1Q11

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Emerging Markets Quarterly
Emerging Markets z Economics z Global
Q1 2011
Our base case assumption is that the European policymakers will be able to
contain the current crisis in the euro area sufficiently to prevent it from
overwhelming the positive turn in the growth signals that is now visible in the
forward-looking PMI new orders data for many EM countries. But there is
clearly a substantial risk that further upheaval in the euro area could generate
financial market wobbles in the early months of 2011 with negative implications
for global output growth.
Another threat to the signs of improving growth prospects is inflation, which has
staged a comeback as a global EM investor theme, in part because actual
inflation has risen in many emerging markets countries in recent months. But at
this stage, it is only food price inflation that has risen. Although we think
headline inflation in many EM countries will rise somewhat further in the coming
few months, the scenario that we find most likely for 2011 is one in which the
inflation rates in most EM countries end 2011 pretty close to the rates we are
seeing at present.

08 December 2010
Fixed Income Research
http://www.credit-suisse.com/researchandanalytics
Contributors
Kasper Bartholdy
+44 20 7883 4907
kasper.bartholdy@credit-suisse.com

Berna Bayazitoglu
+44 20 7883 3431
berna.bayazitoglu@credit-suisse.com

Alonso Cervera
+52 55 5283 3845
alonso.cervera@credit-suisse.com

Dong Tao
+852 2101 7469
dong.tao@credit-suisse.com

See inside cover for full list of contributors

08 December 2010
Emerging Markets Quarterly 3
Table of Contents
Better news on growth; worse news on inflation 5
Summary 5
The latest PMI new orders readings suggest that somewhat better
times lie ahead 6
While some EM countries are seeing new IP strength, others
continue to see notable weakness 7
Grounds to expect stronger IP figures across the world in the
coming months 8
GDP growth has fallen less sharply than IP growth 8
Rising EM inflation all about food at this stage 12
EM currencies: More appreciation pressure in store 16
EM real GDP growth and inflation forecasts 22
Global macroeconomic forecasts 23
Latin America 25
Argentina: Heading into a transition year 26
Brazil: Strong growth in investments in 2011 31
Chile: Keeping an eye on inflation 36
Colombia: Still high expectations for the fiscal reforms 40
Mexico: Get ready for some positive surprises 44
Panama: Building on (and under) solid ground 49
Peru: Likely to emerge unscathed by politics 53
Venezuela: Positioning for 2012 57
Europe, Middle East and Africa 63
Czech Republic: Slowly but surely 64
Egypt: Presidential elections looming large 69
Hungary: An elusive fiscal target for 2011 74
Israel: Striking the right balance 79
Kazakhstan: Out of the woods 84
Nigeria: Elections offer hope 89
Poland: Full steam into election year 94
08 December 2010
Qatar: Energizing the non-hydrocarbon economy 99
Romania: Politics still in focus 104
Russia: Low interest rates stoke capital outflows 109
South Africa: The repo rate has bottomed out 114
Turkey: Basking in the favor of global liquidity 118
Ukraine: Staying the course, for now 123
United Arab Emirates: 2011, the year of recovery 128
Non-Japan Asia 133
China: Normalization accelerated 134
Hong Kong: Higher CPI, elevated home prices 139
India: Good for now... 143
Indonesia: When boring is good 148
Korea: Growth resumes, inflation rises 153
Malaysia: A short-lived contraction? 158
Philippines: From very dovish to dovish 162
Singapore: Another roller-coaster ride 166
Taiwan: Growth remains supported in 2011 170
Thailand: Political uncertainty, cooling economy 175
Vietnam: In trouble again 179
Long-term sovereign FX debt ratings 182
Key websites 184
Previous publications 190
Key dates 193
Balance of payments financing needs 198
Government funding needs 212
Summary macroeconomic data 223

08 December 2010
Better news on growth; worse news on inflation
Summary
Available short-term leading indicators point to a strengthening of the high-
frequency growth data in the coming months both in the EM countries and the
rest of the world. This is a welcome prospect after a spell of weak EM IP growth
between March and August.
Our base case assumption is that the European policymakers will be able to
contain the current crisis in the euro area sufficiently to prevent it from
overwhelming the positive turn in the growth signals that is now visible in the
forward-looking PMI new orders data for many EM countries. But there is clearly
a substantial risk that further upheaval in the euro area could generate financial
market wobbles in the early months of 2011 with negative implications for global
output growth.
Exhibit 1: The new orders index
for EM has been rising steadily
since August
Exhibit 2: Global EM CPI-inflation*
now rising modestly on the back of
higher food inflation
New orders components of the PMI indices Percentage year-on-year change
23
32
41
50
59
68
Nov-08 May-09 Nov-09 May-10 Nov-10
US ISM new orders
Global new orders
EM new orders
EM new orders ex-China

2
5
8
11
14
17
Apr-08 Feb-09 Dec-09 Oct-10
Headline CPI**
Food CPI
Non-food CPI
Core inflation***

* The EM index in the chart takes into account PMI readings for
Brazil, Mexico, Czech Republic, Hungary, Poland, Russia, South
Africa, Turkey, China, India, Korea, Singapore and Taiwan;
weighted by each countrys contribution to global IP.
Source: the BLOOMBERG PROFESSIONAL service, PMI
Premium, Haver Analytics and Credit Suisse
*Based on data for 29 countries (weighted by their 2009 nominal
GDP; see also the footnotes for Exhibits 32 - 34); ** For Argentina
we use the inflation series compiled by the Buenos Aires City
consultancy *** Based on data for 17 countries (listed in the
footnotes for Exhibits 32-34)
Source: the BLOOMBERG PROFESSIONAL service, Buenos
Aires City consultancy.
Another threat to the signs of improving growth prospects is inflation, which has
staged a comeback as a global EM investor theme, in part because actual inflation
has risen in many emerging markets countries in recent months. But at this stage,
it is only food price inflation that has risen. Although we think headline inflation in
many EM countries will rise somewhat further in the coming few months, the
scenario that we find most likely for 2011 is one in which the inflation rates in
most EM countries end 2011 pretty close to the rates we are seeing at present.
Kasper Bartholdy
+44 20 7883 4907
Jacqueline Madu
+44 20 7883 4216
jacqueline.madu@credit-suisse.com

08 December 2010
The latest PMI new orders readings suggest that
somewhat better times lie ahead
Available short-term leading indicators notably the new orders components of the
purchasing managers indices point to a strengthening of the high-frequency growth data
in the coming months both in the EM countries and the rest of the world. This follows a
spell of pronounced weakness in the EM IP growth data between March and August.
Exhibit 3: The overall EM purchasing managers
index for EM rose nicely in September-November
(driven by China)
Exhibit 4: The new orders index for EM has been
rising since August and is now again close to the
highs seen in early 2010
A figure above 50 indicates an expansion in industrial production while a figure
below 50 indicates a contraction
The new orders indices are sub-components of the purchasing managers'
indices
32
38
44
50
56
62
US mf g ISM
Global mf g PMI
EM mfg PMI
EM mfg PMI ex-China

23
32
41
50
59
68
US ISM new orders
Gl obal new orders
EM new orders
EM new orders ex-China
* The EM index in the chart takes into account PMI readings for Brazil, Mexico, Czech
Republic, Hungary, Poland, Russia, South Africa, Turkey, China, India, Korea, Singapore and
Taiwan; weighted by each countrys contribution to global IP.
Source: the BLOOMBERG PROFESSIONAL service, PMI Premium, Haver Analytics and
Credit Suisse
* The EM index in the chart takes into account PMI readings for Brazil, Mexico, Czech
Republic, Hungary, Poland, Russia, South Africa, Turkey, China, India, Korea, Singapore
and Taiwan; weighted by each countrys contribution to global IP.
Source: the BLOOMBERG PROFESSIONAL service, PMI Premium, Haver Analytics and
Credit Suisse
At this stage, only China and Russia among the five largest EM economies have recorded
a significant increase in industrial production (IP) in recent months; and the bounce in
Russia reflects in part a recovery from levels that were pushed down a few months ago
under the influence of extreme weather. Meanwhile IP has continued to decline (in level
terms) in Korea and Brazil and has remained flat in India.
But there are grounds for measured optimism about the growth data that will come out in
the coming few months.
First, the positive change of IP trend in China is significant not just for China but also for
many other EM countries. Chinas IP stagnated (in sequential terms) throughout the
period from April to July. But it grew rapidly in sequential terms between August and
November. This points to rising final demand in China and to intensified demand for
inputs from industrial producers. Growing demand from China should help lift exports
from other countries in Asia and should generate support for global commodity prices,
which in turn benefit many EM countries in Latin American and EMEA (as well as
Indonesia and Malaysia in Asia).
Second, recent strength in the ISM new orders index and in the euro area new orders
index points to a rebound in industrial output growth both in the US and Europe, which
should help the export sector in the EM countries. Indeed, in the EMEA area, it is not
just Russia that has seen sturdy IP growth (in sequential terms) in recent months as
both Turkey and the CE3 countries have continued to see good IP momentum.
Third, the lead indicators for the EM countries are themselves suggesting that better
times lie ahead. Our index for aggregate (IP-weighted) new orders for the EM universe
(based mainly on data from Markit) has been rising since September. This reflects
importantly a rebound of the index for China (which has a large weight in the EM-wide
figures); but the new orders figures have also strengthened in the most recent months in
the EMEA countries. In addition, the PMI new orders figures specifically for November
offer a hint of a positive turnaround in Asia outside of China after very significant
08 December 2010
weakness in the preceding months. It seems to us natural to expect a positive IP
turnaround in non-Japan Asia outside of China given the positive PMI signals coming
out of China, the US and northern Europe. But we nevertheless find it comforting to see
support for this notion in a reading for PMI new orders directly out of non-Japan Asia.
These grounds for optimism should be set against the possibility of a negative shock from
Europe. Our base case assumption is that the European policymakers will be able to
contain the current crisis in the euro area sufficiently to prevent it from overwhelming the
moderately positive growth signals that are now visible in the forward-looking PMI new
orders data for many of the EM countries. But there is clearly a very substantial risk that
this baseline view could be wrong and that further upheaval in the euro area could
generate major financial market wobbles in the early months of 2011, with possible
negative implications for global output growth.
Many investors are focusing on the possibility that possible financial assistance programs for
Portugal and Spain would exhaust the EFSF and leave no additional available bailout funding
for other euro area sovereigns that might need it. Our base case view is that if it really came to
that point, and if the euro area governments have not by then agreed on an expanded EFSF or
the currently much-debated possible E-bond issuance (run by the euro area as a whole) to
meet the challenge, the ECB would step up its purchases of euro area government bonds
sufficiently to ensure that the euro area governments would remain funded.
Nevertheless, the ECB also seems likely to remain sufficiently cautious prior to this
possible crisis point to keep alive market concerns about worse outcomes. So we find it
impossible to express great confidence about calm in euroland at this stage, and the
possibility of additional crisis in the euro area currently appears to be the main threat to the
prospect of improving growth data.
While some EM countries are seeing new IP strength,
others continue to see notable weakness
As we noted above, the good news that is detectable in the PMI data is still not fully
reflected in the backward-looking data for industrial production, except in China and in
parts of the EMEA area.
A glance at Exhibit 5 below makes this clear. The growth number for any particular month
in this Exhibit was computed by comparing the IP level for that month with the IP level
three months earlier.
Exhibit 5*: Industrial production growth is no longer falling in China, EMEA or
Latin America but it remains very weak in parts of Asia and in Latin America
Annualized percentage change over the last 3 months in the IP level
-45
-30
-15
0
15
30
45
Sep-08 Mar-09 Sep-09 Mar-10 Sep-10
LatAm**
EMEA
NJA
NJA ex-China
*The 20 countries taken into account and weighted by their industrial shares of 2009 nominal GDP are listed in footnotes of Exhibit 12, Exhibit
13 and Exhibit 14.
Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse
08 December 2010
The main good news conveyed by Exhibit 5 is that annualized three-month IP growth for
non-Japan Asia bottomed out in June and has risen significantly since then. The increase
in this growth rate reflects overwhelmingly the fact that Chinas IP has powered ahead in
the interim period.
The other main piece of good news to emerge from Exhibit 5 is a bounce in three-month
IP growth for the EMEA region. This bounce is explained in part by a recovery in Russias
IP from particularly weak levels seen during the countrys extreme heat-wave in the
summer. But several other EMEA countries have also seen good IP momentum in recent
months (see Exhibit 21 and Exhibits 24 to 26).
By contrast, there is little good news on Latin Americas IP growth. Although it did pick up a bit
in August and September, it remained depressingly close to zero as recently as in September.
It is noteworthy that IP growth has slowed less abruptly in Mexico than in Brazil (compare
Exhibits 18 and 19). It seems to us reasonable to speculate that Brazils cumulative exchange
rate strength during 2009 and 2010 is part of the explanation for the recent Brazilian IP
underperformance relative to Mexico and relative to many of the EMEA countries.
The most uncomfortable aspect of Exhibit 5 is the line that pertains to Asia outside of
China and Japan. Three-month IP growth for this region hit zero in August and fell
substantially into negative territory in September. As the Exhibit suggests, there has been
a quite spectacular collapse of IP growth for non-Japan Asia outside of China since the
end of last year -- from positive annualized rates of more than 30% at the end of 2010 to
outright negative rates now.
The country-specific IP figures for Korea, India and Brazil (those for Korea and Brazil
include October-observations) show no clear signs of an IP bounce in any of these
countries at this stage. This is illustrated by the thick dark lines in Exhibits 16-18.
Grounds to expect stronger IP figures across the world in
the coming months
After looking at the IP figures, it would be easy to forget that we started our growth
commentary above on an optimistic note. What was the tentative good news that we were
talking about only a few paragraphs ago? The main good news is a bounce in the new
orders numbers (drawn from producer sentiment surveys) both in the EM countries and in
parts of the G3. Thus, the figures for new orders in Exhibits 16-18 offer the promise of
some pick-up in IP growth during the coming months.
It is worth noting, however, that the good news is only tentative and that the sentiment-
bounce does not look impressively large as yet in Korea, India and Brazil.
For Korea in particular, the persuasively good news is probably not the countrys own still-
meek PMI new orders readings so much as the strength of the recent IP data out of China
(see Exhibit 15) and the strengthening of the leading sentiment indicators for both the US
and Asia ( Exhibits 12 and 14).
GDP growth has fallen less sharply than IP growth
The comments above focus exclusively on the industrial sector, which is not necessarily
representative of the whole economy. There are two important reasons to focus on the
industrial sector. One is that the sector often gives good early signals of developments in
the broader economy. The other is that data on the industrial sector are relatively easy to
obtain on a monthly basis, and in a form that is reasonably comparable across countries.
But it is important to note that growth during recent quarters in many EM countries has
been more sluggish in the industrial sector than in the broader economy.
08 December 2010
Exhibit 6: Real GDP growth, quarter-on-quarter annualized
Annualized percentage change in real GDP quarter on quarter
China Brazil Russia US Euro area Japan
Q1 2010 10.5 11.3 3.3 3.7 1.3 6.6
Q2 2010 7.5 4.9 4.3 1.7 3.9 1.8
Q3 2010E 9.2 0.8 -4.0 2.5 1.8 3.9
Q4 2010E 9.2 4.9 8.5 2.2 1.7 -2.2
Q1 2011F 9.1 5.7 5.5 2.8 2.3 0.5
Q2 2011F 9.2 5.3 4.5 3.2 3.0 1.5
Source: National statistical agencies (for historical data) and Credit Suisse (for forecasts).
This is clear from the figures in Exhibit 6, which lists the recent and prospective annualized
quarter-on-quarter real GDP growth rates for selected countries (the forward-looking
figures are Credit Suisse forecasts). Nevertheless, the figures confirm that the slowdown
between Q1 and Q3 that was evident in the IP numbers that we studied above is also
visible (albeit to a much more moderate extent) in the sequential real GDP growth figures.
Exhibit 7: The level of IP has been increasing in
China and EMEA in recent months but has remained
flattish in Asia outside of China and in Latin America
Exhibit 8: EM industrial production growth* has
turned in a positive direction in China and EMEA
but is close to zero and still falling in Asia outside
of China and in Latin America
Seasonally and workday-adjusted index, June 2008=100 Annualized % change, last 3 months IP level vs. preceding 3 months IP level
82
89
96
103
110
117
124
NJA
NJA ex-China
LatAm**
EMEA

-40
-30
-20
-10
0
10
20
30
40
LatAm**
EMEA
NJA
NJA ex-China
*Please see footnotes in Exhibit 12, Exhibit 13 and Exhibit 14 for countries included.
Source: Haver Analytics, the BLOOMBERG PROFESSIONAL service
*The 20 countries taken into account and weighted by their industrial shares of 2009 nominal
GDP are listed in footnotes of Exhibit 12, Exhibit 13 and Exhibit 14.

Exhibit 9: LatAms PMI new
orders fell significantly from
April to September but stabilized
in October and November

Exhibit 10: EMEA overall new
orders remain buoyant, boosted
by export orders
Exhibit 11: In non-Japan Asia ex-
China new orders turned up
modestly in November, helped by
some recovery in export orders
30
40
50
60
Nov-08 Jul-09 Mar-10 Nov-10
Mfg PMI
New orders
Export orders

25
30
35
40
45
50
55
Mfg PMI
New orders
Export orders*

32
43
54
65
Mfg PMI ex-Ch
New orders ex-Ch
Export orders ex-Ch

Note: We weight the PMIs for Brazil and Mexico by their
industrial shares of GDP.
Source: PMI Premium
Note: We weight the PMIs for Czech Republic, Hungary, Poland,
Russia, South Africa and Turkey by their industrial shares of GDP.
*Excludes South Africa
Source: PMI Premium
Note: We weight the PMIs for India, Korea and Singapore
by their industrial shares of GDP.
Source: Haver Analytics, Statistics Office, PMI Premium

08 December 2010
Exhibit 12: Latin America IP, mfg
PMI and US ISM new orders
Exhibit 13: EMEA IP and mfg PMI
and euro zone new orders
Exhibit 14: Non-Japan Asia IP and
mfg PMI and global new orders
24
36
48
60
72
Nov-07 Nov-08 Nov-09 Nov-10
86
91
96
101
106
LatAm PMI**
LatAm new orders**
US new orders
LatAm IP level* (rhs)

24
34
44
54
64
84
89
94
99
104
EMEA new orders**
EMEA mfg PMI**
Eurozone new orders
EMEA IP level* (rhs)

25
40
55
70
84
94
104
114
124
NJA PMI**
NJA new orders**
Global new orders
NJA ex-Ch IP level* (rhs)

* The five countries weighted by their industrial share of
2009 nominal GDP are Argentina, Brazil, Chile, Colombia
and Mexico; seasonally and workday-adjusted index, June
2008 = 100.
** We weight the PMIs for Brazil and Mexico by their
industrial shares of GDP.
* The eight countries weighted by their industrial shares of
2009 nominal GDP are Czech Republic, Hungary, Poland,
Romania, Russia, South Africa, Turkey and Ukraine;
seasonally and workday-adjusted index; June 2008 = 100.
**We weight the PMIs for Czech Republic, Hungary, Poland,
Russia, South Africa and Turkey by their industrial shares of
GDP.
* The seven countries weighted by their industrial shares of
2009 nominal GDP are China, India, Korea, Malaysia,
Singapore, Taiwan and Thailand; seasonally and workday-
adjusted index, June 2008 = 100. Note that China is
excluded.
** We weight the PMIs for China, India, Korea and
Singapore by their industrial shares of GDP.

Exhibit 15: China IP and mfg PMI* Exhibit 16: Korea IP and mfg PMI Exhibit 17: India IP and mfg PMI
32
39
46
53
60
67
90
105
120
135
China PMI
China new orders
China IP level* (rhs)

33
44
55
66
76
83
90
97
104
111
118
Korea mfg PMI
Korea new orders
Korea IP level* (rhs)

40
48
56
64
72
90
97
104
111
118
125
India mfg PMI
India new orders
India IP level* (rhs)
*We use the governments manufacturing PMI series;
Seasonally and workday-adjusted IP index, 2005=100 as
calculated by Credit Suisse.
Source: Credit Suisse, Haver Analytics, Statistics Office
*Seasonally and workday-adjusted index, 2005=100.

Exhibit 18. Brazil IP and mfg PMI Exhibit 19. Mexico IP and mfg PMI Exhibit 20. Russia IP and mfg PMI
30
38
46
54
62
75
85
95
105
Brazil new orders
Brazil mfg PMI
Brazil IP level* (rhs)

34
41
48
55
62
87
90
93
96
99
102
Mexico mfg PMI
Mexico new orders
Mexico IP level* (rhs)

28
34
40
46
52
58
64
80
85
90
95
100
105
Russia PMI
Russia new orders
Russia IP level* (rhs)


08 December 2010
Exhibit 21: Turkey IP and mfg PMI

20
30
40
50
60
80
87
94
101
Turkey mfg PMI
Turkey new orders
Turkey IP level* (rhs)

*Manufacturing production; seasonally and workday-adjusted
index, 2005=100.

Exhibit 23: S. Africa mfg output
and mfg PMI
25
40
55
70
80
90
100
110
S. Africa mfg PMI
S. Africa new orders
S. Africa mfg output level* (rhs)

*Manufacturing production; seasonally and workday-adjusted
index, 2005=100.

Exhibit 22: Industrial production growth by country
% year-on-year change
Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Oct 10
Latin America*
2.1 -5.5 -12.9 -10.4 -6.5 2.7 10.6 10.4 6.5 na
Argentina
(1)

0.5 -10.5 -14.0 -8.5 -2.5 6.0 13.4 9.6 6.3 na
Brazil
6.8 -6.7 -15.5 -11.5 -8.2 7.1 18.1 14.4 7.9 2.1
Chile
1.2 -3.4 -9.9 -9.3 -5.5 -2.0 -6.0 1.9 4.4 1.7
Colombia
-3.8 -9.6 -10.0 -12.5 -4.9 0.0 3.7 7.7 1.5 na
Mexico
-1.4 -2.7 -10.6 -9.5 -6.0 -1.7 5.1 7.9 6.2 na
EMEA*
1.2 -9.7 -17.2 -14.2 -9.8 2.3 9.6 11.1 7.7 na
Czech Republic
0.6 -13.5 -21.0 -16.8 -12.8 -1.9 7.3 12.0 10.1 na
Hungary
-2.5 -12.3 -22.8 -21.0 -17.9 -7.0 5.9 12.1 12.5 na
Poland
3.0 -4.6 -12.3 -5.6 -1.9 5.3 10.1 12.5 12.0 8.0
Romania
2.3 -6.0 -12.3 -7.4 -3.4 3.8 4.7 4.1 3.2 na
Russia
1.9 -9.0 -15.6 -13.6 -9.6 2.1 9.5 10.9 6.4 6.6
South Africa
3.2 -6.2 -14.9 -17.0 -13.5 -3.7 4.2 8.7 4.6 na
Turkey
-1.4 -12.6 -22.0 -15.4 -8.0 9.8 17.1 14.0 10.0 na
Ukraine
-2.2 -26.2 -31.7 -30.1 -22.4 4.1 11.5 13.2 8.9 10.6
Non-Japan Asia*
10.4 2.3 3.6 5.1 9.5 16.9 17.4 16.6 12.8 na
NJA excl China
3.6 -8.4 -13.5 -5.1 2.0 14.3 24.9 18.3 10.7 na
China
13.0 6.4 10.1 9.0 12.3 17.9 14.6 16.0 13.5 13.1
India
4.7 0.8 0.5 4.0 8.6 13.1 15.8 12.0 8.8 na
Korea
5.9 -11.1 -15.5 -6.1 4.3 17.5 26.2 19.7 12.1 13.5
Malaysia
1.9 -8.7 -14.5 -10.8 -6.9 2.5 11.0 10.7 4.3 na
Singapore
-10.2 -10.8 -23.2 -0.3 8.0 2.8 38.6 46.3 14.6 31.0
Taiwan
0.5 -24.3 -32.1 -16.6 -5.2 28.6 48.2 29.2 19.0 14.4
Thailand
5.2 -9.4 -21.7 -10.8 -5.9 12.7 31.4 17.8 9.7 6.3
World*
7.1 -1.4 -3.5 -1.5 2.8 11.5 14.7 14.4 10.6 na
(1) Argentinean IP data taken from a privately collected index.
*The regional aggregate is calculated by weighting each countrys IP data by its industrial share of 2009 nominal GDP.

Exhibit 24: Poland IP and mfg PMI Exhibit 25: Hungary IP and mfg PMI
Exhibit 26: Czech Republic IP and
mfg PMI
32
39
46
53
60
87
92
97
102
107
Poland new orders
Poland mfg PMI
Poland IP level* (rhs)

30
41
52
63
70
77
84
91
98
105
Hungary mfg PMI
Hungary new orders
Hungary IP level* (rhs)

20
31
42
53
64
82
88
94
100
106
Czech mfg PMI
Czech new orders
Czech IP level* (rhs)

Source: Haver Analytics, Statistics Office

08 December 2010
Rising EM inflation all about food at this stage
Inflation has staged a comeback as a global investor theme in recent months.
There are principally two reasons for this. The first is the US Federal Reserves decision to
proceed with another bout of quantitative easing, which aims to push up core inflation in
the US moderately from the current exceptionally low level (while reducing the rate of
unemployment) and which may in the end push up inflation in other countries that dont
particularly need it. The second is the fact that actual inflation has risen in many emerging
markets countries in the most recent couple of months. Although these two events may
not be entirely unrelated and although we think headline inflation in many EM countries will
rise somewhat further in the coming few months, the most likely scenario for 2011 is, in
our view, that the inflation rates in most EM countries will end 2011 pretty close to the
rates we are seeing at present.
The Feds QE program and the resulting consensus view among investors that the dollar
must weaken are generating a steady inflow of funding from abroad into the EM local fixed
income markets, a flow that subjects the EM currencies to appreciation pressure. Many
EM central banks are countering currency appreciation pressure with dollar buying in the
market for foreign exchange. Some are holding back on otherwise well-justified increases
in their policy interest rates in order to help stem the inflow of foreign currency. These
attempts to stem the currency appreciation pressure add, in some cases, to longer-term
inflation risk.
But we do not find this problem grave at this stage. Most EM central banks are intervening
to slow the pace of currency appreciation but are in practice allowing gradual appreciation
anyway, and this genuinely reduces their need for interest rate increases, even in
countries that are faced with narrow (or fully closed) output gaps.
Our Taylor rule estimates

(which take into account the influence of the exchange rate on the
monetary conditions) suggest that monetary policy is currently too loose in Mexico, Turkey,
South Africa, and Korea (and too tight in Brazil and India) -- but only moderately so (see
Exhibit 37) . Specifically in the case of Turkey the most extreme case -- the Taylor rule
estimates suggest that policy is too loose based on the most recent year-on-year reading for
inflation. But if we insert into the equation the headline inflation rate that we think will prevail
six months from now (after a fall in inflation that will be induced by foreseeable base effects),
the equation no longer suggests that current policies are much too loose. Similarly in the
case specifically of South Africa: if we take into account the chances of currency
appreciation, the rate hike signal from the Taylor rule equation is not that strong.
To be sure, year-on-year EM headline inflation has indeed risen in September-November,
but this is mainly a result of rising food price inflation (as Exhibits 27 and 28 illustrate). The
increase in food inflation is in turn mainly due to bad harvesting weather. It is not a
consequence of loose EM monetary policy. Inflation in the EM CPI basket excluding food
has in fact declined modestly in recent months. Only the increase in food price inflation is
pulling up the headline rate. It is notable and encouraging in this regard that global grain
prices seem to have stabilized in dollar terms since mid-October after rising sharply during
the preceding three months (see Exhibit 30). It is possible that the increase in global grain
prices has been given an extra push by speculative positioning, which may in turn have been
fuelled by loose monetary policy in the US and elsewhere in the G3. But we believe that the
dominant driver of the increase in food price inflation in the second half of 2010 has been
weather shocks, and we think it will require additional (by definition unpredictable) weather
shocks to keep food prices on the rise all over the world during the coming quarters.
It is also worth noting that policy interest rates have been on the rise this year in those EM
countries where the output gaps have almost closed, including China, India, Korea and
Brazil among the largest EM countries.
08 December 2010
Moreover, real interest rates (measured simplistically as the gap between the policy
interest rate and backward-looking 12-month inflation) were rising this year in a passive
way in many additional EM countries until headline inflation began to pick up from
September onwards. This is because inflation fell in both Latin America and EMEA
between February and July. In the absence of rate cuts, these regions real interest rates
(at the short end of the curve) were rising in those months. The implication is that the
period since February has seen a combination of falling output growth and rising real
interest rates in much of Latin America and EMEA.
In non-Japan Asia, inflation rose in the first half of 2010 before stabilizing in recent months,
and although a number of central banks in the region were raising rates during the first half
of the year, real interest rates remained broadly unchanged during that period. But the
central banks in most of these countries recognize that policy rates will need to rise further
if growth rebounds soon from the recent soft spell, as we think it will. We think the most
likely scenario for 2011 is one in which many emerging markets countries will in practice
see a combination of rising policy interest rates and some appreciation (typically 4-5%) of
their currencies against a basket of G3 currencies.
Exhibit 27: Global EM CPI-inflation* now rising
modestly on the back of higher food inflation but non-
food inflation remains subdued
Exhibit 28: CPI-inflation for global EM excluding
China and India* shows an even sharper
acceleration in food inflation in recent months
% year-on-year change in various measures of global EM consumer prices % year-on-year change; China and India excluded from the EM CPI measures
2
5
8
11
14
17
Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10
Headline CPI**
Food CPI
Non-food CPI
Core inflation***

2
4
6
8
10
12
14
16
Headline CPI**
Food CPI
Non-food CPI
Core inflation***
*The 29 countries taken into account and weighted by their 2009 nominal GDP are listed in the
footnotes for Exhibits 32 - 34.
** For Argentinas headline CPI, we use the true inflation series compiled by Buenos Aires city;
the official series understates true inflation
*** The 17 countries taken into account and weighted by their 2009 nominal GDP are listed in
the footnotes for Exhibits 32 - 34.
Source: the BLOOMBERG PROFESSIONAL service, Buenos Aires city
*Same 29 countries as in the footnotes for Exhibits 32 - 34 but excluding China and India.
** For Argentinas headline CPI, we use the true inflation series compiled by Buenos Aires
city; the official series understates true inflation
***Same subset of 17 EM countries as in the footnote for Exhibit 27 but excluding India.
Source: the BLOOMBERG PROFESSIONAL service, Buenos Aires city

Exhibit 29: Global oil prices do
not currently represent a threat to
non-food inflation . . .
Exhibit 30: Moderation in global
grain price inflation* a sign that
EM food inflation may be peaking
Exhibit 31: Metals price inflation
has so far been benign, helping
to curb non-food inflation
% year-on-year change in the US$ WTI price % year-on-year change in US$ % year-on-year change in the in LMEX index
-70
-35
0
35
70
105
140
03-Dec-07 03-Jun-09 03-Dec-10

-50
0
50
100
150
06-Dec-07 06-Jun-09 06-Dec-10
Wheat prices
Average grain prices

-60
-30
0
30
60
90
120
03-Dec-07 03-Jun-09 03-Dec-10
Source: the BLOOMBERG PROFESSIONAL service *Year-on-year change in an index that attributes equal
weight to wheat, corn, soy and rice prices measured in US$
Source: the BLOOMBERG PROFESSIONAL service

08 December 2010
Exhibit 32: Latin America CPI-
inflation* stayed flat in October
although food inflation rose
Exhibit 33: Emerging Europe, Middle
East and Africa CPI-inflation*
continued to rise in October due to
accelerating food inflation
Exhibit 34: Non-Japan Asia CPI-
inflation* is being nudged upward
by a continued uptrend in food
inflation
% year-on-year change % year-on-year change % year-on-year change
2
7
12
17
Oct-06 Feb-08 Jun-09 Oct-10
Headline CPI**
Food CPI
Non-food CPI
Core inflation***

3
6
9
12
15
18
Headline CPI
Food CPI
Non-food CPI
Core inflation**

-4
0
4
8
12
16
Headline CPI
Food CPI
Non-food CPI
Core inflation**
* The eight countries taken into account and weighted by
2009 nominal GDP are Argentina, Brazil, Chile, Colombia,
Ecuador, Mexico, Peru and Venezuela.
** For Argentinas headline CPI, we use the true inflation
series compiled by Buenos Aires city; the official series
understates true inflation
***Core inflation excludes food, energy and regulated prices;
only for a selected subset of four of the eight Latin American
countries listed above, including Brazil, Chile, Mexico and Peru
Source: the BLOOMBERG PROFESSIONAL service,
Buenos Aires city
* The 12 countries taken into account and weighted by 2009
nominal GDP are Czech Republic, Egypt, Hungary, Israel,
Kazakhstan, Nigeria, Poland, Romania, Russia, South Africa,
Turkey and Ukraine.
**Core inflation excludes food, energy and regulated prices;
only for a selected subset of eight of the 12 EMEA countries
listed above, including Czech Republic, Hungary, Israel,
Kazakhstan, Poland, Russia, South Africa and Turkey
* The nine countries taken into account and weighted by
2009 nominal GDP are China, Hong Kong, India, Indonesia,
Korea, Philippines, Singapore, Taiwan and Thailand.
**Core inflation excludes food, energy and regulated prices;
only for a selected subset of five of the eight non-Japan
Asian countries listed above, including India, Korea,
Philippines, Taiwan and Thailand

Exhibit 35: EM real (ex-post) and nominal policy
rates fell in September . . .
Exhibit 36: . . . but this is due to the dip in real policy
rates in EMEA; in September, real policy rates
(ex-post) were stable in Non Japan Asia and LatAm
% %
-2
-1
0
1
2
3
Nov-07 Aug-08 May-09 Feb-10 Nov-10
3
4
5
6
7
8 Real interest rate (ex-post)
Nominal interest rate (right axis)

-4
-2
0
2
4
6
8
Oct-06 Oct-07 Oct-08 Oct-09 Oct-10
EMEA
LatAm
NJA
Source: the BLOOMBERG PROFESSIONAL service, Buenos Aires city Source: the BLOOMBERG PROFESSIONAL service, Buenos Aires city

Exhibit 37: Monetary policy interest rates not deviating massively from our
Taylor Rule estimates of the appropriate rates
Policy interest rates in %
0.00
2.00
4.00
6.00
8.00
10.00
12.00
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Taylor rule estimate for Q4 2010
Current rate

Source: Credit Suisse

08 December 2010
Exhibit 38: Headline CPI-inflation by country
Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Oct 2010 Nov 2010
Latin America*
11.0 10.8 9.7 8.6 7.5 7.0 7.7 8.5 8.2 8.4 na
Argentina
(1)

26.9 24.2 21.2 17.0 13.9 14.1 17.9 21.5 23.6 23.8 na
Brazil
6.3 6.2 5.8 5.2 4.4 4.2 4.9 5.1 4.6 5.2 na
Chile
9.3 8.6 6.0 3.0 -0.7 -1.9 -0.2 1.2 2.2 2.0 na
Colombia
7.7 7.8 6.6 4.8 3.2 2.4 2.0 2.1 2.3 2.3 2.6
Ecuador
10.0 9.3 7.9 5.5 3.5 3.9 4.0 3.3 3.6 3.5 na
Mexico
5.5 6.2 6.2 6.0 5.1 4.0 4.8 4.0 3.7 4.0 na
Peru
6.1 6.6 5.6 4.0 1.9 0.4 0.7 1.1 2.2 2.1 2.2
Venezuela
34.7 33.4 29.6 28.2 28.7 28.1 27.4 31.9 29.8 27.6 na
Emerging Europe, Middle East, Africa*
12.4 11.1 9.6 8.3 7.6 7.1 7.0 6.2 6.1 6.7 na
Czech Republic
6.7 4.7 2.2 1.4 0.2 0.4 0.7 1.2 1.9 2.0 na
Egypt
22.4 19.6 13.3 10.6 9.9 13.2 12.9 10.9 10.9 11.0 na
Hungary
6.3 4.3 3.0 3.6 5.0 5.2 6.0 5.4 3.8 4.2 na
Israel
5.1 4.6 3.4 3.2 3.1 3.5 3.5 2.8 2.0 2.5 na
Kazakhstan
19.4 11.6 8.8 8.3 6.4 5.9 7.3 7.0 6.6 7.3 7.7
Nigeria
13.1 14.9 14.3 12.6 10.8 12.7 14.9 14.0 13.4 13.4 na
Poland
4.7 3.7 3.2 3.7 3.6 3.3 3.0 2.3 2.2 2.8 na
Romania
8.1 6.8 6.8 6.1 5.0 4.6 4.6 4.4 7.5 7.9 na
Russia
14.9 13.8 13.8 12.5 11.4 9.2 7.2 5.9 6.2 7.5 na
South Africa
13.4 11.1 8.4 7.8 6.4 6.0 5.7 4.5 3.5 3.4 na
Turkey
11.7 11.0 8.4 5.7 5.3 5.7 9.3 9.2 8.4 8.6 7.3
Ukraine
26.3 25.5 20.4 15.1 15.3 13.3 11.2 8.4 8.5 10.1 na
Emerging Asia*
6.7 4.3 1.3 -0.2 -0.5 1.5 3.4 4.1 4.3 4.8 na
Emerging Asia ex- China and India
7.3 5.6 3.9 1.9 0.7 1.6 2.7 3.0 3.3 3.5 na
China
5.3 2.5 -0.6 -1.5 -1.3 0.7 2.2 2.9 3.5 4.4 na
Hong Kong
4.6 2.3 1.7 -0.1 -0.9 1.3 1.9 2.6 2.3 2.6 na
India
(2)

11.1 8.6 3.6 0.5 0.3 4.3 9.5 10.6 9.2 8.6 na
Indonesia
12.0 11.8 8.6 5.9 2.8 2.6 3.7 4.4 6.2 5.7 6.3
Korea
5.5 4.5 3.9 2.8 2.0 2.4 2.7 2.6 2.9 4.1 3.3
Philippines
12.2 9.7 6.9 3.2 0.3 2.9 4.3 4.2 3.8 2.8 na
Singapore
6.5 5.8 3.4 0.2 -0.4 -0.7 0.9 3.0 3.4 3.5 na
Taiwan
4.5 1.9 0.0 -0.8 -1.3 -1.3 1.3 1.1 0.4 0.6 1.5
Thailand
7.2 2.2 -0.2 -2.7 -2.1 1.9 3.7 3.3 3.2 2.8 2.8
Emerging Markets*
9.0 7.4 5.2 3.8 3.2 4.0 5.3 5.6 5.6 6.0 na
Emerging Markets ex-China and India
10.6 9.6 8.2 6.8 5.8 5.6 6.2 6.2 6.2 6.5 na
(1) Unofficial CPI from Buenos Aires city. (2) WPI inflation, % yoy
*The regional aggregate is calculated by weighting each countrys CPI data by its 2009 nominal GDP

08 December 2010
EM currencies: More appreciation pressure in store
The recent increase in global grain price inflation and the recent strengthening of the
leading indicators for both EM and the US have complicated life for those central banks
that were previously inclined to be passive and favor currency weakness in response to
the output slowdown in the summer months. Many of those central banks were particularly
keen to avoid currency appreciation when the risk of an increase in inflation still remained
somewhat distant. Some will now find it hard to hold back on rate increases as they will
worry about second-round influences (through wage increases) of the jump in food prices
and some will wish to let part of the burden of the anti-inflationary effort be borne by
currency appreciation. The US Feds current implementation of its second round of
quantitative easing will probably further buttress the capital flows towards the EM countries,
and the resulting EM currency appreciation pressure will, in many cases, help limit the
need for the central banks to raise rates dramatically. We think the net result will be a
protracted period of only gradually increasing policy rates in much of the EM universe and
moderate further EM currency appreciation.
There are many possible currency valuation models. One of the simplest (and one that
clearly should not be used blindly as a guide to currency trading) focuses on the real (i.e.,
inflation-adjusted) effective (i.e., trade-weighted) exchange rate (REER). A possible
valuation guide from this model comes from a comparison of the current REER level with
the average REER level seen in the past five years. This comparison is shown in the
fourth column of Exhibit 40 below.
We recognize that this simple model is unsatisfactory, so we also operate a more
sophisticated model that takes into account each countrys productivity growth, terms of
trade changes and interest rate levels (the model was documented in Valuation of
emerging markets currencies, published 5 November 2010). The latest results of this
more elaborate valuation model are shown below in Exhibit 39.
The currencies that appear particularly cheap in this model are those of Ukraine,
Kazakhstan, Peru and five countries in non-Japan Asia: China, Taiwan, Hong Kong, Korea
and Malaysia.
The ones that look expensive in the model are those of Colombia, India, Turkey, the
Czech Republic, Brazil, Egypt and Indonesia.
Exhibit 39: Deviation of November 2010 REERs from the fair-value estimates
Number of standard deviations
-3
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November 2010 REER is more than one standard deviation stronger than the "fair value" REER
November 2010 REER is within (+/-) one standard deviation of the "fair value" REER
November 2010 REER is more than one standard deviation weaker than the "fair value" REER
* October REER was used for Israel and Peru


08 December 2010
Exhibit 40: Percentage change in the real effective exchange rate*
Real effective exchange rate appreciation is represented in this table by a positive percentage change
2 December 2010

% chg 2 Dec
2010 over 2 Nov
2010
% chg 2 Dec
2010 over 2 Dec
2009
% chg 2 Dec
2010 over 1yr
average
% chg 2 Dec
2010 over 5yr
average
% chg 2 Dec
2010 over 10yr
average
% chg 2 Dec
2010 over 20yr
average
1 month chg 1 year chg
Argentina
(1)
2.1 15.2 0.3 13.5 6.3 -19.4
Brazil 1.9 6.8 3.4 18.9 41.4 31.3
Chile 2.8 6.1 4.3 6.8 11.7 9.7
China 2.3 5.1 1.4 7.3 10.5 17.0
Colombia -2.6 10.1 -1.3 12.1 23.6 22.1
Czech Republic -2.8 0.5 0.4 5.7 16.1 39.1
Egypt 3.1 7.4 1.5 21.1 24.6 35.9
Hong Kong 1.0 -3.9 -3.8 -8.3 -16.8 -22.8
Hungary -2.9 -3.5 0.1 1.2 5.4 19.7
India 0.6 9.1 1.3 13.2 17.3 22.4
Indonesia 1.7 7.3 0.8 8.2 17.6 13.6
Kazakhstan 3.5 11.5 1.7 2.8 9.1 29.3
Korea -1.7 0.9 -0.1 -11.1 -10.2 -12.4
Malaysia -0.2 4.6 0.0 1.8 1.3 -5.0
Mexico 0.4 6.7 3.9 0.9 -3.5 0.6
Nigeria 1.5 6.4 0.7 4.7 16.9 27.4
Philippines -0.7 4.7 0.1 3.5 13.3 9.9
Poland -1.4 -0.2 0.7 -0.8 1.4 13.5
Romania -1.3 0.4 1.3 -3.5 5.2 22.1
Russia 2.8 5.4 -1.2 5.4 19.2 53.7
Saudi Arabia 2.7 4.2 -0.3 4.6 -0.2 -4.5
Singapore 0.4 6.4 3.5 8.3 9.6 6.6
South Africa 3.1 11.0 5.8 14.6 13.7 1.6
Taiwan 2.1 3.7 1.4 -2.8 -8.2 -17.6
Thailand 1.4 9.3 3.6 5.3 13.3 8.3
Turkey -0.9 14.2 3.2 9.4 20.9 36.9
Ukraine 4.1 14.1 3.3 -2.3 -2.0 9.2
United Kingdom 1.6 2.2 0.6 -9.9 -15.2 -16.0
United States 1.7 -1.1 -3.0 -6.0 -12.1 -11.0
Euro -3.8 -11.3 -2.6 -6.3 -4.3 -7.4
Japan -2.7 1.7 2.4 11.1 3.7 -5.3
(1) Adjusted by unofficial inflation data supplied by Buenos Aires City
*Inflation-adjusted, trade-weighted exchange rate; figures in bold are more than one standard deviation from the average REER change across
the included countries

08 December 2010
Exhibit 41: Argentinas REER* Exhibit 42: Brazils REER* Exhibit 43: Chiles REER*
1990=100; an up-move indicates real appreciation 1990=100; an up-move indicates real appreciation 1990=100; an up-move indicates real appreciation
70
90
110
130
150
170
190
210

40
50
60
70
80
90
100
02Dec95 02Dec00 02Dec05 02Dec10

90
100
110
120
130
140
02Dec95 02Dec00 02Dec05 02Dec10
*Inflation-adjusted by unofficial CPI data, trade-weighted data
Source: Buenos Aires city, Credit Suisse
*Inflation-adjusted, trade-weighted data

Exhibit 44: Chinas REER* Exhibit 45: Colombias REER* Exhibit 46: Czechs REER*
80
85
90
95
100
105
110
02Dec95 02Dec00 02Dec05 02Dec10

85
95
105
115
125
135
145
02Dec95 02Dec00 02Dec05 02Dec10

100
115
130
145
160
175
190
02Dec95 02Dec00 02Dec05 02Dec10


Exhibit 47: Egypts REER* Exhibit 48: Hong Kongs REER* Exhibit 49: Hungarys REER*
70
80
90
100
110
120
130
140
150
02Dec95 02Dec00 02Dec05 02Dec10

90
100
110
120
130
140
150
160
02Dec95 02Dec00 02Dec05 02Dec10

110
125
140
155
170
185
200
02Dec95 02Dec00 02Dec05 02Dec10

08 December 2010
Exhibit 50: Indias REER* Exhibit 51: Indonesias REER* Exhibit 52: Kazakhstans REER*
60
70
80
90
100
02Dec95 02Dec00 02Dec05 02Dec10

20
35
50
65
80
95
110
03Nov95 03Nov00 03Nov05 03Nov10

130
152
174
196
218
240
02Dec95 02Dec00 02Dec05 02Dec10

Exhibit 53: Koreas REER* Exhibit 54: Malaysias REER* Exhibit 55: Mexicos REER*
50
60
70
80
90
100
110
03Nov95 03Nov00 03Nov05 03Nov10

