a 1.6% rise in February, which marked a sevenmonth-high. As a result of the notable increase, the overall trend continued to improve in February, with annual average growth in industrial production rising to.% from January s.8%. FocusEconomics Consensus Forecast panelists foresee industrial production growing.% in 1, which is unchanged from the previous month s projection. In 16, the panel expects industrial production to increase.8%. Inflation Consumer Price Index MONETARY SECTOR Consumer prices decline in annual terms again in March Consumer prices increased.6% over the previous month in March, which mirrored February s print. According to Statistics Estonia, the result mainly reflected higher prices for motor fuels, as well as for clothing and transport. Conversely, prices for housing and for household goods were lower compared to the previous month. %. -. Month-on-month (left scale) Year-on-year (right scale) Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Year-on-year and month-on-month variation of consumer price index in %. Source: Statistics Estonia. %.. Consumer prices decreased.6% compared to the same month last year in March, which was a less pronounced decline than the.8% drop tallied in the previous month. Meanwhile, annual HICP inflation rose from a.% annual decline in January to a.% decline in February (the last month for which data are available). Annual average HICP inflation ticked down from January s.% to.% in February. FocusEconomics Consensus Forecast panelists expect harmonized inflation to average.% in 1, which is down. percentage points from last month s forecast. In 16, the panel expects average inflation to accelerate to 1.9%. FocusEconomics Consensus Forecast

46 Economic Indicators 1-19 Estonia April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 1,67 17,171 17,11 18,8 19,61 16, 16,6 18,86,11, GDP (USD bn) GDP per capita (EUR) 11, 1, 1,11 1,196 1,68 1, 1,71 16,6 17,66 18,8 GDP (EUR bn) Economic Growth (Nom. GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (% of active population, aop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %) Inflation (CPI, annual variation in %, eop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Exchange Rate (USD per EUR, eop) Exchange Rate (USD per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, s.a. qoq variation in %) Inflation (HICP, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Exchange Rate (USD per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Inflation (HICP, annual variation in %) Exchange Rate (USD per EUR, eop) FocusEconomics Consensus Forecast 6

47 Real Sector Gross Domestic Product and Fiscal Balance Estonia April 1 1 Real GDP -19 var. in % Real GDP Q1 1-Q 16 var. in % Economic Growth and Fiscal Balance Estonia World GDP 1 evolution of forecasts 6 Maximum Consensus Minimum 6 Estonia - World Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts Maximum Consensus Minimum 1 Real GDP Fiscal Balance variation in % % of GDP Individual Forecasts Capital Economics Danske Bank DekaBank DNB EIU..8.. JPMorgan Nordea Oxford Economics SEB Swedbank WIIW Minimum Maximum.... Median Consensus History days ago days ago days ago Additional Forecasts Central Bank (Dec. 1) IMF (Oct. 1) Euro. Comm. (Feb. 1) Unemployment % of active pop. 6 Fiscal Balance % of GDP 1 1 Estonia Estonia Unemployment evolution of fcst Fiscal Balance evolution of fcst General: Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Statistics Estonia (SE) and Eurostat. Forecasts based on FocusEconomics Consensus Forecast. 1 GDP, annual variation in %. Source: SE. Quarterly GDP (not seasonally-adjusted), year-on-year variation in %. Source: SE. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. Unemployment, % of active population. Source: SE. 6 Balance of non-financial public sector as % of GDP. Source: Eurostat. 7 Unemployment, evolution of 1 and 16 forecasts during the last 18 months. 8 Balance of non-financial public sector as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 7

48 Estonia April 1 Monetary and External Sector Inflation and Current Account Balance 9 Inflation -19 in % Estonia Inflation 1 evolution of fcst 6 Maximum Consensus Minimum 1 Inflation Q1 1-Q 16 in % Inflation and Current Account Balance 1 Inflation 16 evolution of fcst Estonia Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Maximum Consensus Minimum Prices (HICP) Current Account variation in % % of GDP Individual Forecasts Capital Economics Danske Bank DekaBank DNB EIU JPMorgan Nordea Oxford Economics SEB Swedbank WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts Central Bank (Dec. 1) IMF (Oct. 1) Euro. Comm. (Feb. 1) Current Account % of GDP 1 Current Account evol. of fcst 1 Estonia General: Long-term chart period from to 19 unless otherwise stated. All monetary and external sector data are from the Statistics Estonia (SE) and the Bank of Estonia (EP, Eesti Pank). See below for details. Forecasts based on FocusEconomics Consensus Forecast. 9 Inflation, annual average variation of harmonized index of consumer prices (HICP) in % Source: SE. 1 Inflation, annual variation of quarterly average harmonized index of consumer prices (HICP) in %. Source: SE. 11 Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. 1 Current account balance as % of GDP. Source: EP. 1 Current account balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 8

49 Fact Sheet Estonia April 1 General Data Official name: Republic of Estonia Capital: Tallinn (.m) Area (km):,8 Population (million, 1 est.): 1. Population density (per km, 1): 9. Population growth rate (%, 1 est.): -.7 Life expectancy (years, 1 est.): 7.1 Illiteracy rate (%, 11):. Language: Estonian, n Measures: Metric system Time: GMT+ Estonia in the Region Population %-share in Baltics Latvia.% Estonia 1.1% GDP %-share in Baltics Latvia.% Estonia.% Lithuania 6.8% Lithuania.6% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants):.1 Telephones - mobile cellular (per 1 inhabit.): 16 Internet Users (per 1 inhabitants): 8. Broadband Subscriptions (per 1 inhabitants): 6. Energy (1) Primary Energy Production (trillion Btu): 1 Primary Energy Consumption (trillion Btu): 9 Electricity Generation (billion kw-h): 11. Electricity Consumption (billion kw-h): 8. Oil Supply (thousand bpd): 11. Oil Consumption (thousand bpd): 8.6 CO Emmissions (million metric tons):.7 Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 18 Railways (km): 1,196 Roadways (km): 8,1 Waterways (km): Chief Ports: Tallinn, Kunda, Pärnu Trade Structure - Primary markets share in % Political Data Prime Minister: Taavi Roivas Last elections: 1 March 1 Next elections: 19 Central Bank President: Ardo Hansson Latvia 9.% Other.% Exports 1.7% Other EU % Asia ex- Japan.% Sweden 1.8% Other.% Imports Other EU- 7 7.% Long-term Foreign Currency Ratings Finland 1.% Sweden 16.8% Germany 11.% Finland 1.% Agency Rating Outlook Moody s: A1 Stable S&P: AA- Stable Fitch Ratings: A+ Stable Primary products share in % Strengths Commitment to prudent fiscal policy Widespread English proficiency High per capita income Weaknesses Small domestic market High external debt Ageing population Mineral Fuels 16.% Food 9.% Exports Other 11.% Mineral Fuels 17.1% Food 1.1% Other 9.% Imports Manufact. Products 6.% Manufact. Products 6.% FocusEconomics Consensus Forecast 9

50 Hungary April 1 Hungary Hungary LONG-TERM TRENDS -year averages Population (million): GDP (EUR bn): GDP per capita (EUR): 1,81 1,86 1,9 GDP growth (%):.6.9. Fiscal Balance (% of GDP): Public Debt (% of GDP): Inflation (%): Current Account (% of GDP):..1. External Debt (% of GDP): Outlook improves Hungary recorded the largest expansion in eight years in 1 with the help of strong fiscal and monetary stimulus. More recent indicators suggest that momentum moderated at the outset of this year: industrial production expanded at a slower pace in February and economic sentiment decreased for a fifth consecutive month in March. Last month, Economy Minister Mihály Varga said that the government was examining the possibility of lowering the Value Added Tax (VAT) along with other levies, including banking, corporate and personal income taxes, by 18. At 7%, Hungary s VAT is one of the highest in Europe. However, Varga did not outline how the government, which needs to achieve a deficit of below % of GDP, would make up for lower tax revenues. In March, Standard & Poor s raised Hungary s credit rating from BB to BB+, citing reduced external vulnerability as the main reason for its decision. Hungary is expected to expand at a slower, but still robust pace this year. FocusEconomics Consensus Forecast panelists project that GDP will increase.7% in 1, which is up.1 percentage points from last month s projection. For 16, the panel forecasts an expansion of.%. The fall in consumer prices softened in February, dropping.6% in annual terms, which was up from January s 1.% decline. On March, the Central Bank cut the base rate from.1% to 1.9%. Panelists expect inflation to be flat on average in 1 and see inflation rising to.% in 16. Teresa Kersting Economist Industrial Production variation in % %. Year-on-year Annual average -. Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes and annual average variation of industrial production index in %. Source: Hungarian Central Statistics Office and FocusEconomics calculations. REAL SECTOR Industrial production growth slows in February According to preliminary data released by the statistical institute (KSH) on 8 April, industrial output in February rose a working-day adjusted.8% over the same month of the previous year, marking a deceleration compared to the 7.7% increase observed in January. The print slightly exceeded market expectations of a.6% increase. On a monthly basis, industrial production dropped a seasonally- and workingday adjusted.% in February, contrasting January s.% expansion. Meanwhile, annual average growth in industrial production moderated from 7.% in January to 7.1% in February. FocusEconomics Consensus Forecast panelists expect industrial production to grow.1% in 1, which is down.1 percentage points from last month s projection. For 16, the panel expects industrial output to expand.%. The Central Bank expects the economy to expand.% in 1 and.1% in 16. FocusEconomics Consensus Forecast panelists expect a.7% FocusEconomics Consensus Forecast

51 Hungary April 1 expansion in 1, which is up.1 percentage points from last month s projection. For 16, the panel expects growth to expand.%. GKI-Erste Economic Sentiment Index - - Economic sentiment Consumer confidence Business confidence -6 Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Consumer confidence, business confidence and economic sentiment indicators. Source: GKI Economic Research Co. OUTLOOK Economic sentiment inches down again in March In March, the GKI-Erste economic sentiment index inched down from February s minus. points to minus.6 points, representing a fifth consecutive decline and the lowest reading in seven months. Consumer sentiment fell from minus. points in February to minus.8 points in March. According to GKI, [a]lthough there has been an almost continuous deterioration in recent months, the mood is still relatively optimistic. Households assessed their future financial situation in the next year and their savings capacity worse than in February, whereas they considered the possibility of purchasing high-value durables more favourable. FocusEconomics panelists expect total consumption to expand.8% in 1, which is up. percentage points from last month s projection. For 16, the panel expects total consumption to increase.%. Conversely, business sentiment improved from. points in February to. points in March. According to GKI, the result reflects that expectations improved in the industrial sector, whereas they stagnated in the construction sector and moderated for the trade and services sectors. Regarding the expectations on the general economy, GKI-Erste added that, the expected position of the Hungarian economy improved slightly with the exception of the service sector. However, it deteriorated somewhat among consumers. Panelists expect fixed investment to increase.9% in 1, which is down. percentage points over last month s estimate. For 16, the panel sees investment expanding 1.%. Inflation Consumer Price Index 1.. %. -. Month-on-month (left scale) Year-on-year (right scale) Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Year-on-year and month-on-month variation of consumer price index in %. Source: Hungarian Central Statistics Office. 7.. %.. MONETARY SECTOR Drop in consumer prices softens in March In March, consumer prices rose.6% over the previous month, coming in marginally above the.% increase observed in February. The figure represented the largest increase since January 1 and reflected higher prices for several categories of the price index, such as food as well as clothing and footwear. In annual terms, consumer prices decreased.6% in March, which came in above the 1.% drop observed in the previous month, and represented the smallest decline in five months. As a consequence, inflation remains below the Central Bank s target of.%, with a tolerance margin of plus/minus 1.%. Core consumer prices, which exclude volatile items such as fresh food and fuel, rose.% over the previous month, matching February s result. Meanwhile, annual core inflation remained at February s 1.%. In its March inflation report, the Central Bank projects that inflation will be flat on average in 1. For 16, the Bank sees inflation averaging.6%. FocusEconomics Consensus Forecast panelists sees inflation to be flat on average in 1, which is down. percentage points from last month s projection. For 16, the panel expects inflation to rise to.%. MONETARY SECTOR Central Bank cuts base rate; leaves door open for further rate cuts The Central Bank cut the base rate from.1% to 1.9% at its March monetary policy meeting as market analysts had expected. In cutting the rate, FocusEconomics Consensus Forecast 1

52 Hungary April 1 the Bank resumed the easing cycle that had been interrupted since July of last year. The Bank had lowered the base rate gradually from 7.% to.1% in the months from July 1 to July 1. Central Bank Base Rate in % %.. Jan-1 Jul-1 Jan-11 Jul-11 Jan-1 Jul-1 Jan-1 Jul-1 Jan-1 Jul-1 Jan-1 Note: Central Bank base rate in %. Source: Hungarian Central Bank (MNB). In the March inflation report, which contained the rate cut decision, the Bank noted that the domestic economy continued to record solid growth in the final quarter of last year and that it is likely to be the main anchor of growth in the next quarters, sustained by increasing real household incomes and employment. The Bank sees investment picking up going forward, resulting from increased economic activity and the Bank s extended Funding for Growth Scheme. Moreover, the Bank expects exports growth to perform solidly, helped by stronger growth in Hungary s main export markets. Regarding price developments, the Central Bank stressed that, downside risks to inflation increased relative to the December, inflation report, as the probability had increased that second-round effects of the oil price drop were taking hold. According to the Bank, the real economy will continue to have a disinflationary impact in the next quarters as the negative output gap is expected to close only gradually toward the end of 16 and this will also contribute to inflationary pressures remaining subdued for a sustained period. The Central Bank left the door open for further rate hikes in stating that, [c] autious easing of monetary conditions may continue as long as it supports the achievement of the medium-term inflation target. Dan Bucşa, Economist at UniCredit Research, commented: Despite stronger reflation, we expect the NBH to continue with rate cuts. We expect a 1bp cut to 1.8% to be decided at the policy meeting on 1 April, with the policy rate reaching 1.% before the end of 1H1. The NBH will probably continue to cut in H1 as long as market conditions permit, with -bp in cuts possible this year. The NBH s deputy governor, Ádám Balog, signalled recently that the easing cycle could go below 1.%. In terms of data flow, the NBH will look at March wage growth and at 1Q1 preliminary GDP figures as the most important data releases for the next two months. On the same day, but in a separate statement, the Monetary Council announced that it had established a plus/minus 1. percentage point tolerance band around its.% inflation target in order to improve the flexibility of its inflation targeting regime. Particularly, the Central Bank noted that its decision to broaden the target range was motivated by the fact that tolerating, deviations of consumer prices from the inflation target temporarily, helps to avoid, excessive volatility of real variables. The next monetary policy meeting is scheduled for 1 April. FocusEconomics Consensus Forecast panelists see the base rate at 1.6% by the end of 1. For 16, the panel sees the base rate ending the year at.7%. FocusEconomics Consensus Forecast

53 Economic Indicators 1-19 Hungary April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 1,71 1,9 1,78 1,1 1,9 11, 11,878 1,897 1,17 1,9 GDP (USD bn) GDP (HUF bn) 6,96 8, 8,9 9,86 1,891,7,9 6,7 7,71 9,8 Economic Growth (Nom. GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Total Consumption (annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (% of active population, aop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %) Inflation (CPI, annual variation in %, aop) Inflation (Core, annual variation in %, aop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, eop) Central Bank Base Rate (%, eop) Month Interbank Rate (%, eop) Year Bond Yield (%, eop) Stock Market (BUX Index variation in %) Exchange Rate (HUF per USD, eop) Exchange Rate (HUF per USD, aop) Exchange Rate (HUF per EUR, eop) Exchange Rate (HUF per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) International Reserves (EUR bn) International Reserves (months of imports) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq variation in %) Inflation (CPI, annual variation in %, aop) Central Bank Base Rate (%, eop) Month Interbank Rate (%, eop) Year Bond Yield (%, eop) Exchange Rate (HUF per USD, eop) Exchange Rate (HUF per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual var. in %) Unemployment (% of active population) GKI-Erste Economic Sentiment GKI-Erste Consumer Confidence GKI-Erste Business Confidence Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Exchange Rate (HUF per USD, eop) Exchange Rate (HUF per EUR, eop) Merchandise Exports (annual variation in %) FocusEconomics Consensus Forecast

