Jim O Neill Managing Director Head of Global Economics, Commodities and Strategy Research

The BRIC Effect Jim O Neill Managing Director Head of Global Economics, Commodities and Strategy Research March 29 2010 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 1

GDP Forecasts % yoy 2008 2009 GS Consensus* GS Consensus* USA 0.4-2.4 2.6 3.1 2.4 3.0 Japan -1.2-5.2 2.2 1.9 1.7 1.6 Euroland 0.5-4.0 1.2 1.1 1.9 1.5 UK 0.6-4.9 1.7 1.4 3.4 2.3 Europe 0.8-3.9 1.4 1.2 2.3 1.8 China 9.6 8.7 11.4 9.9 10.0 9.1 India 6.7 6.6 8.2 8.2 8.7 7.9 Brazil 5.1-0.1 6.4 5.3 5.0 4.6 Russia 5.6-7.9 4.5 3.9 5.5 4.6 BRICs 7.9 5.1 9.4 8.4 8.8 8.0 Advanced Economies 0.5-3.1 2.3 2.4 2.5 2.5 World 2.8-0.7 4.6 4.3 4.7 4.3 * Consensus Economics March 2010 2010 2011 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 2

Domestic Demand Forecasts (%) % yoy 2008 2009 (f) 2010 (f) 2011 (f) USA -0.7-3.4 2.3 1.9 Japan -1.3-4.0 1.5 1.3 Euroland 0.6-3.4 0.3 1.2 UK 0.1-5.3 1.2 2.5 China 9.0 13.0 12.4 9.9 India 4.8 4.9 7.6 9.7 BRICs 8.1 7.0 9.8 9.3 Advanced Economies 0.2-3.4 1.9 2.0 World 2.6-0.4 4.4 4.4 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 3

Change in US$ Size of GDP from 2000 to 2009 5000 4500 US$bn 4000 3500 3000 2500 2000 1500 1000 500 0 *2000 GDP was adjusted for the updated 2003 re-base of the series. Source: IMF, GS Global ECS Research Goldman Sachs Global Economics, Commodities and Strategy Research 2010 4

Inflation Forecasts % yoy 2008 2009 2010 2011 GS Consensus* GS Consensus* USA 3.8-0.3 1.9 2.2 0.5 1.9 Japan 1.4-1.4-1.0-1.1-0.5-0.3 Euroland 3.3 0.3 1.0 1.1 1.6 1.4 UK 3.6 2.2 2.5 2.6 1.4 1.7 Europe 3.5 0.8 1.4 1.4 1.7 1.5 China 5.9-0.7 3.5 3.2 2.8 3.3 India 8.4 3.4 5.0 3.3 5.5 6.6 Brazil 5.7 4.9 5.1 4.6 5.4 4.7 Russia 14.1 11.7 5.3 7.1 6.6 6.9 BRICs 7.5 2.2 4.2 3.8 4.0 4.6 Advanced Economies 3.4 0.2 1.5 1.6 1.2 1.6 World 5.4 1.6 2.9 2.9 2.7 3.1 * Consensus Economics March 2010 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 5

Crisis Indicator 6 5 Index 4 GS FSI (Financial Stress Index 3 2 1 0-1 -2 90 92 94 96 98 00 02 04 06 08 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 6

Credit Spreads 280 bp bp 1800 1600 230 180 CDX IG (lhs) CDX HY (rhs) 1400 1200 1000 130 800 80 600 400 30 06 07 08 09 10 200 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 7

US Financial Conditions Index 104 103 102 101 Index Easier Conditions 100 99 98 97 US FCI Oil Augmented FCI 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 8

OECD Financial Conditions 104 103 Index, Jan 2000 = 100 OECD FCI Oil Augmented FCI 102 Easier Conditions 101 100 99 98 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 9

UK Financial Conditions Index 102 101 Index 100 99 98 97 96 95 Easier Conditions 94 93 92 UK FCI 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 10

China FCI 112 111 110 109 108 107 106 105 104 103 Index Easier Conditions China FCI 102 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 11

GLI vs IP 8 4 % yoy 0-4 -8-12 -16 GLI G7 IP -20 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 12

Momentum of the GLI 1.0 0.6 %mom, 3MMA 0.2-0.2-0.6-1.0-1.4-1.8 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 13

Monthly Direction of GLI Components Up Business Confidence Aggregate GS Australian Dollar Trade Weighted Index S&P GS Industrial Metals Index US Initial Jobless Claims Flat Belgian Manufacturing Survey Japan IP Inventory/Sales Ratio US Durable Goods Inventory/Shipments Ratio Down Consumer Confidence Aggregate ISM New Orders Less Inventories Korean Exports Goldman Sachs Global Economics, Commodities and Strategy Research 2010 14