65
75
85
95
105
02Dec95 02Dec00 02Dec05 02Dec10

85
100
115
130
145
02Dec95 02Dec00 02Dec05 02Dec10

Exhibit 56: Nigerias REER* Exhibit 57: Philippines REER* Exhibit 58: Polands REER*
50
70
90
110
130
02Dec95 02Dec00 02Dec05 02Dec10

85
95
105
115
125
135
02Dec95 02Dec00 02Dec05 02Dec10

190
212
234
256
278
300
02Dec95 02Dec00 02Dec05 02Dec10

08 December 2010
Exhibit 59: Romanias REER* Exhibit 60: Russias REER* Exhibit 61: Saudi Arabias REER*
50
70
90
110
130
02Dec95 02Dec00 02Dec05 02Dec10

80
100
120
140
160
180
200
02Dec95 02Dec00 02Dec05 02Dec10

75
80
85
90
95
100
105
110
02Dec95 02Dec00 02Dec05 02Dec10

Exhibit 62: Singapores REER* Exhibit 63: South Africas REER* Exhibit 64: Taiwans REER*
1990=100; an up-move indicates real appreciation
96
98
100
102
104
106
108
110
112
114
116
02Dec95 02Dec00 02Dec05 02Dec10

50
60
70
80
90
100
110
02Dec95 02Dec00 02Dec05 02Dec10

66
70
74
78
82
86
90
94
02Dec95 02Dec00 02Dec05 02Dec10

Exhibit 65: Thailands REER* Exhibit 66: Turkeys REER* Exhibit 67: Ukraines REER*
60
70
80
90
100
110
120
02Dec95 02Dec00 02Dec05 02Dec10

80
97
114
131
148
165
02Dec95 02Dec00 02Dec05 02Dec10

90
112
134
156
178
200
02Dec95 02Dec00 02Dec05 02Dec10

08 December 2010
Exhibit 68: United Kingdoms
REER*

Exhibit 69: United States REER* Exhibit 70: Eurozones REER*
70
75
80
85
90
95
100
105
110
02Dec95 02Dec00 02Dec05 02Dec10

90
95
100
105
110
115
120
02Dec95 02Dec00 02Dec05 02Dec10

68
72
76
80
84
88
92
96
02Dec95 02Dec00 02Dec05 02Dec10

Exhibit 71: Japans REER*
80
90
100
110
120
130
140
02Dec95 02Dec00 02Dec05 02Dec10


08 December 2010
EM real GDP growth and inflation forecasts

Exhibit 72: Annual forecasts as of 8 December 2010
Real GDP growth (%) End-year CPI inflation (% change, year-on-year)
2008 2009 2010E 2011F 2012F 2008 2009 2010E 2011F 2012F
Latin America* 4.4 -1.6 6.5 4.7 4.5 7.6 4.9 6.5 6.2 5.9
Argentina 6.8 0.9 9.5 6.0 4.0 7.2 7.7 11.0 10.8 13.0
Brazil 5.2 -0.2 7.6 5.0 5.0 5.9 4.3 5.8 5.4 4.5
Chile 3.7 -1.5 5.3 5.8 5.0 7.1 -1.4 3.3 3.0 3.0
Colombia
(1)
2.7 0.8 4.1 4.3 4.4 7.7 2.0 2.7 3.5 3.7
Mexico 1.5 -6.1 5.3 4.0 3.5 6.5 3.6 4.4 3.7 3.5
Panama 10.1 3.2 6.1 6.5 6.7 6.8 1.6 4.5 3.5 2.9
Peru 9.8 0.9 8.6 6.5 6.0 6.7 0.2 2.2 2.6 2.8
Venezuela 4.8 -3.3 -1.5 1.5 3.0 31.9 26.9 28.6 27.6 28.1
Europe, Middle East, and Africa* 4.3 -3.4 4.1 4.5 4.8 9.9 6.5 6.5 6.2 5.6
Czech Republic 3.2 -4.0 2.3 2.6 3.0 3.6 1.0 2.0 1.9 1.9
Egypt 7.2 4.7 5.1 5.8 6.0 20.2 9.9 10.1 11.2 10.7
Hungary 0.6 -6.3 1.1 2.8 3.3 3.5 5.6 4.6 4.3 3.5
Israel 4.2 0.8 3.9 3.8 4.2 3.8 3.9 2.3 2.8 2.9
Kazakhstan 3.3 1.2 5.7 5.8 6.0 9.5 6.4 7.7 6.6 5.9
Nigeria 6.2 6.8 7.6 7.6 8.0 15.1 13.9 12.0 14.4 11.5
Poland 5.0 1.8 3.8 4.0 3.9 3.3 3.5 2.8 2.5 2.5
Romania 7.3 -7.1 -2.0 1.5 4.2 6.3 4.8 8.0 4.2 3.5
Russia 5.2 -7.9 3.6 4.7 5.2 13.3 8.8 8.4 7.2 6.0
Saudi Arabia 4.2 0.6 3.2 4.5 5.1 9.0 4.2 5.7 5.6 4.0
South Africa
(2)
3.7 -1.8 3.0 3.5 3.6 9.0 6.3 3.4 4.6 5.8
Turkey 0.7 -4.7 8.0 4.8 4.4 10.1 6.5 7.3 6.3 6.6
Ukraine 2.1 -15.1 4.3 4.5 5.0 22.3 12.3 9.9 10.5 8.4
United Arab Emirates 7.4 -3.0 2.3 4.7 5.2 na -0.3 2.8 4.5 4.6
Non-Japan Asia* 7.1 6.1 9.0 7.6 7.5 3.3 2.7 4.6 5.4 4.2
China 9.6 9.1 10.1 9.2 9.0 1.2 1.7 4.1 5.5 4.0
Hong Kong 2.2 -2.8 6.8 4.8 4.8 2.1 1.3 2.8 5.3 4.2
India
(3)
6.7 7.4 8.4 7.7 7.5 6.6 6.9 7.5 6.9 6.0
Indonesia 6.0 4.5 6.0 5.8 5.5 10.2 2.8 6.5 7.0 5.3
Korea 2.3 0.2 6.0 4.8 4.3 4.1 2.8 3.6 3.7 3.4
Malaysia 4.6 -1.7 7.0 5.2 5.8 4.4 1.1 2.2 2.7 2.5
Philippines 3.7 1.1 6.9 4.0 5.3 8.0 4.3 2.9 5.3 5.2
Singapore 1.8 -1.3 15.2 4.7 5.4 5.5 -0.5 4.4 2.0 2.2
Taiwan 0.7 -1.9 10.0 4.4 4.5 1.3 -0.2 1.0 2.2 2.5
Thailand 2.5 -2.3 8.0 4.3 5.4 0.4 3.5 3.2 3.7 3.2
Vietnam 6.3 5.3 6.4 6.2 6.5 19.9 6.5 12.0 8.0 7.0
Emerging Markets** 5.8 2.0 7.2 6.2 6.2 5.9 4.1 5.5 5.7 4.9
*Aggregates for regions are weighted averages; country data are weighted by their 2009 nominal US dollar GDP figures. **Aggregated emerging markets figures are average of regional data
weighted by regional 2009 nominal US dollar GDP.
(1) The methodology to calculate GDP and the series itself were revised in late June 2008. The revised estimates for both real and nominal GDP were significantly higher than in the old series.
(2) Headline CPI inflation less mortgage interest costs. (3) Indian fiscal year begins in April; WPI inflation.
Source: 2010 Thompson Reuters Limited, the BLOOMBERG PROFESSIONAL
TM
service, National Statistical Offices, Central banks, Credit Suisse

08 December 2010
Global macroeconomic forecasts

Exhibit 73: Quarterly and annual forecasts as of 3 December 2010
2010 2011F Annual average
Q1 Q2E Q3E Q4E Q1 Q2 Q3 Q4 08 09 10F 11F
Global Real GDP (y/y) 4.9 5.1 4.8 4.2 4.1 4.1 4.4 4.8 2.9 -0.7 4.7 4.4
IP (y/y) 10.5 11.3 8.8 6.7 5.6 5.3 6.0 6.7 0.8 -6.8 9.3 5.9
Inflation (y/y) 3.4 3.4 3.3 3.6 3.4 3.6 3.6 3.4 5.9 1.9 3.5 3.6

US Real GDP (q/q ann) 3.7 1.7 2.5 2.2 2.8 3.2 3.6 3.6 0.4 -2.6 2.8 2.8
IP (y/y) 2.7 7.2 6.4 4.8 4.0 3.3 3.3 4.5 -3.3 -9.3 5.4 3.8
Inflation (y/y) 2.4 1.8 1.2 1.1 1.3 1.2 1.0 0.6 3.8 -0.3 1.6 1.0
Policy rate (end of period) 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 ... ... ...

Japan Real GDP (q/q ann) 6.6 1.8 3.9 -2.2 0.5 1.5 1.5 1.5 -1.2 -5.2 3.5 0.9
IP (y/y) 27.5 20.9 13.4 4.5 -3.0 -3.5 -1.0 3.0 -3.4 -21.9 16.1 -1.1
Inflation ex. fresh food (y/y) -1.2 -1.2 -1.0 -0.5 -0.9 -0.6 -0.5 -0.5 1.5 -1.3 -1.0 -0.6
Policy rate (end of period) 0.10 0.10 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 ... ...
USDJPY 93 89 84 82 79 83 86 ... ... ...

Euro-16 Real GDP (q/q ann) 1.3 3.9 1.8 1.7 2.3 3.0 3.0 2.9 0.3 -4.0 1.7 2.5
IP (y/y) 3.3 6.8 6.5 5.1 2.6 2.7 2.8 2.8 -1.8 -14.6 5.4 2.8
Inflation (y/y) 1.1 1.5 1.7 1.9 2.0 1.7 1.6 1.7 3.3 0.3 1.6 1.7
Policy rate (end of period) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.50 ... ...
EURUSD 1.35 1.23 1.36 1.36 1.48 1.5 1.5 ... ... ...

UK Real GDP (q/q ann) 1.8 4.7 3.3 1.5 2.3 2.6 2.3 2.3 -0.1 -5.0 1.8 2.5
IP (y/y) 0.3 1.7 3.3 3.6 3.1 2.7 2.8 2.8 -3.1 -10.1 2.2 2.9
Inflation (y/y) 3.2 3.4 3.1 3.1 3.7 3.4 3.5 3.2 3.6 2.2 3.2 3.4
Policy rate (end of period) 0.50 0.50 0.50 0.50 0.50 0.50 0.50 1.00 ... ...
GBPUSD 1.52 1.49 1.57 1.57 1.61 1.6 1.7 ... ... ...

Switzerland Real GDP (q/q ann) 4.2 3.5 0.2 -1.8 1.0 2.4 2.8 4.6 1.9 -1.9 2.4 1.2
Inflation (y/y) 1.1 1.0 0.3 0.1 0.0 0.2 1.1 1.7 2.4 -0.5 0.6 0.7
Policy rate (end of period) 0.25 0.25 0.25 0.25 0.25 0.50 0.75 0.75 ... ... ...
USDCHF 1.05 1.08 0.98 0.98 0.95 1.0 1.0 ... ... ... ...
Source: Datastream International Limited ALL RIGHTS RESERVED, Credit Suisse

08 December 2010
Latin America

08 December 2010
Argentina: Heading into a transition year
We do not anticipate a policy shift ahead of the October presidential and
congressional elections. Our base case scenario is that, in the coming months, the
Cristina Kirchner administration will deliver more populist measures (aimed at increasing
support among low-income voters), along with some pragmatic initiatives (such as curing
the arrears with the Paris Club, in an effort to regain the support of the middle class and
the business sector). Fiscal and monetary policy will likely remain loose. In our view,
issues such as high inflation, the lack of credible macro indicators and the need for price
adjustments for utilities and public services are unlikely to be addressed any time soon.
The outcome of the October elections which, at this point, is difficult to predict should
determine the direction of policy after 2011; our 2012 macro projections assume that the
next administration will adopt a gradual approach to solving Argentinas problems.
Politics are likely to remain fluid through Q1 2011. The death of former president, Nestor
Kirchner, was a shock to the political establishment, throwing the official coalition and the
already divided opposition parties into disarray. Among other things, it is unclear whether
President Cristina Kirchner will seek reelection, whether the Peronist party will unify and who
will be the opposition parties presidential candidates. We are unlikely to have a clear reading
of the new political dynamics until the end of the austral summer in March and, with primary
elections not being held until August, uncertainty might be prolonged even further.
We expect Cristina Kirchner to seek a second term and to be one of the main
presidential contenders. In our view, Cristina Kirchner is a savvy politician, who will
likely capitalize on the recent increase in her popularity brought about by the sudden
death of her husband. Opinion polls show that she has the support of about 30% of
voters, ten percentage points below the required majority to win the elections in the first
round if the opposition parties remain divided. We think that it will be challenging for
Cristina Kirchner to regain the support of the middle class and, thus, add more votes to
her tally. However, the relatively buoyant economic environment coupled with sizable
fiscal spending should be supportive of the official coalitions performance in the
presidential, congressional and regional elections.
Congress might again be a source of political noise; however, with the opposition
block likely to remain divided, there is little chance that any major initiatives will
be approved. We think that in 2011, the opposition parties which, as a block, have
majorities in both houses of congress will again put forward proposals that would be
politically unfavorable to the government. However, the rifts within the opposition block
will likely prevent such initiatives from being approved, as we saw happen in 2010. Such
rifts, plus the vast differences in ideology parties in the opposition falling along the
entire left-right political spectrum, are likely to make it difficult to build broad alliances
ahead of the elections and should benefit the official coalition.
Economic activity remained torrid through much of 2010. We expect the official statistics
to show that real GDP grew 9.5% in 2010, the fastest growth rate in the region. However, the
actual expansion of the economy was probably about 8%-8.5%, still quite high, reflecting the
strong cyclical rebound from 2009 (when the economy shrank 3%-4%), a record agricultural
harvest, a favorable external environment, and loose fiscal and monetary policies.
Growth should decelerate in 2011. We think that the official data will continue to
overstate real GDP growth and that it will show an expansion of 6% in 2011. We expect
the actual expansion to be about 5%, driven largely by domestic demand. Consumer
spending should grow 6.1% in 2011 on the back of declining unemployment, stable or
rising real wages (we expect nominal wage increases in 2011 to match, if not exceed
true inflation), strong consumer sentiment and credit growth. Government consumption
and investment should also add to headline GDP growth in 2011, but the contribution of
private investment is likely to remain limited. The main risks to the growth outlook in
2011 are a potential sizable slowing of global growth (which we do not view as likely) or
weather shocks that affect the agricultural harvest.
Carola Sandy
+1 212 325 2471
carola.sandy@credit-suisse.com

08 December 2010
Inflation should rise further in 2011 and may remain high into 2012. True inflation
should end 2010 at about 25%, well above the 11% that the official statistics will likely
show. The government and the central bank have no appetite for measures to cool down
the economy and rein in inflation. This stance is unlikely to change in an electoral year,
which implies that inflation will continue rising; we expect true inflation to end 2011 at
30%-35%. We think that the government will remain unwilling to end the underreporting
of inflation because of the potentially high political, financial and legal costs that might
arise from formally acknowledging that inflation is much higher than officially reported.
The announced creation of a CPI index at the national level, with technical assistance
from the IMF, will probably be a drawn out process, with no near term results. Thus, it
will likely fall to the next administration to deal with these issues; we expect the next
government to bring down inflation gradually because a rapid reduction of inflation would
require a sizable slowing of activity, which would be politically costly.
The fiscal balances are not as good as they appear, but they remain comparatively
healthy. We expect the federal government to post an overall fiscal deficit of 0.1% of
GDP in 2010, down from the 0.6% of GDP deficit in 2009 (this improvement is consistent
with an increase in the primary fiscal surplus to 2% of GDP in 2010 from 1.5% in 2009).
However, the reported fiscal balances mask the sharp increase in primary spending,
34% in nominal terms, which was financed not only by higher tax collection (up in
tandem with nominal GDP), but also by extraordinary non tax revenues. In 2010, the
government received sizable transfers of investment profits from the social security
agency (ANSES) and the central bank, which we estimate will have totaled 0.6% and
1.7% of GDP, respectively. Without such transfers, the federal government would have
posted overall fiscal deficits of 2.4% of GDP in 2010 and 2.2% in 2009. The adjusted
fiscal balances do not look as good, but they still compare well to the fiscal balances of
many other countries in the EM universe, many of which are rated several notches
higher. We project an overall fiscal deficit of 0.5% of GDP for the federal government in
2011 (2.3% of GDP if adjusted for extraordinary non tax revenues).
We expect the government to reach an accord to cure the Paris Club arrears, but we
are not optimistic about a normalization of its relationship with the IMF. Talks with
the Paris Club will start in mid-December, but an accord which should entail the
repayment of the debt in arrears of about $7bn over two years or so will probably not be
reached until late Q1 2011. Meanwhile, despite the IMFs assistance on the issue of the
new CPI index, we do not expect the government to fully normalize its relationship with the
IMF; specifically, we do not think that the Article IV consultation will take place in 2011.
The government plans to cover the bulk of its funding needs in 2011 by tapping
the central banks FX reserves. The government plans to use $7.5bn of the central
banks FX reserves to pay part of the debt service due in 2011, and we think that it will
draw as much as $3bn more to repay the Paris Club. Loans from the IFIs and from other
public entities (ANSES, in particular) should cover the rest of the funding needs. If bond
spreads continue to tighten, the government may sell new bonds in 2011 and show that,
in fact, it has regained access to the capital markets. We still expect the government to
carry out liability management transactions in the months ahead.
We project a current account surplus of 1.0% of GDP and a relatively stable
nominal exchange rate in 2011. We project that the merchandise trade surplus, on an
FOB/FOB basis, will be $16.1bn in 2011, little changed from our estimate of a $15.8bn
surplus in 2010. Our projection assumes that the price of agricultural commodities will
remain fairly flat in 2011 (relative to Q4 2010 levels) and that volumes exported will fall
only modestly. Thus, the potential of a smaller than expected agricultural harvest is a
risk to the external accounts (although such risk might be partially offset by higher
prices). We expect that the central banks stock of reserves may continue to increase if
capital outflows do not resume and despite the use of FX reserves to pay the debt
service. Our expectation of FX flows are supportive of a stable nominal exchange rate,
which we think the government wants to use as an anchor of voter sentiment and a (not
very effective) nominal anchor to contain inflation.
08 December 2010
Exhibit 74: Privately collected
economic indicators Exhibit 75: Real GDP growth
Contributions to real GDP growth in percentage points
100
200
300
400
500
110
120
130
140
150
160
170
Auto production*
Construction activity**
FIEL's IP index***

-18
-15
-12
-9
-6
-3
0
3
6
9
12
00 01 02 03 04 05 06 07 08 09 10 11
Investment
Private consumption
Government spending
Net exports
GDP growth
F
o
r
e
c
a
s
t

We expect the economy to
continue growing at a
relatively strong pace in
2011, after rebounding
sharply in 2010.

*June 2002=100, left axis. **2002=100, seasonally adjusted, left
axis. ***1993=100, seasonally adjusted, right axis.
Source: ADEFA, Grupo Construya, FIEL, Credit Suisse
Source: INDEC, Credit Suisse

Exhibit 76: Agricultural production Exhibit 77: Consumer Confidence
Millions of tons
0
10
20
30
40
50
60
70
80
90
100
9
9
/
0
0
0
0
/
0
1

0
1
/
0
2

0
2
/
0
3

0
3
/
0
4

0
4
/
0
5

0
5
/
0
6

0
6
/
0
7

0
7
/
0
8
0
8
/
0
9
0
9
/
1
0
E
1
0
/
1
1
F
*
Other
Sun-flower seed
Wheat
Corn
Soy

10
20
30
40
50
60
Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10
Index of consumer confidence
Purchases of durables sub-index

A key risk to our 2011
growth outlook and to our
projections of the fiscal and
external accounts is that
the agricultural harvest is
negatively affected by
weather shocks. Some
regions are currently
receiving less rain than
usual.
We expect consumer
spending to be one of the
main drivers of growth on
the back of stronger
sentiment

Source: USDA, Credit Suisse Source: Di Tella University, Credit Suisse

Exhibit 78: Unemployment rate
Exhibit 79: Bank credit to the private
sector
% % yoy
0
4
8
12
16
4
Q
0
3
3
Q
0
4
2
Q
0
5
1
Q
0
6
4
Q
0
6
3
Q
0
7
2
Q
0
8
1
Q
0
9
4
Q
0
9
3
Q
1
0

0
10
20
30
40
50
60
Feb-07 Nov-07 Aug-08 May-09 Feb-10 Nov-10
Consumers
Businesses
Total

declining unemployment
and the strong rebound in
credit growth

Source: INDEC, Credit Suisse Source: Central Bank, Credit Suisse

08 December 2010
Exhibit 80: CPI inflation and nominal
wages
Exhibit 81: Index of confidence in the
government
Year-on-year % change
0
5
10
15
20
25
30
F
e
b
-
0
7
M
a
y
-
0
7
A
u
g
-
0
7
N
o
v
-
0
7
F
e
b
-
0
8
M
a
y
-
0
8
A
u
g
-
0
8
N
o
v
-
0
8
F
e
b
-
0
9
M
a
y
-
0
9
A
u
g
-
0
9
N
o
v
-
0
9
F
e
b
-
1
0
M
a
y
-
1
0
A
u
g
-
1
0
N
o
v
-
1
0
Official data
True inflation*
Consumer expectations**
Overall wage level***

0
1
2
3
Nestor Kirchner
administration
Cristina Kirchner
administration

We think that rising true
inflation and unanchored
inflation expectations are
likely to result in demands
for sizable wage hikes in
2011, which should further
add to inflationary pressures.
In our view, the government
is unlikely to address the
issue of the underreporting
of CPI inflation.
The governments popularity
has rebounded as the
buoyant economy and
declining unemployment rate
seem to be assuaging
voters concerns over
inflation.

*As estimated by B.A. City consultancy. **Consumers' median
expectation for inflation over the next 12 months. ***% change yoy in
average nominal wages.
Source: INDEC, B.A. City Consultancy, Di Tella University, Credit Suisse
Source: Di Tella University, Credit Suisse

Exhibit 82: Federal government
finances Exhibit 83: Current account
% of GDP $bn
17
21
25
29
33
04 05 06 07 08 09 10F 11F
Non-tax revenues
Tax revenues*
Total spending
Primary spending**

-25
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10F11F
Transf ers*
Trade balance
Investment income
Services balance
Current account balance

Fiscal policy should remain
loose in 2011 ahead of the
presidential and
congressional elections.
We project that the current
account surplus will reach
1% of GDP in 2011,
assuming that international
agricultural prices remain
near the levels observed in
Q4 2010 and that volumes
exported do not fall
significantly relative to
2010.

*includes social security taxes. **includes transfers to provincial and
municipal governments.
Source: Ministry of Economy, Credit Suisse
*In 2009, it includes the IMF's SDR allocation
Source: INDEC, Credit Suisse

Exhibit 84: Nominal exchange rate
and central bank's net FX purchases
Exhibit 85: Central bank's stock of
international reserves
$bn
-4
-3
-2
-1
0
1
2
May-08 Nov-08 May-09 Nov-09 May-10 Nov-10
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
Central bank's monthly
net FX purchases ($bn,
lef t axis)*
Nominal exchange rate
(ARS per USD, right
axis)

25
28
31
34
37
40
43
46
49
52
May-08 Jan-09 Aug-09 Apr-10 Nov-10
Gross
Net of borrowing
f rom bilateral
lenders
Net of borrowing f rom bilateral
lenders, net of reserve req. on
USD deposits

If capital outflows do not
resume, the central bank
will likely remain a net buyer
of dollars in the FX market.
This should allow it to
increase its stock of FX
reserves despite the
governments use of these
to pay the debt service.

*Data for November 2010 is for Nov 1- Nov 26 period only.
Source: Central bank, Credit Suisse

08 December 2010
Argentina: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
National accounts, population and unemployment
Real GDP growth (%) 9.0 9.2 8.5 8.7 6.8 0.9 9.5 6.0 4.0
Growth in real private consumption (%) 9.5 8.9 7.8 9.0 6.5 0.5 7.9 6.1 4.0
Growth in real fixed investment (%) 34.4 22.7 18.2 13.6 9.1 -10.2 15.3 8.7 7.0
Fixed investment (% of GDP) 17.7 19.8 21.6 22.6 23.1 20.6 21.7 22.2 22.8
Nominal GDP ($bn) 152 182 212 261 327 308 362 414 468
Population (mn) 38.2 38.6 39.0 39.4 39.7 40.1 40.5 40.9 40.9
GDP per capita ($) 3,978 4,711 5,452 6,626 8,216 7,662 8,935 10,119 11,452
Unemployment (% of labor force, end-year)
(1)
12.1 10.1 8.7 7.5 7.3 8.4 7.2 7.0 7.0
Prices, interest rates and exchange rates
CPI inflation (%, December over December) 6.1 12.3 9.9 8.5 7.2 7.7 11.0 10.8 13.0
CPI inflation (% change in average index for the year) 4.4 9.6 10.9 8.8 8.6 6.3 10.5 10.8 12.5
Exchange rate (ARS per USD, end-year) 2.97 3.03 3.06 3.15 3.45 3.78 4.02 4.15 4.30
Exchange rate (ARS per USD, average) 2.94 2.93 3.08 3.12 3.16 3.73 3.91 4.16 4.25
REER (% change, December to December)
(2)
-4.3 4.6 0.0 -8.6 6.8 -15.9 -1.1 4.7 6.6
Nominal wage growth (% year-on-year, average)
(3)
9.3 20.3 18.9 22.7 22.4 16.7 27.0 20.0 16.0
Prime lending rate 30 days in pesos (end-year, %) 3.0 6.0 8.3 10.3 13.0 11.5 11.5 12.5 12.5
Fiscal data
General government fiscal balance (% of GDP) 3.7 2.1 1.9 1.1 0.9 -1.6 -0.5 -0.9 -0.6
General government primary fiscal balance (% of GDP) 5.3 4.4 4.0 3.4 2.9 0.8 1.9 1.5 1.9
General government expenditure (% of GDP) 25.2 27.0 27.9 31.4 32.7 36.6 38.3 38.7 37.8
Federal government primary fiscal balance (% of GDP) 3.9 3.7 3.5 3.2 3.2 1.5 2.0 1.7 2.1
Gross general government debt (% of GDP, end-year)
(4)
130.9 88.5 81.6 71.1 57.4 61.6 48.5 44.0 40.4
Net general government debt (% of GDP, end-year)
(4) (5)
124.8 84.0 72.5 63.6 51.1 47.9 34.9 29.8 27.1
Money supply and credit
Broad money supply (M2, % of GDP) 19.2 20.2 19.5 18.4 17.7 18.3 18.0 17.7 17.4
Broad money supply (M2, % year-on-year change) 34.6 25.1 18.4 17.1 22.6 14.6 22.0 18.0 15.0
Domestic credit (% of GDP) 33.8 30.7 26.6 24.7 22.2 23.5 24.3 22.4 21.2
Domestic credit (% year-on-year change) 10.7 7.8 6.8 15.3 14.1 17.3 28.1 11.0 10.0
Domestic credit to the private sector (% of GDP) 10.5 11.7 13.0 14.5 13.7 13.5 13.3 12.6 11.9
Domestic credit to the private sector (% year-on-year change) 16.1 32.1 37.4 37.8 20.5 9.5 21.6 14.0 10.0
Balance of payments
Exports (goods and nonfactor services, % of GDP) 26.2 25.9 25.7 25.4 25.1 21.7 22.2 21.8 20.7
Imports (goods and nonfactor services, % of GDP) 18.4 19.2 19.3 20.5 20.7 15.9 18.0 18.0 17.7
Exports (goods and nonfactor services, % increase in $ value) 15.8 18.0 16.1 21.6 23.7 -18.7 20.3 12.2 7.7
Imports (goods and nonfactor services, % increase in $ value) 48.4 25.0 17.7 29.8 26.8 -27.8 33.6 14.4 10.8
Net balance of factor income ($bn)
(6)
-9.3 -7.3 -6.1 -5.9 -7.6 -9.3 -10.2 -11.2 -12.0
Current account balance ($bn) 3.2 5.3 7.8 7.4 7.0 11.3 4.8 4.2 2.3
Current account balance (% of GDP) 2.1 2.9 3.7 2.8 2.2 3.7 1.3 1.0 0.5
Net FDI Inflows ($bn) 3.2 3.5 2.9 4.7 7.7 3.7 1.5 0.9 0.9
Scheduled external debt amortization ($bn)
(7)
7.5 4.7 2.4 2.5 2.3 1.7 1.7 1.6 1.6
Foreign debt and reserves
Foreign debt ($bn)
(4)
171 128 124 140 151 149 138 136 133
Public ($bn) 116 79 77 86 90 93 82 80 77
Private ($bn) 55 48 48 54 60 56 56 56 56
Foreign debt (% of GDP, end-year) 112.6 70.2 58.5 53.5 46.1 48.3 38.1 32.8 28.3
Foreign debt (% of exports of goods and services) 429 272 228 210 183 223 172 151 137
Central bank gross FX reserves ($bn) 19.6 28.1 32.0 46.2 46.4 48.0 54.0 56.0 58.0
Central bank net FX reserves ($bn)
(8)
19.6 28.1 32.0 44.6 41.5 44.4 51.0 53.5 56.0
(1) Starting in 2003, people participating in the Jefes de Hogar subsidy program are counted as employed. Adjusting the data by Jefes de Hogar, the unemployment rate is 2-4 points higher. (2)
Increase indicates appreciation. REER was estimated using the official inflation data series. (3) Weighted average of wages in the formal and informal private sector, and the public sector. (4) Debt data
assumes that Paris Club debt starts to be repaid in 2011. (5) Net of Brady guarantees (through 2003), the Bogar bond, bonds held by Central Bank and estimated cash holdings. (6) For 2002-2005
period, it includes notional interest paid on defaulted debt. (7) It includes scheduled amortizations to multilaterals only. (8) Net of borrowing from the BIS and other bilateral lenders.
Source: Central bank, INDEC, Ministry of Economy, Credit Suisse
08 December 2010
Brazil: Strong growth in investments in 2011
We see full-year real GDP growth falling from 7.6% in 2010 to 5.0% in 2011. As we
said in Brazil 2011/12: Strong growth in GDP and investments, with above-target inflation
and higher interest rates (published on 1 December 2010), we think real GDP growth will
converge towards our estimate for potential growth in 2011. Uncertainties regarding the
GDP growth forecasts have increased in the past few months, due to the strong
deceleration in economic activity in Q2 2010 and Q3 2010. We expect annualized quarter-
on-quarter real GDP growth lower than 1% in Q3, deceleration explained by the industrial
sector. Industrial production growth declined from 3.0% qoq in Q1 2010 to 1.2% qoq in Q2
and -0.4% qoq in Q3. The path was probably due to the adjustment of industrial
inventories and the acceleration of imports penetration in the domestic market. High
business and consumer confidence, continued declines in the unemployment rate, and
continued credit expansion suggest that economic activity will accelerate in the short term.
We forecast a deceleration in household consumption, from 7.6% in 2010 to 5.9%
in 2011, and in fixed investment growth, from 23.2% in 2010 to 14.5% in 2011. The
ratio of fixed investments to GDP, which has historically typically been well below 20%,
should rise to about 23% in 2012. Changes in net external demand (exports minus
imports) will be a drag for GDP growth in 2011, as imports expand faster than exports.
Job market conditions remain very strong, although growth in the number of people
employed should decelerate from 3.6% in 2010 to 2.8% in 2011. We expect the labor
force to grow around 2.0% in 2010, implying a fall in the average unemployment rate
from 6.8% in 2010 to 6.0% in 2011. Real wages look set to increase by 3.0% in 2011,
leading to an increase in the real wage bill of 6.0% in 2011, versus 7.5% in 2010.
IPCA inflation is on course to remain well above the 4.5% center of the central
banks target range throughout 2011. We think year-on-year IPCA inflation will be at
5.8% in December 2010 and 5.4% in December 2011. Food inflation has been the main
driver of the inflation dynamics in Brazil in 2010. Consumer price inflation has risen
strongly since September 2010 as a result of the recent agricultural commodity price
shock. Possible continued high food inflation and the spillover impact on other prices
represents the most important inflation risk for 2011 and seems likely to continue to
subject overall consumer price inflation to upward pressure. The median market forecast
for year-on-year IPCA inflation in December 2011 rose to 5.2% at the end of November,
raising the risks of persistent high inflation throughout 2011.
We expect the Central Bank to increase the Selic interest rate from the current
level of 10.75% to 13.50% at the end of 2011 in order to prevent IPCA inflation from
reaching the 6.5% upper limit of the target range. Our models suggest that the central
bank should increase the Selic basic rate by 275bps. This would start with a hike of
50bps in January 2011, followed by four hikes each of 50bps between March and July
and one 25bps hike in August. We think this monetary policy tightening will bring
consumer price inflation back down to the center of the target range by mid-2012, and
open the room for an easing cycle from the middle of 2012 onwards.
The central bank raised the reserve requirements on demand and time deposits in
the beginning of December. The reserve requirements on time deposits in the banking
system were raised from 50% to 54%, and that on demand deposits from 23% to 32%.
Reserve requirement for auto loans, vehicle leasing and payroll loans to individuals
were also increased. These measures reinforce our view that the central bank will raise
interest rates. According to the central bank, the decision to impose more rigid
requirements on loans and higher reserve requirements is meant as a prudential
measure. However, the central bank agrees that the measures imply some monetary
policy tightening as well. The decision might allow the central bank to buy some time
before increasing interest rates.
We forecast that the current-account deficit will rise from $51bn (2.5% of the GDP)
in 2010 to $73bn (3.1% of the GDP) in 2011. This forecast is mostly due to our
projection of a decline in the trade surplus from $17.5bn in 2010 to US$3.5bn in 2011
and of an increase in remittances of profits and dividends, from $31bn in 2010 to $36bn
Nilson Teixeira
+55 11 3841 6288
nilson.teixeira@credit-suisse.com
Leonardo Fonseca
+55 11 3841 6348
leonardo.fonseca@credit-suisse.com
Daniel Lavarda
+55 11 3841 6352
daniel.lavarda@credit-suisse.com
Tales Rabelo
+55 11 3841 6353
tales.rabelo@credit-suisse.com

08 December 2010
in 2011. The slow recovery in global economic activity, the sharp rise in domestic
demand, and the appreciated local currency should prompt imports to grow faster than
exports in 2011.
Strong capital inflows will more than suffice to finance the current account deficit.
We expect the net capital inflow to remain very high in 2011, near the level seen in
2010. We forecast an increase of the inflow of foreign direct investment (FDI) from
$35bn in 2010 to $40bn in 2011. Regarding the portfolio investments, we expect a
decrease in inflows in 2011. This decline is due the 2010 base being boosted by the
Petrobras share offering which generated a net inflow of $13.9billion (36% of the total
inflow for 2010). We expect the inflow from abroad into local fixed-income instruments to
be at a similar in 2011 as in 2010, despite the increase in the Tax on Financial
Transactions (IOF) to 6% on capital inflows for the acquisition of fixed income
instruments in Q4 2010. Higher basic interest rate should stimulate the inflows for
domestic fixed-income securities.
The Real is, in our view, likely to appreciate slightly against the dollar over the
coming year, taking the BRLUSD exchange rate to 1.60 by the end of 2011. The likely
increase in the interest rate differential between Brazil and the US, buoyant global investor
risk appetite and the still good Brazilian domestic economic fundamentals should lead to
Brazilian currency appreciation next year if the government and the central bank do not
intervene in the currency markets. We see a risk of new and more drastic policy measures
to stem BRL appreciation. However, in the context of rising inflation and the likely
imminent start of monetary policy tightening, exchange rate strength may increasingly be
seen as a tool that could help limit inflation and reduces the magnitude of the required
interest rate hikes. This thinking will, we think, lead the government and the central bank to
allow the currency to appreciate a little against the dollar next year. Our projections for the
balance of payments suggest that the central bank may continue its interventions in the
spot market and purchase $13bn in 2011. This would lead to an increase the central
banks FX reserves from US$289bn at end-2010 to US$313bn at end-2011.
We expect the government to meet its primary surplus target for 2011 of R$125
billion (3.1% of GDP), without using its legal right to deduct up to R$32 billion (0.9%
of GDP) in investment expenditures from the spending figures that feed into the
calculation of the deficit. After excluding the effects of the Petrobras capitalization, we
expect growth in fiscal revenues to decrease from 10.5% in 2010 to 9.0% in 2011, while
spending growth should fall from 9.5% in 2010 to 6.0% in 2011. Strong growth in domestic
demand should boost tax revenues while spending is set to be contained by slowing
growth in social security benefits (related to the minimum wage) and personnel expenses.
The main risk is the possibility of larger-than-expected increases in the minimum wage,
which influences 47% of fiscal expenditures. An increase in the minimum wage much
higher than that (R$540) suggested by the rule used in recent years would not only
worsen the deficit for next year but also generate uncertainty concerning the incoming
administrations commitment to fiscal prudence. We expect the public-sectors net debt-to-
GDP ratio to continue to decline from 40.3% in 2010 and 39.5% in 2011, but we think the
gross public debt/GDP ratio will rise from 59.9% in 2010 to 61.5% in 2011.
The administration of President Dilma Rousseff is unlikely to put in place
significant economic reforms in the near term, in our view. On the positive side,
there is little political incentive to change the current economic policies significantly in a
market-unfriendly way, given that the recent years achievement of low inflation and high
economic growth in seems to have been the driver of record approval ratings for the
Lula administration and of the election of the governments candidate in the presidential
election in October 2010. There is also little chance that Congress will approve
important measures, despite the government coalitions continued comfortable majority
in the Chamber of Deputies (387 of 513 seats) and the comfortable majority obtained in
the Senate (61 of 81 seats). On the negative side, despite the large number of
measures that could contribute to an improvement in the countrys long-term prospects,
we do not think the government has as yet set an agenda with priority measures to be
sent to Congress for debate.
08 December 2010
Exhibit 86: Real GDP growth
Exhibit 87: Unemployment rate and
real wage bill growth
% growth in value added or demand in real terms %
GDP
Agriculture
Industry
Services
Household consumption
Government consumption
Gross fixed capital formation
Exports
Imports
2009
-0.2
-5.2
-5.5
2.6
4.1
3.7
-9.9
-10.3
-11.4
2010e
7.6
8.6
10.7
5.3
7.6
3.3
23.2
10.0
39.8
2011e
5.0
2.9
5.4
4.3
5.9
2.7
14.5
9.2
27.1
2012e
5.0
4.5
5.5
4.5
5.0
3.0
14.0
10.0
22.0
S
u
p
p
l
y
D
e
m
a
n
d
GDP
Agriculture
Industry
Services
Gross fixed capital formation
Exports
Imports
2009
-0.2
-5.2
-5.5
2.6
4.1
3.7
-9.9
-10.3
-11.4
2010e
7.6
8.6
10.7
5.3
7.6
3.3
23.2
10.0
39.8
2011e
5.0
2.9
5.4
4.3
5.9
2.7
14.5
9.2
27.1
2012e
5.0
4.5
5.5
4.5
5.0
3.0
14.0
10.0
22.0
S
u
p
p
l
y
D
e
m
a
n
d

1.5
4.5
5.6
4.9
4.0
7.5
6.1
7.5
5.9
11.5
9.9
10.0
9.3
8.1
6.8
6.0
5.0
7.9
2004 2005 2006 2007 2008 2009 2010e 2011e 2012e
Real wage bill growth
Unemployment rate
1.5
4.5
5.6
4.9
4.0
7.5
6.1
7.5
5.9
11.5
9.9
10.0
9.3
8.1
6.8
6.0
5.0
7.9
2004 2005 2006 2007 2008 2009 2010e 2011e 2012e
Unemployment rate
Unemployment rate

GDP growth will be slower
in 2011 than it was on
average in 2010 but will
bounce back from the low
seen in Q3 2010. Growth
will continue to be driven by
domestic demand, with
strong growth in both
consumption and
investment. Employment
will continue to expand, and
the wage bill will rise on the
back of increasing
employment and rising real
wages per employee.

Source: IBGE, Credit Suisse Source: IBGE, Credit Suisse

Exhibit 88: IPCA inflation Exhibit 89: IPCA inflation forecasts
%, 12 month accumulated %, 12 month accumulated
5.4
5.2
6.9
7.5
4.9
4.5
4
6
8
10
12
Oct-10 Apr-11 Aug-11 Dec-11
IPCA
Food
Non-food

5.7
5.4
5.5
6.0
5.2
5.8
5.5
5.8
6.2
5.4
5.2
Dec-10 4Q10 1Q11 2Q11 3Q11 4Q11
Median market forecast
Credit Suisse
5.7
5.4
5.5
6.0
5.2
5.8
5.5
5.8
6.2
5.4
5.2
Dec-10 4Q10 1Q11 2Q11 3Q11 4Q11
Median market forecast
Credit Suisse

The increase in IPCA
inflation in Q4 2010 and in
inflation expectations raises
consumer inflation risks for
2011. Inflation will likely
remain above the 4.5%
center of the central banks
target range in 2011 due to
the dynamics of food prices
and those prices that are
adjusted based on past
inflation. Only a sharp
reversal in food inflation
would enable IPCA inflation
to decline towards the
center of the target range in
the next few quarters.

Source: IBGE, Credit Suisse Source: Central Bank of Brazil, Credit Suisse

Exhibit 90: Selic rate priced into the yield curve
%
10.5
Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Dec-12
11.0
11.5
12.0
12.5
13.0
13.5
Credit Suisse
DD-MMM-YY Date of the Copom meeting
275bps
10.75
11.25
11.75
12.25
12.75
13.25
13.50
8-Dec-10
19-Jan-11
2-Mar-11
20-Apr-11
9-Jun-11
20-Jul-11
31-Aug-11
Yield curve
as of 26 November

The increase in actual
inflation and in inflation
expectations in recent
months demands a
monetary policy response in
2011.The central bank will
want to put inflation back on
the target path. We think
the central bank will raise
the Selic rate by 275bps in
2011. Our figure exceeds
the forecast of 200bps that
is embedded in the yield
curve.


08 December 2010
Exhibit 91: Uses and sources in the balance of payments
US$ bn
USES
Current-account balance
Trade balance
Exports
Imports
Services and income
Net interest
Profits and dividends
International travel
Other
Unilateral transfers
Medium- and long-term amortizations
2008
-50.6
-28.2
24.8
197.9
-173.1
-57.3
-7.2
-33.9
-5.2
-11.0
4.2
-22.4
2009
-54.4
-24.3
25.3
153.0
-127.7
-52.9
-9.1
-25.2
-5.6
-13.0
3.3
-30.1
2010e
-84.1
-51.0
17.5
198.8
-181.3
-71.4
-9.5
-31.3
-10.4
-20.3
3.0
-33.2
2011e
-107.1
-73.3
3.5
229.9
-226.4
-80.9
-10.7
-36.0
-12.0
-22.2
4.0
-33.7

SOURCES
2008
50.6
2009
54.4
2010e
84.1
2011e
107.1
Capital account
Foreign direct investments
Portfolio investments
Equities
Fixed income
Medium- and long-term disbursements
Assets of Brazilians abroad
Short-term and other
International reserves
1.1
45.1
6.3
-7.6
13.8
31.6
-23.5
-6.9
193.8
1.1
25.9
46.7
37.1
9.7
35.8
-15.8
7.3
238.5
1.2
35.0
52.2
38.5
13.7
55.4
-49.7
37.3
289.0
1.6
40.0
41.0
26.0
15.0
51.7
-26.2
23.0
313.0
Capital account
Foreign direct investments
Portfolio investments
Equities
Fixed income
Medium- and long-term disbursements
Assets of Brazilians abroad
Short-term and other
International reserves
1.1
45.1
6.3
-7.6
13.8
31.6
-23.5
-6.9
193.8
1.1
25.9
46.7
37.1
9.7
35.8
-15.8
7.3
238.5
1.2
35.0
52.2
38.5
13.7
55.4
-49.7
37.3
289.0
1.6
40.0
41.0
26.0
15.0
51.7
-26.2
23.0
313.0

High growth in domestic
demand will probably cause
imports to grow faster than
exports in 2011, with a
sharp reduction in the trade
surplus. The increase in
outgoing remittances of
profits and dividends should
also contribute to a rise in
the current-account deficit
next year. But we expect
capital inflows to remain
high and think that the BRL
will appreciate against the
dollar to R$1.60/US$ at the
end of 2011.


Exhibit 92: Growth in primary
revenues and expenditures of the
federal government
Exhibit 93: Primary surplus and
public-sector net debt (PSND)
% % of GDP
Revenues (net of transfers
to states and municipalities)
Expenditures
For 2010 and 2011,
we disregarded the
revenues and
expenditures of the
Petrobras
capitalization
2006 2008 2010e 2012e 2011e 2009 2007 2005
22.0
-1.2
17.0
-0.7
7.5
7.0
9.8
7.6
-0.2
10.5
6.8
8.8
9.8
9.3
3.4
9.7
9.5
6.0
6.7
9.0
Change
considering
the Petrobras
transaction
Revenues (net of transfers
to states and municipalities)
Expenditures
For 2010 and 2011,
we disregarded the
revenues and
expenditures of the
Petrobras
capitalization
2006 2008 2010e 2012e 2011e 2009 2007 2005
22.0
-1.2
17.0
-0.7
7.5
7.0
9.8
7.6
-0.2
10.5
6.8
8.8
9.8
9.3
3.4
9.7
9.5
6.0
6.7
9.0
Change
considering
the Petrobras
transaction

05 07 09 11e 13e 15e
3.9
3.2
3.4
2.1
3.1
3.1
2.8
2.7
2.5
2.8
3.2
Primary surplus
Average
PSND
2.8
Our reference scenario
assumes GDP growth near
5.0% p.a., FX rate near
R$1.70/US$, and inflation of
4.0% from 2013 on.
38.4
42.8
40.3
39.5
38.5
37.0
34.0
45.1
47.0
48.2
36.0
06 08 10 12e 14e 05 07 09 11e 13e 15e
3.9
3.2
3.4
2.1
3.1
3.1
2.8
2.7
2.5
2.8
3.2
Primary surplus
Average
PSND
2.8
4.0% from 2013 on.
4.0% from 2013 on.
38.4
42.8
40.3
39.5
38.5
37.0
34.0
45.1
47.0
48.2
36.0
06 08 10 12e 14e

We think the public sector
will meet its primary surplus
target of 3.1% of the GDP in
2011 as a result of a sharp
rise in receipts and a
deceleration in social
security and personnel
expenditures. The main
fiscal risks are the pace of
the increase of the
minimum wage and the
possible use by the
government of accounting
mechanisms (such as those
seen in the Petrobras
capitalization) to meet the
primary surplus target.