54 Real Sector Gross Domestic Product Hungary April 1 1 Real GDP -19 var. in % Real GDP Q1 1-Q 16 var. in % Real GDP growth in % - Hungary World GDP 1 evolution of forecasts 1 1 % % % % Maximum Consensus Minimum GDP 1 Panelist Distribution 6 - Hungary World - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts Maximum Consensus Minimum 1 Individual Forecasts 1 16 BofA Merrill Lynch.9.9 Capital Economics.. Citigroup Global Mkts.7.1 Concorde Securities.. Credit Agricole.. Credit Suisse. 1.9 Danske Bank.. Deutsche Bank.7. EIU..6 Erste Bank.. Experian.9. Frontier Strategy Group.6. GKI Economic Research. - Goldman Sachs.8.1 HSBC.. ING.8.1 JPMorgan.8. KBC.. Kopint-Tárki..1 MKB Bank Nomura.8. OTP Bank.6.1 Oxford Economics.6. Raiffeisen Research.. UBS.. UniCredit.6. Minimum. 1.7 Maximum.. Median.6. Consensus.7. History days ago.6. 6 days ago.. 9 days ago.. Additional Forecasts Central Bank (Mar. 1).. IMF (Oct. 1). 1.8 European Commission (Feb. 1) % % < >. Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Hungarian Central Statistics Office (KSH, Kozponti Statisztikai Hivatal). Forecasts are based on FocusEconomics Consensus Forecast. 1 GDP, real annual variation in %. Quarterly GDP (not seasonally adjusted), year-on-year variation in %. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. GDP, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast

55 Real Sector Additional forecasts Hungary April 1 Consumption and Investment Consumption Investment variation in % variation in % Individual Forecasts BofA Merrill Lynch Capital Economics.... Citigroup Global Mkts Concorde Securities Credit Agricole Credit Suisse Danske Bank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group GKI Economic Research Goldman Sachs HSBC..1.. ING JPMorgan KBC Kopint-Tárki MKB Bank Nomura OTP Bank Oxford Economics Raiffeisen Research UBS.... UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Consumption variation in % 1 Hungary Consumption evolution of fcst Investment variation in % 1-1 Hungary Investment evol. of forecasts... Long-term chart period from to 19 unless otherwise stated. All real sector data are from Hungarian Central Statistics Office (KSH, Kozponti Statisztikai Hivatal). Forecasts are based on FocusEconomics Consensus Forecast. 6 Total consumption, annual variation in %. 7 Total consumption, evolution of 1 and 16 forecasts during the last 18 months. 8 Gross fixed investment, annual variation in %. 9 Gross fixed investment, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast

56 Real Sector Additional forecasts Hungary April 1 Industry and Unemployment 1 Industry variation in % Industry Unemployment variation in % % of active pop. Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Concorde Securities Credit Agricole Credit Suisse Danske Bank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group GKI Economic Research Goldman Sachs HSBC ING JPMorgan KBC Kopint-Tárki MKB Bank Nomura OTP Bank Oxford Economics Raiffeisen Research UBS UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Hungary Industry evol. of forecasts Unemployment % of active pop Hungary Unemployment evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Hungarian Central Statistics Office (KSH, Kozponti Statisztikai Hivatal). Forecasts are based on FocusEconomics Consensus Forecast. 1 Industrial production, annual variation in %. 11 Industrial production, evolution of 1 and 16 forecasts during the last 18 months. 1 Unemployment, % of active population. 1 Unemployment, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 6

57 Hungary April 1 Real Sector Additional forecasts Fiscal Balance and Public Debt Fiscal Balance Public Debt % of GDP % of GDP Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Concorde Securities Credit Agricole Credit Suisse Danske Bank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group GKI Economic Research Goldman Sachs HSBC ING JPMorgan KBC Kopint-Tárki MKB Bank Nomura OTP Bank Oxford Economics Raiffeisen Research UBS UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Fiscal Balance % of GDP Hungary Fiscal Balance evol. of forecasts Public Debt % of GDP 1 Hungary Public Debt evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from Eurostat. Forecasts are based on FocusEconomics Consensus Forecast. 1 General government balance as % of GDP. 1 General government balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. 16 Public debt as % of GDP. 17 Public debt as % of GDP, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 7

58 Monetary Sector Inflation Hungary April 1 18 Inflation - 19 in % 1 Inflation 1 evolution of fcst 6 Maximum Consensus Minimum - Inflation 1 Panelist Distribution % % % Hungary Inflation Q1 1-Q 16 in % 1 1 Inflation 16 evolution of fcst 1 8 Hungary - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Maximum Consensus Minimum Inflation annual variation of consumer price index in % Individual Forecasts 1 16 BofA Merrill Lynch Capital Economics Citigroup Global Mkts -.7. Concorde Securities.1. Credit Agricole.7. Credit Suisse - - Danske Bank.. Deutsche Bank -.. EIU.. Erste Bank -..1 Experian 1.. Frontier Strategy Group. 1. GKI Economic Research. - Goldman Sachs HSBC 1..7 ING JPMorgan -.1. KBC.. Kopint-Tárki -.1. MKB Bank..8 Nomura -.6. OTP Bank.1.8 Oxford Economics -.. Raiffeisen Research.1.7 UBS.. UniCredit -..8 Minimum Maximum 1.. Median.. Consensus.. History days ago.. 6 days ago.6. 9 days ago 1..7 Additional Forecasts Central Bank (Mar. 1)..6 IMF (Oct. 1).. European Commission (Feb. 1).8.8 % 1% % < >. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the Hungarian Central Statistics Office (KSH, Kozponti Statisztikai Hivatal). Forecasts are based on FocusEconomics Consensus Forecast. 18 Inflation, annual variation of consumer price index (CPI) in % (aop). 19 Quarterly inflation, annual variation of consumer price index (CPI) in % (aop). Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. Inflation, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 8

59 Monetary Sector Interest Rate Hungary April 1 Interest Rate - 19 in % Interest Rate Q1 1-Q 16 in % 1 Hungary Hungary Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Int. Rate 1 evolution of fcst 6 Int. Rate 16 evolution of fcst 6 Maximum Consensus Minimum Maximum Consensus Minimum Interest Rate 1 Panelist Distribution 6% Interest Rate Base Rate Individual Forecasts 1 16 BofA Merrill Lynch Capital Economics.1.1 Citigroup Global Mkts 1.. Concorde Securities 1.. Credit Agricole 1.8. Credit Suisse - - Danske Bank Deutsche Bank EIU - - Erste Bank - - Experian - - Frontier Strategy Group - - GKI Economic Research - - Goldman Sachs 1.6. HSBC 1.7. ING 1.. JPMorgan 1.6. KBC - - Kopint-Tárki 1.. MKB Bank 1.. Nomura 1.. OTP Bank 1.. Oxford Economics 1.8. Raiffeisen Research UBS - - UniCredit 1.. Minimum Maximum.1. Median 1.. Consensus History days ago days ago days ago.17.8 % % % < >. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the Central Bank (MNB, Magyar Nemzeti Bank). Forecasts are based on FocusEconomics Consensus Forecast. Interest rate, Central Bank base rate in % (eop). Quarterly interest rate, Central Bank base rate in % (eop). Interest rate, evolution of 1 forecasts during the last 18 months. 6 Interest rate, evolution of 16 forecasts during the last 18 months. 7 Interest rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 9

60 Monetary Sector Exchange Rate Hungary April 1 8 Exchange Rate HUF per EUR 9 Exchange Rate HUF per EUR Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 HUF per EUR 1 evol. of fcst 1 HUF per EUR 16 evol. of fcst 6 6 Maximum Maximum Consensus Consensus Minimum Minimum HUF per EUR 1 Panelist Distribution 6% Exchange Rate HUF per EUR Individual Forecasts 1 16 BofA Merrill Lynch Capital Economics Citigroup Global Mkts 1 Concorde Securities 98 9 Credit Agricole 9 9 Credit Suisse Danske Bank - Deutsche Bank 1 - EIU 1 8 Erste Bank - - Experian - - Frontier Strategy Group - - GKI Economic Research - - Goldman Sachs HSBC ING 1 JPMorgan 1 - KBC 1 - Kopint-Tárki 1 MKB Bank 1 19 Nomura OTP Bank 1 1 Oxford Economics 9 Raiffeisen Research 1 UBS 1 UniCredit Minimum 98 9 Maximum Median 1 11 Consensus 11 1 History days ago days ago days ago 11 1 % % % < > Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from Thomson Reuters. Forecasts based on FocusEconomics Consensus Forecast. 8 Exchange rate, HUF per EUR (eop). 9 Quarterly exchange rate, HUF per EUR (eop). Exchange rate, evolution of 1 forecast during the last 18 months. 1 Exchange rate, evolution of 16 forecast during the last 18 months. Exchange rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 6

61 External Sector Current Account and Trade Balance Hungary April 1 Current Account and Trade Balance Current Account Trade Balance % of GDP EUR bn Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Concorde Securities Credit Agricole Credit Suisse Danske Bank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group GKI Economic Research Goldman Sachs HSBC ING JPMorgan KBC Kopint-Tárki MKB Bank Nomura OTP Bank Oxford Economics Raiffeisen Research UBS UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Current Account % of GDP Trade Balance EUR bn 1 1 Hungary Current Account evol. of fcst Trade Balance Imports Exports Trade Balance evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Central Bank (MNB, Magyar Nemzeti Bank). Forecasts based on FocusEconomics Consensus Forecast. Current account balance, as % of GDP. Current account balance, evolution of 1 and 16 forecasts during the last 18 months. Trade balance, exports and imports, in EUR. 6 Trade balance, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 61

62 External Sector Exports and Imports Hungary April 1 Exports and Imports Exports Imports EUR bn EUR bn Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Concorde Securities Credit Agricole Credit Suisse Danske Bank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group GKI Economic Research Goldman Sachs HSBC ING JPMorgan KBC Kopint-Tárki MKB Bank Nomura OTP Bank Oxford Economics Raiffeisen Research UBS UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Exports variation in % - Hungary Exports evolution of fcst Imports variation in % - Hungary Imports evol. of forecasts 9 88 Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Central Bank (MNB, Magyar Nemzeti Bank). Forecasts based on FocusEconomics Consensus Forecast. 7 Exports, annual variation in %. 8 Exports, evolution of 1 and 16 forecasts during the last 18 months. 9 Imports, annual variation in %. Imports, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 6

63 External Sector Additional forecasts Hungary April 1 International Reserves and External Debt Int. Reserves External Debt EUR bn EUR bn Individual Forecasts BofA Merrill Lynch Capital Economics Citigroup Global Mkts Concorde Securities Credit Agricole Credit Suisse Danske Bank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group GKI Economic Research Goldman Sachs HSBC ING JPMorgan KBC Kopint-Tárki MKB Bank Nomura OTP Bank Oxford Economics Raiffeisen Research UBS UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Int. Reserves months of imports 1 Hungary Int. Reserves evolution of fcst 1 16 External Debt % of GDP 16 Hungary External Debt evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Central Bank (MNB, Magyar Nemzeti Bank). Forecasts are based on FocusEconomics Consensus Forecast. 1 International reserves, months of imports. International reserves, evolution of 1 and 16 forecasts during the last 18 months. External debt as % of GDP. External debt, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 6

64 FOCUSECONOMICS Hungary April 1 Fact Sheet General Data Official name: Hungary Capital: Budapest (.m) Other cities: Miskolc (.7m) Debrecen (.m) Area (km): 9,8 Population (million, 1 est.): 9.9 Population density (per km, 1): 17 Population growth rate (%, 1 est.): -. Life expectancy (years, 1 est.): 7. Illiteracy rate (%, 11): 1. Language: Hungarian Measures: Metric system Time: GMT+1 Hungary in the Region Population %-share in Poland 1.% Ukraine 1.% Other 1.% Turkey.% Hungary.7% 8.8% GDP %-share in Czech Republic.7% Poland 11.% Other 1.7% Turkey 18.1% Hungary.9% 7.1% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants): 9.9 Telephones - mobile cellular (per 1 inhabit.): 116 Internet Users (per 1 inhabitants): 7.6 Broadband Subscriptions (per 1 inhabitants):.1 Energy (1) Primary Energy Production (trillion Btu): 7 Primary Energy Consumption (trillion Btu): 91 Electricity Generation (billion kw-h):. Electricity Consumption (billion kw-h): 6.8 Oil Supply (thousand bpd): 8. Oil Consumption (thousand bpd): 1 CO Emmissions (million metric tons): 7.9 Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 1 Railways (km): 8,7 Roadways (km): 199,67 Waterways (km): 1,6 Chief Ports: Budapest, Dunaujvaros Trade Structure - Primary markets share in % Political Data Prime Minister: Viktor Orbán Last elections: 6 April 1 Next elections: April 18 Central Bank President: György Matolcsy Other 6.% Slovakia 6.1% Romania 6.% Exports Other EU- 7.6% Slovakia.6% China 7.% Austria 7.1% Other 1.% 8.8% Imports Other EU- 7.9% Long-term Foreign Currency Ratings Germany.6% Germany.1% Agency Rating Outlook Moody s: Ba1 Stable S&P: BB+ Stable Fitch Ratings: BB+ Stable Primary products share in % Strengths EU membership provides support to economy against financial market crises Highly educated work force Strategic geographical location Weaknesses Unorthodox fiscal policy Small domestic market Large external debt Political instability Food 8.% Other 1.% Exports Mineral Fuels 11.9% Imports Other 17.% Manufact. Products 81.% Manufact. Products 7.8% FocusEconomics Consensus Forecast 6

65 Latvia April 1 Latvia Latvia LONG-TERM TRENDS -year averages Population (million):.1.. GDP (EUR bn): GDP per capita (EUR): 1,6 1, 1,6 GDP growth (%): Fiscal Balance (% of GDP): Public Debt (% of GDP): Inflation (%):. 1.. Current Account (% of GDP): Outlook stable The economy grew at the slowest pace of the post-crisis period, expanding just.% in 1 and signals from the latest economic data are not positive: industrial production contracted slightly and unemployment reached a 1-month high in February. Despite this disappointing news, strong private consumption, which has been driven by real wage increases, should sustain economic growth going forward. In addition, the decline in exports to due to the current tense diplomatic situation and resulting n sanctions should be compensated for by increased trade activities with the European Union as the region s economy regains momentum. Latvia s economic outlook remains fairly positive. Although tensions between the EU and will continue to create uncertainty in various fronts of the economy, low oil prices together with an accommodative monetary policy are expected to support domestic demand. FocusEconomics panelists expect that GDP will grow.% in 1, which is unchanged from last month s estimate. Panelists expect that GDP growth will increase to.% in 16. In February, harmonized consumer prices were unchanged over the same period last year following a.% decrease in January. FocusEconomics panelists expect HICP inflation to average.% this year, which is down.1 percentage points from last month s projection. In 16, the panel sees inflation rising to an average of 1.8%. Eric Denis Economist Industrial Production variation in % 6 % - Year-on-year Annual average REAL SECTOR Industrial production deteriorates for the fourth consecutive month in February In February, industrial production contracted 1.6% over the same month last year. The contraction followed the.% drop observed in January and marked the fourth consecutive decline in Latvia s industrial production. February s deterioration resulted from a large contraction in electricity production and gas supply, which was only partially offset by an increase in the mining and quarrying sector. A month-on-month comparison paints a better picture of industrial production than the annual data. Industrial production rose a seasonally-adjusted 1.% over the previous month, which contrasted the.1% decrease observed in January. -6 Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes and annual average variation of industrial production index in %. Source: Central Statistics Bureau and FocusEconomics calculations. Meanwhile, the annual average variation in industrial production in February was unchanged at January s minus.9%. FocusEconomics Consensus Forecast panelists expect industrial production to expand 1.8% in 1, which is down. percentage points from the previous month s projection. For 16, the panel expects growth in industrial output to accelerate to.7%. FocusEconomics Consensus Forecast 6