Korean Exports Year on Year Since 2006 90 70 % chg February 50 30 10-10 -30-50 % yoy % qoq sa ann -70 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 15

China Lead Indicators 18 16 14 12 10 8 6 4 2 % yoy GSCA (lhs) CEMAC-GS Leading Indicator (rhs) Index 1996=100 97 98 99 00 01 02 03 04 05 06 07 08 09 10 106 105 104 103 102 101 100 99 98 97 96 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 16

BRICs Manufacturing Activity* 20 15 Index Index 58 56 10 54 5 0-5 -10-15 -20 BRICs New Orders Less Inventories (lhs) BRICs Manufacturing PMI 05 06 07 08 09 52 50 48 46 44 42 40 Source: Institute of Supply Management, NTC, GS Calculations. *GDP weights Goldman Sachs Global Economics, Commodities and Strategy Research 2010 17

Euroland Leading Indicator vs Industrial Production 4 2 qoq Euroland IP and leading indicator (3m/3m) 0-2 -4-6 -8-10 IP, 3m/3m Leading indicator -12 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 18

UK Services PMI 65 Index 60 55 50 45 40 35 UK Services PMI 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 19

BoJ Tankan 50 40 30 20 10 0-10 -20-30 -40-50 -60-70 %, DI BoJ Large manufacturers BoJ Large nonmanufacturers 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 20

Relative Manufacturing Production 120 index Jan06=100 110 100 90 80 70 Germany Japan Korea Taiwan 60 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 21

US House Prices vs Income Ratio 4.5 Percent 3.0 4.0 House Price/Income Ratio* (left) Mortgage Rate (right, inverted) 4.0 5.0 3.5 6.0 3.0 7.0 8.0 2.5 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 9.0 * S.a. median home price divided by median family income. Source: Department of Commerce. FRB. NAR. Goldman Sachs Global Economics, Commodities and Strategy Research 2010 22

Share of Private Consumption in US GDP 72 71 % GDP 70 69 68 67 66 65 90 92 94 96 98 00 02 04 06 08 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 23

US Export and Import Growth 20 15 3M MA, % yoy 10 5 0-5 -10-15 -20-25 -30 Exports Non-oil Imports 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 24

Domestic Demand and Growth Contributions, Last Decade 45 40 35 30 25 20 15 10 5 % 2000-2009 average contribution in USD terms Demand Contribution Growth Contribution 0 China Russia India Brazil BRICs US Euroland Goldman Sachs Global Economics, Commodities and Strategy Research 2010 25

Retail Sales US and BRICs 36 32 %yoy 28 24 20 16 12 8 4 0-4 USA Brazil BRICs -8 Russia China India* -12 04 05 06 07 08 09 10 * Private final consumption Goldman Sachs Global Economics, Commodities and Strategy Research 2010 26

Recent Trend in Real Retail Sales 80 60 40 USD Billion Jan 2007 Change in Real Retail Sales Since Jan 2007 20 0-20 -40 U.S. China -60 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 27

Real Retail Sales in Developed vs EM 140 120 100 80 60 40 20 0-20 -40 Bil$ Change in Real Retail Sales Since Jan 2007 World Advanced Emerging -60 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Source: National Sources, GS Global ECS Research. Goldman Sachs Global Economics, Commodities and Strategy Research 2010 28

Chinese Export and Import Growth 80 %yoy, 3MMA 60 40 20 0-20 -40 Total Exports Total Imports Non-Commodity Imports 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 29

Germany s Exports to Asia rising stabilisation elsewhere 140 130 120 110 100 90 80 70 index Jan07=100 China India Russia US UK France Japan Italy Spain 60 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Source: Haver Analytics, GS calculations Goldman Sachs Global Economics, Commodities and Strategy Research 2010 30

Consumption Contribution 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0-0.1 pps Real Contribution to World Consumption* USA Euroland EM ex BRICs BRICs -0.2 04 05 06 07 08 09 10 11 *Calculated from consumer expenditure for India, US, Japan, Euroland, and other Emerging Markets. Brazil and Russia use private consumption and China uses household consumption. Annual averages 2004-2008, GS forecasts 2009-2010. Goldman Sachs Global Economics, Commodities and Strategy Research 2010 31

The Largest Economies in 2050 80,000 70,000 GDP 2007 US$bn 60,000 50,000 40,000 30,000 20,000 10,000 0 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 32

The Largest Economies in 2050 80,000 70,000 GDP 2007 US$bn 60,000 50,000 40,000 In 2050, the BRICs and N-11 will dominate 30,000 20,000 10,000 0 China United States India EU-5 Brazil Russia Indonesia Mexico United Kingdom Turkey Japan France Germany GCC Nigeria Philippines Canada Italy Korea Iran Vietnam Egypt Spain Pakistan Bangladesh Goldman Sachs Global Economics, Commodities and Strategy Research 2010 33