Source: Brazilian Treasury, Credit Suisse Source: Central bank, Credit Suisse

Exhibit 94: Breakdown of coalition
parties in the Senate
Exhibit 95: Breakdown of coalition
parties in the Chamber of Deputies
Number of house representatives Number of senators
20
14
6 5
4
4
8
11
6
2
17
8
7
1
4
6
7
16
13
1
2010 2011
PV 1 1
PT
PMDB
PR
PP
PDT
PTB
Other
PSDB
DEM
PPS
PSol
Opposition Governments coalition
20
14
6 5
4
4
8
11
6
2
17
8
7
1
4
6
7
16
13
1
2010 2011
PV 1 1
PT
PMDB
PR
PP
PDT
PTB
Other
PSDB
DEM
PPS
PSol

2010 2011
88
79
41
41
34
28
21
55
53
43
15 79
89
43
41
26
23
21
45
58
56
14
3
15
3
12
PT
PMDB
PR
PP
PSB
PDT
PTB
Other
PSDB
DEM
PV
PPS
PSol

The government has won a
wide majority in Congress in
the 2010 elections. The lack
of a set agenda suggests a
low probability of important
reforms being approved in
2011. Although the change
of administration raises
uncertainty, we think the
risk of significant market-
unfriendly changes being
made to economic policy in
the next few years is low.

Source: Superior Electoral Court, Senate, Credit Suisse Source: Superior Electoral Court, Chamber of Deputies, Credit Suisse

08 December 2010
Brazil: Selected economic indicators
2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 5.7 3.2 4.0 6.1 5.2 -0.2 7.6 5.0 5.0
Nominal GDP ($bn) 663 881 1,089 1,366 1,647 1,581 2,015 2,395 2,550
Population (mn) 182.1 184.2 186.0 188.5 190.9 191.5 193.3 194.9 196.5
GDP per capita ($) 3,642 4,784 5,853 7,075 8,271 8,257 10,427 12,286 12,975
Unemployment (% of labor force, year end) 11.5 9.9 10.0 9.3 7.9 8.1 6.8 6.0 5.0
CPI inflation (% year-on-year change, December over December) 7.6 5.7 3.1 4.5 5.9 4.3 5.8 5.4 4.5
Exchange rate (BRL per USD, end-year) 2.66 2.34 2.14 1.77 2.34 1.74 1.70 1.60 1.80
Exchange rate (BRL per USD, average) 2.93 2.44 2.18 1.95 1.84 1.99 1.76 1.65 1.70
REER (% year-on-year change, December to December)
(1)
5.1 25.8 1.3 14.7 -18.1 37.3 5.2 4.1 -4.9
Nominal wage growth (% year-on-year change, December to December)
(2)
6.1 8.5 7.7 7.7 10.5 7.6 10.3 8.7 8.2
Selic Interest rate (%, end-year) 17.75 18.00 13.25 11.25 13.75 8.75 10.75 13.50 11.00
Fiscal figures
Consolidated government fiscal balance (% of GDP) -2.7 -3.4 -3.5 -2.5 -1.9 -3.3 -2.2 -2.9 -2.5
Consolidated government primary balance (% of GDP) 3.6 3.9 3.2 3.2 3.4 2.1 3.1 3.1 2.8
Consolidated government expenditures (% of GDP)
(3)
35.6 37.5 38.0 37.1 36.9 38.8 39.3 39.4 40.7
Consolidated government debt (% of GDP, end-year)
(4)
56.0 56.4 56.4 58.0 57.9 62.9 59.9 61.5 63.3
(5)
50.6 48.2 47.0 45.1 38.4 42.9 40.3 39.5 38.5
Balance of payments
Exports (goods and non-factor services, % of GDP) 16.5 15.3 14.5 13.9 14.5 11.5 11.4 11.1 12.7
Imports (goods and non-factor services, % of GDP) 12.1 11.1 11.1 11.8 14.0 11.1 12.1 12.4 14.6
Exports (goods and non-factor services, % year-on-year change in $ value) 30.4 23.1 17.1 17.4 23.8 -20.8 27.0 15.1 15.7
Imports (goods and non-factor services, % year-on-year change in $ value) 25.8 22.2 23.1 30.8 39.7 -20.7 39.4 21.4 18.6
Current account balance ($bn) 11.7 14.0 13.6 1.6 -28.2 -24.3 -51.0 -73.3 -91.3
Current account balance (% of GDP) 1.8 1.6 1.3 0.1 -1.8 -1.5 -2.5 -3.1 -3.8
Net FDI inflows ($bn)
(6)
8.3 12.5 -9.4 27.5 24.6 36.0 26.5 26.0 30.0
FDI inflows ($bn)
(7)
18.1 15.1 18.8 34.6 45.1 25.9 35.0 40.0 45.0
(8)
-33.2 -32.8 -44.1 -38.2 -22.4 -30.1 -33.2 -33.7 -32.0
Foreign debt ($bn) 220.2 188.0 199.4 240.5
262.9 277.6 292.5 296.7 290.4
Public ($bn) 114.7 87.6 76.3
70.3 67.4 77.2 82.7 89.3 81.9
Private ($bn)
(9)
105.5 100.4 123.1
170.2 195.6 200.4 209.8 207.4 208.5
Foreign debt (% of GDP) 33.2 21.4 18.3
18.0 16.7 17.6 14.5 12.4 12.1
Foreign debt (% of exports of goods and services) 201.2 139.6 126.4 129.9 114.8 153.0 127.0 111.9 94.7
Central bank gross FX reserves, including forward FX transactions ($bn) 38.5 60.2 98.1 202.6 192.1 238.5 289.0 313.0 326.0
Central bank gross non-gold FX reserves ($bn) 52.5 53.2 85.2 179.4 192.8 237.3 287.8 311.8 324.8
(1) Real effective exchange rate. Deflator: CPIs. Increase indicates appreciation. (2) Average annual growth in nominal wages. (3) Total government expenditures; includes interest payments.
(4) Figures related to the Central Bank's new methodology. (5) Net of international reserves, Worker's Fund (FAT) assets, Central Bank holdings of government securities, social security system
holdings of government securities. (6) Net FDI inflow minus Brazilian investments abroad. (7) Net inflow of foreign-owned companies. (8) Scheduled amortizations for public and private sectors.
(9) Included intercompany loans.
Source: IBGE, IPEA, Central Bank of Brazil, Trade Ministry and Credit Suisse

08 December 2010
Chile: Keeping an eye on inflation
We remain optimistic about Chiles growth prospects for 2011. We project that real
GDP growth will accelerate next year from an already strong performance in 2010. The
worsening in the external accounts should be modest, however, thanks in part to the
benefits from persistent high copper prices. The main macro challenge for the Chilean
authorities will continue to be in assessing correctly inflation risks in order to set the
appropriate pace of interest rate hikes. We project continued monthly rate hikes for most
of 2011. On the political front, the challenge continues to be in translating macro
achievements to the micro level, particularly to low-income households.
We are increasing our real GDP growth forecast for 2011 from 5.2% to 5.8%. For
2010, we are now projecting real GDP growth of 5.3% versus 5.0% previously. The
strong performance of the Chilean economy continues to be associated with the
significant monetary and fiscal stimuli of recent quarters, as well as with the strong
economic growth in many of its top export destinations (for example, China and Brazil
account for 24% and 6% of total exports, respectively). Domestic demand growth has
remained particularly vibrant in 2010 and will probably slow to still high levels in 2011.
We project private consumption will grow 7% in real terms in 2011 (9% in 2010), while
gross fixed investment should grow 12% in 2011, versus 20% in 2010.
Booming imports continue to mask the strength of domestic demand in the GDP
figures. In the first three quarters of 2010, real imports of goods and services grew 30%
year-on-year in real terms, compared to real export growth of just 1.0%. High export
prices (particularly copper) have compensated for the discrepancy in growth rates of
import and export quantities, resulting in a projection of a very modest current account
deficit in 2010 (0.1% of GDP). In the twelve-month period ending in September 2010,
copper exports accounted for 57% of total exports. Though the current account gap will
likely widen in 2011, it will likely do so to a still manageable level of 1.8% of GDP.
The main macroeconomic challenge for Chilean authorities will likely continue to
be in assessing correctly inflation risks. Our central case is that inflation will remain
near the 3.0% target in 2011. Risks on higher inflation readings come mainly from the
quick closing of the output gap, the increasingly tight labour market and from higher
global commodity prices, particularly foodstuffs. For now, the strength of the Chilean
peso seems to be the main factor helping compensate for these risks.
Our base case scenario is that the central bank will continue to tighten monetary
policy during most of 2011. We have lowered slightly our projection of the neutral level
of the monetary policy rate from 5.5% to 5.0% to take into consideration the expectation
of persistently low interest rates in developed economies. In our view, the central bank
should continue to hike the monetary policy rate by 25bps per monthly meeting. At this
pace, the bank would reach the neutral level of 5.0% in July 2011.
We think that the Chilean peso will continue to appreciate against the US dollar,
potentially to a level as strong as 460 pesos per dollar at some point in 2011. We
base our view on the strong local GDP growth, the modest external and fiscal
imbalances and the expectations of a tighter monetary policy stance. At an exchange
rate of 460 pesos per dollar, the risk of an intervention in the currency market by the
central bank would increase substantially, in our view. Our new forecast for the nominal
exchange rate at year-end 2011 is 480 pesos per dollar versus 500 previously.
Finally, surveys show that approval levels of President Piera are below those
that prevailed before the miraculous rescue of thirty-three miners in October.
Pieras popularity appears to have been hit mainly among low income families. In our
view, the main challenge for Chiles political class continues to be in finding ways of
translating a strong set of macro results into more tangible benefits at the micro level.
Income inequality in Chile remains high even for Latin American standards.
Alonso Cervera
+52 55 5283 3845

08 December 2010
Exhibit 96: Monthly real GDP proxy
Exhibit 97: GDP growth and
contribution of demand, net exports
Jan-10 = 100, seasonally adjusted Percentage points
88
90
92
94
96
98
100
102
104
106

(15)
(10)
(5)
-
5
10
15
20
25
3
Q
0
4
3
Q
0
5
3
Q
0
6
3
Q
0
7
3
Q
0
8
3
Q
0
9
3
Q
1
0
Real GDP
Domestic demand
Net exports

The recovery phase that
began in May 2009 was
interrupted only briefly by
the earthquake and tsunami
in late February.
Domestic demand remains
very strong, a fact that has
been masked in the GDP
figures by booming imports.

Source: Central bank, Credit Suisse Source: Central bank, Credit Suisse

Exhibit 98: Employment and wages Exhibit 99: Retail sales by type of good
Employment in millions; nominal wage increases in yoy terms Seasonally adjusted indices in real terms; Oct-09 = 100
6.3
6.5
6.7
6.9
7.1
7.3
Mar-09 Sep-09 Mar-10 Sep-10
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Employment
(lhs)
Wage increases
(rhs)

115
111
137
80
90
100
110
120
130
140
Total
Non durables
Durables

Employment growth has
been running at 8.0% yoy in
2010; this is starting to put
upward pressure on wage
negotiations.
Strength in private
consumption is broad-
based, but it has been
particularly notable in the
case of durable goods.


Exhibit 100: Stock of credit to the
private sector
Exhibit 101: Consumer confidence
and positive views on personal
situation
Billions of Sep-10 pesos Consumer confidence index of the U.de Chile;
7,000
7,500
8,000
8,500
9,000
9,500
Sep-06 Sep-07 Sep-08 Sep-09 Sep-10
50,000
52,000
54,000
56,000
58,000
60,000
62,000
64,000
66,000
68,000
Consumer (lhs)
Total (rhs)

20
40
60
80
100
120
140
Confidence (rhs)
Personal economic situation (lhs)

Some factors supporting
consumption growth are the
recent acceleration in bank
lending to consumers and
the steady increase in
consumer confidence since
early 2009.
Consumers positive views
about their own personal
situation are near multi-year
highs.

Source: Central bank, Credit Suisse Source: Adimark, U. de Chile, Credit Suisse

08 December 2010
Exhibit 102: Consumer price inflation
and the monetary policy rate Exhibit 103: Swaps curve
% %
-4
-2
0
2
4
6
8
10
Nov-06 Nov-07 Nov-08 Nov-09 Nov-10
Annual inflation
Monetary policy rate

0
1
2
3
4
5
6
7
0 2 4 6 8 10
12/31/09
9/30/10
12/7/10

We think that the central
bank should continue to
tighten the monetary policy
rate, bringing it to 5.0% by
the middle of 2011.
In the past quarter, the
swaps curve steepened
somewhat, in tandem with
the experience of many
other fixed income markets.

Source: INE, Central bank, Credit Suisse Source: Credit Suisse

Exhibit 104: Terms of trade and the
real exchange rate
Exhibit 105: Trade balance and
current account
3Q00 = 100; RER increase denotes appreciation % of GDP; twelve month rolling
75
100
125
150
175
200
225
3
Q
0
0
3
Q
0
1
3
Q
0
2
3
Q
0
3
3
Q
0
4
3
Q
0
5
3
Q
0
6
3
Q
0
7
3
Q
0
8
3
Q
0
9
3
Q
1
0
Terms of trade
RER

-5
0
5
10
15
20
3
Q
0
4
3
Q
0
5
3
Q
0
6
3
Q
0
7
3
Q
0
8
3
Q
0
9
3
Q
1
0
Trade balance Current account

The improvement in the
terms of trade has not been
fully reflected in the real
exchange rate.
We project that the current
account will post a small but
growing deficit in 2011 and
2012.


Exhibit 106: FX reserves and
governments external savings
Exhibit 107: Government approval
levels
% of GDP; data as of September 2010 % of Chileans who approve
1.9%
1.9%
5.7%
13.4%
0.0% 5.0% 10.0% 15.0%
Financial
assets (FA)
Pension
fund reserve
Economic
stabilization
fund (FEES)
FX reserves

30
35
40
45
50
55
60
65
M
a
r
-
1
0
A
p
r
-
1
0
M
a
y
-
1
0
J
u
n
-
1
0
J
u
l
-
1
0
A
u
g
-
1
0
S
e
p
-
1
0
O
c
t
-
1
0
N
o
v
-
1
0
... the President
the government
the government's handling of the economy

The governments external
savings position remains
very strong.
The miraculous rescue of
the miners in October was
not enough for the
President to keep a high
approval rating particularly
among low income
households.

Source: DIPRES, Central bank, Credit Suisse Source: Adimark, Credit Suisse

08 December 2010
Chile: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%)
6.0 5.6 4.6 4.6 3.7 -1.5 5.3 5.8 5.0
Growth in real private consumption (%)
7.2 7.4 7.1 7.0 4.6 0.9 9.2 7.0 6.0
Growth in real fixed investment (%)
10.0 23.9 2.3 11.2 18.6 -15.3 20.0 12.0 10.0
Fixed investment (% of GDP)
20.9 24.5 24.0 25.5 29.2 25.1 28.4 30.0 31.5
Nominal GDP ($bn)
95.7 118.3 146.7 164.4 170.5 161.3 190.3 224.4 253.3
Population (mn)
16.1 16.3 16.4 16.6 16.8 16.9 17.1 17.2 17.4
GDP per capita ($)
5,946 7,274 8,928 9,906 10,169 9,531 11,131 13,007 14,553
Unemployment (% of labor force, annual average)
(1)

10.0 9.3 8.0 7.0 7.8 9.6 8.4 7.2 7.0

CPI inflation (%, December over December)
2.4 3.7 2.6 7.8 7.1 -1.4 3.3 3.0 3.0
CPI inflation (% change in average index for the year)
1.1 3.1 3.4 4.4 8.7 1.6 1.5 3.2 3.0
Exchange rate (CLP per USD, end-year)
556 514 514 498 639 507 485 480 500
Exchange rate (CLP per USD, average)
609 559 530 522 524 559 510 470 490
REER (% year-on-year change, annual average)
(2)

4.9 4.1 3.6 -2.4 -2.5 0.5 7.8 4.3 -4.0
Nominal wage growth (% year-on-year change, average)
(3)

2.9 5.0 5.4 7.3 8.5 6.4 4.0 5.0 5.5
Monetary policy reference rate (end-year, %)
2.3 4.5 5.3 6.0 8.3 0.5 3.3 5.0 5.0
Fiscal data

General government fiscal balance (% of GDP)
2.1 4.6 7.7 8.2 4.3 -4.5 0.8 1.3 0.6
Central government primary fiscal balance (% of GDP)
3.1 5.4 8.4 8.8 4.8 -4.0 1.3 1.8 1.0
Central government expenditure (% of GDP)
19.9 19.3 18.1 18.7 21.2 24.9 23.8 23.6 22.1
Gross central government debt (% of GDP, end-year)
(4)

10.7 7.3 5.3 4.1 5.2 6.2 9.0 9.2 8.7
Net central government debt (% of GDP, end-year)
(5)

4.1 -0.1 -6.7 -13.7 -20.5 -11.3 -5.4 -3.7 -3.6

Broad money supply (M2, % of GDP)
45.9 49.1 49.1 53.6 61.2 57.4 57.7 58.4 55.1
Broad money supply (M2, % year-on-year change)
18.7 21.5 17.5 20.5 18.6 -5.3 8.3 10.0 11.0
Domestic credit (% of GDP)
66.9 68.3 67.3 73.8 82.1 87.1 90.6 91.7 85.7
Domestic credit (% year-on-year change)
15.2 16.0 15.8 21.0 15.5 7.2 12.0 10.0 10.0
Domestic credit to the private sector (% of GDP)
62.3 64.3 63.7 69.7 79.3 70.3 69.4 70.2 65.6
Domestic credit to the private sector (% year-on-year change)
13.3 17.3 16.4 20.6 18.4 -10.5 6.2 10.0 10.0
Balance of payments

Exports (goods and nonfactor services, % of GDP)
40.3 40.9 45.3 46.8 45.3 38.6 41.9 40.4 39.3
Imports (goods and nonfactor services, % of GDP)
31.1 32.3 30.2 32.8 40.6 30.6 35.3 34.9 34.6
Exports (goods and nonfactor services, % increase in $ value)
44.2 25.5 37.4 15.7 0.4 -19.4 28.2 13.4 10.0
Imports (goods and nonfactor services, % increase in $ value)
25.8 28.7 16.0 21.7 28.3 -28.8 36.3 16.5 12.0
Current account balance ($bn)
2.1 1.4 7.2 7.5 -2.5 4.2 -0.3 -3.9 -5.5
Current account balance (% of GDP)
2.2 1.2 4.9 4.5 -1.5 2.6 -0.1 -1.8 -2.2
Net FDI Inflows ($bn)
5.6 4.8 5.1 10.0 7.2 4.7 10.0 8.0 7.5
(6)

6.2 9.1 8.2 11.4 14.1 10.6 9.1 11.3 8.8

Foreign debt ($bn)
43.5 46.2 49.5 55.7 64.3 74.0 83.4 88.0 89.0
Public ($bn)
9.8 9.8 11.4 12.8 12.3 13.8 16.0 18.0 18.0
Private ($bn)
33.7 36.4 38.1 43.0 52.0 60.3 67.5 70.0 71.0
Foreign debt (% of GDP, end-year)
45.5 39.1 33.7 33.9 37.7 45.9 43.9 39.2 35.1
Foreign debt (% of exports of goods and services)
113 95 74 72 83 119 105 97 89
Central bank gross FX reserves ($bn)
16.0 17.0 19.4 16.9 23.2 25.4 27.5 29.5 31.5
(1) Adjusted for seasonality. (2) Real effective exchange rate, increase indicates appreciation. (3) General compensation index (includes fringe benefits). (4) Excludes debt of the central bank.
(5) Net of dollar assets deposited in the central bank and abroad through various funds and of debt owed by public sector companies to the government. (6) Scheduled amortizations for public
and private sectors.
Source: Central bank, INE, DIPRES, Credit Suisse

08 December 2010
Colombia: Still high expectations for the fiscal reforms
The Santos government is trying to deliver a medium-term adjustment to the
countrys fiscal finances; thus far, the results are mixed. The government has
obtained the first four out of eight congressional votes required to reform the royalties
regime (which is a constitutional amendment) and, in the coming days, it should obtain
full approval for a bill aimed at closing loopholes in the income and financial transactions
tax regimes. However, there has been little progress on the other proposals the health
reform, the fiscal rule and the fiscal sustainability initiative (another constitutional
amendment). We think that unless the government makes a stronger effort to obtain
political support for these other bills and get them approved in H1 2011, the fiscal reform
will lose momentum and might fall significantly short from expectations. If the reforms
are approved by congress (and assuming that they are not significantly watered down
from their original versions), the next challenge will come from the Constitutional Court,
which in the past has derailed other fiscal adjustment efforts.
We expect that, over the next year or two, the government will implement a tax
reform to raise revenues and reduce the fiscal deficit in the near term. The
proposed fiscal rule seeks a reduction of the central governments deficit from 4.3% of
GDP in 2010 to 1.5% in 2015, with two thirds of this adjustment taking place during the
Santos administration. The government has yet to fully identify how it will implement the
required increase in revenues and reduction of expenditures. Since fiscal spending is
rigid, we expect the Santos government to ultimately go back on its campaign promise to
not raise taxes to deliver the proposed fiscal adjustment.
Real GDP growth should average 4.1% in 2010 and 4.3% in 2011. Real GDP was up
4.3% yoy in H1 2010 but, as the cyclical rebound loses steam, we expect a slightly
weaker expansion in H2. Meanwhile, leading indicators suggest that the economy will
continue growing in the coming quarters. Consumer confidence has risen and
unemployment is declining gradually. Business sentiment has strengthened, partly in
anticipation of a resolution of the trade disputes with Venezuela, which could give an
important boost to the industrial sector. Therefore, consumer spending and fixed
investment which we estimate were up 3.8% and 17% in 2010, respectively should
remain the main drivers of the economic expansion in 2011.
The monetary tightening cycle should start in late Q2 2011. We project that headline
CPI will end 2010 at 2.7%, a significantly low level by Colombian standards. We expect
inflation to continue rising in the months ahead, reflecting for the most part recent
weather shocks that should result in higher prices for fresh food. The normalization of
trade with Venezuela, an important buyer of food from Colombia, may add further
pressure to food prices. The central bank is unlikely to react to the increase in food
inflation in early 2011; however, as the output gap closes (by mid 2011) and there is a
risk of generalized price increases, the central bank should start raising its policy rate.
We expect a 150bps cumulative increase in the policy rate in H2 2011, bringing it to
4.5%. Our projection for headline CPI inflation at the end of 2011 is 3.5%, in the upper
range of the central banks inflation target range of 2%-4%.
The nominal exchange rate has weakened over the past month but we expect it to
resume its appreciating trend in 2011. The measures announced by the government
and the central bank to fight the appreciation of the peso have not been very aggressive.
Thus, in our view, the weaker peso largely reflects the perceived threat that the
government and the central bank adopt a more forceful stance. However, given that FDI
flows are likely to remain large in 2011 and that the government will be unable to
maintain its revenues offshore on a permanent basis, we expect the appreciating trend
to reappear in the coming months. We project a nominal exchange rate of 1,880 pesos
per dollar at the end of 2010, and a strengthening to 1,790 by the end of 2011.

Carola Sandy
+1 212 325 2471

08 December 2010
and retail sales growth Exhibit 109: Urban unemployment rate
-15
-5
5
15
25
35
Oct-04 Apr-06 Oct-07 Apr-09 Oct-10
Consumer confidence index
Retail sales (excluding fuel), % yoy

9
11
13
15
17
19
21
J F M A M J J A S O N D
2007 2008
2009 2010
2000-2006 min/max range

The rebound of consumer
spending reflects an
improvement in consumer
sentiment and a modest
decline in the
unemployment rate.

Source: Fedesarrollo, DANE, Credit Suisse Source: DANE, Credit Suisse

Exhibit 110: Industrial sector sentiment Exhibit 111: Industrial sector
Increase = optimistic
10
20
30
40
50
60
70
80
90
100
Sep-99 May-03 Jan-07 Sep-10
Perception about current
business conditions
Expectations about future
business conditions

-30
-20
-10
0
10
20
30
40
50
Oct-04 Oct-06 Oct-08 Oct-10
Industrial production, % yoy
Industrial exports, % yoy in
dollar terms, 3-month m.a.

Despite the optimism of
industrial producers, the
performance of industrial
output has been rather
disappointing.
The decline in industrial
exports owes to the past
diplomatic and trade
disputes with Venezuela, a
situation that might turn
around in coming months
and bring some relief to
industrial producers

Source: ANDI, Credit Suisse Source: DANE, Credit Suisse

Exhibit 112: Real GDP growth Exhibit 113: CPI Inflation
Contributions to real GDP growth in percentage points % change year on year
-3
-1
1
3
5
7
9
11
13
02 03 04 05 06 07 08 09 10 11
Government spending
Net exports
Investment
Private consumption
GDP growth
F
o
r
e
c
a
s
t

-1
0
1
2
3
4
5
6
7
8
-2
0
2
4
6
8
10
12
14
16
Headline inflation (left axis)
Non-food inflation (left axis)
Food inflation (right axis)

We project that GDP growth
will average 4.1% in 2010,
and that the pace of activity
will increase only modestly
in 2011.
Inflation has remained
remarkably low through
much of 2010, benefiting
from positive supply shocks
that have lowered the
domestic food prices and

Source: DANE, Credit Suisse Source: DANE, Credit Suisse

08 December 2010
Exhibit 114: Tradable and non-
tradable inflation
Exhibit 115: Central bank's reference
interest rate
% change year on year, excluding food and regulated
services
% per annum
-1
0
1
2
3
4
5
6
7
Non-tradable goods and services
Tradable goods and services

-1
1
3
5
7
9
11
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11
Nominal interest rate
Real interest rate*
F
o
r
e
c
a
s
t

from the appreciation of
the peso.
The central bank estimates
that the output gap will
close by the end of H1
2011, which should lead to
the start of the tightening of
monetary policy.

Source: Central bank, Credit Suisse *Adjusted by headline inflation.
Source: Central bank, DANE, Credit Suisse

Exhibit 116: Nominal exchange rate Exhibit 117: FDI inflows
COP per US dollar Gross FDI inflows by sector, $ bn
1,780
1,830
1,880
1,930
1,980
2,030
Apr-10 Jun-10 Aug-10 Oct-10 Dec-10

0
2
4
6
8
10
12
02 03 04 05* 06 07 08 09 10F
Banking
Manufacturing
Mining
Oil
Other
Current account deficit
Projected
total FDI
inflows

The weakening of the
nominal exchange rate over
the past month reflects, in
our view, the concern
among market participants
that the government and the
central bank might adopt
more aggressive measures
to fight the appreciation of
the peso.
With FDI flows likely to
remain large, we expect the
appreciating trend of the
currency to resume in 2011.

Source: Bloomberg, Credit Suisse *2005 includes the sale of Bavaria.

Exhibit 118: Official projections for the
central governments overall deficit
Exhibit 119: Expected adjustment of
fiscal spending and revenues between
2011 and 2014
% of GDP % of GDP
4.3
4.1
2.9
2.8
2.4
1.5
0
1
2
3
4
2010 2011 2012 2013 2014 2015

13.7
15.2
18.0
17.6
12
14
16
18
20
2010 2014 2010 2014
Fiscal revenues
Primary
expenditures

The Santos administration
plans to deliver an
ambitious fiscal adjustment
over the next four years
(with an important part of
the deficit reduction, 0.9
percentage points of GDP,
left to be implemented by
the next government).
However, it has yet to fully
identify how it will achieve
the expected increase in
revenues and reduction in
expenditures during the
2010-2014 period.

Source: Ministry of Finance, Credit Suisse Source: Ministry of Finance, Credit Suisse

08 December 2010
Colombia: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 5.3 4.7 6.7 6.9 2.7 0.8 4.1 4.3 4.4
Nominal GDP ($bn) 117 147 192 208 242.1 233.9 284.7 327.2 362.9
Population (mn) 42.4 42.9 43.4 43.9 44.5 45.0 45.5 46.1 46.1
GDP per capita ($) 2,765 3,417 4,418 4,724 5,447 5,201 6,255 7,099 7,873
Unemployment (% of labour force, end-year) 13.0 12.2 12.8 10.3 10.9 12.3 12.0 11.5 11.5

Exchange rate (COP per USD, end-year) 2,628 2,322 2,361 2,020 2,250 2,043 1,880 1,790 1,800
Exchange rate (COP per USD, average) 2,004 2,005 2,006 2,077 1,968 2,157 1,904 1,795 1,754
(1)
17.8 6.3 0.0 6.9 -2.3 3.7 10.3 6.2 0.7
(2)
8.1 7.6 8.8 5.1 5.6 8.0 2.5 3.5 3.5
Central bank reference rate (end-year, %) 6.5 6.0 7.5 9.5 9.5 3.5 3.0 4.5 4.5
Fiscal data

General government fiscal balance (% of GDP) -1.6 -2.1 -2.4 -1.7 -0.6 -2.9 -3.6 -3.6 -3.3
General government primary fiscal balance (% of GDP) 3.4 1.5 2.1 2.1 3.3 0.5 -0.3 -0.2 0.0
Central government fiscal balance (% of GDP) -5.0 -4.4 -3.7 -3.0 -2.8 -4.4 -4.3 -4.3 -3.9
Consolidated public sector overall balance (% of GDP) -1.2 0.0 -0.7 -0.6 -0.1 -2.7 -3.6 -3.6 -3.1
Gross public sector debt (% of GDP, end-year) 53.2 50.8 47.5 43.7 42.8 45.1 45.5 45.4 45.5
(3)
42.4 38.9 36.0 32.3 31.9 34.8 34.9 34.7 34.9

Domestic credit to the private sector (% year-on-year change) 10.6 15.7 30.9 26.6 17.1 -0.4 12.0 10.0 9.0
Balance of payments

Net balance of factor income ($bn) -4.3 -5.5 -5.9 -8.0 -10.3 -9.5 -11.6 -12.2 -13.0
Net transfers ($bn) 3.7 4.1 4.7 5.2 5.5 4.6 4.5 4.7 5.0
Current account balance ($bn) -0.9 -1.9 -3.0 -6.0 -6.9 -5.0 -6.6 -8.2 -9.4
Current account balance (% of GDP) -0.8 -1.3 -1.6 -2.9 -2.9 -2.2 -2.3 -2.5 -2.6
Net FDI inflows ($bn) 2.9 5.6 5.6 8.1 8.3 4.2 6.0 6.5 6.5
(4)
1.4 2.0 2.0 1.6 1.7 1.2 1.6 1.2 1.2

Foreign debt ($bn) 39.5 38.5 40.1 44.6 46.4 53.6 58.2 61.6 64.1
Public ($bn) 25.8 24.2 26.3 28.8 29.4 37.0 41.1 44.0 46.0
Private ($bn) 13.7 14.3 13.8 15.7 16.9 16.6 17.1 17.6 18.1
Foreign debt (% of exports of goods and services) 203 158 140 130 109 140 129 128 124
(1) Increase indicates appreciation. (2) Wages for manufacturing workers. (3) Non-financial public sector debt net of intergovernmental loans and holdings of public sector bonds by public
sector entities. (4) Scheduled amortizations for public sector.
Source: Central Bank, Ministry of Finance, DANE, Credit Suisse

08 December 2010
Mexico: Get ready for some positive surprises
We project that Mexico will post above-average real GDP growth in 2011. This
reflects our expectations of an acceleration in the US economy and of a gradual
improvement in domestic factors, including the labour and credit markets. We think that
inflation will be lower in 2011 than in 2010, thanks in part to the absence of tax increases
and to our view that the Mexican peso will appreciate from current levels. Our base-case
scenario is that the central bank will leave the overnight rate unchanged at 4.5% in
2011. We see the recent sell-off in yields as an opportunity to put on receiver positions.
The spike in crime that we saw earlier this year, and which we addressed three
months ago in this space, seems to be behind us. This is particularly true in certain
cities like Monterrey. Though crime problems are far from being over, we are
encouraged by the recent arrests of several leaders of various drug cartels, as well as
by the governments initiative to provide more information to the public on these issues.
We think that reforms on the judicial front to help tackle these problems will capture the
spotlight in the remainder of the Calderon administration (2011-2012). At least this is
one area where there is some degree of agreement in Mexicos political class!
We are increasing our real GDP growth forecast for 2011 from 3.2% to 4.0%. This
revision reflects the greater-than-expected dynamism of the economy in recent quarters
as well as our expectations of a gradual acceleration of the US economy in the next four
quarters. Our new growth forecast for 2011 compares to consensus expectations of
3.5%. Even for 2010 we think that the final real GDP growth figure will surprise on the
upside. We now estimate the economy grew at an average rate of 5.3% in real terms in
2010, compared to market expectations of 5.0%. We project positive growth rates in
every quarter in 2011. From a year-on-year standpoint, we estimate that the first half of
2011 will post average growth of 4.4% versus 3.7% in the second half.
We think that Mexicos dependence on the US economy has weakened marginally
in recent quarters. In our view, this has been made possible by the gradual recovery in
domestic credit, particularly in the mortgage and business segments. When thinking
about potential sources of positive surprises on the domestic front, one must think about
the credit channel for various reasons, including: a) the low level of financial
intermediation; b) the solid position of most financial institutions operating in Mexico; c)
the pressure on banks to lower commissions and fees; and, d) the sharp drop in local
yields and flattening of the yield curve in recent years.
Despite this, the main source of downside risk to our Mexico growth forecasts is
weaker US growth. For the record, the US inputs for our Mexico scenario come from
our US economics team. Our colleagues project average US real GDP growth of 2.8% in
2011 (unchanged versus 2010) and average industrial output growth of 3.8% in 2011,
down from an estimated 5.4% in 2010.
We project that annual inflation will be between 3.0% and 4.0% throughout 2011,
averaging 3.6%, down from an estimated average of 4.2% in 2010. According to our
forecasts, the lowest annual inflation prints will materialize in the first quarter of 2011,
with readings as low as 3.0% by March. Our inflation forecasts are slightly more
optimistic than consensus expectations (as per the latest central bank survey) which put
annual inflation in a range between 3.3% and 4.2% in 2011, with an average of 3.9%.
Despite our benign view on inflation, we think that the central bank will keep the
overnight rate unchanged in 2011 at 4.5%. We, and the average analyst in the latest
central bank survey, are sceptical that the bank will be successful in bringing inflation
down to the 3.0% target by the end of 2011, a goal that the bank has re-affirmed as
recently as in the November 2010 monetary policy statement. Our consensus-matching
view is that in the fourth quarter of 2011 annual inflation will be just slightly below 4.0%.
Alonso Cervera
+52 55 5283 3845

08 December 2010
We are optimistic on the prospects for the Mexican peso in 2011. We base our
optimism on the positive economic growth outlook, the countrys modest external
imbalances and our expectations that monetary policy will be unchanged in Mexico and
in the US at least through the end of 2011. We think that these elements will eventually
support a decisive move by the currency below this years so far unbreakable technical
support level of 12.15 pesos per dollar to a new support level of 11.80 pesos per dollar.
Our year-end 2011 exchange rate forecast is 12.00 pesos per dollar.
In this scenario, the foreign exchange commission would probably increase the
amount of dollar put options it sells monthly, in order to try to contain the rally.
This measure, however, would be more symbolic than powerful. Similarly, we would
expect a more dovish language in the central banks monetary policy statementsbut
no actual rate cuts as long as the extent of the rally was in line with our expectations.
The adoption of more radical measures to stem the rally is far less likely.
Mexican yields have sold off sharply since mid-October, largely following the
back-up in US treasury yields. We view this as a buying opportunity. Central bank
data suggests that the sell-off has not been driven by foreign investors, as their holdings
have continued to rise since the sell-off began. Instead, the sell-off seems to have been
driven by some unloading of positions by local investors, mainly pension funds, and by
an overall worsening in liquidity conditions. We think that sentiment towards Mexican
fixed income assets will improve in early 2011 upon the clear drop in annual inflation
prints and potentially a more dovish language from the central bank.
We remain unconcerned about Mexicos fiscal position in the short-run; in the
medium-term, however, we continue to worry about the high dependence on oil-
related revenues. We think that the set of assumptions in the 2011 budget is
reasonable and should allow the government to maintain a narrow fiscal gap as a
percentage of GDP. More importantly, we project that the debt burden will continue to
decline as a percentage of GDP in 2011-2012. With new oil hedges in place for 2011,
we think that one story that could lead to a worsening in sentiment about the countrys
fiscal position would be a sudden drop in oil output. This is not our base case. Daily oil
output averaged 2.58 million barrels per day (mbpd) between January and October
2010, with a low of 2.55 mbpd in June and a high of 2.62 mbpd in January.
While we are slightly less concerned about the crime situation, we will continue to
watch for signs of trouble from this topic on economic data. In particular, we will
continue to watch the behaviour of foreign direct investment (FDI) as well as the direct
investments of Mexicans abroad. In our central scenario we have a small improvement
in the net FDI result from $7.4bn in 2010 to $10.0bn in 2011, driven by a small increase
in inflows and a modest decline in outflows. We are relieved that outflows in the third
quarter ($715mn) were far smaller than the quarterly average between January and
June ($4.0bn).
On the political front, we think that next year will be dominated the gubernatorial
elections in the state of Mexico (July) and by the early talk about potential
candidates for the 2012 presidential elections. The elections in the state of Mexico in
2011 will be particularly important to assess the strength of departing state Governor
Enrique Pea Nieto (from the PRI), who is currently seen as the favourite to win the next
presidential elections. Meanwhile, some cabinet re-shuffle associated to the 2012
elections cannot be ruled out, as there are several cabinet members in the alleged short
list of potential PAN candidates for the presidential elections.
We do not expect any of the three main ratings agencies to take action on
Mexicos long-term foreign currency rating (BBB for Fitch and S&P and BBB+ for
Moodys, all with stable outlook). If the outlook were to change it would be from stable
to positive by either Fitch or S&P (or both). An outright upgrade or downgrade seems
unlikely in 2011.
08 December 2010
Exhibit 120: Real GDP level Exhibit 121 : Real GDP by sector
1Q00=100 seasonally adjusted; dots denote annual averages Sep-05=100; trend series
110
112
114
116
118
120
122
124
126
4
Q
0
6
4
Q
0
7
4
Q
0
8
4
Q
0
9
4
Q
1
0
F
4
Q
1
1
F
+1.5
-6.1
+5.3
+4.0

95
100
105
110
115
Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10
GDP Proxy Primary output
Industrial GDP Services GDP

We think that the Mexican
economy will surprise on
the upside in 2011, relative
to consensus expectations.
The slowdown in the third
quarter was temporary, in
our view; the economy will
likely re-accelerate going
into 2011, in line with the
US.

Source: INEGI, Credit Suisse Source: INEGI, Credit Suisse

Exhibit 122: Commercial bank lending
to the private sector
and jobs registered at IMSS
Oct-07=100; seasonally adjusted in real terms Jobs in millions; seasonally adjusted data
70
80
90
100
110
120
130
140
Total Consumption
Housing Companies

50
60
70
80
90
100
110
120
130
12.8
13.3
13.8
14.3
14.8
Jobs (rhs)
Conf idence f or purchases
of durable goods (lhs)
Consumer
conf idence
(lhs)

Several factors help explain
the gradual recovery of the
domestic economy. They
include the steady recovery
in credit to the private
sector, the strong pace of
job creation and the
increase in consumer
confidence levels.

Source: Central bank, Credit Suisse Source: STPS, INEGI, Credit Suisse

Exhibit 124: Annual consumer price
inflation
Exhibit 125: TIIE swaps curve in
selected dates
% %
0
1
2
3
4
5
6
7
D
e
c
-
0
3
D
e
c
-
0
4
D
e
c
-
0
5
D
e
c
-
0
6
D
e
c
-
0
7
D
e
c
-
0
8
D
e
c
-
0
9
D
e
c
-
1
0
D
e
c
-
1
1
Headline
Core

4.0
5.0
6.0
7.0
8.0
9.0
0 5 10 15
31-Dec-09
30-Jun-10
6-Dec-10

We project that annual
headline inflation will remain
between 3.0% and 4.0% in
2011, after rising to an
estimated 4.4% at the end
of 2010. The lowest inflation
prints in 2011 will likely
materialize in March.
We view the recent sell-off
in local rates as an
opportunity to add receiver
positions across the curve.

Source: Central bank, Credit Suisse Source: Credit Suisse

08 December 2010
Exhibit 126: Foreign holdings of
government securities Exhibit 127: Real exchange rate
Billions of pesos Increase denotes appreciation
200
250
300
350
400
450
500
550
600
1
/
2
/
0
9
2
/
9
/
0
9
3
/
1
9
/
0
9
4
/
2
6
/
0
9
6
/
3
/
0
9
7
/
1
1
/
0
9
8
/
1
8
/
0
9
9
/
2
5
/
0
9
1
1
/
2
/
0
9
1
2
/
1
0
/
0
9
1
/
1
7
/
1
0
2
/
2
4
/
1
0
4
/
3
/
1
0
5
/
1
1
/
1
0
6
/
1
8
/
1
0
7
/
2
6
/
1
0
9
/
2
/
1
0
1
0
/
1
0
/
1
0
1
1
/
1
7
/
1
0

90
110
130
150
170
190
210
230
Avg. 1995-2010

Foreign inflows into the
local market, which have
slowed recently, help
explain the rally in the
Mexican peso.
The real exchange rate does
not seem to be expensive
versus its historical average
since 1995.

Source: Central bank, Credit Suisse Source: Credit Suisse

Exhibit 128: Current account and
trade deficits Exhibit 129: Public sector balance
% of GDP on a twelve-month rolling basis % of GDP
-3
-2
-1
0
3
Q
0
0
3
Q
0
2
3
Q
0
4
3
Q
0
6
3
Q
0
8
3
Q
1
0
Current account
Trade balance

-3
-2
-1
0
1
2
3
4
5
1
9
9
5
1
9
9
7
1
9
9
9
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
F
Primary balance
Overall balance

External and fiscal
imbalances remain modest
by EM and developed
country standards.
This helps make Mexico
look attractive, even if the
growth story is less
appealing than that of other
emerging economies.

Source: Central bank, Credit Suisse Source: Central bank, Ministry of Finance, Credit Suisse

Exhibit 130: Foreign direct investment
in Mexico and of Mexicans abroad
Exhibit 131: Presidents approval
rating vs. perception that the security
problem has worsened in the last year
$bn; twelve-month rolling % of responses
-15
-10
-5
0
5
10
15
20
25
30
3
Q
0
2
3
Q
0
3
3
Q
0
4
3
Q
0
5
3
Q
0
6
3
Q
0
7
3
Q
0
8
3
Q
0
9
3
Q
1
0
Inflows Outflows
Balance

50
54
58
62
66
70
F
e
b
-
0
7
M
a
y
-
0
7
A
u
g
-
0
7
N
o
v
-
0
7
F
e
b
-
0
8
M
a
y
-
0
8
A
u
g
-
0
8
N
o
v
-
0
8
F
e
b
-
0
9
M
a
y
-
0
9
A
u
g
-
0
9
N
o
v
-
0
9
F
e
b
-
1
0
M
a
y
-
1
0
A
u
g
-
1
0
N
o
v
-
1
0
68
70
72
74
76
78
80
82
84 Approval (lhs)
Security has worsened (rhs)

One variable to watch in
2011 is the net FDI balance,
to assess how permanent
was the recent drop in
inflows and the acceleration
in outflows in early 2010.
The presidents approval
rating is poised to rebound in
2011 if our assessment of
the economy is correct and if
perceptions on the security
problem begin to improve.