66 Latvia April 1 The Central Bank expects the economy to expand.7% this year. FocusEconomics Consensus Forecast panelists expect the economy to grow.% in 1, which is unchanged from last month s projection. For 16, panelists expect the economy to expand.%. Inflation Consumer Price Index 1. Month-on-month (left scale) Year-on-year (right scale) 1. MONETARY SECTOR Consumer prices rebound in March In March, consumer prices rose.8% over the previous month. The result was above the.% rise tallied in February and marked the largest increase in over three years. March s increase was largely the result of higher housing and health costs, which were partly offset by a fall in prices for food and transport.. % Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Month-on-month and year-on-year variations of consumer price index in %. Source: Central Statistics Bureau. 1. %.. Consumer prices grew.% over the same month last year, which contrasted the.1% drop observed in February. Meanwhile, annual HICP consumer prices based on the harmonized index of consumer prices recorded zero growth in February, which is the last month for which data are available. The reading contrasted the.% decrease tallied in January. Annual average HICP inflation remained unchanged at January s.6% in February. The Central Bank expects HICP inflation to average 1.% in 1. FocusEconomics Consensus Forecast panelists expect HICP inflation to average.% in 1, which is down.1 percentage points from last month s projection. For 16, the panel expects inflation to average 1.8%. FocusEconomics Consensus Forecast 66

67 Economic Indicators 1-19 Latvia April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 11,1 1,68 1,77 1,76 1,79 1,66 1,6 1,61 16,8 18,61 GDP (USD bn) GDP per capita (EUR) 8,6 9,78 1,779 11,7 11,8 1, 1,897 1,7 1,6 1,6 GDP (EUR bn) Economic Growth (Nom. GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual var. in %) Unemployment (% of active population, aop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual var. of M in %) Inflation (CPI, annual variation in %, eop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Year Bond Yield (%, eop) Stock Market (variation of OMXR in %) Exchange Rate (USD per EUR, eop) Exchange Rate (USD per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq variation in %) Inflation (HICP, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Exchange Rate (USD per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Inflation (HICP, annual variation in %) Exchange Rate (USD per EUR, eop) FocusEconomics Consensus Forecast 67

68 Real Sector Gross Domestic Product and Fiscal Balance Latvia April 1 1 Real GDP -19 var. in % Real GDP Q1 1-Q 16 var. in % Economic Growth and Fiscal Balance 1-1 Latvia - World 1 1 GDP 1 evolution of forecasts 6 Maximum Consensus Minimum Latvia World - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts 6 Maximum Consensus Minimum 1 Real GDP Fiscal Balance variation in % % of GDP Individual Forecasts Capital Economics Citadele Danske Bank DekaBank DNB EIU JPMorgan Nordea Oxford Economics SEB Swedbank WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts Cen. Bank (Dec. 1) Euro. Comm. (Feb. 1) IMF (Oct. 1) Unemployment % of active pop. 6 Fiscal Balance % of GDP Latvia Latvia Unemployment evolution of fcst 8 Fiscal Balance evolution of fcst General: Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Central Statistical Bureau (CSB) and Eurostat. See below for details. Forecasts based on FocusEconomics Consensus Forecast GDP, annual variation in %. Source: CSB. Quarterly GDP (non-seasonally adjusted), year-on-year variation in %. Source: CSB. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. Unemployment, % of active population. Source: CSB. 6 Balance of non-financial public sector as % of GDP. Source: Eurostat. 7 Unemployment, evolution of 1 and 16 forecasts during the last 18 months. 8 Balance of non-financial public sector as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 68

69 Latvia April 1 Monetary and External Sector Inflation and Current Account Balance 9 Inflation - 19 In % 1 Inflation Q1 1-Q 16 In % Inflation and Current Account Balance Inflation 1 evolution of fcst 1 Latvia Maximum Consensus Minimum Latvia - Q1 1 Q1 1 Q1 1 Q1 1 Q Inflation 16 evolution of fcst 1 Maximum Consensus Minimum HICP Current Account variation in % % of GDP Individual Forecasts Capital Economics Citadele Danske Bank DekaBank DNB EIU JPMorgan Nordea Oxford Economics SEB Swedbank WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts Cen. Bank (Dec. 1) Euro. Comm. (Feb. 1) IMF (Oct. 1) Current Account % of GDP 1 1 Current Account evol. of fcst Latvia General: Long-term chart period from to 19 unless otherwise stated. All monetary and externa sector data are from the Central Statistical Bureau (CSB) and the Bank of Latvia (BoL, Latvijas Banka). See below for details. Forecasts based on FocusEconomics Consensus Forecast. 9 Inflation, annual average variation of harmonized index of consumer prices (HICP) in %. Source: CSB. 1 Inflation, annual variation of quarterly average harmonized index of consumer prices (HICP) in %. Source: CSB. 11 Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. 1 Current account balance as % of GDP. Source: BoL. 1 Current account balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 69

70 FOCUSECONOMICS Fact Sheet Latvia April 1 General Data Official name: Republic of Latvia Capital: Riga (1.1m) Area (km): 6,89 Population (million, 1 est.):. Population density (per km, 1): 1. Population growth rate (%, 1 est.): -.6 Life expectancy (years, 1 est.): 7. Illiteracy rate (%, 11):. Language: Latvian, n Measures: Metric system Time: GMT+ Latvia in the Region Population %-share in Baltics Estonia 1.1% Latvia.% GDP %-share in Baltics Estonia.% Latvia.% Lithuania 6.8% Lithuania.6% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants):. Telephones - mobile cellular (per 1 inhabit.): 17 Internet Users (per 1 inhabitants): 7. Broadband Subscriptions (per 1 inhabitants):.7 Energy (1) Primary Energy Production (trillion Btu): 9. Primary Energy Consumption (trillion Btu): 169 Electricity Generation (billion kw-h): 6. Electricity Consumption (billion kw-h): 7.1 Oil Consumption (thousand bpd):. CO Emmissions (million metric tons): 7.9 Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: Railways (km):,9 Roadways (km): 7, Waterways (km): Chief Ports: Riga, Ventspils Trade Structure - Primary markets share in % Political Data Prime Minister: Laimdota Straujuma Last elections: October 1 Next elections: October 18 Central Bank President: Ilmars Rimsevics Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: A Stable S&P: A- Stable Fitch Ratings: A- Stable Germany 7.% Other.% Estonia 1.1% Exports Lithuania 1.8% 18.% Other EU- 7.% Poland 8.% Germany 11.6% Other 19.8% Primary products share in % Lithuania 19.1% 9.% Imports Other EU- 7.1% Strengths Strategic location between and European Union EU membership provides support against financial crisis Weaknesses Strong dependency on energy supply from High private debt Small domestic market Agric. Raw Mat. 1.% Mineral Fuels 7.% Food 16.9% Other 9.% Exports Manufact. Products 6.% Mineral Fuels 16.% Food 1.8% Imports Other 1.7% Manufact. Products 7.% FocusEconomics Consensus Forecast 7

71 Lithuania April 1 Lithuania Lithuania LONG-TERM TRENDS -year averages Population (million):..9.9 GDP (EUR bn): GDP per capita (EUR): 11,7 1,776 1,17 GDP growth (%):...9 Fiscal Balance (% of GDP): Public Debt (% of GDP): Inflation (%): Current Account (% of GDP): External Debt (% of GDP): Outlook stable Economic struggles in took their toll on Lithuania s economy in Q 1, which caused the external sector to perform worse and GDP growth to moderate. However, the International Monetary Fund (IMF) stated recently that the country s, recent resiliency augurs well for the future. The IMF expects that low energy prices and improving prospects for the Eurozone will partially compensate for cautious investment and subdued demand from. Moreover, in order to keep the deficit from widening, the IMF recommended targeted spending cuts and tax increases worth at least.% of GDP in 1. Meanwhile, concerns about s military intentions prompted Lithuania to increase defense spending and reintroduce military conscription. Lithuania s economic outlook is fairly stable, even though economic weakness in Lithuania s main exports destination outside the European Union and ongoing geopolitical tensions constitute downside risks. FocusEconomics Consensus Forecast panelists see the economy growing.7% in 1, which is unchanged from last month s forecast. For 16, the panel expects the economy to expand.%. Teresa Kersting Economist Industrial Production variation in % 1 % Year-on-year Annual average Harmonized consumer prices fell 1.1% year-on-year in March, coming in above February s steep 1.% drop. FocusEconomics Consensus Forecast participants expect HICP inflation to average.% in 1 and 1.% in 16. REAL SECTOR Industrial production rebounds in February In February, industrial production expanded.6% over the same month of last year, which contrasted the.% decrease recorded in January. The turnaround reflects a notable pick-up in manufacturing and that output of several sectors, including water supply, mining and quarrying as well as electricity, gas and steam, shrank at a softer pace than in January. On a sequential basis, industrial production increased 6.% over the previous month in seasonally-adjusted terms, contrasting the.% fall recorded in January and recording the largest expansion since June 1. Annual average growth in industrial production improved from.6% in January to 1.% in February, the best reading in a year Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes and annual average growth of industrial production index in %. Source: Statistics Lithuania and FocusEconomics calculations. FocusEconomics Consensus Forecast panelists expect industrial production to increase.% year, which is unchanged over last month s estimate. The panel expects industrial production to accelerate to a.% expansion in 16. The Central Bank expects GDP to grow.7% in 1 and.% in 16. FocusEconomics Consensus Forecast panelists see the economy growing.7% in 1, which is unchanged from last month s estimate. In 16, the panel expects GDP to expand.%. FocusEconomics Consensus Forecast 71

72 Lithuania April 1 Inflation Consumer Price Index 1.. MONETARY SECTOR Drop in consumer prices softens in March In March, consumer prices increased.8% over the previous month, contrasting the.% decline registered in February. The result represented the largest increase since March 1. According to the statistical institute, the result was driven by lower prices for foodstuff, fuel, and clothing.. % -1. Month-on-month (left scale) Year-on-year (right scale) Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Year-on-year and month-on-month variation of consumer price index in %. Source: Statistics Lithuania and FocusEconomics calculations.. %. In annual terms, consumer prices fell 1.%, which followed February s steep 1.8% drop. Meanwhile, harmonized consumer prices (based on the harmonized index of consumer prices) fell 1.1% in March, coming in above February s 1.% decline. Annual average HICP prices fell.% in March, coming in below February s flat reading and representing the steepest drop since August. The Central Bank expects harmonized consumer prices to fall.% on average in 1. For 16, the Bank expects HICP inflation to average 1.6%. FocusEconomics Consensus Forecast panelists expect harmonized inflation to average.% in 1, which is down. percentage points from last month s estimate. In 16, the panel sees inflation at 1.%. FocusEconomics Consensus Forecast 7

73 Economic Indicators 1-19 Lithuania April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 11,818 1,99 1,19 1,79 16, 1,8 1,19 1,67 17, 19,17 GDP (USD bn) GDP per capita (EUR) 9,1 1, 11,1 11,777 1,76 1,69 1,7 1, 1,1 16,16 GDP (EUR bn) Economic Growth (Nom. GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Total Consumption (annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (aop, % of active population) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %) Inflation (CPI, annual variation in %, eop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Year Bond Yield (%, eop) Exchange Rate (USD per EUR, eop) Exchange Rate (USD per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual var. in %) Merchandise Imports (annual var. in %) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq variation in %) Inflation (HICP, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Exchange Rate (USD per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Inflation (HICP, annual variation in %) Exchange Rate (USD per EUR, eop) FocusEconomics Consensus Forecast 7

74 Real Sector Gross Domestic Product and Fiscal Balance Lithuania April 1 1 Real GDP -19 var. in % 1-1 Lithuania World GDP 1 evolution of forecasts 6 Maximum Consensus Minimum 1 Real GDP Q1 1-Q 16 var. in % Economic Growth and Fiscal Balance 6 Lithuania World - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts Maximum Consensus Minimum 1 Real GDP Fiscal Balance variation in % % of GDP Individual Forecasts Capital Economics Danske Bank DNB EIU JPMorgan Nordea Oxford Economics SEB Swedbank WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts Central Bank (Mar. 1) IMF (Apr. 1) Eur. Comm. (Feb. 1) Unemployment % of active pop. 6 Fiscal Balance % of GDP 1 Lithuania 1 - Lithuania Unemployment evolution of fcst Fiscal Balance evolution of fcst General: Long-term chart period from to 19 unless otherwise stated. All real sector data are from Statistics Lithuania (SL, Statistikos Departementas) and Eurostat. Forecasts based on FocusEconomics Consensus Forecast. 1 GDP, annual variation in %. Source: SL. Quarterly GDP (not seasonally adjusted), year-on-year variation in %. Source: SL. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. Unemployment, % of active population. Source: SL. 6 Balance of non-financial public sector as % of GDP. Source: Eurostat. 7 Unemployment, evolution of 1 and 16 forecasts during the last 18 months. 8 Balance of non-financial public sector as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 7

75 Lithuania April 1 Monetary and External Sector Inflation and Current Account Balance 9 Inflation - 19 in % Inflation 1 evolution of fcst 1 Lithuania Maximum Consensus Minimum -1 1 Inflation Q1 1-Q 16 in % Inflation and Current Account Balance 1 8 Lithuania - Q1 1 Q1 1 Q1 1 Q1 1 Q Inflation 16 evolution of fcst 1 Maximum Consensus Minimum HICP Current Account variation in % % of GDP Individual Forecasts Capital Economics Danske Bank DNB EIU JPMorgan Nordea.... Oxford Economics SEB Swedbank WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts Central Bank (Mar. 1) IMF (Oct. 1) Eur. Comm. (Feb. 1) Current Account % of GDP 1 Current Account evol. of fcst Lithuania General: Long-term chart period from to 19 unless otherwise stated. All monetary and external sector data are from Statistics Lithuania (SL, Statistikos Departementas) and the Bank of Lithuania (LB, Lietuvos Bankas). See below for details. Forecasts based on FocusEconomics Consensus Forecast. 9 Inflation, annual average variation of harmonized index of consumer prices (HICP) in % Source: SL. 1 Inflation, annual variation of quarterly average harmonized index of consumer prices (HICP) in %. Source: SL. 11 Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. 1 Current account balance as % of GDP. Source: LB. 1 Current account balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 7

76 Fact Sheet Lithuania April 1 General Data Official name: Republic of Lithuania Capital: Vilnius (.8m) Other cities: Kaunas (.6m) Area (km): 6, Population (million, 1 est.):. Population density (per km, 1):. Population growth rate (%, 1 est.): -. Life expectancy (years, 1 est.): 76. Illiteracy rate (%, 11):. Language: Lithuanian, n and Polish Measures: Metric system Time: GMT+ Lithuania in the Region Population %-share in Baltics Estonia 1.1% Latvia.% Lithuania 6.8% GDP %-share in Baltics Estonia.% Latvia 9.8% Lithuania.8% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants):.7 Telephones - mobile cellular (per 1 inhabit.): 11 Internet Users (per 1 inhabitants): 68. Broadband Subscriptions (per 1 inhabitants):. Energy (1) Primary Energy Production (trillion Btu): 16. Primary Energy Consumption (trillion Btu): 8 Electricity Generation (billion kw-h):.9 Electricity Consumption (billion kw-h): 9.7 Oil Supply (thousand bpd): 9.1 Oil Consumption (thousand bpd): 7.7 CO Emmissions (million metric tons): 16.7 Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 61 Railways (km): 1,767 Roadways (km): 8,166 Waterways (km): 1 Chief Ports: Klaipeda Trade Structure - Primary markets share in % Political Data Prime Minister: Algirdas Butkevičius Last elections: 1 October 1 Next elections: 16 Central Bank President: Vitas Vasiliauskas Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: Baa1 Positive S&P: A- Stable Fitch Ratings: A- Stable Estonia 7.8% Other 6.% Germany 7.9% Exports Latvia 11.% 19.% Other EU- 7 8.% Latvia 6.% Poland 9.9% Germany 1.% Other 16.% Primary products share in % Imports Other EU- 7 6.% 1.6% Strengths Open economic structure EU membership guarantees stable legal system Adoption of the euro as official currency in January 1 Weaknesses Small domestic market Sizeable external imbalances Limited fiscal discipline. Mineral Fuels.% Food 16.9% Other.6% Exports Manufact. Products.1% Mineral Fuels.% Food 1.1% Other 6.% Imports Manufact. Products 9.% FocusEconomics Consensus Forecast 76