BRICs & N11. 2009 Growth Environment Score (GES) 8 7 6 5 1997-2009 Change 1997 GES 1997 Average Developing 2009 Average Developing 4 3 2 1 0 Brazil China Russia India Korea Mexico Turkey Vietnam Iran Egypt Indonesia Philippines Bangladesh Nigeria Pakistan Goldman Sachs Global Economics, Commodities and Strategy Research 2010 34

GES Scores for BRICs vs Korea Brazil China India Russia Korea Total 5.3 5.2 4.0 5.1 7.4 Rule of Law 4.4 4.3 5.2 3.2 6.6 Corruption 4.9 4.1 4.3 3.0 5.9 Political Stability 4.8 4.4 3.0 3.8 5.8 Lifeexp 7.5 7.6 5.9 6.5 8.8 Inflation 8.6 8.5 7.9 6.5 8.8 External Debt 8.5 9.1 8.4 7.6.. GovtDebt 4.0 4.8 0.0 7.1 5.6 GFCF 3.8 8.0 6.9 4.4 5.9 Schooling 7.4 6.2 4.2 6.9 9.7 Openness 2.2 4.0 3.1 2.2 5.0 Computers 2.1 0.8 0.4 1.8 7.7 Mobiles 6.4 4.2 2.1 10.0 9.0 Internet 4.7 2.2 1.0 2.8 10.0 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 35

Maplecroft Risk Indices Dynamic Structural BRICs Brazil 6.2 6.0 Russia 2.5 5.8 India 3.9 3.1 China 5.4 3.5 N11 Bangladesh 3.1 1.7 Egypt 4.9 4.3 Indonesia 4.1 3.6 Iran 1.9 4.0 Mexico 6.5 6.1 Nigeria 2.4 2.1 Pakistan 2.2 1.3 Philippines 3.8 4.3 South Korea 8.3 8.9 Turkey 6.0 5.9 Vietnam 5.5 3.9 USA 8.9 8.9 Germany 9.2 9.2 Luxembourg 9.7 9.5 Source: Maplecroft Goldman Sachs Global Economics, Commodities and Strategy Research 2010 36

Each Country s Share of Euroland GDP 30 25 % Euroland GDP 20 15 10 Country's Share of Euroland GDP (2009) 5 0 Germany France Italy Spain Netherlands Belgium Austria Greece Finland Ireland Portugal Slovakia Luxembourg Slovenia Cyprus Malta Goldman Sachs Global Economics, Commodities and Strategy Research 2010 37

Euroland Budget Deficit and Government Debt Cyclically Adjusted Budget Deficit (%GDP)** Gross general government debt (% of GDP)*** Germany* -1.9 76.3 France -7.0 77.8 Italy -3.5 114.9 Spain -10.0 55.2 Netherlands -3.2 61.5 Belgium -4.6 97.9 Austria -3.3 67.6 Greece -12.6 113.4 Finland -0.5 39.6 Ireland -9.6 64.5 Portugal -6.6 76.6 Slovakia -6.0 34.7 *Countries listed according to their share of Euroland GDP. **Source: European Commission ***Source: Eurostat, GS estimates. Goldman Sachs Global Economics, Commodities and Strategy Research 2010 38

Inflation Expectations in US 3.7 3.5 % yoy University of Michigan 5-yr Inflation Expectations 3.3 3.1 2.9 2.7 2.5 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 39

Five Year Forward Oil Price 140 $/barrel 120 100 5-yr Forward Oil Price 80 60 40 20 0 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 40

GSDEER Estimates for Major Countries Spot* GSDEER Q1-2010 % Deviation from GSDEER 5-Yr Forecast EUR/$ 1.33 1.22 10 1.20 $/Yen 91.90 105.52 15 108.12 /$ 1.49 1.59-6.6 1.55 $/CNY 6.82 6.84 0.3 5.85 $/CAD 1.03 1.15 11.8 1.16 AUD/$ 0.91 0.79 14.3 0.79 $/KRW 1138 1274 12.0 975 $ TWI 210.8 232.1-10.1 - *as of 24 March 2010 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 41

US BBoP vs Current Account 2.0 1.0 % of GDP 4qtr avg 0.0-1.0-2.0-3.0-4.0-5.0-6.0-7.0 Current Account BBoP 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 42

BRICs BBoP vs Current Account 12 10 8 % GDP Current Account BBoP 6 4 2 0-2 97 98 99 00 01 02 03 04 05 06 07 08 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 43

Euroland: BBoP vs Current Account 5 4 % of GDP 12-Month Mov. Avg. 3 2 1 Current Account 0-1 -2-3 BBoP -4-5 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 44

Japan: BBoP vs Current Account 8 6 4 2 0 % of GDP, 12MMA Current Account -2-4 BBoP -6-8 -10 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 45