Source: Central bank Credit Suisse Source: Consulta Mitofsky, Credit Suisse

08 December 2010
Mexico: Selected economic indicators
2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 4.1 3.2 5.2 3.3 1.5 -6.1 5.3 4.0 3.5
Growth in real private consumption (%) 5.6 4.8 5.6 4.0 1.9 -6.1 4.2 4.3 4.0
Nominal GDP ($bn) 760 849 952 1,036 1,096 883 1,038 1,164 1,248
Population (mn) 103 103 105 107 109 111 113 114 116
GDP per capita ($) 7,376 8,204 9,048 9,679 10,070 7,975 9,217 10,167 10,717
Unemployment (% of labour force, end-year) 3.9 3.6 3.6 3.7 4.0 5.5 5.4 5.0 4.5
Exchange rate (MXN per USD, end-year) 11.3 10.8 10.9 10.9 13.5 13.1 12.2 12.0 12.5
Exchange rate (MXN per USD, average) 11.3 10.9 10.9 10.9 11.1 13.5 12.7 12.2 12.3
(1)
1.0 6.3 6.3 -2.1 -13.0 5.4 4.0 -1.7 -4.4
(2)
4.4 4.5 4.3 4.3 4.5 4.5 4.6 4.8 4.8
Central bank's reference rate (%, end-year) 8.60 8.25 7.00 7.50 8.25 4.50 4.50 4.50 5.50
Fiscal data
(3)
-0.2 -0.1 0.1 0.0 -0.1 -2.3 -2.6 -2.7 -2.0
General government primary fiscal balance (% of GDP) 2.2 2.2 2.5 2.1 1.8 -0.1 -0.5 -0.6 0.0
Oil-related revenues (% of total public sector revenues) 36.0 37.3 38.0 35.4 36.9 31.0 33.2 35.0 33.0
(4)
35.0 33.8 33.6 33.7 38.8 40.4 38.6 37.8 37.1
Broad money supply (M2, % year-on-year change in nominal terms) 10.4 15.1 13.6 8.7 16.9 6.1 10.0 8.0 8.0
Domestic credit (% year-on-year change in nominal terms) 2.4 3.9 15.4 11.1 2.4 6.6 12.0 12.0 10.0
Balance of payments
Oil exports (% of GDP) 3.1 3.8 4.1 4.2 4.6 3.5 3.7 3.3 2.8
Net transfers ($ bn) 18.8 22.1 25.9 26.4 25.5 21.5 21.5 23.6 25.9
Current account balance ($bn) -5.2 -4.9 -4.8 -8.7 -16.5 -6.2 0.6 -1.6 -6.2
Current account balance (% of GDP) -0.7 -0.6 -0.5 -0.8 -1.5 -0.7 0.1 -0.1 -0.5
(5)
17.5 18.6 24.7 20.4 34.0 28.0 31.0 30.2 16.0
Foreign debt ($bn) 131 128 117 124 125 163 174 180 184
Public ($bn)
(6)
79 72 55 55 57 96 98 100 102
Private ($bn) 52 57 62 69 68 66 76 80 82
Central bank net non-gold international reserves ($bn) 61.5 68.7 67.7 78.0 85.4 90.8 113.7 128.1 142.5
(1) Real effective exchange rate, increase indicates appreciation. (2) Contractual wage increases at a national level in the public and private sectors (excludes fringe benefits). (3) Narrow
definition that excludes off-balance expenditures. (4) Includes all contingent liabilities associated with IPAB, Pidiregas, FARAC, financial intermediation and other debtor support programs.
(5) Scheduled short- and long-term market and non-market amortizations for public and private sectors. (6) Includes the total stock of Pidiregas debt.
Source: Ministry of Finance, INEGI, Banco de Mexico, Credit Suisse

08 December 2010
Panama: Building on (and under) solid ground
We think Panama will continue to be one of the fastest-growing economies in our
emerging markets coverage universe in 2011. We forecast that Panamas real GDP
will expand 6.5% in 2011, after growing an estimated 6.1% in 2010. As a small open
economy, Panama benefits from increased global trade flows and higher capital inflows
after achieving investment grade status. On the domestic demand side, government
spending should expand as the large underground public transportation project
advances in 2011. A significant increase in capital expenditure by the Panama Canal
Authority will also contribute to growth in 2011 and 2012. We expect fixed investment to
remain strong as well; we project it will reach 24%-25% of GDP in the coming years
compared with 17% in 2005. The price environment should remain relatively stable,
although we note some upside risk to our 2011 inflation forecast (3.5% year on year)
stemming from potentially higher imported food prices.
We project the 2011 fiscal deficit will remain below the limit of 1.5% of GDP set out
in the fiscal responsibility law. We expect the general government deficit to remain
around 0.5% of GDP in 2011, in line with our expectation for 2010 as gains from
economic growth and fiscal reforms balance against some under-execution of ambitious
capital expenditure plans. Fiscal and social security reforms have strengthened
Panamas fiscal framework and we believe the authorities are committed to fiscal
prudence, as outlined in their five-year plan. With President Martinellis rebounding
approval ratings and strong support in the congress, the government should be able to
carry on with its reform agenda.
We expect strong growth and good fiscal performance to continue to benefit the
public sector debt dynamics. We project general government debt to GDP to decline
to 41.5% of GDP in 2011 from 43.2% of GDP in 2010. Panamas near-term fiscal
financing needs remain relatively low. The proceeds from an expected $500mn Samurai
bond placement early next year will probably be used to meet modest external funding
requirements, including a $332mn external debt maturity in February 2011. The
remainder of the medium-term external amortization profile is manageable as well,
which should keep foreign borrowing at low levels between now and 2015. As a result,
we forecast the debt to GDP ratio will fall to 40% in 2012 and are confident that the
government can easily meet is goal of reducing debt to below 40% of GDP ahead of the
2015 deadline set by the fiscal responsibility law.
Although much of Panamas positive credit momentum already appears to be
priced in, we think another sovereign rating upgrade may still be 12-24 months
away. Fitch, Moodys and Standard & Poors each upgraded Panama to investment
grade (Baa3/BBB-) in 2010. We project Panamas credit metrics will continue to improve
in the medium term. Nevertheless, we believe the rating agencies will wait to see further
improvement in the sovereigns government and external debt ratios materialize before
lifting the rating another notch, especially in the context of the significant capital
spending plans. Fitchs positive outlook suggests it could be the first to move when the
time comes. Panamas 5-year CDS already trades inside that of similarly rated Brazil
and Peru and has outperformed higher-rated Mexico since mid-2010.
Panama is one step closer to securing its free trade agreement with the US and
should move up to the OECDs white list in 2011. Panama and the US signed a tax
information exchange agreement in late November, which clears a key obstacle to
presenting the US-Panama free trade agreement to the US Congress for ratification.
The trade pact has already been approved by Panamas legislature. Signing this tax
treaty also keeps Panama on track to enact enough tax information exchange
agreements to move on to the OECDs white list for countries that have met international
standards for tax transparency. We think these developments increase the likelihood
that the US will eventually approve the free trade agreement between the two nations.
Casey Reckman
+1 212 325 5570
casey.reckman@credit-suisse.com

08 December 2010
Exhibit 132: Index of economic activity Exhibit 133: Real GDP growth
1996 = 100 Contribution to real GDP growth, pp; % change
170
180
190
200
210
220
Sep-07 Sep-08 Sep-09 Sep-10
Index of Economic Activity
Trend

6.7
6.5
6.1
3.2
10.1
12.1
-2.5
0
2.5
5
7.5
10
12.5
2007 2008 2009 2010 2011 2012
Net Exports
Government Spending
Investment
Private Consumption
GDP Growth
CS forecast

The trend in the index of
economic activity suggests
Panamas economy is
returning to a higher growth
trajectory.
We expect strong and
relatively balanced real
GDP growth over the
forecast horizon.

Source: Comptrollers Office, Credit Suisse Source: Comptrollers Office, Credit Suisse

Exhibit 134: Container flows in
Panamanian ports
Exhibit 135: Panama canal toll
revenues
Thousands of containers per month; three-month moving
average
$mn; three-month moving average
250
300
350
400
450
500
550

80
90
100
110
120
130
140
150

The recovery in trade flows
also supports our optimism
regarding the countrys
economic growth.
Container volumes, as well
as price increases
associated with funding the
canals expansion, underpin
higher toll revenues.

Source: Comptrollers Office, Credit Suisse Source: Panama Canal Authority, Credit Suisse

Exhibit 136: Consumer price inflation
Exhibit 137: President Ricardo
Martinellis approval rating
%, year-on-year % of respondents indicating a positive opinion
0
2
4
6
8
10
12
14
16
18
20
Headline
Food & Beverages

50
55
60
65
70
75
80
85
90
95
100
Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10

Higher food prices could
pressure headline inflation
as food comprises 32% of
the CPI basket, but we do
not foresee a return to 2008
price levels.
President Martinellis
popularity has recovered
from July, when it fell in
connection with the clashes
between demonstrators and
police in Bocas del Toro.

Source: Comptrollers Office, Credit Suisse Source: Dichter & Neira, Credit Suisse

08 December 2010
Exhibit 138: Interest rates
Exhibit 139: Deposits and loans in the
banking system
% $bn
-8
-6
-4
-2
0
2
4
6
8
10
Deposit rate
Lending rate
Real deposit rate

16
18
20
22
24
26
28
30
Aug-07 Aug-08 Aug-09 Aug-10
Deposits Loans

Higher inflation caused real
rates to return to negative
territory in recent months,
but this did not slow deposit
growth in 2007 and 2008.
Loan growth resumed in
2010, another sign of
confidence in the recovery.

Source: Banking Superintendence, Credit Suisse Source: Banking Superintendence, Credit Suisse

Exhibit 140: Fiscal accounts
Exhibit 141: Public sectors external
debt amortization profile
% of GDP $bn
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2007 2009 2011 2010
Interests
Primary balance
Overall balance
C
S

F
o
r
e
c
a
s
t

0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2010 2011 2012 2013 2014 2015
External Internal

Economic growth and fiscal
reforms support revenues
as large public works
projects require increased
capital expenditure.
Global bonds come due in
2011 and 2012, but each
represents less than 2% of
GDP.

Source: Comptrollers Office, Ministry of Economy and Finance,
Credit Suisse
Source: Ministry of Economy and Finance, Credit Suisse

Exhibit 142: Composition of public-
sector external debt
Exhibit 143: Public-sector external
bond debt by maturity
$bn $mn
Commercial
$0.2bn
Multilateral
$1.6bn
Bilateral
$0.2bn
Global
Bonds
$8.1bn

2029
$951
2027
$975
2026
$980
Other
$908
2020
$1000
2015
$1471
2036
$1785

Global bonds comprise
more than 75% of public-
sector external debt.
Meanwhile, much of
Panamas external bond
debt matures at least ten
years from now.

Source: Ministry of Economy and Finance, Credit Suisse Source: Ministry of Economy and Finance, Credit Suisse

08 December 2010
Panama: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 7.5 7.2 8.5 12.1 10.1 3.2 6.1 6.5 6.7
Growth in real private consumption (%) 4.3 8.8 4.4 0.9 -2.1 -0.2 3.5 4.5 4.7
Nominal GDP ($bn) 14.2 15.5 17.1 19.5 23.0 24.1 26.4 29.2 31.2
Population (mn) 3.2 3.2 3.3 3.3 3.4 3.5 3.5 3.6 3.7
GDP per capita ($) 4,459 4,788 5,209 5,834 6,759 6,950 7,495 8,137 8,530
Unemployment (% of labor force, annual average) 12.4 10.2 9.1 7.3 6.4 6.6 6.2 6.0 6.0
Exchange rate (CLP per USD, end-year) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Exchange rate (CLP per USD, average) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
REER (% year-on-year change, annual average)
(1)
-2.2 6.6 -4.6 -2.0 3.2 -5.0 2.0 2.7 2.2
Nominal wage growth (% year-on-year change, average) 1.2 1.2 5.0 7.9 7.3 0.3 -1.4 1.8 3.1
Monetary policy reference rate (end-year, %) 2.1 2.7 4.1 4.2 2.9 2.5 3.5 3.7 4.0
Fiscal data
General government fiscal balance (% of GDP) -4.9 -2.5 0.5 3.5 0.4 -1.0 -0.5 -0.5 -0.6
General government primary fiscal balance (% of GDP) -0.6 2.0 4.9 7.0 3.6 1.9 2.4 1.9 1.9
Gross general government debt (% of GDP, end-year) 70.4 66.2 61.0 53.7 45.4 45.6 43.2 41.5 40.0
(2)
79.2 78.9 87.2 90.0 86.0 90.6 88.8 89.2 89.9
(2)
8.3 8.7 22.5 17.3 12.8 10.3 7.7 11.0 7.5
Domestic credit (% year-on-year change) 12.6 6.6 6.3 29.7 13.4 -0.1 14.5 8.5 7.5
Balance of payments
Exports (goods and nonfactor services, % increase in $ value) 16.6 19.5 17.6 14.6 13.0 1.2 0.7 10.5 11.0
(3)
0.6 1.0 2.1 0.2 0.9 0.2 0.2 0.5 0.4
Foreign debt ($bn) 7.2 7.6 7.8 8.3 8.5 10.2 10.2 10.2 10.3
(1) Real effective exchange rate, increase indicates appreciation. (2) Estimated by the Central American Monetary Council (cash holdings are assumed to be zero). (3) Scheduled amortizations
for the non-financial public sector.
Source: Banking Superintendence, the BLOOMBERG PROFESSIONAL service, Comptroller's Office, Ministry of Economy and Finance, Panama Canal Authority, Credit Suisse

08 December 2010
Peru: Likely to emerge unscathed by politics
The April 2011 presidential elections are unlikely to be a source of economic or
financial volatility. The most recent opinion polls show center-right politicians Luis
Castaeda, Keiko Fujimori and former President Alejandro Toledo as the leading
contenders, which lowers the risk of significant changes to the current economic
framework. In our view, populist politician Ollanta Humala has been unable to garner
voter support because the currently buoyant economic environment has made
Peruvians more likely to support politicians who would maintain the status quo.
Real GDP growth should decelerate to 6.5% in 2011 from an estimated 8.6% in
2010. Our projection for a lower pace of growth reflects tighter monetary and fiscal
policies, as well as the slowdown of the cyclical rebound observed in past quarters.
Domestic demand should continue driving the economy. We expect consumer spending
to grow 5.5% in 2011 (on the back of improving consumer sentiment and rising
employment) while fixed investment should expand nearly 16%.
We expect the government to outperform the 2010 and 2011 deficit targets. Tax
collection up 24% yoy during January-October has benefited from strong economic
activity and rising export revenues. Thus, despite the sizable growth of primary spending
in past quarters, the 2010 overall fiscal deficit should come in well below the 1.5% of
GDP deficit target. The 2011 budget law will introduce restraints on the spending front,
making it likely that the government will again outperform the 2011 deficit target of 1% of
GDP. Meanwhile, the proposed creation of a sovereign wealth fund, possibly in H1 2011
likely tapping the existing fiscal stabilization fund, which amounts to about $2.5bn
should further strengthen investor sentiment.
Inflation has remained subdued despite the strength of the economic recovery.
We expect headline CPI inflation to end 2010 at 2.2% yoy, rising only gradually in the
months ahead. We believe that the tightening of monetary policy that started in May
2010 has successfully prevented inflationary pressures from building up. The central
bank has paused during the past two monthly monetary meetings but we anticipate one
more 25bp hike this year, bringing the policy rate to 3.25%. We expect the central bank
to remain in the sidelines in Q1 and to resume the tightening cycle in Q2, raising the
policy rate by an additional 100bps before end-2011. The main risk to our end-2011
inflation forecast, 2.6% yoy, is a potential sizable increase in global prices for food and
fuel, of which Peru is a net importer.
The central bank will likely continue to intervene in the FX market to prevent sharp
movements of the nominal exchange rate. The central bank has bought an
unprecedented $9bn in the FX market in 2010 to prevent a significant appreciation of the
Sol; in addition, it has implemented quasi-capital controls, aimed at discouraging
portfolio inflows. With the financial system still highly dollarized, we expect the central
bank to maintain its aggressive stance regarding the currency in 2011. Should net dollar
inflows be large, the central bank will again buy dollars to prevent a sharp appreciation
of the Sol. Conversely, if the Sol were to come under pressure, we would expect the
central bank to sell dollars in an equally aggressive manner. We project a nominal
exchange rate of 2.8 Soles per dollar at the end 2010; given our sanguine outlook of the
economy and our view that the electoral process will not disrupt the economy, we expect
the nominal exchange rate to strengthen to 2.7 Soles per dollar by the end of 2011.
We project that the current account deficit will improve to 0.8% of GDP in 2011
from an estimated 2.4% of GDP in 2010. Credit Suisses view is that mineral prices will
increase in 2011 relative to the levels observed in 2010, which should further improve
Perus terms of trade. We expect the dollar value of Perus commodity exports (mainly
copper, gold and zinc) to increase 26% in 2011, thus, despite the likely sizable growth of
imports (in tandem with domestic demand), we should observe an improvement in the
merchandise trade balance to $8.7bn in 2011 from an estimated $6bn in 2010. Such
improvement would offset the expected widening of the services trade deficit and the
deterioration of the investment income balance.
Carola Sandy
+1 212 325 2471

08 December 2010
Exhibit 144: Real GDP growth Exhibit 145: Economic activity indicators
-2
0
2
4
6
8
10
12
3Q06 3Q07 3Q08 3Q09 3Q10
% quarter-on-
quarter, s.a.
% year-on-year

-50
-30
-10
10
30
50
70
90
110
Cement sales
Industrial production*
Imports**
Imports of capital goods**

Recent economic indicators
suggest that economic
activity remained strong in
Q4, supportive of our view
that real GDP growth will
average 8.6% in 2010.

Source: Central bank, Credit Suisse *Non-commodity manufacturing output sub-index of the monthly
GDP proxy. **Growth in dollar terms.
Source: ASOCEM, INEI, SUNAT, Credit Suisse

Exhibit 146: Business sentiment
and employment growth
Business' perceptions about the economy, employment,
and purchase orders

20
30
40
50
60
70
O
c
t
-
0
8
J
a
n
-
0
9
A
p
r
-
0
9
J
u
l
-
0
9
O
c
t
-
0
9
J
a
n
-
1
0
A
p
r
-
1
0
J
u
l
-
1
0
O
c
t
-
1
0
Optimism about the
economy
Increase # of workers
in next 3 months
Purchase orders

35
40
45
50
55
60
-1
0
1
2
3
4
5
6
7
8
9
10
Index of consumer
confidence, left axis
Employment growth,
right axis

The strength of business
and consumer confidence
bodes well for the
performance of private
investment and consumer
spending in the coming
quarters.

Source: Central bank, Credit Suisse Source: Apoyo consulting, Central bank, Credit Suisse

Exhibit 148: Real GDP growth Exhibit 149: CPI inflation
Contributions to real GDP growth in percentage points % change yoy
-6
-4
-2
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08 09 10 11
Government spending
Private consumption
Investment
Net exports
GDP
F
o
r
e
c
a
s
t

-1
1
3
5
7
9
11
F
e
b
-
0
8
M
a
y
-
0
8
A
u
g
-
0
8
N
o
v
-
0
8
F
e
b
-
0
9
M
a
y
-
0
9
A
u
g
-
0
9
N
o
v
-
0
9
F
e
b
-
1
0
M
a
y
-
1
0
A
u
g
-
1
0
N
o
v
-
1
0
Headline
inflation
Food
inflation
Non-food
inflation

Inflation has remained
subdued despite the
strength of economic
growth.
The main risk to inflation in
the months ahead is a
potential sizable increase in
food or fuel prices; our
base-case scenario is that
such prices increases are
unlikely to materialize.

Source: Central bank, Credit Suisse Source: INEI, Credit Suisse

08 December 2010
Exhibit 150: Central bank's reference
interest rate
Exhibit 151: Nominal exchange rate and
central bank's monthly FX intervention
% per annum (Data through 1 December 2010)
0
1
2
3
4
5
6
7
F
-
0
7
J
-
0
7
O
-
0
7
F
-
0
8
J
-
0
8
O
-
0
8
F
-
0
9
J
-
0
9
O
-
0
9
F
-
1
0
J
-
1
0
O
-
1
0
F
-
1
1
J
-
1
1
O
-
1
1
F
o
r
e
c
a
s
t

-4
-3
-2
-1
0
1
2
3
4
Dec-07 Dec-08 Dec-09 Dec-10
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
Net purchases of
dollars ($ bn, lef t axis)
Soles per dollar (right
axis)

We expect the central bank
to deliver one more 25bp
hike this year and to stay in
the sidelines in Q1 2011,
resuming the monetary
tightening cycle in mid- to
late-Q2.
The central bank should
remain an aggressive
participant in the FX market
to prevent sharp moves in
the nominal exchange rate.


Exhibit 152: Voters views about the
economic framework that the next
government should follow
Exhibit 153: Voter support for
potential presidential candidates in
2011
% of voters % of voters
8%
13%
44%
49%
42%
31%
0% 20% 40% 60% 80% 100%
Apr-2010
Sep-2010
Continue with the current economic model
Enact moderate changes
Enact radical changes
No preference

0
5
10
15
20
25
J
a
n
-
0
8
A
p
r
-
0
9
A
u
g
-
0
9
N
o
v
-
0
9
F
e
b
-
1
0
M
a
y
-
1
0
A
u
g
-
1
0
N
o
v
-
1
0
Ollanta Humala
Keiko Fujimori
Luis Castaeda
Alejandro Toledo

Polls show that voters do
not want significant
changes to the countrys
economic framework and,
thus, the leading
contenders are center-right
politicians.

Source: Ipsos-Apoyo, Credit Suisse Source: Ipsos-Apoyo, Credit Suisse

Exhibit 154: Terms of trade Exhibit 155: Current account balance
1999 = 100 $bn
70
80
90
100
110
120
130
140
150
160

-19
-14
-9
-4
1
6
11
16
01 02 03 04 05 06 07 08 09 10 11
Transfers
Trade balance
Services
Investment income
F
o
r
e
c
a
s
t

We project a further
improvement in the terms of
trade, which should result in
a narrowing of the current
account deficit in 2011.


08 December 2010
Peru: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

Real GDP growth (%)
5.0 6.8 7.7 8.9 9.8 0.9 8.6 6.5 6.0
3.6 4.6 6.4 8.3 8.7 2.4 5.9 5.5 5.5
7.7 12.0 18.9 22.6 28.3 -8.6 23.2 15.8 14.8
17.8 18.6 20.6 23.2 27.1 24.5 27.8 30.3 32.7
Nominal GDP ($bn)
70.0 79.0 92.0 107.0 127.4 126.7 152.0 172.0 191.0
Population (mn)
27.0 27.2 27.5 27.7 28.0 28.3 28.6 28.9 28.9
GDP per capita ($)
2,585 2,916 3,359 3,861 4,547 4,479 5,315 5,964 6,623
Unemployment (% of labour force, end-year)
8.8 7.6 7.4 7.5 7.8 7.9 7.3 7.0 7.0

3.5 1.5 1.1 3.9 6.7 0.2 2.2 2.6 2.8
3.7 1.6 2.0 1.8 5.8 3.0 1.5 2.3 2.7
Exchange rate (PEN per USD, end-year)
3.28 3.43 3.20 3.00 3.14 2.88 2.80 2.70 2.73
Exchange rate (PEN per USD, average)
3.41 3.30 3.27 3.13 2.92 3.01 2.83 2.75 2.72
(1)

5.8 -6.6 2.3 1.7 4.8 6.4 5.3 3.8 -0.9
(2)

0.0 0.0 8.7 6.0 3.8 0.0 0.0 2.0 2.0
Central bank reference rate (end-year, %)

2.20 3.25 4.50 5.00 6.50 1.25 3.25 4.25 4.25
Fiscal data

-1.1 -0.5 1.8 3.1 2.1 -2.1 -0.9 -0.8 -0.5
General government primary fiscal balance (% of GDP)
0.9 1.4 3.7 4.8 3.7 -0.8 0.2 0.4 0.6
General government expenditure (% of GDP)
18.7 18.9 18.2 17.7 18.8 20.9 21.3 21.0 20.7
Gross public sector debt (% of GDP, end-year)
44.4 37.8 33.0 29.7 24.0 26.7 23.0 21.1 21.3
Net public sector debt (% of GDP, end-year)
(3)

42.1 35.6 31.2 28.4 23.0 25.3 22.0 20.0 20.2

9.1 10.9 11.1 13.4 15.2 17.1 18.2 18.9 19.3
32.5 32.2 17.9 33.6 26.5 15.0 20.2 14.0 12.0
14.4 15.7 13.7 13.6 16.9 18.0 17.8 17.8 17.6
-6.0 20.0 0.9 9.6 38.0 9.6 11.8 10.0 8.0
20.0 21.2 19.9 23.0 27.4 28.0 28.0 28.5 28.6
0.6 17.1 8.1 28.0 32.7 4.7 13.0 12.0 10.0
Balance of payments

21.2 24.8 28.7 29.0 27.6 24.1 25.4 27.3 25.4
18.0 19.2 19.8 22.3 26.7 20.3 22.4 23.2 23.2
37.0 32.8 34.8 17.2 13.4 -13.2 26.6 21.5 3.7
15.8 21.4 20.0 31.2 42.2 -24.3 32.3 17.0 11.3
Net balance of factor income ($bn)
-3.7 -5.1 -7.6 -8.4 -8.8 -7.4 -10.0 -11.1 -11.1
Net transfers ($ bn)
1.4 1.8 2.2 2.6 2.9 2.9 3.0 3.2 3.2
0.0 1.1 2.9 1.4 -4.7 0.2 -2.4 -0.8 -3.6
0.0 1.4 3.1 1.3 -3.7 0.2 -1.6 -0.5 -1.9
1.6 2.6 3.5 5.4 6.2 4.4 6.1 6.5 6.2
(4)

1.3 2.8 1.1 3.3 2.6 1.4 0.8 0.9 1.3

Foreign debt ($bn)
31.1 28.7 28.7 33.1 34.6 35.6 39.4 41.0 41.4
Public ($bn)
24.5 22.3 22.0 21.0 20.0 20.7 20.6 21.7 21.7
Private ($bn)
6.6 6.4 6.6 12.1 14.6 14.9 18.8 19.2 19.6
44.7 36.1 31.1 30.9 27.1 28.1 25.9 23.8 21.6
210 146 108 107 98 117 102 87 85
12.6 14.1 17.3 27.7 31.2 33.1 44.1 48.6 49.1
(1) Real effective exchange rate, increase indicates appreciation. (2) Minimum wage. (3) Public sector debt net of intergovernmental loans. (4) Scheduled amortizations for public sector only.
Source: Central bank, INEI, Ministry of Finance, Credit Suisse

08 December 2010
Venezuela: Positioning for 2012
We think 2011 will be a year in which President Chavez lays the groundwork for
mounting an aggressive presidential campaign in 2012. The government has
accelerated its socialist agenda recently, embarking on a nationalization spree and
pushing legislation to make it easier for the government to control oil sector companies,
banks and property. These moves are not necessarily popular, even though they only
directly affect some interest groups. We interpret this strategy as an effort by President
Chavez to reassert his authority following the electoral setback in September. We also
think Chavez could be aiming to frontload the political costs of radicalization well before
the next electoral season begins in earnest.
Venezuelas political landscape seems more polarized than before, but we think
President Chavez retains the upper hand. It is difficult to predict how the 2012
presidential election will play out, as the electorate was fairly evenly split into pro- and
anti-Chavez camps in Septembers legislative elections. In our view, an opposition
victory appears more probable than in the past. However, we think Chavez has an
advantage as the opposition faces greater institutional and organizational challenges,
including conducting primaries and remaining united behind a single candidate. Key
factors for assessing the potential outcome for 2012 will be the extent to which President
Chavezs more radical policy stance costs him politically, the timing and effectiveness of
the fiscal impulse, and the strength and savvy of the opposition and its candidate(s).
We believe a currency devaluation will occur in 2011. The government and the
central bank are committed to sustaining the current multiple exchange rate framework
for the time being, but demand for foreign exchange is likely to grow as the economy
recovers. Moreover, as it looks towards 2012, the government may be less willing to
tolerate the negative toll that insufficient access to foreign exchange takes on economic
activity and its popular support. Our base case expectation is that the government will
continue to address demand for FX with a combination of devaluation and new debt
issuance. The government seems unconcerned about the impact on inflation of a
devaluation and would certainly welcome the associated fiscal benefits.
In our view, a combined explicit and implicit devaluation strategy would be the
most rational for the government. The local consensus envisions at least a 15%
devaluation, but remains uncertain about how transparent the move will be. We expect
the government to deliver an announced modification to one or more of the exchange
rates used in CADIVI and SITME in early 2011. This way the government would absorb
the political costs associated with devaluation long before the 2012 presidential
campaign and would boost the fiscal accounts over a longer portion of the year. The
authorities then retain the option to implicitly adjust the average exchange rate upwards
by directing more flows through SITME and away from CADIVI if further modifications
were desired closer to 2012. Our forecasts capture this with a 20% devaluation of the
official CADIVI exchange rate for non-essential goods imports, to 5.16 bolivares per
dollar from 4.3 bolivares per dollar.
Public sector indebtedness is likely to continue increasing over our forecast
horizon; next up is a near-term re-tap of PDVSAs new 2017 bond for up to $3bn.
PDVSA would probably use $2bn of the funds raised to repay a loan made by the
national treasury via the central bank. If the placement occurs, we expect the transaction
to be similar to the August reopening of the PD14s to repay part of the same loan from
the national treasury. We think the central bank would prefer to receive dollar bonds that
it can use to manage the supply of dollar assets in the central bank-administered SITME
FX market rather than cash. We project public debt, including general government and
PDVSA, to rise to $93.7bn (42% of GDP) in 2011 from $81.8bn (39% of GDP) in 2010.
Casey Reckman
+1 212 325 5570

08 December 2010
We remain comfortable with the public sectors capacity and willingness to
continue to honor its debt commitments in the foreseeable future. Venezuelas
external amortization profile is manageable and the net dollar asset position is solid. The
sum of the central banks international reserves and the public sectors other liquid
assets was $47bn in September 2010, compared to $34bn in external bond debt.
Nevertheless, we will continue to monitor Venezuelas debt dynamics. We also note
downside risks to the public sector asset position associated with a growing
nationalization bill as well as arbitration cases between PDVSA and two U.S. oil
companies. The decisions in these cases could come as early as 1H10, and could
potentially cost PDVSA up to $7bn in one case and several billion more in the other.
We forecast a general government deficit of 2.7% of GDP in 2011 as the
government looks to accumulate resources ahead of the 2012 campaign. This
compares to a projected 3.0% of GDP fiscal deficit in 2010 and is similar to 2007 and
2008 deficit levels. The budget bill does not typically offer a clear picture for the fiscal
year as the government usually underestimates oil revenues in the budget and then
allocates expenditures on a discretionary basis later in the year. We estimate that the
Venezuelan oil mix will average $76.5 per barrel next year (assuming it trades 10%
cheaper to the price of WTI oil), compared to $40 per barrel in the 2011 budget. In terms
of GDP, our projections call for revenues to increase by less than 1% in 2011 while
expenditures remain relatively flat. We then expect to see a very strong and direct fiscal
impulse in conjunction with the 2012 presidential campaign, hence our forecasts for a
6.7% of GDP fiscal deficit and 3.0% real GDP growth that year.
We recently revised our 2011 real growth projection down to 1.5% from 2.0%. This
is one of the worst projected GDP performances among all emerging markets countries
we cover. Our forecast incorporates strengthening domestic demand from a depressed
statistical base. However, we now foresee more modest public spending next year than
previously anticipated. From the supply side, lower production of crude and refined
products, as well as increased domestic consumption, are likely to continue to hamper
oil sector performance in 2011. Venezuelas production levels could rise in the medium
term thanks to the Orinoco field developments, but we do not anticipate any significant
improvement before 2013. Additionally, Venezuelas unfavourable business and
investment climate, high inflation, as well as FX supply issues continue to weigh on
growth prospects. We also caution that future electricity rationing cannot be ruled out
until new investments in generation and distribution are completed.
Inflation should remain elevated, while potential devaluation and recent adverse
weather conditions could generate additional upward pressure on prices. The
central bank has suggested that Venezuela could achieve single-digit inflation within
three years, but we think shortages driven by limited access to FX, electricity supply
constraints and other structural factors will prevent the CPI from falling rapidly. The food
and non-alcoholic beverages component makes up about a quarter of the Caracas
basket. Thus, recent hikes to administered price ceilings on staple foodstuffs may
reduce shortages, but probably at the cost of higher food inflation in the near term. We
expect headline Caracas CPI inflation to be 27.7% year on year in 2011, compared to
28.6% in 2010 and still highest in our emerging markets coverage universe.
We think the risk of near-term downward revisions to Venezuelas sovereign
ratings remains low, as reflected by their stable outlook. Moodys currently assigns
Venezuela a long-term foreign currency rating of B2. Fitch rates the sovereign one notch
higher at B+. S&Ps BB- rating is the highest, and in our view, could be the first to come
under pressure if Venezuelas capacity and/or willingness to pay deteriorates. However,
the current ratings appear to balance the risks associated with the sovereigns volatile
macroeconomic performance, complicated institutional environment and its fiscal and
external accounts for the time being.
08 December 2010
Exhibit 156: Demand side real GDP Exhibit 157: Headline and food CPI
Contribution to real GDP growth: pp; % change Year-on-year % change; Caracas index
3.0
1.5
-1.5
-3.3 4.8
-12
-8
-4
0
4
8
12
16
2008 2009 2010 2011 2012
Net exports
Investment
Private consumption
Public Spending
GDP Growth
CS Forecast

10
20
30
40
50
60
Headline inflation Food inflation

Stronger domestic demand
relative to a low statistical
base should support a
return to low real GDP
growth in 2011.
Structural factors should
keep headline consumer
price inflation between 25%
and 30%; a potential
devaluation and supply
shocks associated with
recent adverse weather
conditions could generate
additional upward pressure
on prices.


Exhibit 158: Real GDP growth by sector Exhibit 159: Oil exports and prices
-12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
Real GDP
Oil
Non-Oil

2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
0
20
40
60
80
100
120
140 Oil Production (mn barrels/day, lhs)
Venezuelan Basket ($/barrel, rhs)

The oil sectors
performance has lagged,
even as oil prices have
recovered from 2008 levels.
We expect Venezuelas
production to rise in the
medium term due to
Orinoco field developments,
but we do not anticipate any
significant improvement
before 2013 at the earliest.

Source: Central bank, Credit Suisse Source: The BLOOMBERG PROGESSIONAL service, EIA, Credit
Suisse

Exhibit 160: Dollar sales at the official
exchange rates by CADIVI
Exhibit 161: Securities trading in
SITME
$mn, daily average $mn
20
40
60
80
100
120
140
160
180
200
Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10

0
10
20
30
40
50
60
70
80
1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec
Daily vol.
30-day lagging average

Third quarter data show
increased dollar sales in
CADIVI and higher average
volumes of dollar bonds
traded per day in SITME.
We think the government
will rely on devaluation and
new debt issuance to
sustain its multiple
exchange rate framework
through the 2012
presidential election.

Source: CADIVI, Credit Suisse Source: Central bank, Credit Suisse

08 December 2010
Exhibit 162: General government balance Exhibit 163: Annual public expenditure
% of GDP Six month lagging average, % change year-on-year; dotted
lines denote voting dates
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
2008 2009 2010 2011 2012
Interest Payments
Primary Fiscal Balance
Overall Fiscal Balance
CS Forecast

0
10
20
30
40
50
60
70
80
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Total Expenditure
Current Expenditure
R
L**
P
R
R
L

We expect that the
governments 2011 fiscal
strategy will aim to control
public spending and
accumulate resources
which it will then deploy
during the 2012 presidential
election campaign.
Election-related spending in
Venezuela is mainly via
direct transfers, which can
be undone quickly.

Source: Ministry of Finance, Credit Suisse *R=Referendum; L=Legislative Election; P=Presidential Election
**The opposition abstained from the 2005 legislative elections

Exhibit 164: Voting and participation
trends in recent elections
Exhibit 165: Public sector debt
amortizations
% $bn
30
35
40
45
50
55
60
65
70
75
80
Aug-2004 Dec-2006 Dec-2007 Sep-2010
Participation (% of
registered voters)
Anti-Chavez (% of
actual votes)
Pro-Chavez (% of
actual votes)

0
1
2
3
4
5
6
7
8
9
2011 2013 2015 2017 2019 2021+
PDVSA
External -Sovereign
Domestic -Sovereign

The most recent voter
participation rate, a
comparatively high absolute
vote tally and a narrow
margin of victory point to
greater political polarization
now than in previous
periods.
The public sectors
amortization profile remains
manageable, even after
new issuance in 2010.

Source: CNE, Credit Suisse Source: PDVSA, Ministry of Finance, Credit Suisse

Exhibit 166: Public and private sector
net external asset position
Exhibit 167: Public sector liquid
external assets
$bn $bn
0
20
40
60
80
100
120
140
160
Public Private Total*

0
10
20
30
40
50
60
70
80
Other public sector liquid FX holdings*
Central bank international reserves

The public sectors net
external asset position
remains solid at $47.2bn as
of September 2010,
although it has deteriorated
from its September 2008
peak.
The public sectors stock of
liquid external assets rose
during the third quarter,
driven by an increase in
other public sector liquid
holdings.

*The net external asset position includes all external assets (liquid
and illiquid) less all external liabilities (liquid and illiquid)
*Includes cash holdings in government agencies and PDVSA

08 December 2010
Venezuela: Selected economic indicators
2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 18.3 10.3 9.9 8.2 4.8 -3.3 -1.5 1.5 3.0
Growth in real private consumption (%) 15.4 15.7 15.5 18.7 7.5 -3.2 -2.4 1.9 3.4
Growth in real fixed investment (%) 49.7 38.4 29.3 25.3 -3.3 -8.2 -4.8 0.3 1.3
Nominal GDP ($bn)
(1)
112.8 144.2 183.5 226.5 311.1 326.1 207.4 223.5 295.2
Population (mn) 26.2 26.7 27.0 27.5 27.9 28.4 28.8 29.3 29.8
GDP per capita ($)
(1)
4,306 5,400 6,795 8,238 11,152 11,490 7,206 7,629 9,906
Unemployment (% of labor force, end-year) 13.9 13.0 8.4 6.2 6.1 6.6 8.5 7.8 7.0
Exchange rate (VEB per USD, end-year)
(2)
1.92 2.15 2.15 2.15 2.15 2.15 4.30 5.16 5.16
Exchange rate (VEB per USD, average)
(2)
1.89 2.11 2.15 2.15 2.15 2.15 4.30 5.16 5.16
REER (% change, December over December)
(3)
11.9 34.5 10.6 10.3 36.2 18.4 20.0 18.0 20.0
(4)
22.0 19.1 19.3 20.7 25.0 21.2 22.9 21.0 22.6
90 day deposit rate at commercial banks (end-year, %) 12.9 11.7 10.2 10.9 17.6 15.0 15.0 15.0 15.0
Fiscal data
General government fiscal balance (% of GDP) 2.5 4.1 -1.5 -2.6 -2.7 -8.2 -3.0 -2.7 -6.7
(5)
6.2 7.1 0.6 -1.0 -1.2 -6.7 -1.5 -1.2 -5.2
Gross general government and PDVSA debt (% of GDP, end-year)
(6)
42.3 34.9 25.6 26.7 19.0 24.9 39.4 41.9 36.6
Gap between public sector external assets and liabilities (% of GDP, end-year)
(7)
13.7 17.9 24.9 22.8 22.1 15.3 22.8 20.7 11.3
Gap between the public sector's external assets and liabilities ($bn, end-year)
(7)
15.5 25.8 45.7 51.7 68.8 50.0 47.2 46.2 33.4
Balance of payments
Imports (goods and nonfactor services, % increase in $ value) 53.5 36.2 34.8 35.9 9.6 -20.0 -1.1 7.5 15.6
Net FDI inflows ($bn) 0.9 1.4 -2.0 1.0 -0.9 -4.9 -3.6 -2.8 -1.7
(8)
3.5 2.7 5.8 0.7 0.8 1.1 3.2 5.7 1.2
Foreign debt ($bn) 42.3 44.8 41.8 55.9 60.7 73.8 88.1 102.2 112.5
Public ($bn)
(7)
28.1 30.5 26.6 38.9 46.7 61.6 79.6 94.5 105.0
Private ($bn) 14.2 14.3 15.2 16.9 14.0 12.2 8.5 7.8 7.5
Central bank gross FX reserves net of short-term debt ($bn) 24.2 30.3 37.4 34.3 43.1 35.8 28.3 27.3 25.5
(1) Based on the official exchange rate of 4.3 for 2010 and a projected rate of 5.16 for 2011. (2) Expressed in strong bolivares for all years, even though the change took place in January 2008.
(3) Real effective exchange rate, increase indicates appreciation. (4) Wages of the public and private sector. (5) Consolidation of Central Government, Non- Financial Public Enterprises,
Venezuelan Social Security Institute, Deposit and Guarantee Fund and The Venezuelan Investment Fund. (6) Central government, regional governments, PDVSA and China fund; does not
include liabilities of other public institutions such as Central bank, National Development Bank (BANDES), Foreign Trade Bank (BANCOEX), Industrial Bank of Venezuela (BIV) and Andean
Region Development Bank (BANFOANDES). (7) Public sector, including PDVSA and China fund, end-of-period stock. (8) Central government for 2004-2009. Forecast years include PDVSA.
Source: the BLOOMBERG PROFESSIONAL service, Central bank, CADIVI, CNE, IFS, INE, Ministry of Finance, Credit Suisse
08 December 2010
Europe, Middle East and Africa
08 December 2010
Czech Republic: Slowly but surely
Real GDP growth accelerated to 1.1% qoq in Q3 from 0.9% qoq in Q2 in seasonally
adjusted terms. Although the detailed breakdown of the Q3 GDP figures is not
available, we anticipate that net exports probably continued to drive the economic
recovery while household and investment spending growth also contributed positively to
quarter-on-quarter real GDP growth in Q3. Although export growth might have
moderated somewhat compared to the 2.7% qoq increase recorded in Q2, household
spending growth might have accelerated compared to the 0.6% qoq increase recorded
in Q2, in our view. In the meantime, government spending has probably continued to
contract, following a drop of 0.4% qoq in Q2. Industrial output (which accounts for
around 30% of GDP) remained on an uptrend and grew around 2.4% qoq in Q3, yet
remained about 8% below its pre-crisis peak recorded in January 2008.
We forecast that quarter-on-quarter real GDP growth will moderate somewhat in
Q4 2010, and full-year real GDP growth will reach 2.3% in 2010, 2.6% in 2011 and
3.0% in 2012. We estimate that the output gap in the Czech Republic will be closing in
2012. The country is benefiting substantially from the strong German recovery, as 32%
of Czech exports go to Germany, and the exports of goods and services will reach 70%
of GDP in the Czech Republic in 2010, according to our estimates. We believe that
rising exports continue to drive growth in the Czech Republic and translate into an
improvement in the labor market, which in turn supports household spending. The
unemployment rate peaked at 9.9% in February and receded to 8.5% by October, while
employment picked up in Q3. The latest available data showed that average gross
nominal wages rose 2.0% yoy in Q3 2010, which translated into a real wage increase of
0.1% yoy.
Strong exports and recovering domestic demand are pulling in imports, which are
dampening the foreign trade surplus. The euro-value of exports grew 21.3% yoy in
September, but the increase in the euro-value of imports was even higher, reaching
25.5% yoy. This brought the 12-month rolling foreign trade balance down from 4.5% of
GDP in March to 3.6% of GDP in September. This also contributed to the widening of
the current account deficit from 1.2% of GDP in March to 2.4% of GDP in September, on
a 12-month rolling basis. We forecast that the 12-month rolling current account deficit
will stabilize around 2.4%-2.6% of GDP in 2011.
Portfolio investment and FDI inflows remain stable. On a 12-month rolling basis, net
portfolio inflows remained broadly stable between 3.1% and 4.5% of GDP so far this
year, while net FDI inflows increased sharply from 0.7% of GDP in 2009 to 3.8% of GDP
in September this year. On the other hand, however, other investments (which mainly
comprise cross-border loans) recorded net outflows of around 3.6% of GDP in
September, down from net inflows of 0.8% of GDP a year earlier, on a 12-month rolling
basis. In our view, the gradual recovery in economic activity will continue to attract FDI
and portfolio inflows in the remainder of 2010 and 2011, but these will remain
constrained by the uncertain economic outlook in the euro area. We believe that the
surplus on the basic balance (sum of the current account balance and net FDI inflows)
lends fundamental support to the koruna, but we see only limited scope for CZK
appreciation, and maintain our neutral stance. Our end-2010 forecast for EURCZK is
25.0 and we project that the nominal exchange rate of the koruna versus the euro will
stabilise around 24.0 in 2011 and 2012.
CPI inflation has been gradually increasing. It reached 2.0% yoy in October, up from
-0.2% yoy a year earlier, mainly driven by rising food prices. In its forecast published on
4 November, the Czech National Bank (CNB) maintained its projection that headline CPI
inflation is likely to remain close to the 2% target in the next two years, while monetary-
policy relevant core inflation will continuously grow over the forecast horizon and will be
approaching the target in mid-2011. The CNB Boards presentation following its most
Gergely Hudecz
+44 20 7883 9589
gergely.hudecz@credit-suisse.com

08 December 2010
recent meeting (also on 4 November) suggested that the Board maintained its neutral
stance. The presentation stated that headline and monetary-policy relevant inflation will
be close to the inflation target over the monetary policy horizon, and that risks to the
forecast are balanced. The presentation identified higher-than-expected anti-inflationary
effects of fiscal consolidation in the world as a mild risk on the downside, while
highlighting agricultural and commodity price developments as a mild risk on the
upside.
Our forecast continues to envisage that inflation will remain subdued for most of
2011 and hence we expect monetary policy tightening only in H2 2011. We project
monetary policy tightening of 75bps in 2011, which would take the policy rate to 1.50%
by end-2011, and monetary policy tightening of 100bps in 2012, which would take the
policy rate to 2.50% by end-2012. In the meantime, we maintain our view that the ECBs
stance remains a key factor in determining the policy rate outlook for the Czech National
Bank, and consequently the timing of the monetary policy tightening in the Czech
Republic remains contingent on the outlook for the ECBs monetary policy. Our euro
zone economists project that the ECB will hike the policy rate by 50bps in Q4 2011 to
1.50% by end-2011.
Despite the disappointing budget performance in H1 2010, we believe that the
general government budget deficit target of 5.3% of GDP for this year is attainable
given the recent corrective measures. The central governments budget deficit
widened from 5.3% of GDP in December to 7.0% of GDP in March, but then started to
narrow, and was recorded at 5.5% of GDP in November, on a 12-month rolling basis.
The improvement in the 12-month rolling budget deficit between March and November
was mainly due to a steady recovery in revenues. Furthermore, the new government,
which came to power following elections in May, introduced a spending freeze in July to
assure that the budget deficit target will be reached.
The governments fiscal plans for 2011 include further spending cuts. In particular,
the government plans to (1) slash state operating spending (including the public wage
bill) by about 0.8% of GDP, (2) reduce social spending by about 0.3% of GDP and (3)
cut subsidies on home construction saving accounts to save about 0.2% of GDP. In our
view, these measures will be sufficient to attain the 4.5% of GDP general government
budget deficit target in 2011. Moreover, we believe that the recovery in revenues and
further adjustment on the expenditure side will bring down the general government
budget deficit to around 3.5% of GDP in 2012. Based on these assumptions for the
general government budget deficit, we estimate that the general government gross debt
will increase from 39.2% of GDP at end-2010 to 42.6% of GDP by end-2012. We project
that the governments gross funding needs will remain broadly stable around 10% of
GDP in 2011 compared to 2010.
On 10 August, S&P upgraded the outlook for the Czech Republic's long-term
foreign currency sovereign credit rating to positive from stable, while affirming its
credit rating at A. S&P said that the revision of the outlook reflected the possibility of a
ratings upgrade over the next two years, if the new government can successfully
implement its planned measures to alleviate the impact on public finances of
expenditures related to aging. The Czech Republics long-term foreign currency
sovereign debt is currently rated A1 by Moodys and A+ by Fitch.