77 Poland April 1 Poland Poland LONG-TERM TRENDS -year averages Population (million): GDP (EUR bn): 87 1 GDP per capita (EUR): 1, 11,68 1,79 GDP growth (%):.8..6 Fiscal Balance (% of GDP): Public Debt (% of GDP) Inflation (%):.9.. Current Account (% of GDP): External Debt (% of GDP): Outlook stable After increasing.% in 1, recent indicators suggest that the Polish economy has remained strong during the first months of 1. Industrial activity accelerated in February and, despite some moderation, the manufacturing PMI remained firmly entrenched in expansionary territory in March. Meanwhile, the first round of presidential elections will take place on 1 May. Recent polls point to another mandate for the ruling Civic Platform (PO) party. Although President Komorowski s approval ratings have deteriorated in recent months, he is still well ahead of Andrzej Duda, candidate for the opposition Law and Justice (PiS) party. The outcome of the parliamentary election slated for the last quarter of the year is more uncertain. Although polls suggest that opposition PiS could get the largest share of votes, it is very unlikely that the party will have enough seats to rule alone, and it is still not clear which parties would be willing to form a governing coalition led by PiS. Poland s economic prospects remain fairly bright. Private consumption will continue to support growth this year, underpinned by labor market improvements and real wage increases. Polish exports are also expected to benefit from a strengthened German economy. FocusEconomics Consensus Forecast panelists expect the economy to expand.% in 1, which is unchanged from last month s forecast. For 16, the panel sees economic growth picking up to.%. Consumer prices declined 1.6% annually in February, which was down from January s 1.% drop and marked an all-time low. FocusEconomics panelists expect consumer prices to decline.% in 1. For 16, the panel sees inflation picking up to 1.7%. Cecilia Simkievich Economist Purchasing Managers Index 6 Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: HSBC Manufacturing PMI. Readings above indicate an expansion in the manufacturing sector while readings below indicate a contraction. Source: HSBC and Markit. REAL SECTOR Manufacturing PMI drops again in March, but remains entrenched in expansionary territory The manufacturing Purchasing Managers Index (PMI) eased from.1 in February to.8 in March, according to a release provided by HSBC in collaboration with Markit. Despite March s minor deterioration, the index still rests comfortably above the -threshold that separates expansion from contraction in the manufacturing sector. Moreover, despite having eased somewhat since the peak in January, the average of the index over the first quarter of the year was the highest since Q1 1. March s reading reflected increases in the number of new business, new export orders and employment. As pointed out by Markit, the volume of new businesses placed with Polish manufacturers rose for the sixth successive month in March. The rate of growth remained strong overall, despite easing to the weakest in 1 so far. New export orders grew at a faster rate compared to the previous month, underpinned by a weaker value of the zloty against the FocusEconomics Consensus Forecast 77

78 Poland April 1 dollar. The rate of job creation accelerated for the fourth consecutive month in a row and reached the highest print in the survey history in March. FocusEconomics Consensus Forecast panelists expect fixed investment to expand 6.% in 1, which is up.1 percentage points from last month s estimate. For 16, the panel sees fixed investment expanding.%. The Central Bank expects GDP to grow between.7% and.% in 1, and between.% and.% in 16. FocusEconomics Consensus Forecast panelists expect that the economy will expand.% in 1, which is unchanged from the previous month s forecast. For 16, panelists expect the economy to grow.%. Industrial Production variation in % 1 % Year-on-year Annual average - Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes and annual average variation of industrial production index in %. Source: Central Statistical Office (GUS) and FocusEconomics calculations. REAL SECTOR Industrial production accelerates in February In February, industrial production expanded.9% over the same month of last year, which was well above the mild 1.6% increase tallied in January. February s reading overshot the.% rise that the markets had expected. The print reflected improvements in manufacturing, as well as in the electricity, gas and steam sector. Conversely, mining and quarrying, as well as water supply, performed worse than in the previous month. On a month-on-month basis, industrial production increased 1.% in February, which contrasted January s.1% contraction. Despite February s improved performance, the overall trend pointed downward, with annual average growth in industrial production edging down from.% in January to.% in February. FocusEconomics Consensus Forecast panelists expect industrial production to increase.9% in 1, which is down. percentage points from last month s forecast. For 16, the panel expects growth in industrial production to accelerate to.%. Retail Sales variation in % 1 Year-on-year 8 % Annual average REAL SECTOR Retail sales drop in February In February, retail sales dropped 1.% over the same month of last year, which contrasted the.1% rise tallied in January and undershot the flat reading that the markets had expected. February s print marked the lowest reading in over two years. The decrease reflected lower sales for all categories that comprise the index except for fuels, which registered a mild increase compared to the same month of last year. Clothing and footwear as well as and motor vehicles recorded the largest decreases in retail sales. - Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year and annual average variation in %. Source: Central Statistical Office (GUS) and FocusEconomics calculations. As a result of February s fall, annual average growth in retail sales continued on the downward trend that began in May 1. Annual average growth declined from.7% in January to.1% in February, which marked the lowest reading in over a year. FocusEconomics Consensus Forecast panelists see private consumption growing.% in 1, which is unchanged from last month s forecast. For 16, the panel sees private consumption expanding.%. OUTLOOK Business confidence hits nine-month high in March The general business climate index increased from. points in February to 6. points in March, according to the Central Statistical Office s Business Tendency Survey (GUS-BTS). March s result marked the highest reading FocusEconomics Consensus Forecast 78

79 Poland April 1 Business Confidence Index Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Value of month-on-month business confidence index. An index value above indicates a positive assessment of the business climate while a value below indicates a negative assessment. Source: Central Statistical Office (GUS). in nine months. Business confidence is comfortably above the zero-point threshold that separates pessimism from optimism. March s notable increase reflected an improvement in firms expectations for the general economic situation in the next 1 months, as well as for their own financial situations. Expectations for future production as well as for domestic and foreign order books also improved significantly. Firms outlook regarding employment prospects reached the highest point in ten months. MONETARY SECTOR Consumer prices hit an all-time low in February In February, consumer prices fell.% over the previous month, which mirrored the result recorded in the previous month. The reading was just below the flat reading that the markets had expected. According to the Central Statistical Office (GUS), February s decline mainly reflected lower prices for transport, as well as for clothing and footwear. Conversely, prices for food and beverages were higher than in the previous month. Inflation Consumer Price Index.6. %. Month-on-month (left scale) Year-on-year (right scale) 6.. %. Consumer prices dropped 1.6% annually in February, which was down from the 1.% drop tallied in January and marked an all-time low. As a result, inflation continues to move further away from the Central Bank s target of.%, with a tolerance margin of plus/minus 1. percentage points. Meanwhile, the core consumer price index, which excludes food and energy prices, recorded a flat reading in February compared to the previous month. Despite the slight improvement, annual core inflation inched down from January s.6% to.% in February Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Annual and monthly variation of consumer price index in %. Source: Central Statistical Office (GUS).. The Central Bank sees annual variation in consumer prices between minus 1.% and.% in 1, and between minus.1% and plus 1.8% in 16. FocusEconomics Consensus Forecast panelists expect consumer prices to drop.% in 1, which is down. percentage points from last month s projection. For 16, the panel expects inflation to pick up to 1.7%. FocusEconomics Consensus Forecast 79

80 Economic Indicators 1-19 Poland April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 1,8 1,97 1,88 1,6 1,178 11,96 1,9 1,1 1,79 17,67 GDP (USD bn) GDP per capita (EUR) 9, 9,78 1,6 1,81 1,69 11,187 11,9 1,77 1,7 1,866 GDP (EUR bn) GDP (PLN bn) 1,7 1, 1,616 1,66 1,7 1,778 1,87 1,97,96,6 Economic Growth (Nominal GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Domestic Demand (annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (% of active population, eop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %) Inflation (CPI, annual variation in %, aop) Inflation (Core, annual variation in %, eop) Inflation (HICP annual variation in %, aop) Inflation (PPI, annual variation in %, eop) NBP Reference Rate (%, eop) Month WIBOR (%, eop) Year Bond Yield (%, eop) Stock Market (variation of WIG in %) Exchange Rate (PLN per USD, eop) Exchange Rate (PLN per USD, aop) Exchange Rate (PLN per EUR, eop) Exchange Rate (PLN per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) International Reserves (EUR bn) International Reserves (months of imports) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq variation in %) Inflation (CPI, annual variation in %, aop) NBP Reference Rate (%, eop) Month WIBOR (%, eop) Year Bond Yield (%, eop) Exchange Rate (PLN per USD, eop) Exchange Rate (PLN per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Retail Sales (annual variation in %) Unemployment (% of active population) Business Confid. Index (-point threshold) HSBC Manufacturing PMI (-threshold) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Exchange Rate (PLN per USD, eop) Exchange Rate (PLN per EUR, eop) Merchandise Exports (annual variation in %) FocusEconomics Consensus Forecast 8

81 Real Sector Gross Domestic Product Poland April 1 1 Real GDP -19 var. in % Real GDP Q1 1- Q 16 var. in % Real GDP growth in % - Poland World GDP 1 evolution of forecasts 1 Maximum Consensus Minimum GDP 1 Panelist Distribution 8% 6% % 1 Poland -1 World Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts Maximum Consensus Minimum Individual Forecasts 1 16 Bank Zachodni WBK.6. BofA Merrill Lynch..7 Capital Economics..8 Citigroup Global Mkts.7.7 Credit Agricole.. Credit Suisse.1. Danske Bank.9. DekaBank..6 Deutsche Bank.. EIU..6 Erste Bank.1.6 Experian..6 Frontier Strategy Group.9. Goldman Sachs.. HSBC.. ING..8 JPMorgan.1. KBC.6.8 KUKE S.A... Nomura..8 Nordea.. Oxford Economics..9 PKO Bank Polski.6.6 Raiffeisen Research.. UBS.. UniCredit.. WIIW.. Minimum.9. Maximum.7. Median.. Consensus.. History days ago.. 6 days ago.. 9 days ago.. Additional Forecasts Central Bank (Mar. 1) IMF (Oct. 1).. Euro. Comm. (Feb. 1).. % % < >. Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Central Statistical Office (GUS). Forecasts are based on FocusEconomics Consensus Forecast. 1 GDP, real annual variation in %. Quarterly GDP (not seasonally adjusted), year-on-year variation in %. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. GDP, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 81

82 Real Sector Additional forecasts Poland April 1 Consumption and Investment Consumption Investment variation in % variation in % Individual Forecasts Bank Zachodni WBK BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse..1.. Danske Bank..1.. DekaBank Deutsche Bank EIU..7.. Erste Bank Experian....8 Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Nomura Nordea Oxford Economics PKO Bank Polski Raiffeisen Research UBS.... UniCredit WIIW Minimum..7.. Maximum Median Consensus History days ago days ago days ago Consumption variation in % 1 Poland Consumption evolution of fcst Investment variation in % 1-1 Poland Investment evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from Central Statistical Office (GUS). Forecasts are based on FocusEconomics Consensus Forecast. 6 Private consumption, annual variation in %. 7 Private consumption, evolution of 1 and 16 forecasts during the last 18 months. 8 Gross fixed investment, annual variation in %. 9 Gross fixed investment, evolution of 1 and 16 forecasts during the last 18 months... FocusEconomics Consensus Forecast 8

83 Real Sector Additional forecasts Poland April 1 Industry and Unemployment 1 Industry variation in % Industry Unemployment variation in % % of active pop. Individual Forecasts Bank Zachodni WBK BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Nomura Nordea Oxford Economics PKO Bank Polski Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Poland Industry evol. of forecasts Unemployment % of active pop. Poland Unemployment evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Central Statistical Office (GUS). Forecasts are based on FocusEconomics Consensus Forecast. 1 Industrial production, annual variation in %. 11 Industrial production, evolution of 1 and 16 forecasts during the last 18 months. 1 Unemployment, % of active population. 1 Unemployment, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 8

84 Real Sector Additional forecasts Poland April 1 Fiscal Balance and Public Debt Fiscal Balance Public Debt % of GDP % of GDP Individual Forecasts Bank Zachodni WBK BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Nomura Nordea Oxford Economics PKO Bank Polski Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Fiscal Balance % of GDP Public Debt % of GDP 6 Poland 1 Fiscal Balance evol. of forecasts Poland Public Debt evol. of forecasts 1 16 Long-term chart period from to 19 unless otherwise stated. All real sector data are from Eurostat. Forecasts are based on FocusEconomics Consensus Forecast. 1 General government balance as % of GDP. 1 General government balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. 16 Public debt as % of GDP. 17 Public debt as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. 8 FocusEconomics Consensus Forecast 8

85 Monetary Sector Inflation Poland April 1 18 Inflation - 19 in % 1 Inflation 1 evolution of fcst Maximum Consensus Minimum -1 Inflation 1 Panelist Distribution 6% % Poland 19 Inflation Q1 1- Q 16 in % 1 1 Inflation 16 evolution of fcst Poland - Q1 1 Q1 1 Q1 1 Q1 1 Q Maximum Consensus Minimum Inflation annual variation of consumer price index in % Individual Forecasts 1 16 Bank Zachodni WBK -.7. BofA Merrill Lynch Capital Economics Citigroup Global Mkts -.6. Credit Agricole Credit Suisse - - Danske Bank DekaBank..6 Deutsche Bank EIU -.. Erste Bank Experian - - Frontier Strategy Group..8 Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A. -.. Nomura Nordea.. Oxford Economics -.. PKO Bank Polski Raiffeisen Research UBS.. UniCredit WIIW. 1. Minimum Maximum..6 Median Consensus History days ago days ago days ago Additional Forecasts Central Bank (Mar. 1) -1./. -.1/+1.8 IMF (Oct. 1).8. Euro. Comm. (Feb. 1) % % < > 1. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the Central Statistical Office (GUS). Forecasts are based on FocusEconomics Consensus Forecast. 18 Inflation, annual variation of consumer price index (CPI) in % (aop). 19 Quarterly inflation, annual variation of consumer price index (CPI) in % (aop). Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. Inflation, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 8

86 Monetary Sector Interest Rate Poland April 1 Interest Rate - 19 in % 1 Int. Rate 1 evolution of fcst 1 7 Interest Rate 1 Panelist Distribution 1% 8% Poland 1 1 Maximum Consensus Minimum Interest Rate Q1 1- Q 16 in % 11 6 Int. Rate 16 evolution of fcst 9 7 Poland 1 Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Maximum Consensus Minimum 1 Interest Rate NBP Reference Rate Individual Forecasts 1 16 Bank Zachodni WBK 1.. BofA Merrill Lynch Capital Economics Citigroup Global Mkts 1.. Credit Agricole Credit Suisse - - Danske Bank 1. - DekaBank 1.. Deutsche Bank 1. - EIU - - Erste Bank - - Experian - - Frontier Strategy Group - - Goldman Sachs 1.. HSBC ING JPMorgan KBC 1. - KUKE S.A... Nomura 1.. Nordea 1.. Oxford Economics - - PKO Bank Polski 1.. Raiffeisen Research UBS.. UniCredit 1.. WIIW 1.8. Minimum Maximum.. Median 1.. Consensus 1..7 History days ago days ago days ago % % % % < >. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the National Bank of Poland (NBP). Forecasts are based on FocusEconomics Consensus Forecast. Interest rate, NBP Reference Rate in % (eop). Quarterly interest rate, NBP Reference Rate in % (eop). Interest rate, evolution of 1 forecasts during the last 18 months. 6 Interest rate, evolution of 16 forecasts during the last 18 months. 7 Interest rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 86