Current Estimates for the Equity Risk Premium* Real GDP Growth Real Earnings Growth + Dividend Yield = Expected Real Return - Real Bond Yield = Implied ERP Expected Inflation Expected Nominal Return US 3.0 3.0 1.9 4.9 1.5 3.4 2.0 6.9 Japan 1.5 1.5 1.8 3.3 0.8 2.4 0.5 3.8 UK 2.8 2.8 3.3 6.1-0.8 6.9 2.0 8.1 Europe ex UK 2.3 2.3 2.9 5.2-0.8 6.0 2.0 7.2 World 2.5 2.5 2.3 4.8 0.5 4.4 1.8 6.6 Optimistic World 4.0 4.0 2.3 6.3 0.5 5.9 1.8 8.1 *Calculated as of 24 March 2010 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 46

Trend in Forward P/Es 35 30 12mth forward PE United States China Japan India Europe Russia 25 Brazil 20 15 10 5 0 06 06 07 08 08 09 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 47

Interest Rate Forecasts 3-month horizon 6-month horizon 12-month horizon Current* Forward Forecast Forward Forecast Forward Forecast US 3M 0.3 0.4 0.3 0.6 0.3 1.2 0.3 10Y 3.9 4.0 3.5 4.2 3.3 4.5 3.5 Canada 3M 0.5 0.6 0.4 1.1 0.4 1.9 1.2 10Y 3.5 3.7 3.5 3.8 3.5 4.0 3.8 Australia 3M 4.4 4.7 4.7 5.1 4.8 5.5 5.4 10Y 5.7 5.8 5.3 5.8 5.5 5.9 6.0 Japan 3M 0.4 0.2 0.4 0.3 0.4 0.3 0.4 10Y 1.3 1.4 1.5 1.5 1.5 1.6 1.8 Euroland 3M 0.6 0.7 0.8 0.9 1.0 1.4 1.5 10Y 3.1 3.1 3.3 3.2 3.3 3.3 3.4 UK 3M 0.7 0.7 0.8 0.9 1.3 1.5 2.4 10Y 4.0 4.1 4.0 4.2 4.0 4.5 4.3 Sweden 3M 0.5 0.7 0.5 1.1 1.0 1.8 2.5 10Y 3.0 3.1 3.3 3.2 3.4 3.4 3.8 Switzerland 3M 0.3 0.3 0.3 0.4 0.5 1.2 1.0 10Y 1.8 1.9 2.0 1.9 2.1 2.1 2.3 Close 24 March 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 48

Foreign Exchange Forecasts 3-months 6-months 12-months Current* Forward Forecast Forward Forecast Forward Forecast EUR/$ 1.33 1.33 1.45 1.33 1.45 1.33 1.35 $/ 92.1 92.0 92.0 92.0 94.0 91.6 98.0 EUR/ 122.8 122.8 133.4 122.7 136.3 122.2 132.3 EUR/CHF 1.43 1.43 1.44 1.43 1.42 1.42 1.40 CHF/ 85.91 85.93 92.64 85.94 95.99 85.83 94.50 $/CHF 1.07 1.07 0.99 1.07 0.98 1.07 1.04 EUR/ 0.90 0.90 0.87 0.90 0.84 0.90 0.84 /$ 1.49 1.49 1.67 1.49 1.73 1.49 1.61 / 137.1 137.0 153.3 136.8 162.3 136.2 157.5 /CHF 1.60 1.59 1.66 1.59 1.69 1.59 1.67 EUR/NOK 8.04 8.08 8.00 8.11 7.90 8.18 7.80 EUR/SEK 9.69 9.69 9.60 9.69 9.40 9.71 9.00 A$/$ 0.91 0.90 0.95 0.89 0.95 0.87 0.90 NZ$/$ 0.70 0.70 0.74 0.69 0.74 0.68 0.70 $/C$ 1.02 1.02 1.00 1.03 1.00 1.03 1.08 $/CNY 6.83 6.80 6.83 6.76 6.83 6.68 6.49 * Close 24 March 10 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 49

Top Trades for 2010 Trade Entry Level Target 1. Short S&P 500 Dec10/Dec11 Forward Starting Variance Swap 28.20 21.00 2. Long Russian Equities (RDXUSD) 1645.9 2050 3. Long GBP/NZD 2.29 2.60 4. Pay UK Rates vs. Receiving AUD Rates via 1-yr Forward 2-yr Swaps -268.5bp -150bp 5. Pay 2y Rates in Turkey 8.77% 12.00% 6. Long Credit Protection on Spain, Short Credit Protection on Ireland 70.2bp 20bp 7. Long 'Growth' FX Current 103.5 111.8 8. Long PLN/JPY 32.1 37.5 Goldman Sachs Global Economics, Commodities and Strategy Research 2010 50

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