08 December 2010
Exhibit 169: Level of real GDP (in
logs) and long-term trend
2000 prices, seasonally adjusted
-5
-4
-3
-2
-1
0
1
2
3
4
5
Q3-08 Q3-09 Q3-10
-10
-8
-6
-4
-2
0
2
4
6
8
10
% qoq change
% yoy change, right scale

13.2
13.3
13.4
13.5
13.6
Q3-01 Q3-04 Q3-07 Q3-10

Real GDP growth rose from
0.9% qoq in Q2 2010 to
1.1% qoq in Q3 2010.
We forecast that quarter-on-
quarter real GDP growth will
moderate in Q4 2010 as the
contribution of net exports
to growth declines.

Source: CZSO Source: CZSO, Credit Suisse

Exhibit 170: Industrial production in
Germany and the Czech Republic and
total exports from the Czech Republic
Exhibit 171: Household spending, real
wages and employment
% year-on-year change % year-on-year change
-40
-30
-20
-10
0
10
20
30
40
50
60
Industrial production in
Germany
Industrial production in
the Czech Republic
Total exports from the
Czech Republic

-6
-4
-2
0
2
4
6
Q3-08 Q1-09 Q3-09 Q1-10 Q3-10
Household spending
Real wages
Employment

Industrial output in the
Czech Republic displays a
strong correlation with
German industrial
production. Industrial output
remained on an uptrend
and grew around 2.4% qoq
in Q3 2010.
We believe that rising
exports translate into an
improvement in the labor
market which in turn
supports household
spending.

Note : Year-on-year change in exports is based on the euro-value of
exports.
Source: CZSO, Eurostat, Credit Suisse
Source: CZSO, Credit Suisse

Exhibit 172: Exports and imports Exhibit 173: Current account balance
12-month rolling, % of GDP
5
6
7
8
9
10
11
0
1
2
3
4
5
Trade balance, 12-m rolling %
of GDP, right scale
Exports, sa bn
Imports, sa bn

-8
-6
-4
-2
0
2
4
6
8
10
12
Transfers balance
Income balance
Services balance
Trade balance

Exports and recovering
domestic demand are
pulling in imports, which is
dampening the
foreign trade surplus.
The 12-month rolling
current account deficit
widened from 1.2% of GDP
in March to 2.4% of GDP in
September. We forecast
that the current account
deficit will reach 2.6% of
GDP in 2011.

Source: CZSO, Credit Suisse Source: Czech National Bank, Credit Suisse
08 December 2010
Exhibit 174: Capital inflows
Exhibit 175: Contributions to year-on-
year CPI inflation
12-month rolling, % of GDP pps, with exception of CPI
-5
-3
-1
1
3
5
Direct investment
Portfolio investment
Other investment

-2
-1
0
1
2
3
4
Oct-09 Apr-10 Oct-10
Other components
Health
Housing
Alcohol and tobacco
Food
CPI, % yoy

Net portfolio inflows
remained broadly stable,
and net FDI inflows
increased, while other
investments recorded net
outflows so far this year, on
a 12-month rolling basis.
CPI inflation has been
edging higher driven by
rising food prices.

Source: Czech National Bank, Credit Suisse Source: CZSO, Credit Suisse

Exhibit 176: CPI inflation, the policy rate and exchange rate
-1
0
1
2
3
4
Dec-08 Jun-09 Dec-09 Jun-10 Dec-10
20
22
24
26
28
30
Policy rate, %
CPI, % yoy
EURCZK, right scale

We project that inflation will
remain subdued, close to
the central banks target of
2.0% yoy in 2011 and 2012.
The ECBs stance remains
a key factor affecting the
policy rate outlook for the
Czech National Bank.

Source: the BLOOMBERG PROFESSIONAL service, CZSO, Czech National Bank

Exhibit 177: Central government
budget
Exhibit 178: Headline and cyclically
adjusted central budget deficit
12-month rolling, % of GDP % of GDP
22
24
26
28
30
32
34
-8
-6
-4
-2
0
2
4
Balance, right scale
Revenues
Expenditures

0
1
2
3
4
5
6
2005-
2007*
2008 2009 Jun
2010**
2010F 2011F
Cyclical ly-adj usted
Headli ne

We believe that the general
government budget deficit
target of 5.3% of GDP is
attainable this year, given
the recovery in revenues
and corrective measures.
The government proposes
to cut spending to reduce
the general government
budget deficit to
4.5% of GDP in 2011.

Source: Ministry of Finance, Credit Suisse *Average for the period between 2005 and 2007. **In the 12 months
to June.
Source: Ministry of Finance, Credit Suisse

08 December 2010
Czech Republic: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 4.5 6.3 6.8 6.0 3.2 -4.0 2.3 2.6 3.0
Growth in real fixed investment (%) 3.9 1.8 6.5 6.7 3.1 -8.3 -2.9 3.2 5.0
Nominal GDP ($bn) 109.5 124.6 142.7 174.0 217.1 191.7 200.0 224.9 250.9
Population (mn) 10.2 10.3 10.3 10.3 10.5 10.5 10.5 10.5 10.5
GDP per capita ($) 10,717 12,157 13,874 16,892 20,681 18,257 19,043 21,417 23,899
Exchange rate (CZK per EUR, end-year) 30.4 29.1 27.5 26.5 26.9 26.4 25.0 24.0 24.0
Exchange rate (CZK per EUR, average) 31.9 29.8 28.3 27.8 25.0 26.5 25.2 24.4 24.0
Exchange rate (CZK per USD, average) 25.6 24.1 22.3 20.1 17.1 19.0 18.9 17.6 16.6
REER (% year-on-year change, December over December)
(1)
4.2 3.0 3.6 7.5 2.9 0.9 0.5 2.3 -0.4
Nominal wage growth (% year-on-year change, December over December) 6.3 3.9 6.3 6.6 8.3 5.0 3.0 5.0 6.0
CNB 2-week repo rate (% end-year) 2.50 2.00 2.75 3.50 2.25 1.00 0.75 1.50 2.50
Fiscal data
(2)

General government balance, ESA95 (% of GDP) -3.0 -3.6 -2.6 -0.7 -2.7 -5.8 -5.3 -4.5 -3.5
General government primary balance, ESA95 (% of GDP) -1.8 -2.4 -1.5 0.5 -1.6 -4.6 -4.3 -2.8 -1.7
General government expenditure, ESA95 (% of GDP) 45.1 45.0 43.7 42.5 42.9 46.0 45.4 44.4 43.4
Central government balance (% of GDP) -3.3 -1.9 -3.0 -1.9 -0.5 -5.3 -4.2 -3.4 -2.7
General government gross debt, ESA95 (% of GDP, end-year) 30.1 29.7 29.4 29.0 30.0 35.4 39.2 41.3 42.6
Balance of payments
(3)
3.6 4.3 4.1 3.5 5.0 4.4 4.7 4.9 5.1
Foreign debt ($bn)
(4)
40.4 46.0 52.8 66.6 92.5 78.6 93.8 98.5 102.0
Public ($bn)
(5)
6.8 9.3 11.9 15.2 15.4 20.0 22.5 25.5 27.0
Private ($bn) 33.6 36.7 40.9 51.4 77.1 58.6 71.2 73.0 75.0
Foreign debt (% of GDP) 36.9 36.9 37.0 38.3 42.6 41.0 46.9 43.8 40.6
Central bank total foreign reserves ($bn) 28.4 29.6 31.5 34.9 37.0 41.6 48.6 47.8 50.0
(1) Real effective exchange rate (CPI-deflated), increase indicates appreciation. (2) ESA95 budget balances represent the consolidated fiscal balance of the general government on an accrual
basis while the central government balance has a narrower definition and reported on a cash basis. (3) Scheduled amortizations of medium and long term external debt of both the public and
private sector. (4) Liabilities vis--vis non-residents (i.e., includes FX-denominated and local-currency debt). (5) Includes government and central bank.
Sources: Czech National Bank, CZSO, Ministry of Finance, IMF, JEDH, the BLOOMBERG PROFESSIONAL service, Haver Analytics, Credit Suisse

08 December 2010
Egypt: Presidential elections looming large
Domestic demand remains the main driver of real GDP growth. According to the
latest available demand-side breakdown of GDP data, the contribution of household
spending to real GDP growth of 5.1% in FY 2009/10 (which ended 30 June 2010) was
3.7pps, slightly less than the 4.1pps in FY 2008/09. Fixed investment spending growth
of 17% yoy in Q2 2010 boosted the contribution of investment spending growth to real
GDP growth to 1pp in FY 2009/10. This was low compared to the pre-crisis years, but
represented an improvement compared to the 1.3pps it had deducted from real GDP
growth in FY2008/09. The contribution of net exports to real GDP growth fell in
FY2009/10 compared to FY2008/09 as exports contracted and investment spending in
H1 2010 boosted import growth.
Real GDP growth accelerated to 5.6% yoy in Q3 2010 (first quarter of FY 2010/11).
The demand-side breakdown of Q3 GDP data is not available, but monthly indicators on
workers remittances and employment suggest that household spending remained
robust in Q3. Corporate lending and government spending data indicate that investment
spending was another key pillar of the pick-up in real GDP growth to 5.6% in Q3 from
5.1% in FY 2009/10.
In the run-up to the September 2011 presidential elections, ongoing uncertainty
about President Mubaraks eventual successor features prominently in the near-
term macroeconomic outlook. The final outcome of the recent parliamentary elections
secured a highly contentious level of control (over 85%) for the ruling National
Democratic Party (NDP) in the parliament. Although the questions regarding the
legitimacy of the recent election outcome point to the possibility of heightened social
unrest in the very near term, the more important uncertainty surrounds the eventual
succession plan for President Mubarak in the run-up to the presidential elections.
Election related spending should help boost domestic demand further in FY
2010/11, while the pick-up in the global recovery should support even stronger
growth in FY 2011/12, in our view. We expect real GDP growth to rise to 5.8% in FY
2010/11 from 5.1% in FY 2009/10 as economic activity should be driven by the
governments infrastructure spending and transfers to households, in support of the
ruling NDPs presidential election campaign. However, we think that strong investment
spending growth in H1 2010 is unlikely to be sustained next year and that the private
sectors investment spending will be subdued for much of 2011 as non-oil private sector
and foreign investors will probably choose to wait out the political uncertainty
surrounding these elections. Our 2012 outlook is underpinned by our baseline
expectation that the presidential election uncertainty will be resolved smoothly in late
2011, reforms will resume and fiscal prudence will return thereafter. We expect that
investment spending will again be a key driver of economic activity alongside household
spending by H1 2012, supporting FY2011/12 real GDP growth of 6.2%.
Headline CPI inflation fell sharply to 10.2% yoy in November due to a decline in
food prices after having trended steadily higher between May and September, but
unfavorable base effects related to food price inflation will limit the scope for any
more significant moderation in headline inflation in the medium term. Food price
inflation will remain the main driver of headline inflation in the next several quarters, in
our view. It slowed to 17.1% yoy in November from its recent peak of 22.0% in August.
However, we think base effects for food price inflation will become generally unfavorable
from December. We expect headline inflation to rise to 11.2% yoy by end-June 2011 from
10.1% yoy at end-June 2010.
In particular, core and non-food inflation dynamics suggest that monetary policy
tightening is on the horizon. Core inflation, at 7.8% yoy in October, was close to the upper
end of the MPCs unofficial comfort zone of 6%-8%. (Core inflation for November was not
available at the time of writing.) Meanwhile, non-food inflation is a measure that has featured
Jacqueline Madu
+44 20 7883 4216

08 December 2010
almost as prominently as the core inflation measure in recent MPC statements as an
indicator of underlying inflation pressures stemming from the economic recovery. Non-food
inflation rose to 5.6% in November from as low as 3.4% in June. We think this suggests that
inflation will pose a greater challenge for the MPC by the end of FY2010/11. While we expect
the MPC to leave the policy rate on hold at 8.25% at its final meeting of this year on 16
December, we think it will likely hike the policy rate by a cumulative 75bps in H1 2011 to
9.00%. We think favorable base effects related to food price inflation will bring headline
inflation lower in FY2011/12 to 10.7% yoy and lead the MPC to remain on hold.
Against a backdrop of a relatively more moderate global recovery and a further
improvement in domestic demand, we expect the current account deficit to widen
modestly to 1.9% of GDP in FY 2010/11 from 1.5% of GDP in FY 2009/10. (This
represents a downward revision from our previous forecast of 2.3% of GDP due to revisions
to the historical data.) The four-quarter rolling current account deficit widened slightly in Q3
2010 to 1.6% of GDP from a revised 1.5% of GDP in Q2 2010. The minor deterioration in the
current account deficit was fully driven by a pick-up in outflows from the investment income
account, which resulted from a second consecutive quarter of significant profit repatriation by
foreigners. In Q3, investment income payments reached their highest level in the five-year
history of the series. While we think that this dynamic may continue into FY2010/11, we
expect profit repatriation to moderate following the presidential elections and drive the
current account deficit lower to 1.6% of GDP in FY2011/12.
We expect the political uncertainty accompanying the period up to the
presidential elections in 2011 to dampen net FDI flows in the next few quarters.
We expect a modest deterioration in net FDI inflows in FY2010/11 to 2.0% of GDP down
from net FDI inflows of 2.6% of GDP in FY2009/10. Four-quarter rolling net FDI inflows
declined in Q3 to 2.4% of GDP from 2.7% of GDP in Q2. Net portfolio flows rose further
in the four quarters to Q3 2010 to 5.4% of GDP from 3.4% of GDP in Q2, as investors
piled into the carry trade. However, we think we are unlikely to see as strong a pick-up in
inflows in the next few quarters given recent uncertainty over the pounds nominal
exchange rate. We think the pre-election outlook for the capital account will not be
supportive of the Egyptian pound, and now think USDEGP can weaken gradually to
around 5.8 by the end of FY2010/11.
The central banks exchange rate policy remains unclear following the sharp
exchange rate depreciation in November, but we see scope for modest pound
strengthening in FY 2011/12. We think that the central bank has been accumulating FX
reserves to enable it to more effectively smooth out any currency volatility that may
accompany the uncertain election period. Under our assumptions that the global
economy will be performing well by end 2011 and that the presidential elections will
effectively end political uncertainty related to succession, we think the pound should
resume its appreciation trend in 2012.
We continue to expect a deterioration in the fiscal deficit in FY 2010/11 as we think
the government will maintain, if not increase, its social spending prior to the
elections. Thus, we forecast a rise in the fiscal deficit to 8.2% of GDP in FY 2010/11.
This is higher than the governments target fiscal deficit of 7.9% of GDP and up slightly
from the FY2009/10 fiscal deficit of 8.1% of GDP. However, we think the governments
gross debt-to-GDP ratio peaked at around 77% in FY 2009/10 and will decline in
FY2010/11 to about 75%. We also envision a slight reduction in the governments gross
borrowing needs in FY2010/11. This is due to lower net T-bill issuance in the previous
fiscal year, which has helped improve the debt amortization profile.
We think any ratings upgrade for Egypts foreign currency rating is unlikely in the
medium term. The growth outlook remains positive, but we think that fiscal policy is
unlikely to lend any credibility to the governments ambitious target of bringing the fiscal
deficit down to 3.5% of GDP by FY2015/16. As a result, the decline in the governments
gross debt-to-GDP ratio is likely to be only gradual over the next few years.
08 December 2010
Exhibit 179: Contributions to year-on-year real GDP growth
pps, with the exception of real GDP
-6
-3
0
3
6
9
12
15
Q3 06 Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10
Priv. cons. Govt cons.
Fixed inv Inventory chg
Net exports Real GDP, % yoy

Real GDP growth was 5.1%
in FY 2009/10 and 5.6%
yoy in Q3 2010. We expect
full-year real GDP growth of
5.8% in FY 2010/11, mainly
due to household spending.
The contribution of fixed
investment growth to year-
on-year real GDP growth in
FY 2010/11 should be
subdued due to lingering
political uncertainty.
Government infrastructure
spending should support
investment, however.

Source: Central Bank, Haver Analytics, Credit Suisse

Exhibit 180: Household spending,
workers remittances and employment*
Exhibit 181: Real fixed investment
spending, nominal government
investment spending and domestic
credit to corporates
0
2
4
6
8
10
12
-40
-20
0
20
40
60
80
100 Real private consumption
Workers' remittances* (right)
Employment

-40
-30
-20
-10
0
10
20
30
-90
-60
-30
0
30
60
90
120
150
180
Real fixed investment (left)
Gov't fixed investment
Credit to corporates (left)

The demand-side
breakdown of Q3 GDP data
is not available, but monthly
indicators on workers
remittances and
employment suggest that
household spending
remained robust in Q3.
Corporate lending and
government spending data
indicate that investment
spending was another key
pillar of the strong real GDP
growth in Q3. We think
household spending is likely
to boost economic activity in
FY 2010/11.

*Workers remittances in $ terms.
Source: Central Bank, Finance Ministry, Haver Analytics, Credit Suisse

Exhibit 182: Headline, core and non-
food inflation and the policy rate

Exhibit 183: Breakdown of core
inflation
pps, with the exception of core inflation
0
5
10
15
20
25
Core inflation*
Headline inflation
Policy rate, %
Non-food inflation

0
2
4
6
8
10
Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
Other services
Paid services
Retail items
Food, excl fruits/veg
Core inflation (% yoy)

Food price inflation will
remain the main driver of
headline inflation in the next
several quarters, but the
recent acceleration in non-
food inflation suggests that
the pick-up in economic
activity may be starting to
build price pressures.
We expect headline inflation
to rise to 11.2% yoy by end-
June 2011 from 10.1% yoy
in June 2010. As a result,
we expect the MPC to hike
the policy rate by a
cumulative 75bps in H1
2011 to 9.00%.

*Excludes fruit and vegetables and regulated prices (some food
items, fuel and electricity).

08 December 2010
Exhibit 184: Fiscal performance
Exhibit 185: Breakdown of fiscal
spending
-20
-15
-10
-5
0
-30
-20
-10
0
10
20
30
40
50
60
70
Fiscal balance, % of GDP (left)
Revenues, 12m rolling, % yoy
Expenditures, 12m rolling, % yoy

0
15
30
45
Goods/serv. Subs/benefits
Wages Interest
Other spend Non-fin assets
Total spending

We expect no improvement
in the fiscal deficit in FY
2010/11 because the
government will likely prefer
to absorb the rising import
price of wheat under its food
subsidy scheme in the
current fiscal year rather than
risk a civil unrest that could
accompany higher bread
prices during the election
period. However, we think
that the governments gross
debt-to-GDP ratio peaked at
around 77% in FY 2009/10
and will decline in FY2010/11
to about 75% on the back of
economic growth.

Source: Finance Ministry, Credit Suisse Source: Finance Ministry, Credit Suisse

Exhibit 186: Current account and its
components
Exhibit 187: Capital account and its
components
12-month rolling, % of GDP 12-month rolling, % of GDP
-15
-10
-5
0
5
10
15
20
25
-3
-2
-1
0
1
2
3
4
5
Net transfers
Income balance
Services balance
Trade balance

-8
0
8
16
Errors and Omm.
Net other investment
Net FDI inflows
Net portfolio inflows
Change in reserves*

We expect the current
account deficit to deteriorate
in FY 2010/11 although the
revisions to the historical data
have led us to lower our
projection to 1.9% of GDP.
We expect political
uncertainty to accompany the
period up to the presidential
elections in 2011 and
dampen net FDI flows in the
next few quarters.

Source: Central Bank, Haver Analytics, Credit Suisse * Positive number indicates an accumulation of reserves.

Exhibit 188: The Egyptian pound and
the central banks FX reserves
Exhibit 189: Real effective exchange
rate (REER) of the Egyptian pound
and the pound against the basket*
2008/09 = 100; up-move indicates appreciation 2008/09 = 100; up-move indicates appreciation
5.3
5.4
5.5
5.6
5.7
5.8
20
25
30
35
40
45
50
55
FX deposits in local banks
Official FX reserves
USDEGP (left)

70
75
80
85
90
95
100
105
110
115
26-Nov-04 26-Nov-06 26-Nov-08 26-Nov-10
REER
EGP vs basket

The central banks
exchange rate policy
remains unclear. We think
the pre-election outlook for
the capital account will not
be supportive of the
Egyptian pound, and
USDEGP can weaken
gradually to around 5.8 by
the end of FY2010/11.
However, we think that the
central bank has been
accumulating FX reserves
to enable it to more
effectively smooth out any
currency volatility that may
accompany the uncertain
election period.

Source: Central Bank, Haver Analytics, Credit Suisse *The basket we estimate holds about 0.18 euro for every dollar.

08 December 2010
Egypt: Selected economic indicators
Fiscal year ending 30 June*
2004 2005 2006 2007 2008 2009 2010 2011F 2012F
Real GDP growth (%) 4.1 4.5 6.8 7.1 7.2 4.7 5.1 5.8 6.0
Nominal GDP ($bn) 78.7 89.5 107.3 130.3 162.4 188.9 218.4 242.8 286.6
Population (mn)
(1)
68.6 70.0 71.3 73.6 75.2 76.8 77.8 79.6 81.4
GDP per capita ($) 1,148 1,278 1,505 1,770 2,159 2,459 2,807 3,052 3,521
CPI inflation (% year-on-year change, June over June)
(2)
11.6 4.7 7.3 8.6 20.2 9.9 10.1 11.2 10.7
Exchange rate (EGP per USD, end-year) 6.19 5.79 5.76 5.69 5.34 5.59 5.70 5.80 5.70
Exchange rate (EGP per USD, average) 6.16 6.02 5.76 5.72 5.52 5.52 5.52 5.78 5.75
REER (% year-on-year change, June over June)
(3)
2.9 6.5 2.1 1.1 11.3 15.5 10.9 10.0 12.0
Overnight deposit rate (%, end-year) 10.00 9.50 8.00 8.75 10.50 9.00 8.25 9.00 9.00
Fiscal data
(4)

Central government's fiscal balance (% of GDP) -9.5 -9.6 -8.2 -7.3 -6.8 -6.9 -8.1 -8.3 -7.3
Central government's primary fiscal balance (% of GDP) -3.1 -3.5 -2.2 -0.9 -1.2 -1.8 -2.1 -1.9 -0.5
Central government's expenditure (% of GDP) 30.1 30.0 33.6 29.8 31.5 33.7 30.3 29.2 27.2
(4)
105.4 108.6 94.3 81.5 73.5 75.5 76.0 74.5 71.2
(4)
72.2 73.8 72.1 64.0 56.7 59.1 61.8 62.4 60.9
Balance of payments
Exports (goods and non-factor services, % year-on-year change in $ value) 27.5 21.7 21.2 16.3 35.1 -11.7 -0.9 12.4 20.0
Imports (goods and non-factor services, % year-on-year change in $ value) 18.9 29.9 26.5 18.8 39.0 -5.1 -6.4 17.1 19.3
Current account balance ($bn) 3.4 2.9 1.8 2.3 0.9 -4.4 -3.3 -4.5 -4.8
Current account balance (% of GDP) 4.3 3.3 1.6 1.7 0.5 -2.3 -1.5 -1.8 -1.7
(5)
2.5 2.7 3.0 2.9 2.6 3.1 2.6 2.8 3.0
Foreign debt ($bn) 29.9 28.9 29.6 29.9 33.9 31.5 33.7 35.3 37.3
Public ($bn) 20.0 19.2 19.5 19.8 21.9 26.0 27.5 28.3 29.8
Private ($bn) 9.9 9.7 10.1 10.1 12.0 5.5 6.2 7.0 7.5
*The years above are fiscal years ending 30 June; i.e., 2010 refers to the period of 1 July 2009 to 30 June 2010.
(1) Population figure refers to Egyptians living in Egypt and is the figure we use to calculate GDP per capita. (2) Urban inflation instead of national inflation due to the lack of historical data.
(3) Real effective exchange rate, increase indicates appreciation. (4) For the consolidated government, which is a broader definition than the budget sector that includes Economic Authorities
(i.e., Housing ministry) and the National Investment Bank. (5) Includes repayments to the IMF.
Source: Central Bank, Ministry of Finance, Statistics Office, Credit Suisse

08 December 2010
Hungary: An elusive fiscal target for 2011
Real GDP growth picked up to 0.8% qoq in Q3 2010 from 0.4% qoq in Q2 2010 in
seasonally adjusted terms. Although the detailed breakdown of the Q3 GDP figures is
not available, we believe that net exports continued to drive the economic recovery,
while household spending showed signs of bottoming in Q3. According to the available
foreign trade data, both export and import growth held up at around 10% qoq in Q3 in
seasonally adjusted forint terms, a broadly unchanged pace compared to Q2. In the
meantime, retail sales continued to contract in Q3, although at a slower pace than in Q2
(-0.1% qoq in Q3 vs. -0.9% qoq in Q2 in seasonally adjusted terms). Industrial output
(which accounts for 22% of GDP) grew around 2.9% qoq in Q3 in seasonally adjusted
terms, slowing from 4.2% qoq in Q2.
We forecast that quarter-on-quarter real GDP growth will remain broadly steady in
the quarters ahead and that full-year real GDP growth will reach 1.1% in 2010,
2.8% in 2011 and 3.3% in 2012. We believe that the recently announced personal
income tax cuts and pension hikes will boost household spending, and we project that
household spending will grow 0.9% in 2011 and 3.6% in 2012. On the other hand, we
project that the special taxes on the financial, energy, retail and telecom sectors will
dampen investments, keeping investment spending growth subdued at around 0.6%
both in 2011 and 2012. Against this backdrop, we estimate that the output gap will
remain negative until 2012.
Hungary will continue to benefit from robust growth in Germany. About 26% of
Hungarian exports go to Germany, and exports of goods and services will reach around
85% of GDP in Hungary in 2010, according to our estimates. The foreign trade surplus
increased from 4.0% of GDP at end-2009 to 5.4% of GDP in September on a 12-month
rolling basis as a result of strong exports and weak imports. This supported the
improvement in the current account balance, which turned from a deficit of 0.4% of GDP
in 2009 to a surplus of 0.9% of GDP in June 2010, and we estimate that it widened
further to 1.2% of GDP by September 2010, on a 12-month rolling basis. However, we
believe that the pick-up in consumption will lead to faster growth in imports and that the
deficit on the income balance will probably increase as the recovery gains pace.
Consequently, we forecast that the full-year current account will record a surplus of 0.9%
of GDP in 2010 and swing into a deficit of 1.4% of GDP in 2011.
Portfolio inflows are showing tentative signs of recovery. Non-residents holdings of
forint-denominated government securities increased from HUF 2,155bn at end-
December 2009 to HUF 2,406bn in April but then retreated back to HUF 2,184bn in July
and remained subdued throughout August, probably because of unfortunate comments
by politicians comparing Hungary to Greece and Hungarys disengagement from the
IMF. Nevertheless, in September, the government pledged to bring its budget deficit
below 3% of GDP in 2011, and non-residents holdings of forint-denominated
government securities rose back to HUF 2,568bn by mid-November. However, following
the announcement of the governments plans regarding the pension system, non-
residents holdings of forint-denominated government securities edged modestly lower to
HUF 2,532bn by end-November. Given the uncertainties related to the governments
policies, we prefer to stay neutral on the forint and project that its nominal exchange rate
versus the euro will continue to oscillate around 275 in 2011 and 2012. Nonetheless, we
believe that the forint remains exposed to spill-over risks from concerns related to the
euro area and setbacks in global risk appetite.
The governments underlying fiscal stance will be looser in 2011, although the
headline budget deficit target does not reflect this. The central governments 12-month
rolling budget deficit was 3.8% of GDP in October, and we estimate that the special taxes
imposed on the financial, energy, retail and telecom sectors will bring the general
governments budget deficit to 3.8% of GDP this year, in line with the target. However, we
project that fiscal policy will be substantially looser from 2011 onwards. The government
plans (a) to abolish mandatory contributions to privately managed pension funds and (b) to
introduce incentives so that members of the privately managed funds return to the state
Gergely Hudecz
+44 20 7883 9589

08 December 2010
system. These changes in the pension system will on the one hand improve the optics of
the fiscal indicators in 2011 but on the other hand facilitate an aggressive fiscal loosening
next year. We estimate that the general government budget deficit next year would have
been close to 6.0% of GDP in the absence of the changes in the pension system, far
above the 2.9% of GDP target that the governments budget plan set forth.
Although the changes to the pension system might lead to a one-off decline in the
general governments gross debt-to-GDP ratio (by about 4.0pps to 77.7% of GDP
in 2011), this ratio will probably continue to rise in the absence of corrective fiscal
measures, in our view. The government indicated that it will present its structural
reform plans at the end of February 2011 and claims that these will lead to savings of
about HUF600bn-HUF800bn (about 2.0%-2.5% of GDP). The plan will reportedly consist
of about 100 measures, but the time horizon over which the planned savings would
materialize is unclear. We believe that the reform plans will be included in Hungary's
Convergence Program, which will be submitted to the EU early next year, but we do not
expect the measures to have any meaningful fiscal impact before 2012.
The risk of an eventual ratings downgrade by S&P or Moodys will continue to
weigh on market sentiment, in our view. On 3 November, S&P affirmed Hungary's long-
term foreign currency sovereign credit rating at BBB- but kept the outlook negative given
the largely ad hoc fiscal measures. On 6 December, Moodys downgraded Hungarys
long-term foreign currency sovereign credit rating two notches to Baa3 and kept the
outlook negative as a result of concerns regarding medium to long term fiscal
sustainability and external vulnerabilities. Although Moodys move represented a catch-
up with S&P, Moodys said that it might downgrade Hungary again, if the government fails
to stabilize its financial strength. S&P's BBB-/negative and Moodys Baa3/negative ratings
on Hungary's foreign currency long-term debt are one notch below Fitch's BBB/negative
rating. We believe that Fitch might downgrade Hungary before end-2010 but that the
government might be able to avoid a downgrade by S&P and a further downgrade by
Moodys if it presents consistent and credible fiscal plans in February.
We project that the recovery in the labor market and loose fiscal policy will put
upward pressure on inflation. CPI inflation moderated to 3.7% yoy in August from 6.4%
yoy in January but picked up to 4.2% yoy in October, predominantly driven by rising food
prices. In its most recent inflation report (released on 1 December), the central bank
projected that, with the upward effects on inflation of the governments measures emerging
gradually from early 2011, the average CPI inflation rate might be above 4.0% yoy next
year and that CPI inflation might exceed the 3.0% yoy target on the monetary policy
horizon, under the assumptions that the policy rate and the average exchange rate remain
constant at their October 2010 levels (5.25% and EUR/HUF 274, respectively). We also
believe that CPI inflation will probably remain above the 3.0% yoy target, and we project
that CPI inflation will be 4.3% yoy at end-2011 and 3.5% at end-2012.
In a move that marked the beginning of a tightening cycle, according to Governor
Simor, the Monetary Council (MC) hiked the policy rate by 25bps to 5.50% on 29
November. However, of the seven MC members, the four outside members' mandate
will expire on 1 March 2011, and the government is aiming to allow the parliament to
nominate the four outside members of the MC. Given that the parliament is dominated
by the governing Fidesz party, the four new nominees would probably be sympathetic to
the economic policy agenda of the government, which might translate to a markedly
dovish monetary policy bias.
In our view, the new MC will be more likely to ease than to tighten monetary policy
in 2011. Our end-2011 policy rate forecast is 5.00%, and we expect the MC to keep the
policy rate unchanged in 2012. If our expectation materializes, it will probably have an
adverse impact on the forints nominal exchange rate. However, we believe that if the
forint weakens sharply (particularly versus the Swiss franc), the MC might intervene in
the FX market, given the significant stock of household mortgages denominated in
Swiss francs in Hungary.
08 December 2010
Exhibit 191: Level of real GDP (in
logs) and long-term trend
2000 prices
-5
-4
-3
-2
-1
0
1
2
3
4
5
Q3-09 Q1-09 Q3-09 Q1-10 Q3-10
-10
-8
-6
-4
-2
0
2
4
6
8
10
% qoq change, swda

8.1
8.2
8.3
8.4
Q3-01 Q3-04 Q3-07 Q3-10
Real GDP growth picked up
to 0.8% qoq in Q3 2010
from 0.4% qoq in Q2 2010
in seasonally adjusted
terms.
We forecast that quarter-on-
quarter real GDP growth will
remain broadly steady in
the quarters ahead.

Source: KSH Source: KSH, Credit Suisse

Exhibit 192: Household spending, real
wages and employment
Exhibit 193: Foreign trade and
industrial production
-10
-8
-6
-4
-2
0
2
4
6
Sep-08 Sep-09 Sep-10
Household spending
Real wages
Employment

-40
-30
-20
-10
0
10
20
30
40
50
Imports to the euro
area from Hungary
Total exports from
Hungary
Industrial production
in Hungary

We believe that personal
income tax cuts and
pension hikes will boost
household spending in
2011.
In our view, Hungary will
continue to benefit from the
recovery in the euro area,
and net exports will
continue to support real
GDP growth in 2011.

Source: KSH, Credit Suisse Note: Year-on-year changes in exports and imports are based on
euro-value.
Source: KSH, Eurostat, Credit Suisse

4-quarter rolling, % of GDP
4
5
6
7
8
-2
-1
0
1
2
3
4
5
6
Foreign trade balance, 12-m
rolling % of GDP, right scale
Exports, sa bn
Imports, sa bn

-10
-5
0
5
10
Q2-08 Q2-09 Q2-10
Transfers balance
Income balance
Services balance
Trade balance

The foreign trade surplus
increased from 4.3% of
GDP at end-2009 to 5.4%
of GDP in September, on a
12-month rolling basis.
The current account
balance swung from a
deficit of 0.4% of GDP in
2009 to a surplus of 0.9% of
GDP by Q2 2010, on a four-
quarter rolling basis. We
forecast that the full-year
current account surplus in
2010 will remain around
0.9% of GDP.

Source: KSH, Credit Suisse Source: National Bank of Hungary, Credit Suisse

08 December 2010
Exhibit 197: Contributions to
year-on-year CPI inflation
4-quarter rolling, % of GDP pps, with exception of core inflation
-25
-20
-15
-10
-5
0
5
10
15
20
Q2-08 Q2-09 Q2-10
Direct investment
Other investment (public)
Other investment (private)

-2
0
2
4
6
8
10
12
Clothing and durable goods
Other incl. fuels
Services
Electricity, gas
Alcohol and tobacco
Food
Core inflation, % yoy
Portfolio investment inflows
are showing tentative signs
of recovery, but given the
uncertainties related to the
governments policies, we
remain neutral on the forint.
We project that the recovery
in the labor market and
loose fiscal policy will put
upward pressure on
inflation.

Source: National Bank of Hungary, Credit Suisse Source: KSH, Credit Suisse

0
2
4
6
8
10
12
14
16
220
240
260
280
300
320 Policy rate, %
CPI, % yoy
EURHUF, right scale

On 29 November, the MC
assessed that under
unchanged monetary
conditions, inflation might
remain above the 3% target
for a sustained period and
decided to hike the policy
rate by 25bps to 5.50%.
In our view, the new MC will
be more likely to ease than
to tighten monetary policy in
2011.

Source: KSH, National Bank of Hungary, the BLOOMBERG PROFESSIONAL service

budget Exhibit 200: Government debt (ESA95)
44
46
48
50
52
54
56
58
-8
-6
-4
-2
0
2
4
6 Balance, right scale
Expenditures
Revenues

70
75
80
85
90
2008 2009 2010F 2011F 2012F
No pension changes
Assuming debt re-payment

We believe that the
governments underlying
fiscal stance will be looser
in 2011, although the
headline budget deficit
target does not reflect this.
Although the changes to the
pension system might lead
to a one-off decline in the
general governments gross
debt-to-GDP ratio, this ratio
will continue to rise in the
absence of corrective fiscal
measures, in our view.

Source: Ministry for National Economy, Credit Suisse Source: Eurostat, Credit Suisse

08 December 2010
Hungary: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 4.9 3.5 4.0 1.0 0.6 -6.3 1.1 2.8 3.3
Growth in real private consumption (%) 3.1 3.4 1.9 -1.6 -0.6 -6.7 -2.1 0.9 3.6
Growth in real fixed investment (%) 7.9 5.7 -3.6 1.6 0.4 -6.5 -0.8 0.6 0.6
Nominal GDP ($bn) 106.4 112.5 114.0 136.3 154.6 122.1 132.8 147.6 169.5
Population (mn) 10.1 10.1 10.1 10.1 10.0 10.0 10.0 10.0 10.0
GDP per capita ($) 10,514 11,142 11,317 13,543 15,416 12,171 13,259 14,765 16,946
Exchange rate (HUF per EUR, end-year) 245.1 252.3 251.2 252.3 265.6 270.5 275.0 275.0 275.0
Exchange rate (HUF per EUR, average) 251.1 247.9 264.0 251.3 251.8 280.4 275.2 275.0 275.0
Exchange rate (HUF per USD, average) 202.0 199.4 210.1 183.3 171.1 201.8 208.5 202.2 188.4
(1)
9.3 -5.7 3.4 3.9 -3.4 2.1 -3.5 3.1 1.5
Nominal wage growth (% year-on-year change, December over December) -3.0 5.4 12.0 4.7 4.5 0.2 2.6 3.8 6.2
NBH 2-week deposit rate (%, end-year) 9.50 6.00 8.00 7.50 10.00 6.00 5.50 5.00 5.00
Fiscal data
(2)

General government primary balance, ESA95 (% of GDP) -2.1 -3.8 -5.4 -0.9 0.4 0.7 0.3 0.9 1.0
Broad money supply (M2, % year-on-year change) 9.9 13.0 11.8 8.6 10.2 0.8 -1.1 0.8 8.6
Domestic credit (% year-on-year change) 14.1 16.3 18.5 12.8 18.5 -3.5 1.6 6.0 10.0
Balance of payments
Current account balance ($bn) -8.8 -8.3 -8.6 -9.5 -11.3 -0.5 1.3 -2.1 -2.3
Current account balance (% of GDP) -8.3 -7.4 -7.5 -7.0 -7.3 -0.4 0.9 -1.4 -1.3
Net FDI inflows ($bn) 3.4 5.4 3.5 2.1 3.7 -0.3 -2.8 1.2 2.1
(3)
7.6 8.8 7.8 9.3 15.1 12.0 12.6 19.3 16.3
Foreign debt ($bn)
(4)
70.6 83.5 99.1 129.4 176.3 156.3 160.9 163.3 168.0
Public ($bn)
(5)
32.6 31.8 40.6 50.8 55.6 67.8 68.2 64.4 68.0
Private ($bn) 38.1 51.7 58.5 78.6 120.6 88.5 92.7 98.9 100.0
Central bank total international reserves ($bn) 16.0 18.6 21.6 24.1 33.9 44.2 48.7 46.1 47.0
(1) An increase in the real effective exchange rate (CPI-deflated) indicates appreciation. (2) ESA95 budget balances represent the consolidated fiscal balance of the general government on an
accrual basis, while the central government balance has a narrower definition and reported on a cash basis. (3) Scheduled amortizations of medium- and long-term external debt of both the
public and private sector. (4) Liabilities vis--vis non-residents (i.e., includes FX-denominated and local-currency debt). (5) Includes government and central bank; data for 2008-10 also include
IMF, WB and EU lending to government under Hungarys Stand-by arrangement.
Sources: AKK, National Bank of Hungary, Ministry for National Economy, KSH, IMF, JEDH, the BLOOMBERG PROFESSIONAL service, Haver Analytics, Credit Suisse

08 December 2010
Israel: Striking the right balance
The main challenge for the domestic authorities in 2011 will be to consolidate
recent economic gains. Having weathered the global crisis in an impressive fashion,
Israels economy appears set for another year of robust GDP growth in 2011.
Headwinds will remain, however, not least from the still-fragile global economic
environment and the ongoing withdrawal of accommodative monetary and fiscal policies
at home. We believe that the main challenge for the government and the central bank in
2011 will be to strike the right balance between gradual policy tightening and the need to
protect and consolidate the economic gains achieved in recent quarters.
Headline GDP growth has declined in H2 2010, in line with our forecast. Preliminary
data for Q3 revealed that GDP growth declined to 3.8% on a seasonally-adjusted annualized
basis in Q3 2010, from 4.5% in Q2. The decline came on the back of moderating momentum
in private consumption and investment. Annualized growth in the former declined to 1.3% in
Q3, from 6.7% in Q2, while investment growth nearly halved to 9.7%, from 16.2% in Q2.
Reflecting the slowdown in global growth momentum, the volume of exports was down 9.6%
in Q3, along with a smaller contraction in imports of 4.6%. Government consumption took
over as the key driver behind the economic expansion in Q3, contributing 2.5pps to
headline GDP annualized growth, compared to 0.3pp in Q2. Meanwhile, the
contributions of private consumption and investment declined to 0.7pp and 1.8pps,
respectively. In contrast to Q2, the contribution of net exports to annualized real GDP
growth was negative in Q3 (-2.2pps).
The key risk for the economic recovery in 2011 is the uncertain outlook for
external demand, in our view. Despite the moderation in private consumption growth
in Q3, we continue to expect that it will remain robust over the coming quarters, not least
due to the ongoing, albeit diminishing, support from accommodative fiscal and monetary
policies. The key risk for next year is likely to be the fragile outlook for external demand,
in our view. Israeli exporters would do well to repeat this years growth performance in
2011. We expect a more balanced and stable economic growth outlook for next year
and maintain our GDP growth forecasts at 3.9% for 2010 and 3.8% for 2011, before an
increase to 4.2% in 2012.
Rising housing and food prices have pushed CPI inflation higher in H2 2010, as
expected. Inflation was always likely to increase from late Q3 2010 because of a strongly
adverse base effect in the housing price category and upside pressures on food prices
since the summer. CPI inflation rose to 2.5% yoy in October, compared to this cycles low
of 1.8% yoy in July-August, moving closer to the upper end of the Bank of Israels (BoI)
1%-3% target range. Harvest damage from adverse weather conditions and unfavorable
seasonal factors has conspired to push the price of fruit and vegetables higher (up 21%
yoy in October), while evident excess demand for real estate has continued to fuel
increases in housing prices. These two categories have remained the key drivers behind
overall inflation, contributing 0.8pp and 0.9pp, respectively, to the headline figure in
October, with transport costs providing the other meaningful contribution of 0.4pp.
We project that inflation will remain close to the upper end of the target range in
the coming months. We see a risk that the latest bout of adverse weather and
increase in global commodity prices could provide further moderate upward momentum
to CPI inflation in the short term. Rising housing prices also remain an important threat.
We still think, however, that an outright overshoot of the target range is unlikely in the
coming months. Our year-end forecasts for CPI inflation stand at 2.4% for 2010 and
2.8% for 2011. We project that with wage growth recovering and unemployment staying
low, the headline inflation figure will remain close to the upper end of the target range in
2012, reaching 2.9% by the end of that year.
The monetary policy normalization process will continue in 2011, in our view.
Inflation expectations have proved decidedly sticky in recent months, with the 12-month
forward consensus projection standing at 2.8% yoy in mid-November, while the rate
derived from the capital markets was even higher at 3.2% yoy. This, together with the
ongoing closing of the output gap and concerns about a potential asset price bubble in
the real estate market, will prompt the central bank to continue with gradual monetary
Ivailo Vesselinov
+44 20 7883 8057
ivailo.vesselinov@credit-suisse.com

08 December 2010
policy normalization in the coming months, in our view. The BoI kept its policy rate
unchanged at 2.00% in November, but widened the corridor around its interest rate in
the credit window and the commercial banks' deposit window from 25bps to 50bps.
The central bank had previously narrowed the interest rate corridor in March 2009 near
the end of its previous easing cycle and we view the latest decision to reverse this policy
as part of the normalization process.
The BoI remains concerned about the ongoing rise in housing prices. In the latest
Inflation Report for November, central bank officials made references to the contrasting
short-term economic outlooks for Israel and the major global economies such as the US
and EU. The report also contained an explicit mention of the unsustainable high growth
of housing prices and labelled recent prudential measures to tackle rising housing prices
as modest. The BoI concluded that rising housing and share prices have been
apparently encouraged by low interest rates and listed Israel among a group of countries
that should reverse the expansionary policies implemented since the peak of the crisis.
We believe that further prudential measures to tackle rising housing prices, in addition to
the requirement that banks increase their capital provision for floating-interest-rate housing
loans that was implemented in late October, could be possible for next year.
We expect that the central bank will preserve its policy mix of gradual rate hikes
and direct FX market intervention in the coming months. The BoI has also recently
emphasized the headwinds to Israeli exports and noted that in the absence of a
framework for international coordination of monetary policies, countries such as Israel
have to rely on an increasing element of intervention in the FX market. We view these
conclusions to be in line with our long-held projection for additional policy rate hikes
combined with direct FX market intervention to prevent appreciation of the shekel that is
deemed excessive. Our central scenario still envisages that the BoI will seek to bring ex-
ante real interest rates into positive territory in the coming quarters, taking the nominal
policy rate to 3.00% by end-2011 and 3.75% by end-2012. With our US and EU
economists still projecting that the Fed and ECB will maintain relatively loose monetary
policies in the coming months, we continue to expect market pressure for additional
shekel appreciation. We project USDILS at 3.50 by end-2011 and 3.45 by end-2012.
The current account surplus will continue to narrow in the coming quarters, in our
view. For the time being, the BoI has remained opposed to sizeable shekel appreciation.
Its stance appears to have been justified by recent foreign trade data, which revealed that
the deficit jumped to $1.6bn in October. We estimate that this pushed the foreign trade
gap to 3.4% of GDP on a 12-month rolling basis, from 2.4% of GDP at the start of H2
2010. The renewed widening of the trade deficit is in line with our long-held projection and
we reiterate that this trend is likely to persist in the coming months as domestic
consumption continues to recover and demand in some export markets such as the US
and EU remains more subdued. We still expect that the current account surplus will
narrow to 3.0% of GDP by end-2010, from 3.6% of GDP in Q2, and decline further to 1.8%
of GDP by end-2011. We believe, however, that the current account will remain firmly in
surplus over our two-year forecast horizon, with a robust basic balance continuing to
provide underlying support to the shekel. The medium-term outlook for the balance of
payments also remains favorable due to a large expected boost to gas production.
The government is on course to outperform its fiscal target this year, with further
budget deficit consolidation likely in 2011-12. The fiscal performance has stayed
impressive in recent months and the government remains on track to outperform
comfortably this years budget deficit target of 5.5% of GDP. We estimate that the 12-
month rolling fiscal gap reached 3.7% of GDP by end-October, with the outperformance
due to a cyclical boost to revenues and continued spending restraint. Revenues on a
12-month rolling basis rose to 28.3% of GDP by end-October, from 26.9% of GDP at the
end of 2009, while expenditures reached 32.0% of GDP, approximately unchanged from
31.8% of GDP at the end of last year. We project that the overall 2010 budget deficit will
reach 4.1% of GDP a notable improvement on last years deficit of 5.2% of GDP. Our
forecast envisages further fiscal consolidation in the medium term, with the headline
budget deficit reaching 3.4% of GDP in 2011 (marginally above the governments
ambitious target of 3.0% of GDP) and 2.6% of GDP in 2012.
08 December 2010
Exhibit 201: State of the Economy
Index (SEI) and real GDP Exhibit 202: PMI and components
Index, 2005=100 ILSbn, 2005=100
111
112
113
114
115
116
117
118
119
120
121
170
175
180
185
190
SEI
Real GDP, s.a. (right)

0
10
20
30
40
50
60
70
80
90
PMI
Output
New orders
New export orders

High-frequency indicators
continue to suggest that
economic growth will
remain robust in the coming
months. The central banks
favoured leading indicator,
the State of the Economy
Index, is still rising, albeit at
a slower pace. Meanwhile,
after a summer wobble, the
PMI and its subcomponents
have rebounded strongly,
climbing back to stand
comfortably within
expansion territory at the
start of Q4 2010.