87 Monetary Sector Exchange Rate Poland April 1 8 Exchange Rate PLN per EUR PLN per EUR 1 evol. of fcst PLN per EUR 1 Panelist Distribution 6% Maximum Consensus Minimum 9 Exchange Rate PLN per EUR Q1 1 Q1 1 Q1 1 Q1 1 Q PLN per EUR 16 evol. of fcst.6..8 Maximum Consensus Minimum. Exchange Rate PLN per EUR Individual Forecasts 1 16 Bank Zachodni WBK BofA Merrill Lynch.. Capital Economics.1.9 Citigroup Global Mkts Credit Agricole.1. Credit Suisse.. Danske Bank.1 - DekaBank.1.9 Deutsche Bank.8 - EIU.1.19 Erste Bank - - Experian - - Frontier Strategy Group - - Goldman Sachs.1.1 HSBC.. ING.9.8 JPMorgan - - KBC.9 - KUKE S.A..7.9 Nomura.1.8 Nordea.. Oxford Economics.1. PKO Bank Polski.18. Raiffeisen Research.1.9 UBS..9 UniCredit..8 WIIW.1. Minimum.9.8 Maximum.. Median.1. Consensus.11. History days ago.1. 6 days ago.1. 9 days ago.1. % % % < >. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from Thomson Reuters. Forecasts based on FocusEconomics Consensus Forecast. 8 Exchange rate, PLN per EUR (eop). 9 Quarterly exchange rate, PLN per EUR (eop). Exchange rate, evolution of 1 forecast during the last 18 months. 1 Exchange rate, evolution of 16 forecast during the last 18 months. Exchange rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 87

88 External Sector Current Account and Trade Balance Poland April 1 Current Account and Trade Balance Current Account Trade Balance % of GDP EUR bn Individual Forecasts Bank Zachodni WBK BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Nomura Nordea Oxford Economics PKO Bank Polski Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Current Account % of GDP - Poland Current Account evol. of fcst Trade Balance EUR bn Trade Balance Imports Exports Trade Balance evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All external sector data are from the National Bank of Poland (NBP). Forecasts based on FocusEconomics Consensus Forecast. Current account balance, as % of GDP. Current account balance, evolution of 1 and 16 forecasts during the last 18 months. Trade balance, exports and imports, in EUR. 6 Trade balance, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 88

89 External Sector Exports and Imports Poland April 1 Exports and Imports Exports Imports EUR bn EUR bn Individual Forecasts Bank Zachodni WBK BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Nomura Nordea Oxford Economics PKO Bank Polski Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Exports variation in % - Poland Exports evolution of fcst Imports variation in % - Poland Imports evol. of forecasts 1 16 Long-term chart period from to 19 unless otherwise stated. All external sector data are from the National Bank of Poland (NBP). Forecasts based on FocusEconomics Consensus Forecast. 7 Exports, annual variation in %. 8 Exports, evolution of 1 and 16 forecasts during the last 18 months. 9 Imports, annual variation in %. Imports, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 89

90 External Sector Additional forecasts Poland April 1 International Reserves and External Debt Int. Reserves External Debt EUR bn EUR bn Individual Forecasts Bank Zachodni WBK BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Erste Bank Experian Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Nomura Nordea Oxford Economics PKO Bank Polski Raiffeisen Research UBS UniCredit WIIW Minimum Maximum Median Consensus History days ago days ago days ago Int. Reserves months of imports 1 Poland Int. Reserves evolution of fcst External Debt % of GDP 8 6 Poland 1 1 External Debt evol. of forecasts 1 16 Long-term chart period from to 19 unless otherwise stated. All external sector data are from the National Bank of Poland (NBP). Forecasts are based on FocusEconomics Consensus Forecast. 1 International reserves, months of imports. International reserves, evolution of 1 and 16 forecasts during the last 18 months. External debt as % of GDP. External debt, evolution of 1 and 16 forecasts during the last 18 months. 1 9 FocusEconomics Consensus Forecast 9

91 FOCUSECONOMICS Fact Sheet Poland April 1 General Data Official name: Republic of Poland Capital: Warsaw (.m) Other cities: Katowice (.m) Krakow (1.m) Gdansk (1.m) Area (km): 1,68 Population (million, 1 est.): 8. Population density (per km, 1): 1 Population growth rate (%, 1 est.): -.1 Life expectancy (years, 1 est.): 76.7 Illiteracy rate (%, 11):. Language: Polish Measures: Metric System Time: GMT+1 Poland in the Region Population %-share in Romania.% Ukraine 1.% Other 1.% Turkey.9% Poland 1.% 8.8% GDP %-share in Romania.% Czech Republic.7% Turkey 18.1% Other 1.% Poland 1.%.9% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants): 1.9 Telephones - mobile cellular (per 1 inhabit.): 1 Internet Users (per 1 inhabitants): 6.8 Broadband Subscriptions (per 1 inhabitants): 1.6 Energy (1) Primary Energy Production (trillion Btu):,69 Primary Energy Consumption (trillion Btu):,9 Electricity Generation (billion kw-h): 1 Electricity Consumption (billion kw-h): 19 Oil Supply (thousand bpd): 7.7 Oil Consumption (thousand bpd): 7 CO Emmissions (million metric tons): 89 Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 16 Railways (km): 19,8 Roadways (km): 1, Waterways (km):,997 Chief Ports: Gdansk, Gdynia Trade Structure - Primary markets share in % Political Data Prime Minister: Ewa Kopacz Last elections: September 1 Next elections: October 1 Central Bank President: Marek Belka Czech Rep. 6.% U.K. 7.% Other.%.1% Exports Other EU- 7.1% Italy.% China.% Netherlands.9% Other 11.7% Imports 1.% Other EU- 7.% Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: A Stable S&P: A- Positive Fitch Ratings: A- Stable Germany 6.% Germany 7.% Primary products share in % Strengths Sizeable domestic market Commitment to joining Euro area Well-educated labor force Weaknesses Large fiscal deficit Mass emigration of workers has caused labor shortages in some sectors Food 11.% Exports Other 1.8% Mineral Fuels 1.% Food 7.9% Other 7.9% Imports Manufact. Products 78.% Manufact. Products 71.7% FocusEconomics Consensus Forecast 91

92 Romania April 1 Romania Romania LONG-TERM TRENDS -year averages Population (million): GDP (EUR bn): GDP per capita (EUR): 6, 7,976 9,668 GDP growth (%): Fiscal Balance (% of GDP): Public Debt (% of GDP) Inflation (%): Current Account (% of GDP): External Debt (% of GDP): Outlook stable The Romanian economy grew a healthy.8% last year, and a strong pickup in industrial activity in February suggests that growth momentum has carried over into 1. However, the economy is currently suffering from delays in several private investment projects following recent corruption scandals that involve top government officials. Finance Minister Darius Valcov resigned on 1 March after having been accused of accepting massive bribes. The newly-appointed Finance Minister and former EU funds Minister, Eugen Teodorovici, was sworn in on March amid a difficult political environment. Teodorovici will have to face tough negotiations with the IMF, which delayed the third review of a EUR billion aid deal due to disagreements with the government last February. In particular, the new Minister will encounter difficulties in convincing the IMF of the efficacy of the government s recently-announced tax-cutting plans. The IMF has already stated that the planned tax reductions will undermine years of prudent fiscal policy and pose a threat to fiscal consolidation going forward. Romania s economic outlook remains fairly stable. However, recent corruption scandals and the ongoing delay in the third review of the IMF s aid deal are weighing on investor confidence and posing downside risks to growth. FocusEconomics panelists expect the economy to expand.9% in 1, which is unchanged from last month s forecast. For 16, the panel sees growth rising to.1%. Annual inflation rose from.% in February to.8% in March. At its 1 March meeting, the Central Bank decided to cut the monetary policy rate to an all-time low of.%. FocusEconomics panelists foresee inflation ending 1 at 1.7% and 16 at.%. Cecilia Simkievich Economist Industrial Production variation in % %.. Year-on-year Annual average -. Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year changes and annual average variation of industrial production index in %. Source: National Institute of Statistics. REAL SECTOR Industrial production accelerates in February Industrial output increased.% in February over the same month last year, which came in above January s mild 1.% rise and marked the highest print since October 1. According to the National Institute of Statistics, February s rise was mainly the result of strong growth in the manufacturing sector. On a month-on-month basis, industrial production recorded flat growth in February, which was down from the 1.1% rise tallied in the previous month. As a result, annual average growth in industrial production decreased markedly from.% in January to.9% in February. FocusEconomics Consensus Forecast panelists expect industrial production to expand.% in 1, which is up.1 percentage points from last month s estimate. The panel estimates that industrial output will increase.7% in 16. The government expects GDP to expand.% in 1. FocusEconomics Consensus Forecast panelists expect the economy to grow.9% in 1, FocusEconomics Consensus Forecast 9

93 Romania April 1 which is unchanged over the previous month s projection. For 16, the panel expects the economy to expand.1%. Inflation Consumer Price Index. Month-on-month (left scale) Year-on-year (right scale) MONETARY SECTOR Inflation gains ground in March In March, consumer prices rose.1% over the previous month, which came in slightly above the.% increase observed in February. According to the National Institute of Statistics (INSSE), March s result reflected higher prices for all the subcomponents that comprise the index. The non-food products category registered the highest price increase. % Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Year-on-year and month-on-month variation of consumer price index in %. Source: National Institute of Statistics. %. Annual headline inflation increased from.% in February to.8% in March. February s result had marked an all-time low. Inflation is still well below the Central Bank s tolerance margin of plus/minus 1.% around its target of.%. Annual average inflation inched down from February s 1.% to.9% in March, marking a multi-year low. The Central Bank foresees inflation of.1% in 1 and.% in 16. FocusEconomics Consensus Forecast panelists see inflation at 1.7% by the end of 1, which is down. percentage points from last month s forecast. For 16, panelists forecast inflation at.%. Central Bank Reference Rate in % %.. Jan-1 Jan-11 Jan-1 Jan-1 Jan-1 Jan-1 Note: National Bank of Romania reference rate in %. Source: National Bank of Romania (NBR). MONETARY SECTOR Central Bank cuts policy rate to an all-time low At its 1 March meeting, the National Bank of Romania (NBR) decided to reduce the monetary policy rate from.% to.%, which marks an all-time low. The decision came as a surprise to the markets, which had expected the rate to remain unchanged at.%. In addition, the Board decided to narrow the symmetrical corridor of interest rates on the NBR s standing facilities around the policy rate to plus/minus 1.7% from plus/minus.%. As a result, starting 1 April, the interest rate on the NBR s lending facility (Lombard) was lowered to.7% from.%, while the deposit facility rate was kept unchanged at.%. The Bank decided to leave unchanged the current levels of minimum reserve requirements ratios on both leu- and foreign currencydenominated liabilities of credit institutions. In its accompanying statement, the Central Bank pointed out that the economy gained momentum in the fourth quarter of last year on the back of rising final consumption and strong fixed investment, which contributed positively to GDP growth for the first time in two years. The Board commented that monthly economic indicators suggest that the positive trend has continued during 1 thus far. Regarding price developments, annual inflation in February remained unchanged at January s.%. Against this backdrop, the Committee commented that, the Board of the National Bank of Romania decided to lower the monetary policy rate to. percent per annum from. percent starting 1 April 1 and to continue to pursue adequate liquidity management in the banking system. FocusEconomics Consensus Forecast panelists expect the policy rate to end 1 at 1.98%. For 16, the panel foresees the rate closing the year at.%. FocusEconomics Consensus Forecast 9

94 Economic Indicators 1-19 Romania April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 7,76 8,66 7,9 8,996 9,97 8,6 8,9 9,96 11,7 1,96 GDP (USD bn) GDP per capita (EUR),91 6,1 6,6 6,79 7,7 7,9 8,67 9,1 9,61 1, GDP (EUR bn) GDP (RON bn) Economic Growth (Nominal GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (annual var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (% of active population, aop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (ann. var. of M in %) Inflation (CPI, annual variation in %, eop) Inflation (Core, annual variation in %, eop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, eop) NBR Reference Rate (%, eop) Stock Market (BET variation in %) Exchange Rate (RON per USD, eop) Exchange Rate (RON per USD, aop) Exchange Rate (RON per EUR, eop) Exchange Rate (RON per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) International Reserves (EUR bn) International Reserves (months of imports) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq variation in %) Inflation (CPI, annual variation in %, eop) NBR Reference Rate (%, eop) Exchange Rate (RON per USD, eop) Exchange Rate (RON per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Retail Sales (annual variation in %) Unemployment (% of active population) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Exchange Rate (RON per USD, eop) Exchange Rate (RON per EUR, eop) FocusEconomics Consensus Forecast 9

95 Real Sector Gross Domestic Product Romania April 1 1 Real GDP -19 var. in % Real GDP Q1 1-Q 16 var. in % Real GDP growth in % 1 - Romania World GDP 1 evolution of forecasts Maximum Consensus Minimum Consumption variation in % 6 Romania World - Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts 6 Investment variation in % 6 Maximum Consensus Minimum Individual Forecasts 1 16 Alpha Bank.8 - BofA Merrill Lynch.. Capital Economics.. Citigroup Global Mkts.. Credit Agricole.8. Danske Bank.. Deutsche Bank.. EIU.9.8 Erste Bank.8. Eurobank.7 - Frontier Strategy Group..8 HSBC.9. ING.1.9 JPMorgan.7.7 National Bank of Greece.1. Nomura.. Oxford Economics.. OTP Bank.. Raiffeisen Research.. The Bleyzer Foundation. - UniCredit.7. Minimum.. Maximum..8 Median.. Consensus.9.1 History days ago days ago days ago.8. Additional Forecasts IMF (Oct. 1)..8 European Commission (Feb. 1).7.9 Government (Dec. 1) Romania Consumption evolution of fcst Romania Investment evolution of forecasts General: Long-term chart period from to 19 unless otherwise stated. All real sector data are from the National Institute of Statistics (INS, Institutul National de Statistica), the National Bank of Romania (NBR) and Eurostat. See below for details. Forecasts based on FocusEconomics Consensus Forecast. 1 GDP, annual variation in %. Source: INS. Quarterly GDP (not seasonally adjusted), year-on-year variation in %. Source: INS. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. Private consumption, annual variation in %. Source: INS. 6 Gross fixed investment, annual variation in %. Source: INS. 7 Private consumption, change in 1 and 16 forecasts during the last 18 months. 8 Gross fixed investment, change in 1 and 16 forecasts during the last 18 months. 9 Industrial production, annual variation in %. Source: INS. 1 Unemployment, % of active population. Source: Eurostat. 11 Balance of central government as % of GDP. Source: NBR. 1 Industrial production, evolution of 1 and 16 forecasts during the last 18 months. 1 Unemployment, evolution of 1 and 16 forecasts during the last 18 months. 1 Balance of central government as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 9

96 Real Sector Additional forecasts Romania April 1 Consumption variation in % Investment variation in % Industry variation in % Unemployment % of active pop. Fiscal Balance % of GDP Public Debt % of GDP Individual Forecasts Alpha Bank BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Danske Bank Deutsche Bank EIU Erste Bank Eurobank Frontier Strategy Group HSBC ING JPMorgan National Bank of Greece Nomura Oxford Economics OTP Bank Raiffeisen Research The Bleyzer Foundation UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Industry variation in % 1 Unemployment % of active pop. 11 Fiscal Balance % of GDP 1 Romania Romania Romania Industry evolution of forecasts 1 Unemployment evolution of fcst 1 Fiscal Balance evolution of fcst FocusEconomics Consensus Forecast 96