Source: Bank of Israel, Credit Suisse Source: Markit

Exhibit 203: Contributions to quarter-on-quarter annualized real GDP growth
pps, with the exception of GDP
-15
-10
-5
0
5
10
15
20
Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10
Net exports
Investment
Inventories
Private consumption
GDP growth (% qoq annualized)

Real GDP growth eased to
3.8% on an annualized
basis in Q3 2010, with
government consumption
taking over as the key driver
behind the headline figure.
We expect that private
consumption and
investment growth will
remain in positive territory in
the coming quarters, with
domestic demand likely to
play an increasingly
important role in driving
GDP growth in 2011 and
2012.

Source: Central Bureau of Statistics, Credit Suisse

Exhibit 204: Real and nominal wages Exhibit 205: Unemployment rate
3mma, % year-on-year change seasonally adjusted, %
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Aug-07 May-08 Feb-09 Nov-09 Aug-10
Real
Nominal

4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
Q3-06 Q3-07 Q3-08 Q3-09 Q3-10

The central bank has noted
the first visible signs of
recovery in nominal and
real wages since the
summer. Despite a modest
increase in late Q3 2010,
unemployment remains low
in absolute terms and we
expect that it will stay
around current levels over
our two-year forecast
horizon. These trends
suggest to us that private
consumption growth will
remain robust in the coming
months.

Source: Haver Analytics Source: Haver Analytics

08 December 2010
Exhibit 206: Current account balance
and its components
Exhibit 207: BoI FX reserves and
money supply growth
-10
-5
0
5
10
15
Q2-05 Q2-06 Q2-07 Q2-08 Q2-09 Q2-10
Current transfers
Income balance
Services balance
Trade balance
Current account

0
10
20
30
40
50
60
70
80
FX reserves, $bn
M1 growth, % yoy

The foreign trade deficit has
widened in recent months,
in line with our forecast. We
expect that rising import
consumption will contribute
towards a modest
narrowing of the current
account surplus in the
coming quarters, but the
basic balance is
nonetheless likely to remain
strong, in our view. The
central bank has stepped
up its direct FX market
interventions once again,
triggering a modest
increase in money supply
growth.

Source: Bank of Israel, Credit Suisse Source: the BLOOMBERG PROFESSIONAL service

Exhibit 208: Interest rates and CPI inflation
-4
-2
0
2
4
6
8
10
Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11
Real policy rate, %
Policy rate, %
CPI inflation, % yoy
CS forecast

We expect that the central
bank will continue with its
policy of gradual rate hikes
and opportunistic FX market
intervention to prevent
shekel appreciation deemed
excessive in the coming
months. The BoI appears to
be concerned by elevated
inflation expectations and
the risk of an asset price
bubble in the real estate
sector, but at the same
time, has acknowledged the
need to protect exporters at
this stage of the global
economic cycle.

Source: Central Bureau of Statistics, Bank of Israel, Credit Suisse

Exhibit 209: Government budget
balance (excluding net credit)
Exhibit 210: General government
gross debt
-5.0
-4.5
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0

70
72
74
76
78
80
82
84
2006 2007 2008 2009 2010E 2011F 2012F
Central
Pessimistic
Optimistic

We expect a modest
widening in the 12-month
rolling budget deficit
towards year-end, but
maintain our projection that
the government will
outperform comfortably its
5.5% of GDP budget deficit
target for this year, due to
higher-than-projected
nominal GDP growth and
an associated boost to tax
revenues. The general
government debt-to-GDP
ratio is likely to decline
gradually in the coming
quarters, in our view.

Source: Ministry of Finance, Credit Suisse Source: Ministry of Finance, Credit Suisse

08 December 2010
Israel: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 5.0 5.1 5.3 5.2 4.2 0.8 3.9 3.8 4.2
Growth in real fixed investment (%) -0.4 2.5 12.0 13.7 5.1 -6.7 6.0 7.0 6.7
Nominal GDP ($bn) 127.0 134.4 145.8 168.0 203.1 195.8 213.4 239.5 263.3
Population (mn) 6.9 7.0 7.1 7.2 7.4 7.5 7.7 7.9 8.2
GDP per capita ($) 18,488 19,219 20,489 23,192 27,536 26,140 27,708 30,312 32,116
CPI inflation (% year-on-year change, December over December) 1.2 2.4 -0.1 3.3 3.8 3.9 2.3 2.8 2.9
CPI inflation (% change in average index for the year) -0.4 1.3 2.1 0.5 4.6 3.3 2.7 2.7 2.9
Exchange rate (ILS per USD, end-year) 4.32 4.61 4.22 3.86 3.80 3.78 3.62 3.50 3.45
Exchange rate (ILS per USD, average) 4.48 4.48 4.46 4.11 3.57 3.92 3.74 3.56 3.47
(1)
-3.9 -1.8 2.7 3.1 7.4 0.8 9.2 1.2 4.2
Nominal wage growth (% year-on-year change, December over December)
(2)
3.5 1.5 3.0 4.7 0.2 1.3 4.2 4.0 4.5
Central banks base rate (%, end-year) 3.90 4.50 5.00 4.25 2.50 1.25 2.25 3.00 3.75
Fiscal data
Central government fiscal balance (% of GDP) -3.6 -1.8 -0.4 0.4 -2.1 -5.2 -4.1 -3.4 -2.6
Central government primary fiscal balance (% of GDP) 2.9 4.8 6.0 6.4 3.4 0.2 1.3 2.2 3.2
Central government expenditure (% of GDP) 34.9 34.0 33.3 32.4 32.1 32.1 32.2 31.7 31.0
(3)
74.2 70.7 62.4 58.7 54.5 47.7 44.3 46.3 47.5
Balance of payments
Net FDI inflows ($bn) -2.0 1.9 -0.2 0.2 3.7 2.7 -0.5 1.5 2.3
(4)
3.7 4.0 5.0 5.3 4.2 6.5 7.5 5.6 6.3
Foreign debt ($bn) 84.2 77.6 86.5 89.4 86.3 92.1 91.5 92.8 92.8
Public ($bn) 31.1 30.9 33.2 31.9 28.2 31.3 31.1 33.0 33.0
Private ($bn) 53.1 46.6 53.4 57.4 58.1 60.8 60.4 59.8 59.8
(1) Real effective exchange rate; increase indicates appreciation. (2) Annual average of monthly average wages in the economy. (3) Net of central bank FX reserves. (4) Principal repayments
of public and private sector.
Source: Bank of Israel, Central Statistical Bureau, Ministry of Finance, IMF, IFS, Credit Suisse

08 December 2010
Kazakhstan: Out of the woods
A brighter and more stable economic outlook for 2011. Judged by its own heady
standards, GDP growth in Kazakhstan clearly suffered in the aftermath of the global
economic crisis. Notwithstanding the subsequent sharp bounce in headline growth in
2010, the banking sector has continued to struggle. Despite being among the first in the
world to plunge into crisis during the most recent cycle, it is likely to be among the last to
recover. Yet, with supportive commodity prices, renewed capital inflows and the bulk of
the banking-sector restructuring now completed, we believe that a brighter and more
stable economic outlook is in store for 2011 and beyond.
Real GDP growth has slowed in H2 2010, in line with our projection. According to
preliminary data from the Statistical Office, cumulative real GDP growth for the first nine
months of the year declined to 7.5%, from 8.0% by end-H1 2010. The year-on-year rate
thus declined to 6.5% in Q3 2010, from 8.9% in Q2 2010, driven by a weaker
performance in industrial output (where growth was down to 6% yoy, from 12% yoy in
Q2) and agriculture (where output contracted by 17% yoy in Q3 due to adverse weather
conditions, after growth of 4% in Q2). On the other hand, services growth rose to 7.2%
yoy in Q3, from 6.7% yoy in Q2, with growth in the real estate sub-category surging to
8% yoy, from 2% yoy in Q2. We believe that most of these trends continued in Q4, with
a strongly adverse base effect ensuring that overall GDP growth will decline further in
the final quarter of the year. Nonetheless, we estimate that GDP growth will reach some
5.7% for 2010 as a whole, which represents a sharp and impressive bounce from the
1.2% economic expansion in 2009.
We expect gradual strengthening of domestic demand in the coming quarters.
There is no denying that external demand has played the key role in propping up
Kazakhstans economic recovery, as reflected in the sizeable widening of the foreign
trade surplus in recent quarters. In contrast, domestic demand has remained subdued,
with private consumption and investment still constrained by stalled credit extension. We
maintain our view that domestic demand will play an increasingly important role in the
coming quarters, however. Private consumption and investment are likely to be
supported by an overdue, albeit likely gradual, recovery in lending. Robust fiscal
spending is also likely to continue to offer support, with the government planning to hike
public-sector wages by 30% in mid-2011. Given also our constructive forecasts for oil
prices, which envisage an average price for Urals crude of $83/bbl in 2011 and $88/bbl
in 2012, we forecast robust GDP growth of 5.8% next year and 6.0% in 2012.
All eyes remain on the banking sector. For such a favourable growth outlook to
transpire, recovery in the much-maligned domestic banking sector is likely to be essential.
As we have highlighted, recent data appear to provide tentative signs of encouragement.
The banking sectors NPL ratio declined to 33.6% by end-October, compared to a peak of
36.3% in February. The NPL ratio for those banks without restructured obligations (that is,
for the sector excluding BTA, Temirbank and Alliance Bank) also showed signs of peaking
in Q3, but subsequently resumed its upward trend, reaching 19.7% in October. Progress is
likely to remain bumpy in the short term overdue loans by the non-restructured banks
rose by 0.7pps to 18.1% in October, after a drop in the previous month but in general we
believe that the banking sector is showing signs of increasing stabilization.
Rising house prices are supporting the asset quality of banks loan portfolios.
Having bottomed out in Q1 2009, house price inflation has been on a prolonged
recovery trend, with price growth for both new and existing homes entering positive
territory simultaneously for the first time in 28 months in August. Further gains have
been recorded since then, with prices of new houses rising for the fifth consecutive
month in October to take the year-on-year rate to 1.5%, while prices of existing houses
rose by 2.5% yoy in that month. We refrain from drawing definitive conclusions just yet
and note that house prices in Almaty and Astana have remained flat in recent surveys,
with other cities driving the recovery. Nonetheless, we acknowledge that a continuation
of this general trend in the coming months could provide important support to the asset
quality of banks loan portfolios and aid an eventual recovery in lending.
Ivailo Vesselinov
+44 20 7883 8057

08 December 2010
Inflation will decline only gradually in the coming quarters, in our view. In line with
trends elsewhere in the region, rising food prices have pushed CPI inflation higher since the
summer. The headline figure rose to 7.7% yoy in November, edging closer to the upper end
of the official 6%-8% forecast range, compared to this cycles low of 6.5% yoy posted in
August. Food price inflation rose for the fifth consecutive month in November, reaching 8%
yoy. This sub-category took over in August as the key driver behind CPI inflation and
contributed 4pps to the headline figure in November. Further increases in food price and
headline inflation should not be ruled out in the short term, in our view. We expect, however,
that favourable base effects will eventually reverse the upward trend in early 2011. Expected
exchange rate appreciation in the subsequent months is also likely to aid a decline in
inflation, in our view, to 6.5% yoy by the end of next year and to 5.8% yoy by end-2012.
We expect that the central bank will keep its policy rate on hold in the short term.
Notwithstanding the risks from the current upward trend in headline inflation and
potential renewed monetary policy tightening by the Russian central bank, we maintain
our long-held view that the National Bank of Kazakhstan (NBK) will refrain from hiking its
policy rate and will keep it at its current record low of 7.00% at this stage of the cycle.
Indeed, we continue to see scope for moderate rate cuts in the medium term, to 6.50%
by end-2011 and 6.00% by end-2012, as the NBK begins to place greater emphasis on
the exchange rate channel of the monetary policy transmission mechanism.
The tenge will remain supported by a strong basic balance, in our view. Preliminary
data suggest that the current account posted a deficit of $0.1bn in Q3 2010, compared to a
surplus of $2.2bn in Q2. Nonetheless, we estimate that on a 12-month rolling basis the
current account surplus rose to $5.2bn in Q3, or some 4.0% of GDP, from $4.6bn (3.7% of
GDP) in Q2. The foreign trade balance remains the key driver behind the ongoing
improvement in the overall current account, with a 12-month rolling surplus of $29bn in Q3,
up 103% yoy. We believe that the pace of improvement in the foreign trade surplus will
slow next year, due to a more moderate increase in oil prices and an eventual recovery in
domestic consumption. Even so, our central scenario envisages a foreign trade surplus of
$34bn in 2011, which we estimate will push the current account surplus higher to 3.3% of
GDP, from 3.0% in 2010. With projects in the hydrocarbon sector likely to ensure that
annual FDI inflows stay above $8bn in 2011 and 2012, our forecast envisages that the
tenge will be supported by a strong basic balance in the coming quarters.
We continue to project gradual tenge appreciation for 2011. Central bank officials
have signalled that they would like to avoid abrupt exchange rate appreciation in the
short term. NBK Governor Grigory Marchenko appeared to acknowledge in November,
however, that some strengthening of the tenge against the USD would be tolerated by
the central bank next year. Marchenko also confirmed that the NBK would scrap the
tenges trading corridor after March 2011. The current exchange rate regime, which sets
a 127.50-165.00 trading range for USDKZT, was implemented in February 2010 for a
period of one year, so a change in policy from March 2011 would be in line with previous
statements from the domestic authorities. We maintain our projection for steady but
gradual medium-term appreciation of the tenge and keep our end-2011 forecast for
USDKZT at 140.00. We see further tenge gains to 130.00 by end-2012.
The financing outlook for the budget will remain comfortable, we believe. The
government refrained from external debt issuance in 2010, prolonging its decade-long
absence from the international capital markets. The 2011 Republican Budget envisages a
deficit of 2.8% of GDP, which we view as pessimistic, given that it rests on a conservative
assumption of average oil prices of $65/bbl. With a doubling of the oil export duty (to
$40/tonne) and a switch from a 10% flat income tax to a progressive scale planned from
January 2011, we see a likelihood that the republican budget deficit target will be
undershot. In any case, we expect that the general government budget, which includes the
National Fund, will remain in surplus over our forecast horizon. We thus believe that the
government will feel comfortable continuing to rely on domestic financing for the budget
deficit, with any potential attempts to borrow on the international capital markets likely to
be prompted by a desire to create a benchmark for domestic corporates and banks
wishing to borrow abroad rather than by concerns about financing.
08 December 2010
year industrial output growth
Exhibit 212: Industrial output and GDP
proxy
pps, with the exception of industrial output
-15
-10
-5
0
5
10
15
20
Manufacturing
Utilities
Mining
Industrial output, % yoy

0
2
4
6
8
10
12
14
16
18
IP, 3m MA (% yoy)
GDP proxy, 3m MA (% yoy)

Following the initial rebound
from the lows during the
global economic crisis,
domestic growth appears to
have stabilized. High-
frequency indicators reflect
strength in industrial output,
driven by high growth in
manufacturing and mining
production, and suggest
that GDP growth will remain
robust in the short term.
Nonetheless, given adverse
base effects we expect a
moderation for the rest of
H2 2010 and in early 2011.

Source: Haver Analytics, Credit Suisse Source: Haver Analytics, Credit Suisse

Exhibit 213: Contribution to year-on-year real GDP growth
pps
-4
-2
0
2
4
6
8
10
12
Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10E
Goods Services Other*

Services production has
started to play an
increasingly important role
in driving the overall
economic expansion in
recent quarters. GDP
growth reached 6.5% yoy in
Q3 2010, suggesting that
the risks to our full-year
forecast of 5.7% will remain
skewed to the upside. We
project a more stable and
balance growth outlook for
2011 and 2012, with
domestic demand starting
to play an increasingly
important role.

* indirectly measurable financial intermediation services and taxes
Source: Statistical Agency of Kazakhstan, Credit Suisse

Exhibit 214: Domestic credit volume Exhibit 215: Unemployment rate
KZT trn %
0
2
4
6
8
10
12
Oct-07 Jul-08 Apr-09 Jan-10 Oct-10
To households, KZTtrn
To corporates, KZTtrn

5.0
5.5
6.0
6.5
7.0
7.5
Sep-07 Jun-08 Mar-09 Dec-09 Sep-10

Credit extension to both
households and corporates
has remained stalled in
recent months, despite the
improvements in liquidity
and the overall growth
environment. We expect
gradual recovery in the
banking sector next year to
eventually translate into
rising lending to the
economy. Private
consumption has received
some support from the
ongoing rise in disposable
incomes and decline in
unemployment.


08 December 2010
Exhibit 216: Current account and FDI
Exhibit 217: Interest rates and
inflation
4-quarter rolling, % of GDP
-25
-15
-5
5
15
25
35
45
Q3-06 Q3-07 Q3-08 Q3-09 Q3-10E
-10
-5
0
5
10
15
20
Trade balance
Net transfers
Services balance
Income balance
Current account (right)

0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
CPI growth, % yoy
KAZPRIME 3m rate, %
NBK refinancing rate, %

Preliminary data suggest
that the 12-month rolling
current account surplus
rose to 4.0% of GDP in Q3
2010, from 3.7% of GDP in
Q2.The ongoing
improvement has been
driven by a surge in the
foreign trade balance, on
the back of supportive
commodity price trends.
The central bank will need
to maintain a prudent
monetary policy stance in
the face of rising CPI
inflation, in our view.

Source: National Bank of Kazakhstan Source: National Bank of Kazakhstan, Statistical Agency of
Kazakhstan, the BLOOMBERG PROFESSIONAL service

Exhibit 218: Banking sector showing signs of tentative recovery
Non-performing loans (AFN definition*)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
NPLs, KZTbn (right)
NPLs, % of total loans
NPLs, % of total loans (excluding banks with restructured obligations)

An upward trend in house
prices is providing a boost
to the asset quality of
banks loan portfolios. The
banking sectors NPL ratio
peaked in February 2010,
falling to 33.6% by end-
October. Progress is likely
to be bumpy in the short
term, however. The NPL
ratio for those banks without
restructured obligations (the
sector excluding BTA,
Temirbank and Alliance
Bank) has continued to
climb higher.

*The Kazakh financial services supervisor (AFN) defines NPLs as the sum of loans classified as Doubtful 5, Loss, and provisions made on
pooled loans (i.e., those which are too small to classify individually)
Source: AFN, Credit Suisse

Exhibit 219: Debt service payments Exhibit 220: FX reserves and Oil Fund
$bn $bn
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
Banks
Other sectors

0
10
20
30
40
50
60
70
National Fund assets
NBK gross FX reserves
Total reserves

The external debt burden
on the private sector has
declined following the
restructuring of banks
foreign obligations. The
central bank has continued
to resist appreciation
pressures on the tenge, in
the process replenishing its
FX reserves. Elevated oil
prices have boosted asset
accumulation to the
National Fund. We expect a
continuation of these trends
in 2011 and 2012.

Source: National Bank of Kazakhstan Source: National Bank of Kazakhstan

08 December 2010
Kazakhstan: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

Real GDP growth (%) 9.6 9.7 10.7 8.7 3.3 1.2 5.7 5.8 6.0
Growth in real fixed investment (%) 22.5 28.1 29.7 17.8 1.7 1.9 3.9 4.0 4.1
Nominal GDP ($bn) 43.2 57.1 81.0 104.8 133.4 109.2 123.6 142.1 168.4
Population (mn) 15.1 15.2 15.4 15.6 15.8 16.0 16.3 16.5 16.8
GDP per capita ($) 2,863 3,753 5,262 6,736 8,457 6,820 7,581 8,615 10,026
Exchange rate (KZT per USD, end-year) 130.00 133.77 127.00 120.30 120.77 148.46 147.40 140.00 130.00
Exchange rate (KZT per USD, average) 136.04 132.88 126.09 122.55 120.30 147.50 147.35 143.67 134.94
(1)
6.2 6.1 0.6 10.3 11.7 -19.1 10.6 3.3 6.0
(2)
22.5 20.2 19.7 28.1 16.2 14.2 14.0 15.2 14.7
Refinancing rate (%, end-year)
(3)
7.00 8.00 9.00 11.00 10.50 7.00 7.00 6.50 6.00
Fiscal data
(4)
2.0 5.1 7.4 4.4 1.8 -1.4 1.5 1.7 2.1
General government primary balance (% of GDP)
(4)
2.6 6.3 7.7 4.6 2.2 -1.0 2.0 2.3 2.7
(4)
22.6 27.4 22.3 26.4 33.9 31.7 30.3 30.0 29.1
(5)
0.4 -3.9 -5.6 -12.0 -11.8 -8.7 -8.7 -8.3 -4.2
(6)
21.0 24.7 32.5 41.0 33.5 35.5 34.2 34.4 33.4
(6)
81.1 52.3 76.5 58.8 2.2 6.2 9.0 12.8 8.0
Balance of payments
Current account balance ($bn) 0.3 -1.1 -1.9 -7.2 6.3 -4.2 3.7 4.7 5.6
Current account balance (% of GDP) 0.8 -1.8 -2.4 -6.9 4.7 -3.9 3.0 3.3 3.3
(6)(7)
1.5 3.2 2.5 11.4 15.9 19.4 9.7 10.4 16.0
Foreign debt ($bn) 32.9 44.0 74.6 97.4 108.2 113.7 114.4 123.1 132.5
Public ($bn) 3.3 2.2 3.1 2.1 2.2 3.7 2.9 3.9 4.3
Private ($bn)
(7)
29.6 41.8 71.4 95.3 106.1 110.0 111.5 119.2 128.2
National Oil Fund of Kazakhstan ($bn) 5.1 8.1 14.1 21.0 27.5 24.4 31.5 39.0 44.0
(1) Real effective exchange rate, increase indicates appreciation. (2) Annual average of monthly average wages in the economy. (3) The central bank 1-month deposit rate equals half of the
refinancing rate and until the banking crisis in the summer of 2007 represented a more effective policy instrument. (4) Consists of the state budget and the National Oil Fund. (5) Net of National
Oil Fund assets. (6) To public and private sector. (7) Includes intercompany debt.
Source: National Bank of Kazakhstan, Statistical Agency of Kazakhstan, Ministry of Finance, IMF, Credit Suisse
08 December 2010
Nigeria: Elections offer hope
Nigeria has continued to grow strongly in the past two years. The recovery in oil
production has boosted real GDP growth so far this year, and we expect it to contribute
0.5pp to estimated real GDP growth of 7.6% in 2010 compared with the 0.2pp it
deducted from real GDP growth of 6.7% last year. However, the agriculture sector and
sizable government spending have been the main drivers of 7%-8% yoy real GDP
growth in the last several quarters.
While the recovery in oil production occurred despite ongoing unrest in the Niger
Delta, the nearing parliamentary and presidential elections (9 April 2011) will likely
dampen the scope for the oil sector to boost economic growth in 2011. Increased
militant activity both in the run-up and aftermath of the election process should leave oil
production largely flat on average in 2011 compared with estimated 3.4% growth in
2010. However, we think that a 9% pickup in non-oil GDP growth in 2011 (up from an
estimated 8.4% in 2010), boosted by election-related spending, will offset the stagnation
in oil output and keep real GDP growth largely unchanged in 2011.
The medium-term growth outlook is encouraging, as 2012 will see a new
government that we think will usher in a stronger policy framework. The current
key policymakers are very capable, in our view, but require a stronger legislative and
executive framework in order to deliver credible results. Growth in 2012 will likely be
supported by the new governments focus on its priority areas the oil sector and
infrastructure. So while the unrest in the Niger Delta is unlikely to be resolved in the near
term, by 2012 we envisage an environment (much like that of most of 2010) in which the
region will be sufficiently calm to allow oil production to rise. We expect fiscal spending
growth to slow in 2012, but we believe non-oil GDP growth should slow only modestly to
around 8.7% in 2012 as a result of the likely reorientation of government spending
toward infrastructure investment. The Asset Management Company of Nigeria (AMCON)
and past banking reforms can help boost lending to the real sector in the longer term,
but we think there remain significant obstacles to the realization of this outcome in the
medium term.
Inflation remains very high in Nigeria despite a recent revision to the CPI basket
that downgraded the weight of food items to 50.1% from 63.8% previously. Fiscal
policy remains very loose and the election cycle will likely do little to curb unending
inflation pressures as the 2011 presidential and parliamentary elections will be very
closely contested. Inflation fell to 13.4% yoy in October from 13.7% yoy in September.
Inflation peaked at 15.6% yoy in February because of rising non-food inflation and has
been on a bumpy modest downtrend since then. A favorable fall harvest drove the more
recent moderation. We think the effect of the harvest and favorable base effects related
to non-food prices will continue to pull inflation lower to 12% by the end of this year.
We think inflation is unlikely to fall into single digits in the medium term, but after
election-related spending boosts inflation to 13.5% by end-2011, we foresee a fall
to 11.5% in 2012. This forecast is based primarily on our expectation of favorable base
effects related to the elections and our view that policy rate hikes will help curb inflation
at the margin. The MPC began to tighten monetary policy in September, citing the need
to contain inflationary pressures stemming from economic growth and loose fiscal policy.
Contrary to our expectations, the MPC left the policy rate on hold at 6.25% in November.
However, we think its November statement underscored the MPCs tightening bias,
which supports our expectation that the MPC will hike the policy rate to 7.0% in 2011.
The monetary policy tightening cycle is likely to continue into H1 2012 with 50bps of
hikes to 7.50%, before slowing inflation prompts the MPC to end the hiking cycle.
Based on a revised balance of payments methodology agreed with the IMF, the
current account balance remained in surplus throughout the global crisis. The
current account surplus was 13.1% of GDP in 2009 and we think that the recovery in the
oil price this year will help to boost the current account surplus back up to around 17.7%
of GDP. Our medium-term outlook for the oil price suggests that the value of exports will
continue to rise, but we think that election-related spending will also boost imports in
2011 and leave the current account surplus slightly lower as a share of GDP in 2011 at
16%. In 2012, the new administrations infrastructure spending should continue to boost
imports alongside a more modest pickup in the oil price. We expect this to erode the
current account surplus further to 14.3% of GDP in 2012 from 16% of GDP in 2011.
Jacqueline Madu
+44 20 7883 4216

08 December 2010
However, even with the strong current account surpluses, the Q2 balance of
payments data suggest that capital outflows will raise the risk of further naira
depreciation in the medium term. In Q2 2010 the four-quarter rolling current account
surplus widened to 18.8% of GDP from 16.9% of GDP in Q1, and up from 13.1% of GDP
in 2009. However, net FDI inflows were just 2.1% of GDP in the four quarters to Q2,
down from 2.5% of GDP in Q1 and 3.4% of GDP in 2009. Meanwhile modest other
investment outflows and net portfolio inflows continued. Notably, in the four quarters to
Q2, net errors and omissions outflows remained a substantial 24% of GDP. The balance
of payments data show significant double-digit net errors and omissions outflows for
each of the last five years. These data were consistent with naira depreciation since
2008 and the central banks drawdown of FX reserves.
The size of unclassified outflows makes it difficult to draw strong conclusions on
the outlook for external flows, but the continued decline in FX reserves through
November 2010 suggests unclassified outflows continued into Q4. We expect an
end to significant other investment outflows by 2011, as the banking crisis is near
resolution. However, we do not expect a meaningful pickup in portfolio investment to
persist after the government issues its Eurobond in Q4 since the interest rate on
government bonds remains very low. Nor do we think that the uncertainty surrounding
the election period will be associated with a reversal of the significant unclassified
outflows next year, which is likely to prompt further naira weakness, especially during
Q2. Thus, we expect the naira to weaken to about USDNGN155 by end-2011 from the
USDNGN150 we envision for the end of 2010. We see some scope for modest naira
appreciation to USDNGN148 in 2012 under our assumption that the new government
will bring some political stability and coherency to macroeconomic policy.
We do not expect much improvement in fiscal prudence during the election
period. Nigeria felt the impact of the global crisis primarily through lower oil prices,
which drove the fiscal balance further into deficit in 2009. Furthermore, over the last few
years, we have observed a steady weakening in Nigerias fiscal credibility; the three tiers
of government have depleted the Excess Crude Account (to which the government
accrued oil revenues in excess of a budget oil price). But although we expect spending
to rise by around 22% yoy this year, we estimate that the fiscal deficit will fall to around
6.6% of GDP this year, up from a deficit of 10.5% of GDP in 2009 thanks to a recovery
in oil prices and oil production. States and local governments have had to curb their
spending because of financing constraints, but we see little sign of spending restraint in
discussions about the 2011 federal government budget and spending is likely to be high
in H1 2011 because of the elections. Thus, we expect the fiscal deficit to widen next
year to around 7.4% of GDP on the back of 18% yoy growth in fiscal spending in 2011
and more modest growth in oil income than in 2010 (we assume a Bonny light oil price
of $88/bbl and unchanged oil production). We see spending growth slowing to 8% yoy in
2012 as modest efforts at fiscal prudence resume with a new government. Under an oil
price assumption of $93/bbl, we project a fall in the fiscal deficit to 6.2% of GDP in 2012.
We expect the depletion of the Excess Crude Account (a key source of deficit
financing in the past few years) earlier this year to lead to a steady increase in
gross general government debt in the medium term. The upcoming issuance of a
$500mn Eurobond (0.2% of GDP) will have a small impact on government debt ratios,
and external debt should remain low at only 2.3% of GDP in 2010. But we have already
seen a rise in banking sector credit to the government since 2009 as a source of
financing for the government alongside a sharp rise in government bond issuance. We
expect total government debt to rise to 19% of GDP by end-2010 from 15.5% of GDP in
2009 and further to 23.7% of GDP by end-2011. These are still relatively low levels, but
given the lack of spending restraint we foresee, we think the recovery of the oil price will
help to slow the pace of increase in the debt-to-GDP ratio by end-2012 to 26.6%.
We see some scope for a full ratings downgrade by Fitch, to match S&Ps B+
rating on Nigeria. Fitch downgraded the outlook on Nigerias local (BB) and foreign
currency (BB-) credit ratings on 22 October to negative from stable, citing deterioration
in fiscal management. In our view, the action was overdue. It comes over a year after
S&P downgraded Nigerias local and foreign currency credit ratings to B+ (stable) from
BB- (negative). We think the risk of a full downgrade to B+ by Fitch cannot be ruled out,
although the ratings agency may wait to gauge the new governments policy credibility.
08 December 2010
Exhibit 221: Supply-side contributions
to year-on-year real GDP growth Exhibit 222: Real GDP growth
pps, with the exception of real GDP pps, with the exception of real GDP
-2
0
2
4
6
8
10
2004 2005 2006 2007 2008 2009
Agriculture Wholesale
Services Construction
Oil Mining&mfg
Real GDP*

-2
0
2
4
6
8
10
12
2002 2004 2006 2008 2010F 2012F
Non-oil
Oil
Real GDP (% yoy)

A recovery in the oil sector
helped to boost growth in
2009 and is set to support
growth in the medium term
once the election period has
ended.
Agriculture and services are
key sectors of the non-oil
economy. We expect pre-
election spending to help
sustain non-oil growth at the
level of 8%-9% in the
medium term. Central bank
lending initiatives for
agriculture should also
support the sector at the
margin.

* % year-on-year change

Exhibit 223: Credit to the private sector and broad money supply
0
20
40
60
80
100
120
Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10
Credit to private sector
M2

The banking sector is
recovering, although credit
to the private sector
remains weak. The new
Asset Management
Company of Nigeria
(AMCON) should help to
support lending to the real
sector by helping the worst
banks in the system repair
their balance sheets.
However, this outcome is
not likely in the medium
term given various barriers
faced in lending to the real
economy. Thus, credit
growth is unlikely to return
to 2007/08 levels.

Source: Central Bank, Credit Suisse

Exhibit 224: CPI inflation and the policy rate
-5
0
5
10
15
20
25
Food CPI (% yoy)
Headline CPI (% yoy)
MPR (%)*

Inflation should moderate
further in the last few
months of the year because
of favorable base effects
related to food prices.
However, spending during
the upcoming election
period is likely to boost
inflation by end-2011 to
13% from around 12% at
end-2010.
We expect the MPC to
resume the tightening cycle
in 2011, hiking the policy
rate by a total of 125bps
over the next several
quarters from 6.25% at
present.

Source: Central Bank, National Bureau of Statistics, Haver Analytics

08 December 2010
Exhibit 225: Fiscal balance and projected financing sources
% of GDP
-5
0
5
10
15
2007 2008 2009 2010F 2011F 2012F
Government bonds Net credit from banking sector
External borrowing Excess crude account
Fiscal deficit

A pickup in the price of oil
and a recovery in oil
production have likely
helped push the fiscal
deficit down to around 5.5%
of GDP in 2010 from an
estimated 10.5% of GDP in
2009.
With the Excess Crude
Account now depleted and
the elections prompting
increased spending in 2011,
we expect government
borrowing to pick up,
bringing the government
debt-to-GDP ratio above
20% of GDP by 2011.

Source: Central Bank, IMF IFS, Debt Management Office, Credit Suisse

Exhibit 226: Current account and its
components
Exhibit 227: Capital account and its
components
% of GDP % of GDP
-20
-10
0
10
20
30
40
50
60
2004 2005 2006 2007 2008 2009
Net transfers
Income balance
Services balance
Trade balance

-40
-30
-20
-10
0
10
20
30
2004 2005 2006 2007 2008 2009
Errors/omm
Other inv
Net FDI
Net portfolio
Change in reserves*

The current account surplus
remains high and in double
digits. The recovery in the
oil sector is likely to boost
the current account further
in the next few years.
However, capital account
outflows have been
significant in the past and
have remained high in the
four quarters to Q2 2010,
and we think the elections
are unlikely to improve the
situation. Late 2011 is the
earliest we think we might
see a significant turnaround
in capital outflows.

Source: IMF IFS *A positive number indicates a depletion of reserves
Source: IMF IFS

Exhibit 228: FX reserves, oil price and USDNGN
20
40
60
80
100
120
140
115
130
145
160
FX Reserves (US$bn)
Bonny light oil price (US$)
USDNGN (inverted, right axis)

The size of unclassified
outflows makes it difficult to
draw strong conclusions on
the outlook for external
flows. But we think
uncertainty surrounding the
election period is unlikely to
be associated with reversal
of the significant
unclassified outflows next
year.
Despite the positive outlook
for oil prices in the medium
term, we see scope for only
modest naira appreciation
following the elections as a
result.

Source: Central Bank, the BLOOMBERG PROFESSIONAL
TM
service, Credit Suisse

08 December 2010
Nigeria: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%)
10.5 6.5 6.0 6.2 6.2 6.8 7.6 7.6 8.0
7.6 5.8 8.3 9.3 8.4 7.4 7.2 7.4 7.5
Nominal GDP ($bn)
85.2 110.2 144.5 164.9 203.2 164.9 206.1 238.5 287.0
Population (mn)
132.6 136.5 140.4 144.5 148.5 152.6 156.4 160.3 163.8
GDP per capita ($)
642.7 807.5 1,029 1,141 1,368 1,081 1,318 1,488 1,752

10.0 11.6 8.5 6.6 15.1 13.9 12.0 14.4 11.5
15.0 17.9 8.2 5.4 11.6 12.5 13.8 13.9 12.2
Exchange rate (NGN per USD, end-year)
132.4 130.4 128.8 117.9 137.9 149.5 150.5 155.0 148.0
Exchange rate (NGN per USD, average)
133.9 132.2 128.5 125.3 119.6 149.8 150.9 153.8 148.7
(1)

7.3 14.4 2.3 6.6 1.2 -2.6 6.0 -0.1 7.5
Central bank's policy rate (%, end-year)
15.00 13.00 10.00 9.50 9.75 6.00 6.50 7.00 7.50
Fiscal data

8.3 9.4 7.0 -4.8 -4.5 -10.5 -6.6 -7.4 -6.2
10.4 12.3 8.4 -3.7 -3.0 -8.4 -4.9 -5.8 -4.8
27.8 29.0 27.1 30.0 29.6 30.7 29.8 29.8 27.7
Oil-related revenues (% of total government revenues)
81.3 85.2 83.4 70.6 74.9 63.8 69.9 67.0 62.9
Federal government debt (% of GDP, end-year)
(2)

53.7 34.5 11.9 12.4 11.7 15.5 18.9 23.7 26.6

19.8 16.7 19.8 28.1 37.7 43.6 38.8 37.8 37.4
14.0 7.7 50.7 58.1 57.8 17.5 12.0 15.0 15.0
17.7 15.9 4.1 13.0 20.4 32.0 33.0 33.6 33.2
-5.7 14.5 -67.4 256.6 84.2 59.6 30.0 20.0 15.0
13.4 13.8 13.8 24.5 33.2 41.3 34.8 31.9 30.1
26.6 30.8 27.8 97.1 59.4 26.6 6.0 8.0 10.0
Balance of payments

44.7 51.7 41.0 40.9 42.3 37.3 46.4 42.4 39.1
24.6 29.6 24.1 27.9 31.3 29.0 28.5 27.6 26.1
38.8 49.6 3.9 13.9 27.2 -28.3 55.4 5.7 10.9
-4.0 55.5 6.5 32.2 38.4 -24.8 23.0 11.8 13.7
16.8 36.5 36.8 27.6 28.6 21.7 42.5 45.0 49.3
19.8 33.1 25.5 16.8 14.1 13.1 20.6 18.9 17.2
1.9 3.2 5.2 6.4 5.1 5.6 3.0 2.5 4.5
(2)

1.8 8.9 5.0 1.0 0.8 0.7 0.5 0.4 0.4

Foreign debt ($bn)
36.1 27.0 3.7 4.8 5.1 5.4 6.1 7.1 8.1
Public ($bn)
(2)

35.9 26.9 3.5 3.4 3.7 3.9 4.7 5.2 5.7
Private ($bn)
0.2 0.2 0.2 1.4 1.4 1.4 1.4 1.9 2.4
42.3 24.5 2.6 2.9 2.5 3.3 3.0 3.0 2.8
111.1 43.0 4.3 4.3 3.0 5.3 3.1 3.0 2.5
Central bank gross non-gold FX reserves ($bn)
16.9 28.3 42.0 51.3 52.8 42.4 32.5 31.5 33.5
(1) Real effective exchange rate, increase indicates appreciation. (2) Narrow definition that excludes debt of states and local governments. Nigeria reached a deal with the Paris Club in October
2005, which allowed for the paying of arrears and a buyback of debt totaling $12bn in payments made at the end of 2005 and early 2006; the remaining $18bn in debt was written off. At the end
of 2006 Nigeria also called $1.4bn of its par bonds
Source: the BLOOMBERG PROFESSIONAL Service
TM
, Central Bank of Nigeria, National Bureau of Statistics, Ministry of Finance, Debt Management Office, Nigerian National Petroleum
Corporation, IMF, Haver Analytics, Credit Suisse

08 December 2010
Poland: Full steam into election year
Real GDP continued to grow at a steady pace in Q3 2010. It was up 1.3% qoq in
seasonally adjusted terms, broadly unchanged from 1.2% qoq in Q2. While household
and government spending growth picked up in Q3, investment spending growth was
sluggish and exports contracted due to a weaker external environment during that
quarter. The pace of growth in household spending increased from 0.9% qoq in Q2 to
1.1% qoq in Q3, and the pace of growth in government spending picked up from 1.2%
qoq in Q2 to 1.6% qoq in Q3. Meanwhile, however, investment spending slowed sharply,
growing a mere 0.6% qoq in Q3 down from 13.5% qoq in Q2. Export growth (in volume
terms) turned negative in Q3, to -2.0% qoq from +3.8% qoq in Q2, while import growth
decelerated from 1.9% qoq in Q2 to 0.5% qoq in Q3.
We forecast that full-year real GDP growth will be around 3.8% in 2010, 4.0% in
2011 and 3.9% in 2012. In our view, domestic demand will continue to drive real GDP
growth and the contribution of net exports will remain limited. We estimate that in 2011
household spending will grow 2.0% and investment spending 2.2%. Household
spending growth will likely be sustained by the ongoing improvement in the labor market.
The unemployment rate peaked at 13% in February and receded to 11.5% by October,
while employment in the enterprise sector has been growing since the beginning of
2010. Average gross nominal wages in the corporate sector rose 3.9% yoy in October,
which translated into a real wage increase of 1.0% yoy. We assume that nominal wage
growth will stabilize around 4% yoy, employment growth around 2% yoy and domestic
credit growth around 10% yoy in 2011 and 2012. This trajectory would translate into a
decline in unemployment to around 9% by end-2012, according to our estimates.
Strong growth performance continues to attract steady capital inflows, which
amounted to around $45bn (9.6% of GDP) in the 12 months to September,
although the appreciation pressure on the zloty remained limited. On a 12-month
rolling basis, net portfolio investment inflows amounted to around 6.0% of GDP and net
other investment inflows (which mainly comprise cross-border loans) reached 2.6% of
GDP in September. Net FDI inflows decreased from 2.1% of GDP in June to 1.2% of
GDP in September, on a 12-month rolling basis. We believe that net portfolio and FDI
inflows will remain supported by Polands strong growth performance and the
governments privatization plan (which could raise around PLN 30bn during 2011-2013).
However, unidentified FX outflows, which reached about $17.5bn (3.7% of GDP) in the
12 months to September, will probably continue to limit the appreciation pressure on the
zloty, in our view. These unidentified FX outflows (net errors and omissions) might be
arising either from the current or the financial account of the balance of payments.
Furthermore, Polands 12-month rolling current account deficit edged higher from 2.1%
of GDP in April to 2.9% of GDP in September mainly due to a decrease in current
transfers.
We expect the zloty to strengthen gradually against the euro. Following the central
banks direct intervention in the FX market in April, Central Bank Governor Belka, stated
on various occasions that the central bank is not targeting any exchange rate level or
range, but he did not rule out further FX intervention. We maintain our view that direct
intervention in the FX market remains a possibility if the zloty strengthens or weakens
sharply. Nonetheless, we believe that the zloty remains exposed to spill-over risks from
concerns related to the euro area and setbacks in global risk appetite. However, in July,
the IMF approved a one-year Flexible Credit Line (FCL) arrangement for Poland in the
amount equivalent to SDR13.69bn (about $20.4bn). Although the Polish authorities do
not intend to draw on these funds, the FCL provides valuable insurance against external
financing risks for Poland, in our view. Our EURPLN forecasts are 3.90 for end-2011
and 3.80 for end-2012.
Gergely Hudecz
+44 20 7883 9589

08 December 2010
CPI inflation will remain around 3.0% yoy for most of 2011, but will moderate to
around 2.5% yoy by the end of the year, in our view. Inflation was on a downtrend
between April 2009 and August 2010 moderating from 4.0% yoy to 2.0% yoy, but
headline CPI inflation started to pick up in September and reached 2.8% yoy in October,
mainly driven by rising food prices. Core inflation (excluding food and energy prices) has
remained subdued at 1.2% yoy until October, but we believe that price pressures are
building up, as the economy operates at about capacity now and the labor market
continues to recover. However, we project that the favorable base effect for headline
inflation will probably offset the increase in core inflation throughout next year and keep
headline inflation close to 3.0% yoy. Furthermore, we believe that year-on-year CPI
inflation will grind close to the central banks 2.5% yoy target towards the end of 2011, if
the MPC embarks on a tightening cycle in the near term, as we forecast.
We believe that the MPC might hike the policy rate as early as this month. Although
concerns about a slowdown in economic growth and zloty appreciation prevented the
MPC from tightening monetary policy so far this year, we anticipate that the MPC is
ready to hike the policy rate as soon as core inflation shows signs of picking up. We
anticipate that the MPC will hike the policy rate in the coming months (possibly as early
as this month) and then will continue the tightening cycle throughout next year, taking
the policy rate to 4.50% by end-2011.
In contrast to its regional peers, Poland has not tightened fiscal policy in 2010.
The central governments budget deficit widened from 1.8% of GDP in December to
3.0% in October on a 12-month rolling basis. This outcome was in line with the
governments revised fiscal plan, which envisaged that the central governments budget
deficit will rise to 3.7% of GDP in 2010, mainly due to lower revenues. In the meantime,
the government projected that the general governments budget deficit would reach
7.9% of GDP in 2010 and would remain around 6.5% of GDP in 2011. We believe that
the general governments deficit might be lower than projected in 2010 (around 7.3% of
GDP), but will probably remain above 6.5% of GDP in 2011, in the absence of
meaningful corrective measures. We believe that the parliamentary elections due in
autumn 2011 increase the risk of expenditure slippages, and we project that there will be
only a modest decline in the general government budget deficit to 6.8% of GDP in 2011.
We project that in 2011 Polands public debt is coming close 55% of GDP
according to its national definition and 60% of GDP according to the EUs ESA95
definition. However, in our view, the risk stemming from the breaches of the above-
mentioned thresholds in 2011 is modest, as it would take time to establish whether the
debt thresholds have been actually breached, and the possible corrective fiscal
measures would only have a meaningful impact from 2012. Furthermore, the
government is considering changes to the pension systems in an effort to reduce the
impact of the current pension schemes on the general government deficit and debt
levels. The government has several options on the table, and its final decision may
depend on the outcome of the EU summit on 16 December. We believe that a
compromise solution that will allow Poland to exclude some or all of the costs of its
pension reform from the calculation of its government debt is the most likely outcome.
Polands long-term foreign currency sovereign debt is currently rated A2 by
Moodys and A- by Fitch and S&P, all with a stable outlook. We believe that the
proven resilience of Polands economy to the global crisis and its favorable outlook
argue for a more positive assessment of Polands sovereign ratings, but a rating
upgrade remains contingent on further fiscal consolidation, which appears unlikely in the
near term, in our view.
08 December 2010
year real GDP growth
2000 prices, seasonally adjusted pps, with the exception of GDP
-1
0
1
2
3
Q3-09 Q1-09 Q3-09 Q1-10 Q3-10
-3
0
3
6
9
% qoq change

-6
-4
-2
0
2
4
6
8
10
12
Q3-08 Q1-09 Q3-09 Q1-10 Q3-10
Net exports
Inventories
Investment spending
Government spending
Household spending
GDP, % yoy
Real GDP continued to
grow at a steady pace in Q3
2010. It was up 1.3% qoq in
seasonally adjusted terms,
broadly unchanged from
1.2% qoq in Q2.
We forecast that full-year real
GDP growth will be around
3.8% in 2010, 4.0% in 2011
and 3.9% in 2012.