97 Monetary Sector Inflation Romania April 1 1 Inflation - 19 in % Romania Inflation 1 evolution of fcst 1 Maximum Consensus Minimum 19 Core and Producer Prices % var Inflation Q1 1-Q 16 in % Inflation annual variation of consumer price index in % 18 Inflation 16 evolution of fcst 1 Money variation in % 8 6 Romania Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Maximum Consensus Minimum 1 Individual Forecasts 1 16 Alpha Bank - - BofA Merrill Lynch 1.1. Capital Economics Citigroup Global Mkts.. Credit Agricole 1.. Danske Bank - - Deutsche Bank 1.7. EIU.1.1 Erste Bank - - Eurobank - - Frontier Strategy Group.8 1. HSBC 1.. ING.. JPMorgan National Bank of Greece 1.. Nomura - - Oxford Economics 1.. OTP Bank - - Raiffeisen Research..8 The Bleyzer Foundation. - UniCredit.1. Minimum.8 1. Maximum..8 Median 1.7. Consensus 1.7. History days ago.. 6 days ago..6 9 days ago..9 Additional Forecasts IMF (Oct. 1)..9 European Commission (Feb. 1) 1.. Central Bank (Feb. 1).1. Core PPI MSCI Price Index 6 JanJulJanJulJanJulJanJulJanJulJan Stock Market BET 8, 7, 6,,, JanJulJanJulJanJulJanJulJanJulJan General: Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the National Institute of Statistics (INS, Institutul National de Statistica) and the Central Bank (NBR, National Bank of Romania). See below for details. Forecasts based on FocusEconomics Consensus Forecast. European Commission forecasts refer to annual average harmonized inflation. Forecasts based on FocusEconomics Consensus Forecast. 1 Inflation, annual variation of consumer price index (CPI) in % (eop). Source: INS. 16 Quarterly inflation, annual variation of consumer price index (CPI) in % (eop). Source: INS. 17 Inflation, evolution of 1 inflation forecasts during the last 18 months. 18 Inflation, evolution of 16 inflation forecasts during the last 18 months. 19 Core and producer price indices, annual variation in % (eop) Source: INS. Money, annual variation of M in %. -1. Source: NBR. 1 Daily MSCI Price index in EUR. Source: MSCI Barra. From Jan. 1 until end of previous week Daily index levels, BET Index. Source: Bucharest Stock Exchange. Jan. 1 until end of previous week. FocusEconomics Consensus Forecast 97

98 Monetary Sector Interest Rate and Exchange Rate Romania April 1 Interest Rate - 19 in % Interest Rate Q1 1-Q 16 in % Policy Interest Rate and Exchange Rate 1 Int. Rate 1 evolution of fcst 6 Romania 1 1 Maximum Consensus Minimum 1 7 Exchange Rate RON per EUR Q1 1 Q1 1 Q1 1 Q1 1 Q Int. Rate 16 evolution of fcst 6 Romania Maximum Consensus Minimum 1 8 Exchange Rate RON per EUR Interest Rate Exchange Rate % RON per EUR Individual Forecasts Alpha Bank BofA Merrill Lynch.... Capital Economics Citigroup Global Mkts...8. Credit Agricole Danske Bank Deutsche Bank EIU Erste Bank Eurobank Frontier Strategy Group HSBC.... ING.... JPMorgan National Bank of Greece.... Nomura.... Oxford Economics OTP Bank..7.. Raiffeisen Research..7.. The Bleyzer Foundation UniCredit.... Minimum Maximum...8. Median.... Consensus History days ago days ago days ago Q1 1 Q1 1 Q1 1 Q1 1 Q RON per EUR 1 evol. of fcst Maximum Consensus Minimum. RON per EUR 16 evol. of fcst Maximum Consensus Minimum. General: Long-term chart period from to 19 unless otherwise stated. All monetary and external sector data are from the Central Bank (NBR, National Bank of Romania). See below for details. Forecasts based on FocusEconomics Consensus Forecast. Interest rate, Central Bank Reference Rate in % (eop). Quarterly interest rate, Central Bank Reference Rate in % (eop). Interest rate, evolution of 1 forecasts during the last 18 months. 6 Interest rate, evolution of 16 forecasts during the last 18 months. 7 Exchange rate, RON per EUR (eop). 8 Quarterly exchange rate, RON per EUR (eop). 9 Exchange rate, evolution of 1 forecast during the last 18 months. Exchange rate, evolution of 16 forecast during the last 18 months. 1 Current account balance as % of GDP. Trade balance, imports and exports, in EUR bn. International reserves, months of imports. Current account balance as % of GDP, evolution of 1 and 16 forecast during the last 18 months. Exports, annual variation in %. 6 External debt as % of GDP. FocusEconomics Consensus Forecast 98

99 Romania April 1 External Sector Current Account, Trade and International Reserves Current Account Trade Balance Exports Imports Int. Reserves % of GDP EUR bn EUR bn EUR bn EUR bn Individual Forecasts Alpha Bank BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Danske Bank Deutsche Bank EIU Erste Bank Eurobank Frontier Strategy Group HSBC ING JPMorgan National Bank of Greece Nomura Oxford Economics OTP Bank Raiffeisen Research The Bleyzer Foundation UniCredit Minimum Maximum Median Consensus History days ago days ago days ago Current Account % of GDP Trade Balance EUR billion Int. Reserves months of imports Romania 1 7 Trade Balance Imports Exports 1 9 Romania Current Account evol. of fcst Exports annual variation in % 6 External Debt % of GDP 1 16 Romania Romania FocusEconomics Consensus Forecast 99

100 FOCUSECONOMICS Fact Sheet Romania April 1 General Data Official name: Romania Capital: Bucharest (.m) Other cities: Constanta (.7m) Iaşi (.8m) Area (km): 8,91 Population (million, 1 est.): 19.9 Population density (per km, 1): 8.6 Population growth rate (%, 1 est.): -. Life expectancy (years, 1 est.): 7.7 Illiteracy rate (%, 11):. Language: Romanian Measures: Metric system Time: GMT+ Romania in the Region Population %-share in Poland 1.% Ukraine 1.% Other 1.% Turkey.9% Romania.% 8.8% GDP %-share in Czech Republic.7% Poland 1.% Other 1.6% Turkey 18.1% Romania.%.7% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants): 1.8 Telephones - mobile cellular (per 1 inhabit.): 16 Internet Users (per 1 inhabitants): 9.8 Broadband Subscriptions (per 1 inhabitants): 17. Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture 1 Net Exports 8 Energy (1) Primary Energy Production (trillion Btu): 1,9 Primary Energy Consumption (trillion Btu): 1,61 Electricity Generation (billion kw-h): 6. Electricity Consumption (billion kw-h): 6. Oil Supply (thousand bpd): 1 Oil Consumption (thousand bpd): 16 CO Emmissions (million metric tons): Manufacturing Other Industry Services 8 6 Investment Government Consumption Private Consumption Transportation (1) Airports: Railways (km): 1,777 Roadways (km): 8,18 Waterways (km): 1,71 Chief Ports: Constanta, Braila Trade Structure - Primary markets share in % Political Data Prime Minister: Victor-Viorel Ponta Last elections: 9 December 1 Next elections: December 16 Central Bank President: Mugur Isărescu Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: Baa Stable S&P: BBB- Stable Fitch Ratings: BBB- Stable Other 8.% France 7.1% Italy 1.% Turkey.% Exports Germany 19.% Other EU % Asia ex- Japan 6.% Other.6% Hungary 9.1% Primary products share in % Imports Italy 11.% Other EU- 7.8% Germany 17.% Strengths Receiver of large amount of EU funds Low unemployment levels EU membership shields the economy against emerging markets crises Weaknesses Large external imbalances Political instability Lack of structural reforms in key economic sectors. Food Mineral 8.% Fuels.% Other 8.% Exports Manufact. Products 77.9% Mineral Fuels 11.% Food 7.8% Other 7.% Imports Manufact. Products 7.% FocusEconomics Consensus Forecast 1

101 April 1 LONG-TERM TRENDS -year averages Population (million): GDP (USD bn):,6 1,8 1,786 GDP per capita (USD): 1,7 11,9 1,9 GDP growth (%): Fiscal Balance (% of GDP): Public Debt (% of GDP): Inflation (%): Current Account (% of GDP):...7 External Debt (% of GDP): Outlook deteriorates The n economy eked out unexpected growth in the last quarter of 1, demonstrating resilience in the face of geopolitical headwinds, international sanctions, a falling ruble and lower oil prices. However, the start of 1 has brought signs of contraction as negative growth momentum has been picking up speed. In February, industrial production growth plummeted to a two-year low and exports decreased for the eighth time in the last nine months. In addition, the manufacturing and services PMIs continued to point to contraction in March and confidence among n consumers fell to the lowest level since 9 in Q1. Owing to the economic deterioration and lower tax take from the hydrocarbons sector, the Finance Ministry presented new fiscal projections for this year, which foresee a fiscal deficit of.8% of GDP. Following lackluster economic growth in 1, the n economy is expected to take a nosedive this year, driven by lower oil prices, international sanctions and geopolitical tensions. FocusEconomics panelists see the economy contracting.% this year, which is down.1 percentage points from last month s forecast. In 16, the panel expects the economy to recover somewhat and grow a tepid.%. Inflation reached its highest level since in March with a rate of 16.9%. It is expected to continue rising in the first half of the year, before easing in the second half. Bank Rossii cut interest rates by 1 basis points to 1.% in March and signaled that more cuts will be made. Panelists expect inflation to close 1 at 1.%. In 16, the panel sees inflation falling to 7.%. Ricardo Aceves Senior Economist Budget balance % of GDP % Note: General government balance as % of GDP. Source: Ministry of Finance and FocusEconomics Consensus Forecast. REAL SECTOR Reality check prompts the government to change budget plans for this year The government announced on March that it would present new fiscal projection for this year and next in an effort to shore up the deteriorating economic situation and worsening economic prospects. The economy has been affected by a number of structural problems, but the economic deterioration has been exacerbated by the Western sanctions that have been imposed on in response to the Ukrainian crisis and the sharp fall in oil prices that began in the second half of 1. Amendments to the 1 budget passed the first reading in n s lower house of parliament on 7 March. According to the Ministry of Finance, budget revenues are now expected to be RUB 1. trillion this year, which represents a 17.% reduction compared to the Ministry s original projection and a 1.1% decrease over the previous year. Meanwhile, expenditures are expected to stay at RUB 1. trillion, which will then push the fiscal deficit from the previously-expected RUB 1 billion to RUB.7 trillion or from.6% of GDP to.8% of GDP. For 16, the new figures suggest that revenues will recover to RUB 1. trillion and expenditures will fall to RUB 1. trillion. The Ministry of Finance continues to expect that the budget will be balanced in 17. FocusEconomics Consensus Forecast 11

102 April 1 The government s new calculations are based on revised projections for oil prices, which are foreseen averaging USD per barrel in 1, USD 6 per barrel in 16 and USD 7 per barrel in 17. In addition, the government expects the economy to contract.% this year and sees the ruble trading at an average RUB 6 per USD. In the previous budget, which many analysts had already considered too optimistic, the government had assumed that the oil price would average USD 1 per barrel in 1, while it projected economic growth of 1.%. The Ministry of Finance also indicated that the new budget deficit (now projected at RUB.7 trillion, equivalent to.8% of GDP) would be covered by the country s Reserve Fund, rather than by raising debt. The government expects that the RUB.7 trillion Reserve Fund will cover about RUB. trillion in total spending. That will, however, require the parliament to increase the ceiling on annual spending from the Sovereign Wealth Fund, but it is unlikely that the Duma will alter the plan. As a result, the total value of the Reserve Fund is expected to fall by over 6% this year. In the geopolitical arena, although the new Minsk peace agreement better known as Minsk-II that was signed on 1 February appears to be holding for longer than the last agreement, most analysts and observers have concluded that it is fragile and will not hold for very long. In order to de-escalate tensions, observers agree that further rounds of negotiations are required and that additional steps have be implemented. Should the violence in the Eastern regions of Ukraine continue and diplomatic talks fail, Western countries are likely to prolong, and perhaps even increase, economic sanctions on. Should this occur, the n government would have to make further spending cuts and increase borrowing in order to run a similar deficit beyond 1 as the Reserve Fund is expected to be depleted this year. This would be very costly, given the country s worsening sovereign credit rating. The government s new fiscal deficit projections are more in line with those of FocusEconomics panelists who expect the fiscal balance to incur a deficit of.1% of GDP in 1. For 16, participants in the Consensus see the fiscal deficit falling to.1% of GDP. Gross Domestic Product variation in % 6.. %. REAL SECTOR Economy cools in Q but unexpectedly ekes out growth Economic growth decelerated less than expected in the last quarter of 1, according to preliminary data published by the Federal Statistics Service (Rosstat) on 1 April. The n economy increased.% year-on-year in Q, which came in below the revised.9% expansion registered in Q (previously reported: +.7% year-on-year). That said, markets expected that s GDP had contracted.% in the last quarter of 1. Meanwhile, sequential data showed that GDP was flat in seasonally-adjusted terms in Q 1, which followed a similar reading recorded in Q Q1 11 Q1 1 Q1 1 Q1 1 Q1 1 Note: Year-on-year changes of GDP in %. Source: Federal State Statistics Service (Rosstat) and FocusEconomics Consensus Forecast. The moderation in Q was mainly the result of a further contraction in government spending, another decrease in fixed investment and deterioration in the external sector. Exports of goods and services contracted.% annually in Q, which came in below the 1.% decrease observed in Q. Imports plummeted 7.8% over the same quarter of the previous year, which followed the 7.6% contraction registered in the third quarter. Consequently, the external sector s net contribution to overall economic growth fell from 1.7 percentage points to 1. percentage points. FocusEconomics Consensus Forecast 1

103 April 1 Gross Domestic Product variation in % 1... On the domestic front, government spending deteriorated and contracted.% in Q, which was below the.1% decrease tallied in Q. Fixed investment eased the pace of contraction from a 1.7% decrease in Q to a 1.% contraction in Q. Conversely, private consumption showed solid growth in the last quarter of 1, despite the deteriorating economic environment. It increased 1.% in Q, which marked an acceleration over the.% rise recorded in the previous quarter. % In 1, the n economy expanded.6%, which confirmed a preliminary estimate released in January. The reading came in below the 1.% expansion recorded in 1 and represented the worst economic performance since 9. Note: Annual variation of GDP in %. Source: Federal Statistical Office and FocusEconomics Consensus Forecast. The economy is expected to experience a significant contraction this year due to a combination of lower oil prices, high inflation, tightening of monetary policy and no signs that the West will lift the sanctions. The Central Bank expects the economy to contract between.% and.% in 1. FocusEconomics Consensus Forecast panelists project s GDP to fall.% in 1, which is down.1 percentage points from last month s forecast. Panelists are becoming more pessimistic regarding s economic outlook and expect the economy to expand only.% in 16. Purchasing Managers Index (PMI) REAL SECTOR Contraction in services eases while manufacturing worsens The HSBC manufacturing Purchasing Managers Index (PMI) slipped from 9.7 in February to 8.1 in March. The indicator continues to hover below the -threshold that separates expansion from contraction in business activity in the sector. According to HSBC, The n manufacturing sector registered a modest deterioration in operating conditions during March as production and new business both recorded mild declines. Manufacturing PMI Services PMI Mar-1 Jun-1 Sep-1 Dec-1 Mar-1 Jun-1 Sep-1 Dec-1 Mar-1 Note: Markit HSBC Purchasing Managers Index (PMI). A reading above indicates an expansion in business activity while a value below points to a contraction. Source: Markit and HSBC. Industrial Production annual variation in %.. %. -. Year-on-year Annual average -. Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year and annual average variation of industrial production index in %. Source: Federal State Statistics Service (Rosstat) and FocusEconomics calculations. HSBC also noted that March s print reflected a deterioration in employment and that backlogs of work continued to fall. That said, respondents to the March survey pointed out that although input and output prices continued to rise, the increase was slower than in the first two months of the year. Moreover, the services PMI improved in March, rising to 6.1 from 1. in February. Despite the improvement, the indicator remains below the -threshold, which indicates contraction in the sector. According to HSBC, respondents to the survey signaled that economic conditions are still challenging, which was highlighted by a sharp fall in new business. However, in certain sectors, which are affected by seasonal factors (namely hotels and restaurants), saw modest growth in March. In addition, n services providers signaled an increase in optimism that the recent downturn will be transitory, with expectations that business activity will improve in the coming months. HSBC noted that, companies offered a more upbeat assessment of the future than at any time in the past seven months amid hope of a turnaround in wider economic performance over the coming year. REAL SECTOR Industrial production falls to two-year low According to the n statistical office, industrial production contracted 1.6% year-on-year in February. The reading, which contrasted the.9% expansion tallied in January, exceeded the.6% fall the markets had expected and was mainly the result of a plunge in manufacturing output and a deterioration in growth in public utilities. February s contraction represented the sharpest contraction in output since February 1. FocusEconomics Consensus Forecast 1