Source: GUS Source: GUS, Credit Suisse

Exhibit 231: Retail sales, real wages
and employment
Exhibit 232: Manufacturing PMI and
sold industrial production
-5
0
5
10
15
20
Oct-08 Oct-09 Oct-10
Retail sales
Real wages
Employment

120
125
130
135
140
145
150
May-09 Nov-09 May-10 Nov-10
40
45
50
55
60
65
Sold industrial output,
sa 2005=100
Manufacturing PMI,
right scale
Employment PMI, right
scale

In our view, domestic
demand will continue to
drive real GDP growth.
Employment in the
enterprise sector is growing
since the beginning of 2010,
and real wages increased
1.0% yoy in October.
Sold industrial output grew
3.0% qoq in Q3 2010,
exceeding its pre-crisis
peak by 3.5%, but took a
breather in October
contracting 0.6% mom, in
seasonally adjusted terms.

Source: GUS, Credit Suisse Source: GUS, PMI Premium

6
7
8
9
10
11
12
13
14
15
16
-8
-6
-4
-2
0
2
4
6
8
10
12
Foreign trade balance, 12-m
rolling % of GDP, right scale
Exports, sa bn
Imports, sa bn

-8
-6
-4
-2
0
2
4
6
8
10
Transf ers balance
Income balance
Services balance
Trade balance

The foreign trade deficit
narrowed from 7.2% of GDP
in 2008 to 3.0% of GDP in
2009 and remained
contained on a 12-month
rolling basis since end-2009.
The 12-month rolling current
account deficit was 2.9% of
GDP in September, and we
project that it will widen to
3.0% of GDP by end-2010.

Source: GUS, Credit Suisse Source: National Bank of Poland, Credit Suisse
08 December 2010
Exhibit 236: Contributions to
12-month rolling, % of GDP pps, with exception of core inflation
-4
-2
0
2
4
6
8
10
Direct investment
Other investment

-1
0
1
2
3
4
5
6
7
8
Oct-09 Apr-10 Oct-10
Other components
Transport
Housing
Alcohol and tobacco
Food
Core inflation, % yoy

Net FDI inflows moderated
somewhat in Q3 2010, but
other investment inflows
started to pick up.
Inflation was on a
downtrend between April
2009 and August 2010, but
headline CPI inflation
started to pick up in
September, mainly driven
by rising food prices.

Source: National Bank of Poland, Credit Suisse Source: GUS, Credit Suisse

0
1
2
3
4
5
6
7
8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
4.8
5.0
CPI, % yoy
NBP policy rate, %
EURPLN, right scale

We project that CPI inflation
will remain around 3.0% yoy
for most of 2011, but will
moderate to around 2.5%
yoy by the end of the year.
We anticipate that as soon
as core inflation shows
signs of picking up, the
MPC will be ready to tighten
monetary policy.

Source: the BLOOMBERG PROFESSIONAL service, GUS, National Bank of Poland

budget Exhibit 239: Government debt
16
18
20
22
24
-4
-3
-2
-1
0
1
2
3
4
Balance, right scale
Expenditures
Revenues

30
40
50
60
70
80
90
100
2008 2010E 2012F 2014F
Assuming no changes to
the pension system
Assuming changes to the
pension system

In contrast to its regional
peers, Poland has not
tightened fiscal policy in
2010, and we forecast that
the general governments
deficit will remain around
7.3 % of GDP in 2010.
We project that in 2011
Polands public debt is
coming close 55% of GDP,
according to its national
definition and 60% of GDP,
according to the ESA95
definition used by the EU.

Source: Ministry of Finance, Credit Suisse Source: Eurostat, Credit Suisse

08 December 2010
Poland: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 5.3 3.6 6.2 6.8 5.0 1.8 3.8 4.0 3.9
Nominal GDP ($bn) 253.0 304.1 341.6 425.1 528.3 430.1 477.2 527.3 614.9
Population (mn) 38.2 38.2 38.1 38.1 38.1 38.2 38.2 38.2 39.2
GDP per capita ($) 6,623 7,961 8,966 11,157 13,866 11,259 12,491 13,803 15,686
Exchange rate (PLN per EUR, end-year) 4.08 3.85 3.83 3.60 4.15 4.11 4.00 3.90 3.80
Exchange rate (PLN per EUR, average) 4.54 4.02 3.90 3.78 3.52 4.33 3.99 3.94 3.83
Exchange rate (PLN per USD, average) 3.66 3.23 3.10 2.76 2.39 3.12 3.00 2.89 2.64
(1)
13.9 2.2 0.0 6.2 -7.5 -0.2 -0.2 3.7 3.0
7-day NBP reference rate (%, end year) 6.50 4.50 4.00 5.00 5.00 3.50 3.75 4.50 4.50
Fiscal data
(2)

General government primary balance, ESA95 (% of GDP) -2.9 -1.3 -1.0 0.4 -1.5 -4.5 -5.5 -4.5 -3.5
Balance of payments
External debt amortization ($bn)
(3)
25.5 29.1 30.4 43.8 33.9 12.7 26.2 20.3 22.7
Foreign debt ($bn)
(4)
104.2 121.3 144.2 188.7 265.2 228.8 265.9 286.1 290.0
Public ($bn)
(5)
57.9 60.8 69.0 87.5 70.1 93.1 98.0 104.7 112.0
Private ($bn) 46.3 60.5 75.2 101.3 195.1 135.7 167.9 181.3 178.0
Central bank official reserve assets ($bn) 36.8 42.6 48.5 65.8 62.2 79.6 101.4 108.8 120.0
(1) Real effective exchange rate (CPI-deflated), increase indicates appreciation. (2) ESA95 budget balances represent the consolidated fiscal balance of the general government on an accrual
basis while the central government balance has a narrower definition and reported on a cash basis. (3) Scheduled amortizations of medium- and long-term external debt of both the public and
private sector. (4) Liabilities vis--vis non-residents (i.e., includes FX-denominated and local-currency debt). (5) Includes government and central bank.
Sources: GUS, Ministry of Finance, National Bank of Poland, IMF, JEDH, the BLOOMBERG PROFESSIONAL service, Haver Analyitcs, Credit Suisse

08 December 2010
Qatar: Energizing the non-hydrocarbon economy
Qatar is close to realizing its LNG capacity target. After facing project overheating
earlier in the decade during the late Gulf boom and construction delays caused by the
global financial crisis in 2009, Qatar will soon close the book on its large and fast-paced
LNG expansion plan that ultimately envisions lifting production capacity to 77mn tons
per year by 2011 from 36.7mn tons per year in 2009 and asserting the emirate as one of
the world's leading suppliers of natural gas. The government expects the last of Qatar's
mega-trains to come on-stream sometime in Q1 2011.
We revised our 2010 real GDP growth forecast lower to 16.7% from 17.5%
published in June. This is because of several strategic construction delays and
maintenance to already-operational trains. Qatar is still poised to take the title as the
fastest-growing economy in the world, as it sees a 23.8% yoy increase in hydrocarbon
sector production this year. Other factors also boosted economic activity this year:
including higher global fuel prices (averaging $78/bbl in our baseline forecast), stronger
local consumer confidence, increased fiscal spending, and a rebound in investor
sentiment toward the Gulf region following Dubai Worlds debt restructuring deal.
Overall real GDP growth should remain in double digits in 2011, in our view, at
12.8% yoy. Hydrocarbon sector growth will slip from its 2010 high as the final mega-
train comes on line and OPEC remains reluctant to raise the crude-oil output ceiling for a
second consecutive year. Nevertheless, we expect real hydrocarbon sector growth will
remain robust at 15.1% yoy next year. In 2012, the OPEC will likely relax supply
constraints as the global recovery gains traction and oil prices rise further. Crude-oil
production will thus emerge as a key growth catalyst in the hydrocarbon sector (given
the official moratorium on new LNG development projects through 2014). We expect oil
output to increase 3.7% yoy in 2012, to 838,000 bpd. Boosted by non-hydrocarbon
sector growth, we forecast real GDP growth of 8.0% in 2012.
The non-hydrocarbon sector should grow in the double-digits over the medium
term, accelerating from around 9.3% in 2010 to 10% in 2011 and 10.7% by 2012.
Higher oil prices, strengthening external demand, and strong fiscal spending should
bolster non-hydrocarbon economic activity in the coming years. We expect local
authorities to use incoming oil and gas revenues to diversify the economy and further
develop the midstream and downstream components of the hydrocarbon sector. The
property market will be a drag on the economy in the short term though, as a glut of
supply and persistently tight credit conditions suppress sale prices and delay
development projects. We envision that slackening credit conditions and greater parity in
the real estate market will eventually allow growth in the non-hydrocarbon sectors to
overtake that in the hydrocarbon sector by 2012, which we expect to grow just 5.9% in
2012. Infrastructure development in the longer term will gain a new stimulus following
Qatars successful bid to host the 2022 World Cup.
The Qatar Financial Centre (QFC) Authority has introduced a raft of new reforms
aimed at strengthening its position as a leading regional financial hub. Among the
changes is a new tax regime, including a new 10% corporate tax rate starting in 2011,
from which some financial services companies that the government is seeking to attract
will be exempt. The new tax regime is not prohibitive, and the willingness to offer
exemptions points to Qatar's desire to specialize and carve out a niche for itself as a
regional center for insurance and investment management companies. Crucially, it also
indicates that it is not just seeking to emulate the Dubai International Financial Centre
(DIFC) model. The QFC will also manage over $140bn of investments in Qatar over the
next five years, as well as over $1tn in investments across the GCC. The reforms and
lucrative investment opportunities provide explicit insight into Qatar's plan to diversify the
economy away from hydrocarbons and establish itself as a regional financial hub.
The improving global economic picture is supportive of oil prices and places
Qatar's headline external balances on a healthy upward path. Under our baseline
average oil price assumption of $85/bbl in 2011, we envision the foreign trade surplus
Prepared by Brad Phillips
of IHS Global Insight for Credit Suisse
Securities (Europe) Limited
Jacqueline Madu
+44 20 7883 4216
Berna Bayazitoglu
+44 20 7883 3431

08 December 2010
climbing to 28.6% of GDP and the current account surplus reaching 15.9% of GDP. This
marks a notable increase from our 2010 trade surplus forecast of 28.2% of GDP and
14.5% of GDP for the current account surplus. We estimate that if global oil prices were
to average $95/bbl in 2011 ($10/bbl higher than our baseline assumption), Qatars trade
surplus would rise to 31.7% of GDP and the current account surplus would increase to
19.0% of GDP. Under a scenario in which global oil prices were $10/bbl less than our
baseline, the trade and current-account balances would suffer, but remain positive at
25.6% of GDP and 12.9% of GDP, respectively. We project a further rise in oil prices to
an average of $90/bbl in 2012, which will boost Qatars trade surplus to 30.1% of GDP
and its current account surplus to 17.7% of GDP.
The boom in the hydrocarbon sector should also benefit the fiscal balance in FY
2011/12 (ending 31 March 2012), in our view. We think the emirate's oil and gas
earnings, which typically comprise 60% of the government's income, will grow 18.6%
yoy in FY 2011/12. We expect higher energy prices, surging LNG output and limited
growth in crude oil production to push overall revenues up by about 20% yoy in FY
2011/12. We project a somewhat smaller 16.2% yoy increase in expenditures in the
corresponding fiscal year, bringing the fiscal surplus to 10.6% of GDP, from an
estimated surplus of 10.9% of GDP in the current FY 2010/11. We estimate the fiscal
surplus would be a higher 11.7% of GDP if global oil prices are $10/bbl higher in FY
2011/12 than our baseline assumption ($85/bbl). Under an alternative scenario in which
global oil prices are $10/bbl lower than our baseline forecast, the surplus would be 9.5%
of GDP. In FY 2011/12, we expect a lower surplus of 9.8% of GDP, despite a higher oil
price assumption ($90/bbl), due to our projection for a 14% yoy rise in fiscal spending
aimed at boosting the non-hydrocarbon sector.
We expect an end to deflation seen in 2010, but we think that inflationary
pressures will remain subdued next year as slumping rents counter the effects of
higher food prices. We project an average annual inflation rate of 3.1% in 2011, up
from estimated average annual deflation of 2.4% in 2010. Firmer real estate demand
and strengthening consumer demand should continue to push inflation up to an average
annual rate of 4.9% in 2012, in our view.
The monetary authorities moved to discourage capital inflows and overheating
with a rate cut in August. Qatar Central Bank cut its overnight deposit facility for the
first time in over two years, lowering it 50bps to 1.50%, a day after the U.S. Federal
Reserve signaled it will maintain low rates for a prolonged period. The cut was a bid to
close the interest rate differential between Qatar and developed economies. Meanwhile,
given the riyals peg to the US dollar, we think that the Qatari monetary authorities will
wait for a cue from the United States before hiking policy interest rates. We expect
monetary policy tightening to come only in late 2011 or more likely early 2012. The Gulf
States' common currency initiative is still a distant goal. The senior ministers from the six
member countries decided in September 2010 to postpone the implementation of the
customs union (originally agreed to in 2003) because of a failure to agree on a number
of issues. Given the underlying degree of suspicion between the six countries, it is not
surprising the process of integration has progressed at a cautious pace.
Nonperforming loans (NPLs) have been trending higher for much of 2010, but the
Qatari banking sector has a substantial capital cushion and strong profitability.
Banks are currently cautious about lending, given their exposure to the slumping
domestic property market and the ambivalent global recovery picture. However, strong
financial support from the government should eventually lead to greater lending to the
private sector by banks, although growth will likely remain moderate over the next year
before picking up in H2 2011. Prospects for consolidation in the banking sector have
been a recurring topic of discussion as Qatar is a small market and only a handful of
banks are necessary to service it. However, there has been very little merger and
acquisition activity in the banking sector in recent years due to the fact that shareholding
families or governments do not want to relinquish control in their businesses.

08 December 2010
Exhibit 240: Real GDP and selected demand side components
-10
-5
0
5
10
15
20
25
30
35
40
45
2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
0
5
10
15
20
25
30
Exports
GDP (right)

The economy will continue
to grow at a robust (albeit
slower) pace, in our view,
even once the natural gas
sector expansion is
completed in early 2011.
Higher non-hydrocarbon
sector activity that is being
fuelled by the natural gas
earnings will augment
household and government
consumption going forward.
In our view, growth in the
non-hydrocarbon sector will
exceed that in the
hydrocarbon sector by 2012.

Source: Qatar Statistics Authority, IHS Global Insight

Exhibit 241: Crude oil output Exhibit 242: Oil and non-oil GDP
mn barrels per day % year-on-year change
0.70
0.75
0.80
0.85
0.90

0
5
10
15
20
25
30
35
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
F
2
0
1
1
F
2
0
1
2
F
Oil GDP
Non-oil GDP
Real GDP

Oil production has been
inching up this year. That
said, Qatar's share of the
OPEC's overall production
is not likely to rise all that
much in 2011 due to the
ambivalent global recovery
picture. Our current forecast
projects Qatari crude-oil
production rising above its
average of 796,000 bpd in
2010, to 809,000 bpd in
2011. Much of Qatar's
hydrocarbon production
growth will, instead, come
from natural gas production.

Note: Thin line indicates IHS Global Insight estimates or forecasts
Source: International Energy Agency, IHS Global Insight
Source: Qatar Statistics Authority, IHS Global Insight

% of GDP
20
25
30
35
40
45
50
2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
-5
0
5
10
15
20
Revenues
Expenditures
Fiscal balance, right

Despite volatile global
energy prices in the last two
years, Qatari authorities
have managed to maintain
a fiscal surplus above 10%
of GDP. With average
global oil prices at $90/bbl
by 2012, under our baseline
scenario, we expect this
trend to continue through
2012, even as authorities
raise spending in a bid to
diversify the economy away
from hydrocarbons.

Source: Qatar Central Bank, IHS Global Insight

08 December 2010
Exhibit 244: Merchandise trade
% year-on-year change in dollar values
-60
-40
-20
0
20
40
60
80
100
120
140
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10
Exports
Imports
A rebound in merchandise
exports is benefiting from
higher oil prices and higher
output in the energy sector.
We expect the dollar value
of merchandise exports to
rise 23.8% yoy in 2011.
Imports are capturing
renewed private-sector
confidence and the
expansionary fiscal plans of
the local governments.
Accordingly, imports will
grow at a robust rate of
26.0% yoy in dollar terms
this year, in our view.

Note: Thin line indicates IHS Global Insight estimates or forecasts.
Source: Direction of Trade Data (IMF), IHS Global Insight

Exhibit 245: Current account and trade balance
% of GDP
0
5
10
15
20
25
30
35
40
45
2004 2005 2006 2007 2008 2009 2010F 2011F 2012F

Trade balance
The 2009 dip in the external
account surpluses from
lower oil prices and demand
for oil was short-lived.
Qatar's headline external
surpluses have likely
rebounded from not only a
global recovery in demand,
but also the domestic
expansion of the natural
gas sector. The emirate's
foreign trade and current
account surpluses should
increase to $42.1bn (28.6%
of GDP) and $23.5bn
(15.9% of GDP) in 2011.

Source: Qatar Central Bank, IHS Global Insight

Exhibit 246: Consumer prices Exhibit 247: Money supply
-25
-20
-15
-10
-5
0
5
10
15
20

-40
-25
-10
5
20
35
50
65
80
M1
M2

Consumer prices are being
gradually pulled out of their
deflationary pattern, with
food and transportation/
communication prices
leading the way up. Falling
housing costs, though, will
keep inflation in the emirate
benign for the short term.
Money supply will likely
grow at an accelerated rate
this year because of base
effects, stronger growth and
improved lending activity.

Source: Qatar Statistics Authority, IHS Global Insight Note: Thin line indicates IHS Global Insight estimates or forecasts
Source: IMF, IHS Global Insight

08 December 2010
Qatar: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 20.8 7.6 18.6 26.8 25.4 8.6 16.7 12.8 8.0
Nominal GDP ($bn) 31.7 43.0 60.5 80.8 110.7 98.3 122.0 147.2 168.7
Population (mn) 0.8 0.9 1.0 1.2 1.4 1.6 1.8 2.0 2.2
GDP per capita ($) 41,626 48,444 58,073 65,854 76,435 59,990 68,610 73,416 76,421
CPI inflation (% year-on-year change) 8.4 12.6 11.3 13.7 13.2 -21.0 0.4 5.5 4.9
CPI inflation (% change in average index for the year) 6.8 8.8 11.8 13.6 15.2 -16.3 -2.4 3.1 4.9
Exchange rate (QAR per USD, end-year) 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6
Exchange rate (QAR per USD, average) 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6
Short-term interest rate (1yr lending rate, annual average, %) 7.0 6.7 7.2 7.4 6.8 7.0 7.3 7.5 7.6
Fiscal data*
Central government fiscal balance (% of GDP) 16.4 9.5 8.6 10.8 10.3 13.0 10.9 10.6 9.8
Central government primary balance (% of GDP) 18.1 10.7 9.5 11.4 10.9 13.6 11.4 10.6 10.0
General government debt (% of GDP, end-year) 27.9 19.1 12.4 8.2 14.0 28.9 29.1 30.0 30.0
Domestic credit (%year-on-year change) 11.4 39.5 40.7 54.4 50.9 14.1 14.8 12.1 11.0
Balance of payments
Exports (goods and non-factor services, % increase in $ value) 40.2 42.3 32.0 19.3 27.9 -24.7 31.3 23.2 17.6
Imports (goods and non-factor services, % increase in $ value) 24.1 58.8 64.8 24.7 19.2 -17.9 2.2 22.0 12.9
Total external debt service ($bn) 1.4 2.3 3.8 6.9 7.3 7.9 8.7 9.5 10.9
Foreign debt ($bn) 11.4 15.8 24.2 43.8 57.0 69.2 75.6 82.0 85.6
*Fiscal data for fiscal year ending 31 March of the following year; i.e., 2012 corresponds to FY2012/13 which runs from 1 April 2012 to 31 March 2013.
Source: Qatar Statistics Authority, Qatar Central Bank, IMF, United Nations, IHS Global Insight

08 December 2010
Romania: Politics still in focus
We continue to expect elevated political noise in the coming months. The
Romanian governments travails show few signs of abating in the short term. Prime
Minister Emil Bocs coalition survived in late October the second no-confidence vote
tabled by the opposition in four months. Although the opposition fell some way short of
securing the simple majority needed to topple the government, winning only 218 votes in
the 471-strong parliament, Boc felt it necessary to ask all deputies from the ruling
coalition to abstain from voting. This suggests to us that the government remains
concerned about MPs dissenting during secret ballots. With the ruling coalition having
lost control of various parliamentary committees and increasingly being forced to resort
to brinkmanship tactics by attaching confidence votes to key pieces of legislation to push
them through parliament, we see scope for further political noise in the coming months.
Early parliamentary elections remain a tail risk for 2011, in our view. The still-dire
short-term economic outlook and the risk of disrupting the ongoing discussions with the
IMF suggest to us that the opposition may not necessarily want to bring down the
government and take on the poisoned chalice of being in power at this stage. However,
as we approach the expiration of the current IFI program in April 2011 and as the
economic recovery begins to take hold next year, the incentives for the opposition to
topple the government will increase, in our view. We therefore believe that early
elections before their due date in late 2012 should not be ruled out.
The governments austerity measures put a temporary setback to the economic
recovery in Q3 2010, in line with our projection. Real GDP contracted by 0.7% qoq
on a seasonally-adjusted basis in Q3 2010, after a 0.3% qoq rise in the previous quarter.
In year-on-year terms, real GDP contracted 2.5% in Q3, after a 0.5% decline in Q2. We
calculate that the level of real GDP in Q3 2010 remained some 10% below its pre-crisis
peak. The renewed quarterly decline in GDP was driven mainly by weaker private
consumption, with growth that plunged into negative territory in Q3 (down 1.2% qoq on a
seasonally-adjusted basis) due to the governments austerity measures implemented in
July, which included a 25% cut in public-sector wages and a 5pps VAT hike to 24%.
Investment also remained weak, contracting 5.4% qoq on a seasonally-adjusted basis,
after a 4.4% qoq decline in Q2.
Domestic demand will strengthen gradually in the coming quarters, we believe.
Given the economic headwinds at home, external demand in key export markets in the
euro zone is likely to remain the main driver behind Romanias economic recovery at this
stage of the cycle. We expect, however, that a gradual recovery in bank lending and
further repair of public and private balance sheets in the coming months will eventually
strengthen the role of domestic demand in driving the recovery. We continue to project
GDP contraction of 2.0% this year, before a return to positive growth of 1.5% in 2011
and a move closer to trend growth with a 4.2% increase in 2012.
We expect that the government will sign a new deal with the IMF in Q2 2011.
Painful as the austerity measures have been, their implementation has proved crucial for
preserving the governments relationship with the IMF and other IFIs and for supporting
investor sentiment. Our forecast assumes that the IFIs will maintain an accommodative
stance towards the Romanian authorities, tolerating the governments non-compliance
on issues such as payment arrears and ultimately approving the remaining loan
disbursements under the current program. We expect that the two sides will focus in
early 2011 on negotiating a new, most likely precautionary, deal to replace the existing
stand-by arrangement. The success of these negotiations will likely depend on a number
of factors, including progress with pension and public-wage reforms, which in turn will be
subject to the domestic political climate. Our central scenario assumes, however, that
Romania will ultimately sign a new deal with the IMF in Q2 2011.
The government has made progress with cutting the budget deficit. We expect that
a potential new deal with the IMF will alleviate some investor concerns about the
medium-term fiscal outlook. The government has already made progress with cutting the
budget deficit, with the impact of the austerity measures taking the 12-month rolling
Ivailo Vesselinov
+44 20 7883 8057

08 December 2010
general government budget deficit down to 6.7% of GDP, compared to a high of 8.5% of
GDP in Q2 2010. We still see a risk that a seasonal boost to spending late in the year
will push the 2010 budget deficit above the IMF-agreed target of 6.8% of GDP, but any
overshoot is likely to be limited our forecast stands at 7.0% of GDP (cash basis), which
we estimate will take the ESA-95 measure to 7.7% of GDP.
We project a moderate overshoot of the fiscal target for 2011. Our projection
envisages further budget deficit reduction in 2011, when we expect that an overdue
recovery in GDP growth will drive an increase in revenues and that the impact from
recent reforms will curb expenditure growth. We still view the official 4.4% of GDP
budget deficit target for 2011 (cash basis) as optimistic, however, and believe an
overshoot to 5.0% of GDP (5.6% of GDP for the ESA-95 measure) is likely, not least due
to remaining pressure on social spending ahead of the next parliamentary elections. In
any case, we maintain our view that public debt will remain on an upward trajectory over
our two-year forecast horizon, edging closer to 40% of GDP by end-2012.
The government continues to rely predominantly on short-term domestic financing
for the budget. Total issuance of domestic debt in the first eleven months of the year
(RON34.6bn) remained considerably below target (RON49.4bn) and the Finance Ministry
has recently come under increasing pressure to abandon its self-imposed 7% yield ceiling.
The authorities plan to step up domestic issuance and can also rely on their cash reserve
to cover any financing shortfall. Although we do not expect the government to run into
significant financing difficulties in the coming months, it may be forced to sell more even
domestic debt if it cannot go ahead with planned EMTN issuance in the short term,
whether due to further delays in preparing the bond sale or because of perceived
unfavorable market conditions. On a more encouraging note, future external debt issuance
could be boosted by a guarantee by the World Bank, with the two sides holding
preliminary discussions on such a possibility in November.
The overshoot of the inflation target will continue until at least Q3 2011, we
believe. Administrative price hikes and adverse seasonal factors have conspired to
push inflation significantly above the 2.5%-4.5% official target range. Inflation rose to
7.9% yoy in October, from 7.8% yoy in September, with the latest increase driven by
higher food prices. Food price inflation rose for the fifth consecutive month in October,
reaching 5.5% yoy. We reiterate our view that the damage to this years harvest from
volatile weather in the summer and adverse base effects is likely to fuel further
increases in food price inflation in the short term. We believe, however, that the risk from
second-round effects from the summer VAT hike has now dissipated, with non-food
price inflation declining for a third consecutive month in October.
The National Bank of Romania (NBR) will find its room to cut interest rates limited in
the coming months, in our view. Given the aforementioned risk to food prices, our central
scenario envisages that despite favorable base effects, headline inflation will reach 8.0%
yoy by end-2010. The ongoing overshoot of the inflation target, which we expect to last until
at least Q3 2011, is in our view likely to continue to restrict the central banks room for
monetary policy easing. Our forecast still envisages that the NBR will keep its policy rate on
hold at 6.25% in the coming months, before an improvement in the inflation environment
allows modest easing to 6.00% by end-2011 and to 5.00% by end-2012.
We project a modest widening of the current account deficit in 2011. The 12-month
rolling current account deficit widened to 5.7% of GDP at one point in H1 2010, but a
subsequent decline in import consumption in the aftermath of the austerity measures
pushed the gap lower to 4.8% of GDP by end-September. We expect that adverse
seasonal factors will trigger a renewed widening of the deficit by end-2010. A gradual
recovery in domestic demand is likely to take the foreign trade deficit higher next year,
which we expect will push the overall current account gap to 5.5% of GDP by end-2011.
With the FDI likely to continue to cover around 70% of the current account deficit,
however, we expect that overall financing will remain sufficient in the coming quarters.
Against this background, we project a largely stable exchange rate outlook for 2011,
with short-term volatility in the leu likely to remain subject largely to the fragile domestic
political environment.
08 December 2010
Exhibit 248: Industrial output Exhibit 249: Total credit to corporates
Seasonally and work-day adjusted
-8
-6
-4
-2
0
2
4
6
-16
-12
-8
-4
0
4
8
12
% mom
% yoy (right)

-4
-2
0
2
4
6
8
10
12
14
Sep-08 May-09 Jan-10 Sep-10
-40
-20
0
20
40
60
80
100
120
140 RONbn (RHS)
% mom
% yoy (RHS)

Industrial output growth has
been supported by robust
external demand in key
export markets in the euro
zone, with production
growth in the manufacturing
sector running at around
5% yoy since the start of
the year. The short-term
outlook for investment
remains fragile, however,
amid an ongoing lack of
credit extended to
corporates.


Exhibit 250: Contributions to quarter-on-quarter real GDP growth
pps, with the exception of GDP growth
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10
Investment
Inventories
Net exports
GDP growth (% qoq)
Quarter-on-quarter real
GDP growth plunged back
into negative territory in Q3
2010, on the back of a
renewed contraction in
private consumption and
continued weakness in
investment. We see a risk
that this trend will continue
in the short term due to the
impact from the
governments austerity
measures. We expect
gradual recovery in
domestic demand over the
course of 2011, however,
with GDP growth reaching
1.5% next year.

Source: Haver Analytics, Credit Suisse

Exhibit 251: Wage growth Exhibit 252: Unemployment rate
3mma, % year-on-year change Seasonally adjusted, %
-15
-10
-5
0
5
10
15
20
25
30
Real
Nominal

0
1
2
3
4
5
6
7
8
9

The austerity measures
implemented in the
summer, including a 25%
cut in public-sector wages
and the 5pps VAT hike to
24%, have conspired to
push nominal and real wage
growth into negative
territory. Unemployment
appears to have peaked on
a seasonally-adjusted
basis, although the risk of
additional layoffs in the
public sector is set to
remain for the coming
months.


08 December 2010
components
Exhibit 254: NBR FX reserves and
money supply growth
-20
-15
-10
-5
0
5
10
15
Current transfers
Income balance
Services balance
Trade balance
Current account

0
5
10
15
20
25
30
35
40
-20
-10
0
10
20
30
40
50
60
70
80
FX reserves, bn (left)
M2 growth, % yoy
M1 growth, % yoy

After modest widening in H1
2010, the current account
deficit has started to narrow
again in the aftermath of the
implementation of the
austerity measures. We
project a gradual reversal of
this trend in 2011, in line
with rising import
consumption and elevated
global commodity prices.
The central bank has
continued to accumulate FX
reserves, but money supply
growth has remained
subdued to date.


Exhibit 255: NBR policy rate and CPI inflation
-6
-4
-2
0
2
4
6
8
10
12
14
Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11
Real policy rate, %
Policy rate, %
CPI inflation, % yoy
CS forecast
The central banks room to
loosen monetary policy is
likely to remain constrained
in the coming months by the
ongoing overshoot of the
official 2.5%-4.5% inflation
target, which we expect to
last until at least Q3 2011.
Real ex-post interest rates
are set to stay in negative
territory in the short term.
As the inflation environment
improves next year, we
expect that the central bank
will find room for modest
rate cuts.

Source: Statistical Office, National Bank of Romania, Credit Suisse

Exhibit 256: Government budget
balance Exhibit 257: General government debt
-12
-10
-8
-6
-4
-2
0
2
Consolidated budget
State budget
Local budgets
Social security budget

0
5
10
15
20
25
30
35
40
45
2006 2007 2008 2009 2010E 2011F 2012F
Pessimistic
Central
Optimistic

Painful as the austerity
measures have been, they
triggered a clear reduction
in the general government
budget deficit in H2 2010,
reversing a trend that at one
stage appeared to threaten
a sizeable overshoot of this
years 6.8% of GDP budget
deficit target. We project
further fiscal consolidation
in 2011, but note that the
general government debt to
GDP ratio is set to remain
on an upward trajectory in
the short term.

Source: Haver Analytics, Credit Suisse Source: Ministry of Finance, Credit Suisse

08 December 2010
Romania: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 8.5 4.1 7.9 6.3 7.3 -7.1 -2.0 1.5 4.2
Growth in real private consumption (%) 15.8 10.0 12.9 11.9 9.5 -10.9 -2.8 2.1 4.8
Growth in real fixed investment (%) 11.0 15.3 19.9 30.3 16.1 -25.3 -2.1 4.0 6.0
Nominal GDP ($bn) 75.8 99.2 122.7 170.6 204.3 161.1 162.2 161.2 199.4
Population (mn) 21.7 21.6 21.6 21.5 21.5 21.5 21.3 21.1 21.0
GDP per capita ($) 3,497 4,586 5,684 7,922 9,501 7,493 7,616 7,640 9,495
Exchange rate (RON per USD, end-year) 2.91 3.11 2.57 2.46 2.83 2.94 3.24 2.82 2.87
Exchange rate (RON per USD, average) 3.26 2.91 2.81 2.44 2.52 3.05 3.17 3.38 2.96
Exchange rate (RON per EUR, end-year) 3.97 3.68 3.38 3.61 3.99 4.23 4.25 4.15 4.05
Exchange rate (RON per EUR, average) 4.05 3.62 3.52 3.34 3.68 4.24 4.20 4.20 4.10
REER (% year-on-year change)
(1)
13.3 9.7 15.8 1.6 -5.6 -0.6 3.0 4.0 4.3
Monetary policy rate (%, end-year)
(2)
18.0 7.5 8.75 7.50 10.25 8.00 6.25 6.00 5.00
Fiscal data
Central government fiscal balance (% of GDP)
(3)
-1.1 -1.2 -3.2 -3.3 -4.4 -6.4 -6.2 -6.1 -5.0
(3)
-1.2 -1.2 -2.2 -2.5 -5.4 -8.3 -7.7 -5.6 -4.1
(3)
0.2 -0.1 -1.3 -1.8 -4.7 -6.8 -6.0 -3.7 -2.2
General government expenditure (% of GDP, end-year)
(3)
33.5 33.5 35.3 36.0 37.6 40.4 38.6 37.5 36.0
Balance of payments
Exports (goods and non-factor services, % year-on-year change in $ value) 31.3 20.8 20.3 26.5 25.1 -19.4 4.9 26.7 -1.8
Scheduled external debt amortization ($bn) 3.4 5.3 6.5 8.5 12.1 13.8 11.8 21.4 19.9
Foreign debt ($bn) 29.3 36.5 54.3 86.3 100.7 115.7 118.4 114.1 127.6
Public ($bn) 12.8 12.2 13.1 14.4 14.7 27.9 33.0 37.5 39.1
Private ($bn) 16.5 24.3 41.2 71.9 86.0 87.8 85.4 76.6 88.5
(1) Real effective exchange rate, increase indicates appreciation. (2) Prior to 2002: official discount rate; 2002-2004: reference rate; 2005-2006: rate on one-month deposit-taking operations;
2007: rate on two-week deposit-taking operations; from 2008: rate on one-week deposit-taking operations. (3) ESA 95 methodology.
Source: National Bank of Romania, Statistical Agency of Romania, Ministry of Finance, IMF, IIF, Credit Suisse

08 December 2010
Russia: Low interest rates stoke capital outflows
The impact of last summers drought-related disruptions on output proved more
significant than either the market or the government had anticipated. The related
widening of the output gap has prevented the central bank from tightening monetary
policy in response to the sharp increases in both headline and core inflation, causing
real interest rates to decline steeply. Abundant liquidity has kept nominal local rates at
very low levels until recently, allowing those companies that had to raise external
financing during the crisis period an opportunity to refinance part of their expensive
external liabilities in the domestic market. The associated large-scale net capital
outflows (from Q3 2010) have kept the rouble under strong depreciation pressure,
despite the recovery in oil prices. Growth outlook for 2011-2012 is favorable, mainly due
to the terms of trade improvement, pent-up investment demand and the planned
infrastructure upgrades ahead of the 2014 Winter Olympics and the 2018 World Cup.
In seasonally adjusted terms, on our estimates, GDP fell 1% qoq in Q3, reversing
the 1.1% qoq growth in Q2. On a year-on-year basis, real GDP growth slowed sharply
by 2.7% in Q3 from 5.2% in Q2. The Q3 outturn was much worse than either we or the
market had anticipated, and even below the governments more cautious estimates.
Encouragingly, real sector indicators for October point to a pickup in key growth
components. In seasonally adjusted terms, investment expanded 2.0% mom, on our
estimates, after 0.6% mom sa growth in September. Growth in retail sales picked up to
0.3% mom sa in October, after virtually no change in September, despite disappointing
real wages and income data. Wage growth decelerated to 2.0% yoy from 3.2% yoy in
September, while real disposable income fell 0.7% yoy, after 1.8% yoy growth in
September. The weaker real wage growth in October was the result of both an increase
in headline inflation and deceleration in nominal wage growth (to 9.7% yoy from 10.4%
yoy in September).
Together with strong industrial production data for October, real sector data for
October show that the economic recovery rebounded sharply in early Q4.
Industrial production was up 1.5% mom sa, following 0.9% mom sa growth in
September. We have revised upward our Q4 GDP growth estimate to 2.1% qoq sa from
1.8% qoq sa earlier and now expect full-year GDP growth of 3.6% yoy, rather than 4.1%
yoy projected prior to the release of the disappointing Q3 GDP data. The lower 2010
base means scope for somewhat stronger growth in 2011. We think that the pickup in
GDP growth in Q4 2010 will be sustained in Q1 2011, thanks mainly to built-up
investment demand after the disruptions in investment (in particular, construction
activity) in the summer, as well as support for both investment and consumption from
higher oil prices. Our expectation that headline inflation should peak in H1 2011,
combined with the expected increases in nominal public sector wages next year, as well
as a turnaround in rouble dynamics against the basket from Q1 2011, should support
consumer confidence and household demand. We therefore believe that private
consumption will be the main GDP growth driver in H2 2011, compensating for the
expected slowdown in investment (except in Q4 2011, when we expect growth briefly to
turn negative again). We now expect 2011 GDP growth of 4.7% yoy versus 4.5% yoy
previously. In 2012, with elections-related uncertainty out of the way, both investment
and consumption should recover strongly, boosting annual GDP growth to 5.2% yoy.
Headline and core inflation continued to rise steeply in October and November,
driven by a further increase in the prices of key food staples. Year-on-year CPI
inflation reached 8.1% in November, from the 5.5% trough in July, and is set to be close
to 8.5% in December. Inflation is likely to stay high in H1 2011, in view of the
unfavorable trend in recent months and the associated surge in expectations, strong
commodity prices and the likely spending pressures ahead of the elections. We expect
the central bank to switch to a tightening cycle early next year, initially via measures to
curb liquidity and eventually (by late Q1 2011) by hiking deposit rates (we expect
cumulative 50bps of deposit but not lending rate increases next year). The central
Sergei Voloboev
+44 20 7888 3694
sergei.voloboev@credit-suisse.com
Alexey Pogorelov
+7 495 967 8772
alexey.pogorelov@credit-suisse.com

08 December 2010
banks end-2011 inflation target of 6%-7% appears ambitious to us, but the upper limit of
this range may be attained via policy tightening and allowing the rouble to appreciate
once capital flows reverse.
Balance of payments developments have been in particular focus recently given
the unusual weakness of the rouble. The narrowing of the foreign trade surplus has
been gradual, after the one-off jump in imports in August. In seasonally adjusted terms
(on our estimates), the dollar value of imports fell 2% mom in October, after a flat
performance in September and a 15% mom sa jump in August (attributed to a spike in
pharmaceutical imports ahead of the packaging standards change that came into effect
from 1 September). Exports rose 14% yoy in dollar value terms in October, after 18%
yoy in September. We see no evidence of a significant deterioration in Russias foreign
trade balance, and expect sizeable foreign trade surpluses to continue in the near term,
consistent with a decline in the current account surplus to 3.3% of GDP in 2011, from
5.0% of GDP in 2010.
The central bank has reiterated its intention to continue scaling down its presence
in the FX market, by widening the intervention band for the rouble, but has been
forced to pump up its interventions in order to counter the large-scale capital
outflows. On 13 October, the central bank widened its intervention band to 11.5%, from
8.6% previously. The central bank is estimated to have sold more than $11bn in support
of the rouble since end-August, including $9bn since the widening of the band.
We believe that the roubles persistent weakness (a nearly 7% drop against the
basket since mid-May, including by 4.0% since end-August) was due to a change in
the direction of short-term capital flows, ultimately attributable to the low level of
local interest rates. We estimate that up to a third of scheduled FX debt redemptions in
H2 (over $20bn) have been refinanced in the local market, resulting in a sharp drop in
external debt rollover ratios and higher net capital outflows. (The central banks latest net
outflows estimate for Q4, of about $13bn, may well prove optimistic). However, once the
December peak in scheduled FX debt redemptions ($15bn, on central bank estimates)
and budget spending has passed, we expect the rouble to recover early next year,
reflecting the strength of export receipts and the seasonally low imports in Q1 2011.
The federal governments budget deficit has continued to narrow through
November, limiting the governments borrowing needs and allowing it to refrain
from fresh drawdowns on fiscal deposits. The 12-month rolling budget deficit
narrowed to 3.8% of GDP in October, from 4.8% of GDP in June and a high of 6.6% of
GDP in January 2010. Most of the improvement continued to come on the expenditure
side, with 12-month rolling spending declining to 22.4% of GDP in October, from 24.1%
in June and 25.1% of GDP in January 2010. Revenue performance continues to be
sluggish, likely reflecting weakness of growth. Revenues eased to 18.7% of GDP in
October, from 19.3% in June. We now believe that the full-year federal budget deficit will
be close to 3.7% of GDP, rather than the 5.3% of GDP in the revised budget and the
governments most recent projection of 4.6% of GDP.
Net domestic borrowing became a key source of deficit financing in Q3 2010. Net
domestic borrowing totaled 1.6% of monthly GDP both in July and August and 2.9% in
September-October. The governments initial plans for a RUB1.2tn of gross domestic
borrowing this year have proven ambitious: in late September, the Finance Ministry
confirmed plans to issue just RUB 300bn ($9.7bn) of domestic debt in Q4 2010, on top
of RUB 500bn ($16.2bn) placed since the beginning of the year. This target is consistent
with our 2010 deficit forecast (an equivalent of $55bn), some $2-3bn in RUB Eurobond
issue by year-end (with a possibility of a delay into Q1 2011), and fresh draw-downs on
Reserve Fund assets in December 2010 (for up to $20bn). For 2011, the government
currently expects net domestic borrowing to rise sharply to $53bn, from $26bn in 2010.
The governments large-scale privatization program (targeting over $30bn of proceeds in
2011-2013) is now expected to be launched early next year, with stakes in state-
controlled banks likely leading the sell-off program.

08 December 2010
Exhibit 258: Contributions to real GDP
growth
Exhibit 259: Output gap and
unemployment
pps, except for % year-on-year change in real GDP pps
3.4
-15
-10
-5
0
5
10
-15
-10
-5
0
5
10
Agriculture & fishing
Retail trade
Transport & telecoms
Construction
Services and other sectors
Real GDP

5
6
7
8
9
10
Q3-03 Q2-05 Q1-07 Q4-08 Q3-10
-8
-6
-4
-2
0
2
4
Output gap, % (right scale)
Unemployment rate

Real GDP is estimated to
have fallen 1% qoq in
seasonally-adjusted terms
in Q3 2010, driven by a
steep drop in agricultural
output and construction
during last summers heat
wave. We expect a steep
rebound in real GDP in Q4,
of 2.1% qoq sa, consistent
with 3.4% yoy growth.
Unemployment rate has
declined closer to pre-crisis
levels (thanks to buoyancy
of the public sector jobs).
Output gap is unlikely to
close before mid-2012.

Source: Rosstat, Economy Ministry, Haver Analytics, Credit Suisse. *Difference between actual and potential GDP growth. Potential
GDP estimates are based on the HP filter
Source : Rosstat, Credit Suisse, PMI premium

Exhibit 260: Real sector indicators Exhibit 261: Key PMI components
3-month moving average, % year-on-year change Average 2008 level =100
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
Jul-05 Nov-06 Mar-08 Jul-09 Nov-10
Fixed investment
Retail sales
Real disposable income

28
33
38
43
48
53
58
63
80
85
90
95
100
105 New orders
PMI
Employment
IP Index* (rhs)

Fixed investment expanded
by 2.0% mom in seasonally
adjusted terms in October,
after a 0.6% mom sa in
September, supporting our
bullish Q4 GDP view. Real
retail sales and real
disposable income have
decelerated since August,
due to higher headline
inflation. Industrial output
growth since August
exceeded expectations,
despite the lacklustre
manufacturing PMI
readings.

Source: Rosstat, Credit Suisse Source: PMI Premium, Credit Suisse.