104 April 1 A month-on-month comparison confirms the deterioration suggested by the annual data. Industrial production contracted a seasonally-adjusted.7% in February, which followed the 1.8% decrease observed in January. As a result of the contraction seen in the annual data, annual average growth in industrial production fell 1.7% in January to 1.% in February. Economists polled by FocusEconomics expect industrial production to decrease.1% in 1, which is down.6 percentage points from last month s forecast. For 16, the panel expects industrial production to increase 1.1%. Consumer Confidence Index -1 % Q 11 Q1 1 Q 1 Q1 1 Q 1 Q1 1 Q 1 Q1 1 Note: Consumer Confidence Index. Values above indicate an optimistic outlook while values below indicate a pessimistic outlook. Source: Federal State Statistics Service (Rosstat). OUTLOOK n consumers become more pessimistic The consumer confidence indicator elaborated by the Federal Statistics Service (Rosstat) plummeted from minus 18% in the fourth quarter of 1 to minus % in the first quarter. Q1 s result marked the lowest confidence level since Q 9. According to Rosstat, all the components of the index registered substantial deteriorations in Q1 compared to Q, notably households assessment of their current financial situation and the current overall economic situation. Expectations also weakened over the previous quarter, although the weakening was less pronounced this time. The survey also showed that consumers muted inflation expectations, low propensity to buy and increasing fears or rising unemployment. FocusEconomics Consensus Forecast panelists expect private consumption to contract 6.1% in 1, which is down. percentage points from last month s projection. For 16, panelists expect private consumption to expand a mild.6%. Inflation Consumer Price Index. Month-on-month (left scale) Year-on-year (right scale).. % % MONETARY SECTOR Inflation jumps to highest level since In March, consumer prices rose 1.% over the previous month, which came in below the.% increase observed in February. The result, which overshot the 1.% increase the markets had expected, marked a second consecutive moderation in the monthly increase of consumer prices. March s print reflected a slowdown in the increase of both food prices and non-food prices, mainly due to the gradual cooling of the economy, which is acting as a brake on inflation. Despite the moderation on a monthly basis, annual headline inflation crept up from 16.7% in February to 16.9% in March, which slightly overshot the 16.8% increase the markets had anticipated and represented the highest level since February. At the current rate, inflation remains well above the n Central Bank s.% inflation target Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Year-on-year and month-on-month variation of consumer price index in %. Source: Federal State Statistics Service (Rosstat). 9. Inflation is expected to reach its peak in the second quarter this year due to effects of the ruble s sharp depreciation and n embargo on food imports from some Western countries. s Finance Ministry expects that the inflation rate will reach a peak of more than 17% in the first half of this year before easing in the second half. The Ministry expects inflation to end 1 below 1.%. FocusEconomics Consensus Forecast panelists see inflation ending 1 at 1.%, which is up.7 percentage points from last month s forecast. For 16, participants expect inflation to ease to 7.%. FocusEconomics Consensus Forecast 1

105 April 1 MONETARY SECTOR Central Bank cuts interest rates for second time this year, warns of impending contraction in economic activity The recent stabilization in both the ruble and global oil prices prompted s Central Bank to cut the one-week repurchase rate by 1 basis points to 1.% at its 1 March monetary policy meeting. March s cut, which was in line with market expectations, is the second this year and came after the monetary authority s emergency rate hike in December 1, through which it attempted to stabilize the freefall of the ruble and mitigate a potential currency crisis. The Bank insisted that its decision is intended to provide a balance between lowering inflation and supporting economic growth and signaled that more rate cuts will continue. Monetary Policy Rate in % 1 1 % Jan-1 Jul-1 Jan-11 Jul-11 Jan-1 Jul-1 Jan-1 Jul-1 Jan-1 Jul-1 Jan-1 Note: 1-Week Repo Rate in %. Source: Central Bank of the n Federation (CBR). In its statement, the Central Bank said that the economy had managed to grow somewhat at the end of 1. However, the Bank pointed out that, structural factors continue to exert a restraining influence in economic growth, although it did recognize that the economic slowdown is becoming more cyclical. Monetary authorities warned that economic activity will contract in the coming months, which, will contribute to lower inflation. Economic activity is expected to deteriorate going forward mainly due to low oil prices on average, oil prices are lower compared to last year more difficult financial conditions for n borrowers, and the fact that n firms are increasingly finding foreign capital markets to be inaccessible. Consequently, investment is expected to deteriorate and drag on growth. However, an increase in exports will partially mitigate this drag as exports will become more competitive due to the depreciation of the ruble. The Bank went on to state that it expects GDP to contract between.% and.% in 1. Regarding consumer prices, the Central Bank stated that inflation remains high due to the ruble s depreciation and imports restrictions. However, monetary authorities said that the impact of these supply-side factors will fade away in the coming months and will have been exhausted at the end of the year. Simultaneously, the Bank indicated that weaker growth in domestic demand and the fall in real wages will lead to downward pressures on inflation. The Bank foresees that inflation will reach its peak in Q 1 and that it will fall to 9.% at the end of the year. It is expected to decline further to reach the Bank s.% inflation target in 17. The next monetary policy meeting is scheduled for April. Commenting on the Central Bank s decision, Vladimir Miklashevsky, Economist at Danske Bank, pointed out: We welcome the decision to cut, as last year s aggressive monetary policy has caused a massive monetary contraction and is likely to send the n economy deep into recession this year (we expect GDP to fall -7.9%), with a further -.8% y/y fall in 16. As we expect CPI to slow to 11% y/y by the end of 1, we do not exclude the key rate falling under 1% in H 1 as the central bank follows through on its new stance. FocusEconomics Consensus Forecast panelists expect the Central Bank to continue easing the monetary policy throughout this year. They expect the refinancing rate to close 1 at 11.9%. For 16, the panel expects the rate to end the year at 7.89%. FocusEconomics Consensus Forecast 1

106 April 1 EXTERNAL SECTOR Decline in exports and imports moderates in February; Ural oil price falls again in March In February, exports totaled USD 9. billion, which represented a 19.9% contraction over the same month last year. Although the reading marked the eighth contraction in the last nine months, the decrease was slower than the.% plunge registered in January. Imports followed suit and decreased.% annually in February, which, nonetheless marked a moderation in the pace of contraction compared to the.7% decreased registered in January. Merchandise Trade Trade Balance (USD bn, left scale) Exports (yoy, right scale) Imports (yoy, right scale) 8 % The trade surplus, however, continued to improve. In February, the trade balance incurred a surplus of USD 1.6 billion, which was came in above the USD 1. billion observed in February 1. In the 1-months up to February, the trade surplus widened slightly to USD 188 billion from the USD 186 billion recorded in the 1 months up to January Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: 1-month sum of trade balance in USD billion and annual variation of the 1-month sum of exports and imports in %. Source: Federal State Statistics Service (Rosstat) and Ministry of Economic Development. -8 Following a short-lived recovery in February, the price for Ural oil, which is s key export commodity, declined again. At the end of March, the Ural oil barrel traded at USD., which was 1.% lower than at the end of February and lost half of its value in annual terms. Despite expectations that oil prices will remain low this year, n authorities had confirmed that the country will not reduce oil output. Meanwhile, the n Central Bank published its assessment of the country s economic outlook, where it sees two scenarios. Under a baseline scenario, the Banks expects the price for Ural oil to average USD 8. Under a worst-case scenario, the Bank sees oil prices averaging USD 6. FocusEconomics Consensus Forecast panelists expect merchandise exports to plummet.% in 1 and to increase 8.6% in 16. As a result of the imports ban imposed by the government in early August, imports are expected to contract.7% in 1. In 16, imports will rebound and increase 8.%. FocusEconomics Consensus Forecast 16

107 Economic Indicators 1-19 April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 1,67 1,19 1,89 1, 1,99 8,89 1, 11, 1,98 1,76 GDP (USD bn) 1, 1,886,8,,6 1,78 1, 1,61 1,767 1,978 GDP per capita (EUR) 8,6 9,7 1,87 1,88 9,76 8,1 9,1 1,1 1,697 11,9 GDP (EUR bn) 1,1 1,69 1,8 1,6 1,99 1,19 1,6 1,68 1,7 1,66 GDP (RUB bn) 6,9,967 6,176 66,19 71,6 79, 86,1 9,6 1,76 18,7 Economic Growth (Nominal GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (annual var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual var. in %) Unemployment (% of active population, aop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %) Inflation (CPI, annual variation in %, eop) Inflation (CPI, annual variation in %, aop) Inflation (PPI, annual variation in %, eop) Week Repo Rate (%, eop) Year OFZ Bond Yield (%, eop) Stock Market (RTS variation in %) Exchange Rate (RUB per USD, eop) Exchange Rate (RUB per USD, aop) Exchange Rate (RUB per EUR, eop) Exchange Rate (RUB per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (USD bn) Merchandise Trade Balance (USD bn) Merchandise Exports (USD bn) Merchandise Imports (USD bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) International Reserves (USD bn) International Reserves (months of imports) External Debt (USD bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, qoq variation in %) Consumer Conf. Index (-point threshold) Inflation (CPI, annual variation in %, eop) Week Repo Rate (%, eop) Exchange Rate (RUB per USD, eop) Exchange Rate (RUB per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (ann. var. in %) HSBC Manufacturing PMI (-threshold) HSBC Services PMI (-threshold) Unemployment (% of active population) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Exchange Rate (RUB per USD, eop) Exchange Rate (RUB per EUR, eop) Merchandise Exports (annual variation in %) Ural oil price (USD per barrel, eop) FocusEconomics Consensus Forecast 17

108 Real Sector Gross Domestic Product April 1 1 Real GDP -19 var. in % Real GDP Q1 1-Q 16 var. in % Real GDP growth in % World 1 1 GDP 1 evolution of forecasts - % % % 1% % Maximum Consensus Minimum -1 GDP 1 Panelist Distribution World -6 Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts 6 - < > Maximum Consensus Minimum -6 Individual Forecasts 1 16 Alfa-Bank -.. Allianz BCS Berenberg BofA Merrill Lynch -..9 Capital Economics -.. Citigroup Global Mkts Credit Agricole Credit Suisse -.6. Danske Bank DekaBank Deutsche Bank EIU -.. Frontier Strategy Group -.. Goldman Sachs HSBC ING -.9. JPMorgan -.. KBC KUKE S.A Macro-Advisory Ltd. -.. Nomura -..8 Nordea -.9. OTP Bank Oxford Economics -6.. Raiffeisen Research -.. Renaissance Capital -.. Rosbank -.. Scotiabank -.. SEB UBS -.. UniCredit VTB Capital -.. WIIW Minimum Maximum -.. Median -.. Consensus -.. History days ago days ago days ago Additional Forecasts Government (Mar. 1) -. - IMF (Jan. 1) European Commission (Feb. 1) -.. Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Federal State Statistics Service (Rosstat). Forecasts are based on FocusEconomics Consensus Forecast. 1 GDP, real annual variation in %. Quarterly GDP (seasonally adjusted), year-on-year variation in %. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. GDP, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 18

109 Real Sector Additional forecasts April 1 Consumption and Investment Consumption Investment variation in % variation in % Individual Forecasts Alfa-Bank Allianz BCS Berenberg BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Macro-Advisory Ltd Nomura Nordea OTP Bank Oxford Economics Raiffeisen Research Renaissance Capital Rosbank Scotiabank SEB UBS UniCredit VTB Capital WIIW Minimum Maximum Median Consensus History days ago days ago days ago Consumption variation in % Consumption evolution of fcst Investment variation in % Investment evol. of forecasts 1 Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Federal State Statistics Service (Rosstat). Forecasts are based on FocusEconomics Consensus Forecast. 6 Private consumption, annual variation in %. 7 Private consumption, evolution of 1 and 16 forecasts during the last 18 months. 8 Gross fixed investment, annual variation in %. 9 Gross fixed investment, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 19

110 Real Sector Additional forecasts April 1 Industry and Unemployment 1 Industry variation in % Industry Unemployment variation in % % of active pop. Individual Forecasts Alfa-Bank Allianz BCS Berenberg BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Macro-Advisory Ltd Nomura Nordea OTP Bank Oxford Economics Raiffeisen Research Renaissance Capital Rosbank Scotiabank SEB UBS UniCredit VTB Capital WIIW Minimum Maximum Median Consensus History days ago days ago days ago Industry evol. of forecasts Unemployment % of active pop Unemployment evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Federal State Statistics Service (Rosstat). Forecasts are based on FocusEconomics Consensus Forecast. 1 Industrial production, annual variation in %. 11 Industrial production, evolution of 1 and 16 forecasts during the last 18 months. 1 Unemployment, % of active population. 1 Unemployment, evolution of 1 and 16 forecasts during the last 18 months... FocusEconomics Consensus Forecast 11

111 April 1 Real Sector Additional forecasts Fiscal Balance and Public Debt Fiscal Balance Public Debt % of GDP % of GDP Individual Forecasts Alfa-Bank Allianz BCS Berenberg BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Macro-Advisory Ltd Nomura Nordea OTP Bank Oxford Economics Raiffeisen Research Renaissance Capital Rosbank Scotiabank SEB UBS UniCredit VTB Capital WIIW Minimum Maximum Median Consensus History days ago days ago days ago Fiscal Balance % of GDP Fiscal Balance evol. of forecasts Public Debt % of GDP Public Debt evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Ministry of Finance. Forecasts are based on FocusEconomics Consensus Forecast. 1 General government balance as % of GDP. 1 General government balance as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. 16 Public debt as % of GDP. 17 Public debt as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. 1 1 FocusEconomics Consensus Forecast 111

112 Monetary Sector Inflation April 1 18 Inflation - 19 in % Inflation 1 evolution of fcst Inflation 1 Panelist Distribution % % % 1% % Maximum Consensus Minimum 19 Inflation Q1 1-Q 16 in % 1 Inflation 16 evolution of fcst 16 1 < > Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Maximum Consensus Minimum Inflation annual variation of consumer price index in % Individual Forecasts 1 16 Alfa-Bank Allianz BCS Berenberg BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank 1.. Deutsche Bank EIU 1.. Frontier Strategy Group Goldman Sachs - - HSBC 1. - ING 1. - JPMorgan KBC KUKE S.A Macro-Advisory Ltd Nomura Nordea OTP Bank - - Oxford Economics Raiffeisen Research Renaissance Capital Rosbank Scotiabank SEB UBS - - UniCredit VTB Capital WIIW - - Minimum 1..1 Maximum Median Consensus History days ago days ago days ago Additional Forecasts Central Bank Target.. IMF (Oct. 1) 6.. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the Federal State Statistics Service (Rosstat). Forecasts are based on FocusEconomics Consensus Forecast. 18 Inflation, annual variation of consumer price index (CPI) in % (eop). 19 Quarterly inflation, annual variation of consumer price index (CPI) in % (eop). Inflation, evolution of 1 forecasts during the last 18 months. 1 Inflation, evolution of 16 forecasts during the last 18 months. Inflation, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 11

113 Monetary Sector Interest Rate April 1 Interest Rate - 19 in % Interest Rate Q1 1-Q 16 in % Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 Int. Rate 1 evolution of fcst 6 Int. Rate 16 evolution of fcst 1 Maximum Consensus Maximum Minimum Consensus Minimum Interest Rate 1 Panelist Distribution % % % 1% Interest Rate 1-Week Repo Rate Individual Forecasts 1 16 Alfa-Bank - - Allianz - - BCS - - Berenberg - - BofA Merrill Lynch Capital Economics Citigroup Global Mkts 1. - Credit Agricole Credit Suisse Danske Bank 1. - DekaBank - - Deutsche Bank EIU - - Frontier Strategy Group - - Goldman Sachs HSBC 1.. ING JPMorgan KBC 1. - KUKE S.A Macro-Advisory Ltd Nomura Nordea OTP Bank Oxford Economics - - Raiffeisen Research Renaissance Capital Rosbank Scotiabank - - SEB - - UBS UniCredit VTB Capital - - WIIW - - Minimum 9.. Maximum Median Consensus History days ago days ago days ago % < > 19. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from the Central Bank of the n Federation (CBR). Forecasts are based on FocusEconomics Consensus Forecast. Interest rate, 1-Week Repo Rate in % (eop). Quarterly interest rate, 1-Week Repo Rate in % (eop). Interest rate, evolution of 1 forecasts during the last 18 months. 6 Interest rate, evolution of 16 forecasts during the last 18 months. 7 Interest rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 11

114 Monetary Sector Exchange Rate April 1 8 Exchange Rate RUB per USD 9 Exchange Rate RUB per USD Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 RUB per USD 1 evol. of fcst 1 RUB per USD 16 evol. of fcst 1 1 Maximum Maximum Consensus Consensus Minimum Minimum RUB per USD 1 Panelist Distribution 8% 6% % % Exchange Rate RUB per USD Individual Forecasts 1 16 Alfa-Bank.. Allianz 9.. BCS - - Berenberg - - BofA Merrill Lynch.. Capital Economics - - Citigroup Global Mkts Credit Agricole.. Credit Suisse Danske Bank 8. - DekaBank - - Deutsche Bank.6 - EIU Frontier Strategy Group - - Goldman Sachs 6.. HSBC ING. 8.8 JPMorgan KBC - - KUKE S.A. - - Macro-Advisory Ltd. - - Nomura Nordea OTP Bank - - Oxford Economics Raiffeisen Research Renaissance Capital..8 Rosbank Scotiabank 6.. SEB.. UBS UniCredit VTB Capital WIIW Minimum. 8. Maximum Median 6.. Consensus History days ago days ago days ago % < > 1. Long-term chart period from to 19 unless otherwise stated. All monetary sector data are from Thomson Reuters. Forecasts based on FocusEconomics Consensus Forecast. 8 Exchange rate, RUB per USD (eop). 9 Quarterly exchange rate, RUB per USD (eop). Exchange rate, evolution of 1 forecast during the last 18 months. 1 Exchange rate, evolution of 16 forecast during the last 18 months. Exchange rate, panelist distribution of 1 forecasts. Concentration of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists. FocusEconomics Consensus Forecast 11

115 External Sector Current Account and Trade Balance April 1 Current Account and Trade Balance Current Account Trade Balance % of GDP USD bn Individual Forecasts Alfa-Bank Allianz BCS Berenberg BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A Macro-Advisory Ltd Nomura Nordea OTP Bank Oxford Economics Raiffeisen Research Renaissance Capital Rosbank Scotiabank SEB UBS UniCredit VTB Capital WIIW Minimum Maximum Median Consensus History days ago days ago days ago Current Account % of GDP Current Account evol. of fcst Trade Balance USD bn 6 Trade Balance Imports Exports Trade Balance evol. of forecasts 18 Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Central Bank of the n Federation (CBR), the Federal State Statistics Service (Rosstat) and the Ministry of Economic Development. See below for details. Forecasts based on FocusEconomics Consensus Forecast. Current account balance, as % of GDP. Current account balance, evolution of 1 and 16 forecasts during the last 18 months. Trade balance, exports and imports, in USD. Rosstat and Ministry of Economic Development. 6 Trade balance, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 11

116 External Sector Exports and Imports April 1 Exports and Imports Exports Imports USD bn USD bn Individual Forecasts Alfa-Bank Allianz 6 BCS Berenberg BofA Merrill Lynch Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank EIU Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan KBC KUKE S.A. 8 8 Macro-Advisory Ltd Nomura Nordea OTP Bank Oxford Economics Raiffeisen Research 7 18 Renaissance Capital 8 86 Rosbank Scotiabank SEB UBS UniCredit VTB Capital WIIW 6 Minimum Maximum Median 7 17 Consensus History days ago days ago days ago Exports variation in % Exports evolution of fcst 6 9 Imports variation in % Imports evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Federal State Statistics Service (Rosstat) and the Ministry of Economic Development. Forecasts based on FocusEconomics Consensus Forecast. 7 Exports, annual variation in %. 8 Exports, evolution of 1 and 16 forecasts during the last 18 months. 9 Imports, annual variation in %. Imports, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 116

117 External Sector Additional forecasts April 1 International Reserves and External Debt Int. Reserves External Debt USD bn USD bn Individual Forecasts Alfa-Bank Allianz BCS Berenberg BofA Merrill Lynch - - Capital Economics Citigroup Global Mkts Credit Agricole Credit Suisse Danske Bank DekaBank Deutsche Bank 6 7 EIU Frontier Strategy Group Goldman Sachs HSBC ING JPMorgan 17 9 KBC KUKE S.A Macro-Advisory Ltd. 6 Nomura Nordea OTP Bank Oxford Economics Raiffeisen Research Renaissance Capital Rosbank - - Scotiabank SEB UBS UniCredit - - VTB Capital WIIW Minimum Maximum Median Consensus History days ago days ago days ago Int. Reserves months of imports Int. Reserves evolution of fcst External Debt % of GDP External Debt evol. of forecasts Long-term chart period from to 19 unless otherwise stated. All external sector data are from the Central Bank of the n Federation (CBR). Forecasts are based on FocusEconomics Consensus Forecast. 1 International reserves, months of imports. International reserves, evolution of 1 and 16 forecasts during the last 18 months. External debt as % of GDP. External debt, evolution of 1 and 16 forecasts during the last 18 months FocusEconomics Consensus Forecast 117

118 FOCUSECONOMICS April 1 Fact Sheet General Data Official name: n Federation Capital: Moscow (11.6m) Other cities: St. Petersburg (.9m) Novosibirsk (1.m) Area (km): 17,98, Population (million, 1 est.): 1 Population density (per km, 1): 8. Population growth rate (%, 1 est.):. Life expectancy (years, 1 est.): 7.16 Illiteracy rate (%, 1):. Language: n Measures: Metric System Time: GMT+ to GMT+1 in the Region Population %-share in Romania.% Poland 1.% Ukraine 1.% Other 1.% Turkey.9% 8.8% GDP %-share in Romania.% Czech Republic.7% Poland 1.% Other 1.7% Turkey 18.1%.6% Economic Infrastructure Telecommunication (1) Telephones - main lines (per 1 inhabitants): 8. Telephones - mobile cellular (per 1 inhabit.): 1 Internet Users (per 1 inhabitants): 61. Broadband Subscriptions (per 1 inhabitants): 16.6 Energy (1) Primary Energy Production (trillion Btu):,96 Primary Energy Consumption (trillion Btu): 1, Electricity Generation (billion kw-h): 1,1 Electricity Consumption (billion kw-h): 889 Oil Supply (thousand bpd): 1,97 Oil Consumption (thousand bpd):,9 CO Emmissions (million metric tons): 1,78 Economic Structure GDP by Sector share in % GDP by Expenditure share in % Agriculture Manufacturing Other Industry Services Net Exports Investment Government Consumption Private Consumption Transportation (1) Airports: 1,18 Railways (km): 87,17 Roadways (km): 1,8,87 Waterways (km): 1, Chief Ports: Kaliningrad, St. Petersburg Trade Structure Primary markets share in % Political Data President: Vladimir Putin Last elections: March 1 Next elections: 18 Central Bank President: Elvira Nabiullina Long-term Foreign Currency Ratings Agency Rating Outlook Moody s: Ba1 Negative S&P: BB+ Negative Fitch Ratings: BBB- Negative China 6.8% Other.1% Other Asia ex-japan.8% Italy 6.% Exports Germany 6.7% Turkey.% Ukraine.% Netherlands 1.7% Other EU- 7.% Other 8.7% China 16.% Primary products share in % Other Asia ex-japan 7.% Ukraine.7% Imports Germany 1.1% Other EU % Strengths Weaknesses Other 18.% Food 1.9% Other 1.7% Substantial oil and gas wealth Strong international reserves position Rich in natural resources Dependence on oil exports Persistent inflation Financial system vulnerability Weak democratic institutions Rapidly ageing population Mineral Fuels 67.6% Exports Manufact. Products 1.8% Imports Manufact. Products 7.% FocusEconomics Consensus Forecast 118

119 Slovakia April 1 Slovakia Slovakia Outlook stable Slovakia s economy recorded the largest expansion in three years in 1, which was mainly driven by a rebound in investment and an expansion in private consumption supported by improving labor market conditions. Growth momentum remains strong at the beginning of 1, as industrial production expanded in February at the fastest pace since July 1. LONG-TERM TRENDS -year averages Population (million):... GDP (EUR bn): GDP per capita (EUR): 1, 1,6 16,8 GDP growth (%): Fiscal Balance (% of GDP): Public Debt (% of GDP):.1.. Inflation (%): Current Account (% of GDP):... Recovery in the Eurozone as well as the depreciation of the euro should support Slovakia s external sector in the coming years. Continuous improvement in the labor market and increased real household income due to low energy prices are also expected to contribute to growth. FocusEconomics Consensus Forecasts panelists expect GDP to expand.6% in 1, which is unchanged from last month s forecast. For 16, the panel sees economic growth picking up to.9%. Harmonized consumer prices declined.6% annually in February, marking the third consecutive decrease and the largest drop in more than fifteen years (January: -.% year-on-year). The FocusEconomics Consensus Forecast panel expects HICP inflation to average.% this year before rising to 1.6% in 16. Eric Denis Economist Industrial Production variation in % 1 1 % REAL SECTOR Industrial production growth accelerates in February Industrial production increased.% annually in February, marking an acceleration compared to the.1% growth tallied in January. The increase marked a seven-month high. According to the statistical office, February s result reflected an increase in electricity, gas and air-conditioning supply, as well as in manufacturing and in mining and quarrying. On a monthly basis, industrial production rose.% in seasonally-adjusted terms in February, which contrasted the.1% decline tallied in January. Despite February s increase, annual average growth in industrial production declined from.% in January to.1% in February. Year-on-year Annual average - Feb-1 Aug-1 Feb-1 Aug-1 Feb-1 Note: Year-on-year and annual average variation of industrial production index in %. Source: Statistical Office of the Slovak Republic (SOSR) and FocusEconomics calculations. FocusEconomics Consensus Forecast panelists expect industrial production to increase.6% in 1, which is down. percentage points from last month s forecast. For 16, the panel sees industrial output expanding.%. The National Bank of Slovakia (NBS) projects that GDP will grow.% in 1 and.8% in 16. FocusEconomics Consensus Forecast panelists expect GDP growth to reach.6% in 1, which is unchanged from last month s forecast. For 16, the panel projects that economic growth will increase to.9%. FocusEconomics Consensus Forecast 119

120 Slovakia April 1 Inflation Consumer Price Index. Month-on-month (left scale) Year-on-year (right scale)... MONETARY SECTOR Consumer prices record largest year-on-year drop in over five years in February In February, consumer prices fell.% over the previous month, which came in just below the.1% drop tallied in January. February s reading mainly reflected lower prices for transport, as well as for food and beverages and for clothing and footwear. Conversely, prices for healthcare and housing equipment were higher than in the previous month.. % Mar-1 Sep-1 Mar-1 Sep-1 Mar-1 Note: Month-on-month and year-on-year variation of consumer price index in %. Source: Statistical Office of the Slovak Republic (SOSR). 1. %. Consumer prices declined.% in February compared to the same month of last year, which was down from the.% decrease registered in January and marked the largest drop in over five years. Meanwhile, the harmonized index of consumer prices fell.18% in monthly terms in February, which was slightly down from January s.1% fall. Annual harmonized consumer prices dropped.6%, which followed the.% decrease tallied in the previous month. The National Bank of Slovakia expects consumer prices to drop.% on average in 1. For 16, the NBS expects inflation to average 1.7% in 16. FocusEconomics Consensus Forecast participants expect HICP inflation to average.% in 1, which is down. percentage points from last month s forecast. For 16, the panel expects HICP inflation to increase to 1.6%. FocusEconomics Consensus Forecast 1

121 Economic Indicators 1-19 Slovakia April 1 Annual Data Real Sector Population (million) GDP per capita (USD) 16,1 18,11 17,17 18,6 18,8 1, 1,79 17,1 18,88,81 GDP (USD bn) GDP per capita (EUR) 1,9 1,1 1,8 1,61 1,88 1,6 1,89 1,611 16,9 17,1 GDP (EUR bn) Economic Growth (Nominal GDP, ann. var. in %) Economic Growth (GDP, annual var. in %) Private Consumption (annual var. in %) Government Consumption (ann. var. in %) Fixed Investment (annual var. in %) Industrial Production (annual var. in %) Retail Sales (annual variation in %) Unemployment (% of active population, aop) Fiscal Balance (% of GDP) Public Debt (% of GDP) Monetary and Financial Sector Money (annual variation of M in %, eop) Inflation (CPI, annual variation in %, eop) Inflation (HICP, annual variation in %, aop) Inflation (PPI, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Exchange Rate (USD per EUR, eop) Exchange Rate (USD per EUR, aop) External Sector Current Account Balance (% of GDP) Current Account Balance (EUR bn) Merchandise Trade Balance (EUR bn) Merchandise Exports (EUR bn) Merchandise Imports (EUR bn) Merchandise Exports (annual variation in %) Merchandise Imports (annual variation in %) External Debt (EUR bn) External Debt (% of GDP) Quarterly Data Q 1 Q 1 Q1 1 Q 1 Q 1 Q 1 Q1 16 Q 16 Q 16 Q 16 Economic Growth (GDP, annual var. in %) Economic Growth (GDP, s.a. qoq var. in %) Inflation (HICP, annual variation in %, aop) ECB Refinancing Rate (%, eop) Month EURIBOR (%, eop) Exchange Rate (USD per EUR, eop) Monthly Data Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Industrial Production (annual variation in %) Unemployment (% of active population) Inflation (CPI, mom variation in %) Inflation (CPI, annual variation in %) Inflation (HICP, annual variation in %) Exchange Rate (USD per EUR, eop) FocusEconomics Consensus Forecast 11

122 Real Sector Gross Domestic Product and Fiscal Balance Slovakia April 1 1 Real GDP - 19 var. in % Real GDP Q1 1-Q 16 var. in % Economic Growth and Fiscal Balance Slovakia World GDP 1 evolution of forecasts Maximum Consensus Minimum 1 1 Slovakia World -1 Q1 1 Q1 1 Q1 1 Q1 1 Q1 16 GDP 16 evolution of forecasts.... Maximum Consensus Minimum. Real GDP Fiscal Balance variation in % % of GDP Individual Forecasts Capital Economics Citigroup Global Mkts CSOB DekaBank EIU Erste Bank Experian Frontier Strategy Group Komerční Banka OTP Bank Oxford Economics Raiffeisen Research UniCredit VÚB Banka WIIW Minimum Maximum Median Consensus History days ago days ago days ago Additional Forecasts Central Bank (Apr. 1) Euro. Comm. (Feb. 1) IMF (Oct. 1) Unemployment % of active pop. 6 Fiscal Balance % of GDP 1 Slovakia Slovakia Unemployment evolution of fcst Fiscal Balance evolution of fcst General: Long-term chart period from to 19 unless otherwise stated. All real sector data are from the Statistical Office of the Slovak Republic (SOSR, Statisticky urad Slovenskej republiky). Forecasts based on FocusEconomics Consensus Forecast. 1 GDP, annual variation in %. Quarterly GDP (not seasonally adjusted), year-on-year variation in %. GDP, evolution of 1 forecasts during the last 18 months. GDP, evolution of 16 forecasts during the last 18 months. Unemployment, % of active population. 6 Balance of non-financial public sector as % of GDP. 7 Unemployment, evolution of 1 and 16 forecasts during the last 18 months. 8 Balance of non-financial public sector as % of GDP, evolution of 1 and 16 forecasts during the last 18 months. FocusEconomics Consensus Forecast 1