Exhibit 262: Contributions to headline
inflation
Exhibit 263: Food prices and grain
producer prices
pps, except for % year-on-year change in CPI % year-on-year change
0
2
4
6
8
10
12
14
16
18
Jul-07 May-08 Mar-09 Jan-10 Nov-10
0
2
4
6
8
10
12
14
16
18
Food component Non-f ood
Serv ices CPI Total

-5
0
5
10
15
20
25
Jul-07 May-08 Mar-09 Jan-10 Nov-10
-40
-20
0
20
40
60
80
100
Food prices
Core CPI
Grain producer
prices (right scale)

Headline inflation has been
rising steeply since August,
reaching 8.1% yoy in
November, due mainly to
further strong increases in
food prices. Core inflation
rose to an estimated 6.3%
yoy in November, from 5.8%
yoy in October and 4.5% yoy
in July. We expect inflation to
reach 8.4% yoy at end-2010
and to moderate to 7.2% yoy
at end-2011, based on our
expectation that monetary
policy will be tightened in Q1
2011.

Source: Rosstat, Credit Suisse Source: Rosstat, Credit Suisse

08 December 2010
Exhibit 264: FX reserves and money Exhibit 265: Interest rates
% year-on-year change US$ bn % per annum
-20
-10
0
10
20
30
40
50
60
70
80
Feb-06 Apr-07 Jun-08 Aug-09 Oct-10
200
250
300
350
400
450
500
550
600
FX reserves (US$ bn, right scale)
M2 (lef t scale)
M0 (lef t scale)

2
4
6
8
10
12
14
16
May-09 Sep-09 Feb-10 Jul-10 Dec-10
2
4
6
8
10
12
14
16
Fixed tom-next deposit rate
3-month NDF
REPO policy rate
Refinancing rate
Overnight fixed deposit rate

We now expect the current
account surplus at 5.0% of
GDP in 2010, up from 4.0%
of GDP in 2009. In 2011, the
current account surplus is
projected to decline to 3.3%
of GDP, as imports are set
to grow faster than exports
in dollar value terms. Market
interest rates picked up
recently, as the central bank
continued to sterilize liquidity
via its large-scale
interventions in support of
the rouble, while the
government refrained from
drawdowns on fiscal
deposits through November.

Source: Central Bank, Credit Suisse Source: Central Bank, the BLOOMBERG PROFESSIONAL

Exhibit 266: Rouble and Urals oil price Exhibit 267: Approximated rouble band
$/bbl RUB against the basket comprising $0.55 and 0.45
33
34
35
36
37
38
39
Sep-09 Dec-09 Apr-10 Jul-10 Nov-10
40
50
60
70
80
90
100
Rouble vs basket (LHS)
Oil price (Urals), (RHS, inv)

31.4
32.4
33.4
34.4
35.4
36.4
37.4
38.4
Apr-10 Jun-10 Sep-10 Nov-10
31.4
32.4
33.4
34.4
35.4
36.4
37.4
38.4
Free-float mini-band
Basket

The rouble's trend
appreciation against the
basket came to a halt in
May, due to weaker global
risk appetite, capital outflow
and changes in the central
banks intervention policy.
We expect the rouble to
recover early next year,
reflecting the strength of
export receipts, the
seasonally low imports in
Q1 2011 and tighter
monetary and fiscal
conditions.

Source: Central Bank, Credit Suisse Note: The $0.55/0.45 basket is in effect since 8 February 2007.
Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse.


Exhibit 269: Federal budget operations
$bn % yoy change in dollar values 12-month rolling, % of GDP
50
75
100
125
150
175
200
-50
-35
-20
-5
10
25
40
55
70
85
100 Balance (12m rolling, left scale)
Imports, % yoy, 3mma
Exports, % yoy, 3mma

-8
-6
-4
-2
0
2
4
6
8
10
12
Jun-05 Oct-06 Feb-08 Jun-09 Oct-10
8
10
12
14
16
18
20
22
24
26
28
Overall balance (left scale)
Total revenue
Non-interest expenditure

Import growth (in dollar
terms) moderated in
September and October to
34% yoy and 27% yoy,
respectively, from a peak of
53% yoy in August (caused
mainly by temporary
factors). The fiscal position
improved further in October,
due to spending restraint,
with a decline in the 12-
month rolling federal budget
deficit to 3.8% of GDP in
October, from 4.8% of GDP
in June. We expect this
years budget deficit to be
limited to 3.7% of GDP.

October 2010 data are Economy Ministry estimates.
Source: Finance Ministry, Credit Suisse

08 December 2010
Russia: Selected economic indicators
2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
Real GDP growth (%) 7.2 6.4 8.2 8.5 5.2 -7.9 3.6 4.7 5.2
Growth in real gross investment (%) 12.2 9.5 17.7 22.0 10.6 -37.4 11.2 10.4 10.2
Nominal GDP ($bn) 590.9 764.0 989.9 1299.7 1667.0 1231.9 1485.7 1711.4 1927.7
Population (mn) 143.5 142.8 142.1 141.4 140.7 140.0 139.4 139.2 139.1
GDP per capita ($) 4,118 5,351 6,968 9,193 11,847 8,797 10,658 12,295 13,859
Exchange rate (RUB per USD, end-year) 27.7 28.8 26.3 24.5 29.4 30.2 31.4 29.0 29.8
Exchange rate (RUB per USD, average) 28.8 28.3 27.2 25.6 24.9 31.7 30.5 29.7 29.3
Exchange rate (RUB against the basket, end-year)
(1)
30.9 29.7 29.6 34.7 36.1 35.8 35.1 35.3
(2)
6.1 8.1 9.4 4.2 5.1 -5.6 3.0 4.7 4.7
Refinancing rate (%, end-year) 13.00 12.00 11.00 10.00 13.00 8.75 7.75 7.75 7.25
Central bank 1-day direct repo minimum auction rate (%, end-year) 6.00 6.00 6.00 6.00 9.00 6.00 5.00 5.00 4.50
Central bank overnight deposit rate (%, end-year) 0.50 0.50 2.25 2.75 6.75 3.50 2.50 3.00 2.75
Fiscal data
(3)
4.3 7.5 7.4 5.4 3.9 -6.0 -3.7 -3.1 -2.4
(3)
33.5 35.5 32.7 33.1 32.1 40.6 35.1 31.3 28.1
Federal government fiscal balance (% of GDP)
(3)
4.3 7.5 7.4 5.4 4.1 -5.9 -3.7 -3.1 -2.4
Federal government primary fiscal balance (% of GDP) 5.5 8.4 8.1 5.9 4.5 -5.5 -3.1 -2.3 -1.5
(4)
20.9 8.3 0.5 -4.2 -9.9 -4.1 0.8 3.6 5.5
Balance of payments

(% of GDP) 10.1 11.1 9.6 6.0 6.2 4.0 5.0 3.3 1.8
Net FDI inflows ($bn) 1.7 0.1 6.6 9.2 19.4 -7.7 -4.1 6.0 9.0
(5)
8.9 10.8 26.5 5.7 7.3 3.1 3.2 3.8 2.8

Foreign debt ($bn) 213.5 257.2 313.2 463.9 480.5 467.2 450.8 447.3 461.1
Public ($bn)
(6)
114.4 76.5 52.0 44.9 40.5 37.6 40.0 40.3 43.9
Private ($bn) 99.1 180.7 261.2 419.0 440.0 429.6 410.8 407.0 417.2
(1) The basket comprises $0.55 and 0.45. Our forecasts for the USDRUB exchange rate are derived from our basket exchange rate forecasts and Credit Suisse's EURUSD forecasts.
(2) Real effective exchange rate (deflator: CPI), increase indicates appreciation. (3) Net of bank recapitalization costs. (4) Net of official fiscal reserves (Stabilization Fund assets through 2007,
thereafter the sum of the Reserve Fund and the National Welfare Fund). (5) Scheduled amortizations for the public sector. (6) Liabilities of the central and regional governments and the CBR.
Source: Central Bank of Russia, Finance Ministry of the Russian Federation, Economic Expert Group, IMF, Credit Suisse

08 December 2010
South Africa: The repo rate has bottomed out
The global setting and the improvement in the outlook for domestic demand
growth remain supportive of real GDP growth of 3.0% this year, 3.5% in 2011 and
3.6% in 2012, in our view. Real GDP was up 2.6% qoq on an annualized basis in Q3,
slowing from (the downwardly revised) 2.8% qoq in Q2. Owing to industrial strike
activity, the manufacturing sector shaved 0.6pp from headline growth in Q3. Upon the
end of the strike activity, however, the manufacturing PMI increased in October and
moved into expansion territory in November for the first time in three months. Given that
its production is largely for domestic consumption, we believe the manufacturing sector
should remain well supported by the improvement in the outlook for domestic demand.
The mining sector added 0.4pp to headline growth in Q3, and should continue to
respond well to the ongoing strength in the global macro indicators, in our view. (The
demand-side breakdown of the Q3 GDP data will be released on 9 December.)
Household spending continues to recover, while investment spending will likely
get a boost next year from the governments investment spending program. Retail
sales increased 6.2% yoy in Q3, picking up from 5.6% yoy in Q2, while total loans and
advances to households were up 5.5% yoy in Q3, compared to 4.0% yoy in Q2. The
consumer should continue to find support from low interest rates, lower debt service
costs, low inflation, wage settlements well above inflation and a positive wealth effect
from higher asset prices. Meanwhile, we expect no growth in investment spending this
year. Nevertheless, it should be able to grow 4.5% next year, based on our expectation
that both the general government and state-owned enterprises will invest in line with the
commitments contained in the medium-term budget policy statement.
The appreciation pressure on the rand is likely to persist, in our view, despite a
widening current account deficit next year. The 12-month rolling foreign trade deficit
narrowed to 0.2% of GDP in October from 0.6% of GDP in December, which we
estimate should keep the current account deficit around 3.5% of GDP this year, down
from 4.0% of GDP last year. We forecast that the current account deficit will widen to
4.1% of GDP next year as domestic demand continues to recover and global GDP
growth moderates from 4.7% this year. Nevertheless, funding should remain plentiful,
given a prolonged period of low interest rates in the developed world, and keep the rand
under appreciation pressure. We expect the Reserve Bank to continue to purchase FX
in the spot market and through FX swaps to sterilize FDI inflows. We do not expect the
authorities to adopt tax measures to counter currency appreciation.
Inflation will probably finish this year around 3.4% (unchanged from its level in
October) before starting to creep higher next year. Based on our average global oil
price assumption of $85/bbl in 2011 and $90/bbl in 2012, expectations of electricity price
increases of 25% in both years and some pick-up in food price inflation from the 0.5%
yoy recorded in October, we forecast that headline inflation will increase to 4.6% by end-
2011 and 5.8% by end-2012. Increases in administered prices and unit labor costs
(which were up 10.8% yoy in Q2) remain the main upside risks to the inflation outlook,
while the strong rand will continue to partially offset these cost pressures, in our view.
Given our inflation projections and our expectation that the output gap will likely
close in 2012, we expect the MPC to hike the repo rate by 50bps to 6.0% in Q4
2011. Q3 GDP data suggest that the economy is probably operating about 1.0%-1.5%
below capacity currently, which provides ex-post justification to the MPCs decision to
cut the repo rate by a total of 100bps in September and November. However, the MPC
said after its November meeting that "the scope for further downward movement [in the
repo rate] is seen to be limited given the signs of recovery in household consumption
expenditure and credit extension," with which we concur.
Fiscal policy remains counter-cyclical. According to the medium-term budget policy
statement released on 27 October, the governments budget deficit targets are 5.3% of
GDP for FY 2010/11, 4.6% of GDP for FY 2011/12 and 3.9% of GDP for FY 2012/13.
The plan envisages back-loaded adjustment in spending, based on the governments
projection that the recovery will take hold gradually.

Berna Bayazitoglu
+44 20 7883 3431

08 December 2010
Exhibit 271: Real GDP and estimate of
potential GDP
2005 prices, seasonally adjusted ZAR tn, 2005 prices, seasonally adjusted
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Q3-06 Q3-07 Q3-08 Q3-09 Q3-10
% qoq change, annualized
% yoy change

1.25
1.50
1.75
2.00
Q3-00 Q3-02 Q3-04 Q3-06 Q3-08 Q3-10
Real GDP
Estimate of potential GDP

Real GDP was up 2.6% qoq
on an annualized basis in
Q3, slowing from (the
downwardly revised) 2.8%
qoq in Q2. Q3 GDP data
suggest that the economy is
probably operating about
1.0%-1.5% below capacity
currently, which we believe
provides ex-post
justification to the MPCs
decision to cut the repo rate
by a total of 100bps in
September and November.

Source: Statistics South Africa Source: Statistics South Africa, Credit Suisse

Exhibit 272: Contributions to quarter-
on-quarter annualized real GDP growth
Exhibit 273: Manufacturing sectors
performance
Supply side - pps, with the exception of real GDP
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
Q3-06 Q3-07 Q3-08 Q3-09 Q3-10
Construction
Manufacturing
Mining
Agriculture
Real GDP (% qoq)

80
85
90
95
100
105
110
115
120
125
25
30
35
40
45
50
55
60
65
Manufacturing output,
2005=100, sa, level terms
Manufacturing PMI, right

Owing to industrial strike
activity, the manufacturing
sector shaved 0.6pp from
headline growth in Q3.
Upon the end of the strike
activity, however, the
manufacturing PMI
increased in October and
moved into the expansion
territory in November for the
first time in three months.

Source: Statistics South Africa, Credit Suisse Source: Statistics South Africa, PMI Premium

Exhibit 274: Household consumption Exhibit 275: Domestic credit volume
% year-on-year change ZAR tn
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Q3-07 Q3-08 Q3-09 Q3-10
Real retail sales

1.8
1.9
2.0
2.1
2.2
Total domestic credit
Domestic credit to the private
sector

Household spending
continues to recover. Retail
sales increased 6.2% yoy in
Q3, picking up from 5.6%
yoy in Q2, while total loans
and advances to
households were up 5.5%
yoy in Q3, compared to
4.0% yoy in Q2.

Source: Statistics South Africa, Credit Suisse Source: South African Reserve Bank

08 December 2010
merchandise trade balance
% of GDP 3mma, % yoy change in dollar value 4-quarter rolling, % of GDP
-4.5
-3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
12-month trade balance (left)
Exports
Imports

-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
Q2-06 Q2-07 Q2-08 Q2-09 Q2-10
Merchandise trade balance

The 12-month rolling foreign
trade deficit narrowed to
0.2% of GDP in October
from 0.6% of GDP in
December, which we
estimate should keep the
around 3.5% of GDP this
year, down from 4.0% of
GDP last year.

Source: South African Revenue Service, Credit Suisse Source: South African Reserve Bank, Statistics South Africa, Credit
Suisse

Exhibit 278: Gold and platinum prices Exhibit 279: Consumer prices
$ % year-on-year change
0
500
1,000
1,500
2,000
2,500
0
200
400
600
800
1,000
1,200
1,400
1,600
Platinum
Gold (right)

3.0
4.0
5.0
6.0
7.0
8.0
9.0
Apr-09 Oct-09 Apr-10 Oct-10
CPI excluding food,
non-alcoholic
beverages, petrol and
energy
Headline CPI

Although high commodity
prices will likely continue to
support South Africas
export receipts, we forecast
that the current account
deficit will widen to 4.1% of
GDP next year as domestic
demand continues to
recover and global GDP
growth moderates.
Inflation will probably finish
this year around 3.4%
(unchanged from its level in
October) before starting to
creep higher next year.

Source: the BLOOMBERG PROFESSIONAL
TM
service Source: Statistics South Africa, Credit Suisse

year CPI inflation
Exhibit 281: NEER*, inflation and
policy rate
pps, with the exception of CPI
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Other items
Petrol and energy
Food and non-alcoholic
beverages
CPI, % yoy change

40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
NEER (2000=100, left)
Repo rate (%)
CPI inflation (% yoy)

Based on our average
global oil price assumption
of $85/bbl in 2011 and
$90/bbl in 2012,
expectations of electricity
price increases of 25% in
both years and some pick-
up in food price inflation
from the 0.5% yoy recorded
in October, we forecast that
headline inflation will
increase to 4.6% by end-
2011 and 5.8% by end-
2012. We agree with the
MPCs statement in
November that the scope
for further monetary policy
easing is limited.

Source: Statistics South Africa, Credit Suisse * Nominal effective exchange rate; an upward move indicates
appreciation.
Source: South African Reserve Bank, Statistics South Africa, Credit
Suisse

08 December 2010
South Africa: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 4.6 5.3 5.6 5.5 3.7 -1.8 3.0 3.5 3.6
Nominal GDP ($bn) 219.4 246.9 261.2 285.9 276.8 285.6 353.1 407.3 438.8
Population (mn) 47.4 48.2 48.6 49.0 49.1 49.3 50.0 50.4 50.8
GDP per capita ($) 4,631 5,125 5,376 5,837 5,636 5,791 7,062 8,081 8,637
CPI inflation (% year-on-year change, December over December)
1.9 2.0 4.7 7.4 9.0 6.3 3.4 4.6 5.8
-1.2 2.0 3.1 6.0 9.9 7.1 4.3 4.0 5.3
Exchange rate (ZAR per USD, end-year)
5.6 6.3 7.0 6.8 9.5 7.5 6.9 6.8 7.0
Exchange rate (ZAR per USD, average)
6.4 6.4 6.8 7.1 8.3 8.4 7.3 6.8 6.9
(1)
4.5 0.0 -9.4 0.1 -16.5 22.5 11.9 1.0 3.3
(2)

7.7 4.6 14.0 7.1 12.1 15.4 9.0 9.0 9.0
Repo rate (%, end-year)
7.5 7.0 9.0 11.0 11.5 7.0 5.5 6.0 7.0
Fiscal data
(3)

Consolidated government fiscal balance (% of GDP)
-1.5 -0.3 0.7 0.9 -1.2 -6.7 -5.2 -4.3 -3.6
Consolidated government primary fiscal balance (% of GDP)
1.9 2.8 3.5 3.4 1.2 -4.4 -2.6 -1.3 -0.8
Consolidated government expenditure (% of GDP)
25.4 25.8 25.6 26.0 27.4 32.8 33.2 32.8 32.3
34.6 32.7 30.1 27.5 26.6 32.4 35.7 39.8 40.4
Net general government debt (% of GDP, year-end)
32.5 29.1 26.0 22.9 22.2 28.1 31.8 36.3 36.9

13.5 16.6 24.0 20.2 16.1 1.9 6.0 11.0 13.0
67.4 72.6 81.2 86.5 86.7 82.2 81.3 84.0 87.0
13.8 19.5 25.8 21.5 13.6 -0.1 6.3 11.0 13.0
Balance of payments
Exports (goods and non-factor services, % of GDP)
26.4 27.4 30.0 31.3 35.5 27.3 27.6 26.0 26.1
Imports (goods and non-factor services, % of GDP)
26.7 27.9 32.5 34.2 38.5 28.1 28.3 27.5 28.0
Exports (goods and non-factor services, % year-on-year change in $ value)
23.6 16.6 15.9 14.1 9.7 -20.6 25.1 8.5 8.3
Imports (goods and non-factor services, % year-on-year change in $ value)
36.5 17.3 23.2 15.4 8.8 -24.5 24.1 12.0 10.0
-6.7 -8.6 -13.9 -20.5 -19.6 -11.5 -12.5 -16.7 -19.0

(% of GDP)
-3.0 -3.5 -5.3 -7.2 -7.1 -4.0 -3.5 -4.1 -4.3
-0.6 5.7 -6.6 2.7 12.2 4.1 3.0 4.8 4.0
Scheduled external debt amortization ($bn
) (4)

3.9 2.6 2.0 1.8 2.0 2.1 1.8 1.8 1.8
Foreign debt ($bn)
(5)
45.0 48.6 59.4 75.3 72.9 79.3 83.3 87.6 92.9
Public ($bn) 24.2 23.8 25.5 24.4 22.3 27.9 30.9 33.9 35.9
Private ($bn) 20.8 24.8 33.9 50.9 50.6 51.4 52.4 53.7 57.0
(1) Real effective exchange rate, increase indicates appreciation. (2) Based on remuneration per worker, index 2000=100. (3) Data for fiscal years starting 1 April. Selected data refer to the
governments consolidated fiscal balances from 2009. (4) Of medium- and long-term debt only. (5) Including rand-denominated debt held by non-residents.
Source: South African Reserve Bank, National Treasury, Statistics South Africa, South African Revenue Service, IFS, Credit Suisse

08 December 2010
Turkey: Basking in the favor of global liquidity
Household spending continues to grow briskly. An upturn in household spending
that resumed in Q2 2009 in response to the governments post-crisis tax incentives has
continued unabated since then, boosted by the gradual recovery in the labor market and
the historically low (nominal and real) interest rates. GDP data for Q3 2010 are due on
10 December, but (inflation-adjusted) sales tax receipts suggest that household
spending growth remained robust in that quarter and early Q4. Consumer loans are still
expanding at 35-40% (annualized) despite the rise in banks reserve requirement ratios.
Domestic car sales (seasonally adjusted) rose almost 20% qoq in Q3 versus about 11%
qoq in Q2 and 2% qoq in Q1, with their strength persisting also in early Q4.
Investment spending growth might have accelerated in Q3. Available monthly data
on the production and import of investment goods suggest that investment spending
growth might have picked up in Q3, after a remarkable rebound in Q2 when it was the
main driver of the upside surprise in real GDP growth. In particular, import volumes of
investment goods (seasonally adjusted) jumped about 11% qoq in Q3 versus about 8%
qoq in Q2. Historically low interest rates and the sustained recovery in household
spending should keep the environment conducive to capex spending in the coming
quarters, but its pace might slow before the June 2011 parliamentary elections.
Improved global macro data since August are pushing the capacity utilization rate
higher in the export-orientated manufacturing sector. The performance of the
manufacturing sector (about 16% of GDP) was lackluster in March-July, reflecting the
weak state of external demand during that period, but manufacturing output grew 7.2%
in August-October. Boosted by notable increases in both total and export orders,
manufacturing PMI surged to 56.4 in November from 51.3 in August. Our estimate of the
seasonally and work-day adjusted capacity utilization rate in the manufacturing industry
(based on the central banks monthly business survey) rose to 75.4% in November
versus 78-80% in the pre-crisis period.
Against this backdrop, we have revised higher our 2010 full-year real GDP growth
forecast to 8.0% from 7.2% previously. We expect domestic demand to remain the
main driver of growth next year, but as base effects dissipate, we forecast real GDP
growth could slow to 4.8% in 2011. As the policy mix is likely to be tightened after the
June 2011 parliamentary elections, we think real GDP growth might slow further to 4.4%
in 2012. On its most recent real GDP growth forecasts, the central bank estimated the
(negative) output gap at 2.0% in Q3 and around 1.5% in Q4, compared with our view
that the economy has probably been operating near capacity since mid-2010. The
central bank expects the output gap to close in mid-2012 while we expect it to decisively
move into positive territory in 2011. We take the central banks output gap estimates as
provisional (as we do with our own estimates), but bear in mind that the banks output
gap estimates were flat when the economy showed clear signs of overheating in 2006.
The availability of ample (albeit low-quality) financing and the discrepancy
between the growth rates of domestic and external demand have rapidly pushed
the current account deficit into proportions that were seen during the pre-crisis
period. The 12-month rolling current account deficit ballooned to $37.1bn (5.2% of
GDP) in September from $14.4bn (2.3% of GDP) in December, on account of strong
import growth (boosted by the steady recovery in domestic demand) and slower
recovery in Turkeys trading partners, mainly Europe. We estimate that the full-year
current account deficit is heading towards $44.4bn (5.9% of GDP) this year. Turkey
registered current account deficits of 5.7-6.1% of GDP between 2006 and 2008.
However, the balance of payments financing was healthier during those years, with net
FDI inflows covering on average 49% of the current account deficit. In the 12 months to
September, capital inflows were ample, but net FDI inflows amounted to only $5.1bn,
covering only 14% of the current account deficit during the same period. The main
sources of balance of payments financing in the 12 months to September included an
increase in non-residents deposits of $13.4bn, (net) portfolio inflows of $12.9bn,
repatriation of off-shore assets by banks of $11.0bn, and short-term loans of $7.7bn.
Berna Bayazitoglu
+44 20 7883 3431

08 December 2010
Concerned by the low-quality FX inflows and the liras appreciation, the central
bank has stepped up its dollar purchases since 4 October. These purchases
brought the central banks gross FX reserves to $79.4bn by end-November from
$77.0bn in early October and $69.6bn at end-2009, but the ratio of the reserves to the
countrys short-term external debt remains at its lowest since mid-2005. In an effort to
deter short-term FX inflows, the MPC also cut the central banks overnight borrowing
rate (not the policy rate) by 400bps to 1.75% on 11 November. These measures have
been effective in keeping the liras nominal exchange rate against an equally weighted
basket of the dollar and the euro in a range of 1.68-1.73 since early October.
Headline inflation will continue to head lower in the next four or five months, in
our view, although the year-on-year core inflation might have troughed at a
historically low 2.5% in October. The base effect turned favorable in October when
headline inflation peaked at 9.2%, and it will become even more favorable in Q1 2011,
as the tobacco tax (which added 1.7pps to headline inflation earlier this year) falls out of
the annual inflation calculations. We project headline inflation will probably slow to
around 5.0%, or even slightly lower, in February-April next year. We calculate that the
seasonally adjusted core inflation was 0.3% mom in November, after -0.1% mom in
each of the previous two months. Combined with our observation that the manufacturing
sectors capacity utilization rate has been increasing since August, we think that core
inflation might have troughed in October. However, we expect core inflation to remain
below 5.0% (the end-2012 target for headline inflation) until late 2011.
Our end-2011 and end-2012 headline inflation forecasts are 6.3% and 6.6%,
respectively. We assume food price inflation will be about 12% in both years and global
oil prices will average $85/bbl in 2011 and $90/bbl in 2012. In view of the projected
dynamics of headline and core inflation in the coming period, we expect the MPC to
keep the one-week repo rate unchanged at 7.0% until September 2011. The MPC will
probably hike the policy rate to 8.0% by end-2011 and further to 8.5% in early 2012.
A tighter policy mix preferably through fiscal policy would have been in order
now, in our view, not because of imminent price pressures but because of the
widening current account deficit. Credit growth is not moderating, as intense
competition in the banking sector is reducing the effectiveness of the central banks
tighter prudential measures. The government surprised the market favorably on 10
October by announcing a prudent budget deficit target for next year, but budget
execution is unlikely to be consistent with full-year targets until after the June 2011
elections, in our view. (The draft budget envisages non-interest spending growth in
nominal terms slowing to 7.0% next year from a projected 15.5% this year, but non-
interest spending was up 16.5% in the three months to October.) The absence of no
meaningful policy tightening in the face of a growing external imbalance leaves Turkey
vulnerable to changes in investor sentiment and puts at risk the exchange rate-driven
gains on the core inflation front, in our view.
The ruling AKP has a comfortable lead in the opinion polls ahead of the June 2011
elections, but a couple of considerations keep alive the possibility of pre-election
spending. First, Prime Minister Erdogan does not think that his partys current support
level is adequate, suggesting that he has ambitions to garner a constitutional majority in
parliament. Second, available opinion polls show that the opposition CHP, with new
leadership since May, is stronger by 5-10pps, versus its previous support of about 20%.
All rating agencies have Turkey on positive outlook. The widening current account
deficit and the risks associated with pre-election spending will likely delay any possible
ratings upgrade decisions until after the elections, in our view. Since Fitch rates Turkey
one notch below investment grade (BB+) and one notch higher than S&P and Moodys,
it will probably be the first rating agency to upgrade Turkey to investment grade.
08 December 2010
Exhibit 282: Household spending Exhibit 283: Consumer loans
% year-on-year change 4-week moving average, % week-on-week growth
-20.0
-10.0
0.0
10.0
20.0
30.0
Q3-08 Q1-09 Q3-09 Q1-10 Q3-10
-15.0
-10.0
-5.0
0.0
5.0
10.0
Sales tax receipts
(inflation-adjusted)
Household spending
(right)

-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Average: 0.6%
Average: 0.1%
Average: 0.4%
Average: 0.6%

GDP data for Q3 2010 will
be released on 10
December, but available
indicators suggest that an
upturn in household
spending that resumed in
Q2 2009 in response to the
governments post-crisis tax
incentives has continued
unabated since then,
boosted by the gradual
recovery in the labor market
and the historically low
(nominal and real) interest
rates.

Source: Statistics Office, Ministry of Finance, Credit Suisse Source: Central Bank, Credit Suisse

Exhibit 284: Import volumes Exhibit 285: Manufacturing industry
seasonally adjusted seasonally adjusted
110.0
130.0
150.0
170.0
190.0
210.0
230.0
250.0
270.0
Q3-05 Q3-06 Q3-07Q3-08 Q3-09 Q3-10
100.0
110.0
120.0
130.0
140.0
150.0
160.0
170.0
180.0
Investment goods
Consumption goods
Intermediate goods (right)

-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
60.0
65.0
70.0
75.0
80.0
85.0
Export orders* (left)
Capacity utilization rate

We think that investment
spending growth might have
accelerated in Q3. Import
volumes of investment
goods (in seasonally
adjusted terms) were up
about 11% qoq in Q3,
compared with about 8%
qoq in Q2. Meanwhile, the
improvement in the global
macro data since August is
pushing the capacity
utilization rate higher in the
export-orientated
manufacturing sector.

Source: Statistics Office, Credit Suisse * Calculated using the responses to the central banks monthly
business survey.

Exhibit 286: Real GDP
Exhibit 287: Exports, imports and the
current account
TRY bn, 1998 prices, seasonally and work-day adjusted 3mma, % yoy change* 12-month rolling, % of GDP
10.0
15.0
20.0
25.0
30.0
Q2-98 Q2-02 Q2-06 Q2-10
Real GDP
Estimate of potential GDP

-90.0
-60.0
-30.0
0.0
30.0
60.0
90.0
1.0
3.0
5.0
7.0
9.0
Current account deficit
Merchandise imports (left)
Merchandise exports (left)

Our (admittedly simple)
estimates suggest that the
economy is operating near
capacity. The diverging
pace of expansion in
domestic and external
demand is reflected in the
sharp widening of the
current account deficit,
which is heading towards
6.0% of GDP this year,
according to our estimates.

Source: Statistics Office, Credit Suisse * In dollar value.
Source: Central Bank, Statistics Office, Credit Suisse

08 December 2010
Exhibit 288: Some financing items
from the balance of payments
Exhibit 289: Central banks FX
purchases and the liras exchange rate
12-month rolling, $ bn
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Sep-10
Banks' repatriated
assets
Increase in non-
residents' deposits
Portfolio inflows into
local government bonds
Portfolio inflows into the
equity market
FDI

1.600
1.700
1.800
1.900
Aug-09 Jan-10 Jun-10 Nov-10
0.0
0.5
1.0
1.5
2.0
2.5
Central bank's FX
purchases ($bn, right)
End-period basket
exchange rate*

The central bank seems to
be concerned not only by
the widening current
account deficit but also by
the low quality of its
financing. The bank has
introduced a new FX
purchase scheme in early
October and stepped up its
FX purchases since then.
The liras nominal basket
exchange has traded in the
1.68-1.73 range in the last
two months.

Source: Central Bank, Credit Suisse * Average of USDTRY and EURTRY.

Exhibit 290: Monetary policy Exhibit 291: Consumer prices
0.0
4.0
8.0
12.0
16.0
20.0
24.0
0.0
2.0
4.0
6.0
8.0
10.0
O/N borrowing rate
(%, simple)
One-week repo rate
Core index I* (%
yoy change, right)

1.0
3.0
5.0
7.0
9.0
11.0
13.0
Headline CPI
Core index I*

In an attempt to deter short-
term FX inflows, the MPC
also cut the central banks
overnight borrowing rate to
1.75% from 5.75% on 11
November. The one-week
repo rate (the policy rate
since May 2010) has
remained unchanged at
7.0% during this period, as
headline inflation remained
volatile and core inflation
declined to record-low
levels.

Source: Central Bank, Statistics Office * CPI excluding all food items, energy, alcoholic beverages, tobacco
products and gold.
Source: Statistics Office, Credit Suisse

inflation Exhibit 293: Fiscal performance
pps, with the exception of CPI 3mma, % yoy change 12-month rolling, % of GDP
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Nov-09 May-10 Nov-10
Other items
Tobacco
Energy
Food
CPI (% yoy)

-10.0
0.0
10.0
20.0
30.0
40.0
0.0
2.0
4.0
6.0
8.0
Budget deficit (right)
Revenues
Non-interest spending

Although core inflation
might have troughed in
October, headline inflation
will continue to decline in
the next four or five months,
in our view, as a tobacco
tax (which added 1.7pps to
headline inflation earlier this
year) falls out of the annual
inflation calculations.
The ruling AKP is leading
the opinion polls, but pre-
election spending remains a
real possibility, in our view.

Source: Statistics Office, Central Bank, Credit Suisse Source: Ministry of Finance, Statistics Office, Credit Suisse

08 December 2010
Turkey: Selected economic indicators
2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 9.4 8.4 6.9 4.7 0.7 -4.7 8.0 4.8 4.4
Growth in real private consumption (%) 11.0 7.9 4.6 5.5 -0.3 -2.4 6.0 5.0 4.5
Growth in real fixed investment (%) 28.4 17.4 13.3 3.1 -6.2 -22.0 25.2 8.0 7.0
Nominal GDP ($bn) 393.0 484.0 529.9 647.8 735.2 615.8 749.6 852.7 942.2
Population (mn) 69.4 69.8 70.2 70.6 71.0 71.4 71.8 72.2 72.6
GDP per capita ($) 5,663 6,934 7,549 9,176 10,355 8,624 10,440 11,810 12,975
Exchange rate (TRY per USD, end-year) 1.342 1.343 1.413 1.165 1.512 1.506 1.489 1.433 1.494
Exchange rate (TRY per USD, average) 1.422 1.341 1.431 1.302 1.293 1.547 1.496 1.461 1.463
Exchange rate (TRY against the basket, end-year)
(1)
1.584 1.467 1.636 1.437 1.827 1.863 1.720 1.770 1.800
(2)
1.5 16.9 -7.6 17.2 -12.4 1.6 14.4 3.3 4.8
(3)
15.9 11.9 14.3 13.2 4.8 1.8 14.0 10.0 8.0
Central banks overnight borrowing rate (%, end-year)
(4)
18.00 13.50 17.50 15.75 15.00 6.50 7.00 8.00 8.50
One-week repo rate (%, end-year)
(4)
na 15.35 18.38 16.73 15.64 7.11 7.00 8.00 8.50
Fiscal data
(5)

Consolidated government fiscal balance (% of GDP) -4.1 -0.6 0.0 -1.2 -1.9 -4.9 -3.3 -2.8 -2.5
Consolidated government primary fiscal balance (% of GDP) 5.1 4.5 4.9 3.5 2.2 -0.6 -0.4 -1.0 -1.0
Central government fiscal balance (% of GDP) -5.6 -1.8 -0.9 -2.5 -2.8 -6.4 -4.2 -3.7 -3.4
Central government primary fiscal balance (% of GDP) 4.0 3.8 4.5 2.6 1.9 -1.5 -0.7 -0.6 -0.3
Gross government debt (% of GDP, end-year) 56.6 51.1 45.6 39.6 40.0 46.3 42.5 40.9 39.4
Net government debt (% of GDP, end-year) 49.0 41.6 34.0 29.5 28.2 32.5 28.7 27.1 25.6
(6)
19.4 23.6 39.2 40.9 45.7 51.5 51.6 54.8 57.5
(6)
31.2 41.1 25.0 16.0 25.8 13.0 18.0 18.0 16.0
Balance of payments
(7)
19.9 29.4 34.5 39.3 39.2 44.1 39.2 36.1 27.6
Foreign debt ($bn) 161.0 169.9 207.8 249.6 277.0 268.2 289.5 313.0 347.7
Public ($bn) 97.1 85.8 87.3 89.3 92.4 96.7 100.0 100.7 102.8
Private ($bn) 63.9 84.1 120.6 160.2 184.7 171.5 189.5 212.3 244.9
(1) The basket exchange rate is the average of USDTRY and EURTRY exchange rates. Our forecasts for USDTRY are derived from our basket exchange rate forecasts and Credit Suisse's
EURUSD forecasts. (2) Real effective exchange rate, increase indicates appreciation. (3) For the private manufacturing sector for 2004 and 2005, and for the overall manufacturing sector
thereafter. (4) The monetary policy committee changed the definition of the policy rate on 18 May 2010 to the one-week repo rate from central banks overnight borrowing rate previously. (5) The
definition of the consolidated government comprises the central government, extra-budgetary funds, state-owned enterprises, social security institutions and the Unemployment Insurance Fund.
(6) Central banks old definition of M2 is used for both 2004 and 2005 due to lack of data on the new definition. (7) Of medium- and long-term debt, including repayments to the IMF.
Source: Central Bank, Statistics Office, Ministry of Finance, State Planning Organization, IMF Staff Reports, International Financial Statistics, Credit Suisse

08 December 2010
Ukraine: Staying the course, for now
The government and the central bank are on course to win the IMF Boards
approval of the first review under the stand-by program on 20 December, thanks
to further progress on structural reform and preservation of macroeconomic
stability. To qualify for the programs second loan disbursement of $1.5bn (after the
$1.9bn tranche in July), the government has pledged to meet (by 10 December) several
important structural benchmarks, including submission to parliament of a reworked draft
budget (reflecting a broader tax base, in line with recently adopted tax code) as well as
changes to the pension legislation expanding the systems revenue base, and a public
commitment for a further increase in energy tariffs. The governments earlier decision to
hike household utility tariffs by 50%, from 1 August, despite the risk of a public backlash
ahead of local and municipal elections at end-October, has paid off in terms of a
material improvement in the likelihood of the next IMF disbursement, while allowing the
incumbent Regions Party to win most votes in the October local elections. However, the
terms of the subsequent IMF tranche (in late Q1, based on end-2010 criteria) are set to
be more challenging from a political viewpoint, including parliamentary approval of the
planned increase in the minimum pension age and other steps to reduce the large deficit
of the pension system (estimated currently at about 7% of GDP). The associated
political tensions within the ruling coalition, particularly, with the Communist party over
the pension system changes, may complicate approval of reform measures in future.
The reversal of the recent political reform, announced by the constitutional court
on 1 October, has boosted the presidents authority. The constitutional court has
invalidated the political reform adopted in 2004, effectively restoring the strong
presidential system installed by the 1996 Constitution. However, local legal experts have
noted that a restoration of the previous version of the constitution is not automatic and
requires explicit parliamentary approval. Both versions of the constitution prescribe that,
for key constitutional changes, a qualified parliamentary majority of two-thirds of Rada
deputies (300 out of 450) would be required. The main uncertainty associated with the
courts ruling relating to the term of the current parliament and the timing of the next
general elections appears to be close to a resolution, with the constitutional court
confirming a five-year Rada term (until the fall of 2012), rather than a four-year one (as
per the 1996 constitution).
Economic growth decelerated sharply in Q3 2010, due largely to softer external
demand for metals and weather-related disruptions in agriculture, but is likely to
pick-up over the next several quarters. GDP growth slowed to 3.5% yoy in Q3, from
5.9% yoy in Q2. On our estimates, seasonally adjusted GDP growth declined to just
0.1% qoq sa in Q3, from about 1.3% qoq sa in Q2 and 0.6% qoq sa in Q1. From the
demand side, the main factor behind the weaker Q3 GDP performance was an easing in
fixed investment growth, driven in part by the heat wave-related stoppages in
construction activity. We expect investment to bounce back strongly over the next
several quarters, thanks to the favorable prospects for capex additions by companies in
the mining and manufacturing sectors. We currently expect GDP growth to accelerate to
4.5% in 2011 and 5.0% in 2012, from 4.3% this year.
Year-on-year industrial output growth stayed high in September and October, at
10.2% yoy. In seasonally adjusted terms, industrial output growth was strong in August
and September, before easing in October (seasonally adjusted industrial output growth
readings have been very volatile in recent months, reflecting the impact on estimates of
the very steep declines in output in late 2008). Headline growth in October was
particularly strong in manufacturing (11.7% yoy) and utilities output (22.2% yoy), while
the extractive sector rose 4.0% yoy. Manufacturing has been helped by the recovery in
investment demand in Russia and better domestic vehicles sales. Within manufacturing,
the strongest growth in the first ten months of 2010 was registered by machine-building
(33% yoy), including vehicle output (62%). The metal sector expanded 9% yoy in
October and 12% yoy over the first ten months of 2010.
Sergei Voloboev
+44 20 7888 3694

08 December 2010
After a surge in August-September, inflation in October and November was
surprisingly benign. Having reached 10.5% yoy in September, inflation eased to
10.1% yoy in October and 9.2% in November. Food prices remained the key driver of
headline inflation in the recent months, having jumped by 5.6pps in year-on-year terms
in August-September, before declining by 1.8pps over the two following months. Core
inflation rose gradually over this period, to an estimated 8.0% yoy in November, from
7.2% in July. We now expect headline inflation to be kept to single digits in December
2010 and to rise modestly in 2011, reflecting continuing tariff rebalancing and the impact
of a recovery in output. Until now, we note little evidence of demand-driven price
pressures, and we expect the central bank to keep policy rates on hold for the
foreseeable future, despite the likely further increase in headline inflation next year. The
central bank is currently projecting that inflation will pick up to 11.2% yoy at end-2011
from 10.5% for end-2010. Conversely, the IMF expects inflation of 12.0% at end-2010
and 9.7% at end-2011. The disparity in forecasts is mainly attributable to differences in
the perceived timing and magnitude of further tariff increases.
Ukraines underlying fiscal position continues to improve. On a 12-month rolling
basis, the consolidated budget deficit narrowed to 2.9% of GDP in October, from 3.2%
in September and 4.0% of GDP June, thanks mainly to the impact of the recently
adopted revenue measures. The government looks on course to meet its full-year deficit
ceiling agreed with the IMF of 5.5% of GDP for end-2010. However, the improvement in
revenue this year has been driven largely by non-tax revenues that are volatile. The
governments commitment to eliminate the stock of VAT arrears completely by end-2010
now looks in doubt, in view of comments by senior officials about the significant
remaining arrears, and we now expect that some additional 0.2% of GDP in VAT arrears
repayment will need to be budgeted for next year. However, the projected further
reduction in the budget deficit next year, including via elimination of Naftogaz losses,
should reduce overall borrowing needs to about 8% of GDP in 2011, from 9% in 2010.
Early balance of payments data for October point to a sharp widening of the
current account deficit. On a 12-month rolling basis, the current account deficit
widened to $2.8bn (2.0% of GDP), from $1.9bn (1.5% of GDP) in September. In annual
terms, the value of mineral products exports rose 36% yoy, but an increase in the dollar
value of imports was even larger (over 40% yoy). Non-energy imports rose 0.8% mom
(seasonally adjusted) in October, while exports rose 1.4% mom sa. The capital account
surplus dropped in October to $0.3bn, from $1.4bn in September. The FX debt rollover
ratio of the non-financial sector showed a significant increase in October, to 182%, from
118% in the first nine months of the year, while the banking sector rollover ratio eased to
79%, from 87% in January-September. Overall, the full-year current account deficit is
now likely to come out at 2.3-2.4% of GDP, compared to the 1.9% of GDP we projected
previously. Ukraines overall external position remains supported by the availability of
both market and official external financing sources, rising FDI and the likelihood of
higher prices for its core exports (metals, machinery and food products).
Since September 2010, exchange rate volatility has risen sharply, due to a
seasonal pick-up in energy imports and a smaller overall balance of payments
surplus. The hryvnias spot exchange rate weakened by some 1.1% between end-
August and end-November, as the central bank became a net seller of FX on a
consistent basis for the first time since Q1, having sold $1.5bn over this period.
Ukraines stock of FX reserves, boosted in September by the $2bn in Eurobond
proceeds, has been declining most recently, to $33.5bn at end-November. However, the
central banks net international reserves are poised to stay above the floor level agreed
with the IMF for end-2010. The availability of currency reserves for interventions should
help the central bank meet its objective of limiting depreciation of the hryvnia this year to
8.00 versus USD. Going forward, the anticipated acceleration in economic growth and
FDI should support the hryvnia, underscoring its status as the regions least expensive
currency, on our estimates.
08 December 2010
Exhibit 294: Output indicators Exhibit 295: GDP and key components
% year-on-year change Index (2007=100) Real terms, seasonally adjusted indices, 2005 = 100
-40
-30
-20
-10
0
10
20
Jan-05 Dec-06 Nov-08 Oct-10
60.0
70.0
80.0
90.0
100.0
110.0
120.0
Industrial output
Key sectors output
IP, SA (2007=100), right scale

60
80
100
120
140
160
180
1 4 7 10 13 16 19
GDP
Private consumption
Fixed capital
investment

We estimate that real GDP
growth eased in Q3, to
about 0.1% qoq in
seasonally adjusted terms,
from 1.3% in Q2, due to
weaker demand for metals
and weather-related
disruptions in agriculture.
However, we now expect a
rebound in investment
activity and are projecting
full-year 2011 GDP growth
of 4.5%, after 4.3% this
year.

Note: The central banks key sectors indicator covers 72% of GDP.
Source: State Statistics Agency, Central Bank, Credit Suisse
Source: State Statistics Agency, Credit Suisse

Exhibit 297: Consumer and producer
prices
pp, except for % yoy change in CPI % year-on-year change
0
5
10
15
20
25
30
35
40
Feb-07 May-08 Aug-09 Nov-10
0
5
10
15
20
25
30
35
40
Services
Transport & telecoms
Housing & utilities
Non-food
Food
Headline CPI inflation

-5
0
5
10
15
20
25
30
35
40
45
50
Feb-07 May-08 Aug-09 Nov-10
-5
0
5
10
15
20
25
30
35
40
45
50
CPI
PPI

Inflation surprised on the
downside in October and
November 2010, after the
surge in the previous two
months on the back of
much higher food and
energy prices. Core inflation
rose gradually over this
period, to an estimated
8.0% yoy in November,
from 7.2% in July. We now
expect headline inflation to
be kept to single digits in
December 2010 and to rise
modestly in 2011, reflecting
continuing tariff rebalancing
and the impact of a
recovery in output.

Source: State Statistics Agency, Credit Suisse Source: State Statistics Agency, Credit Suisse

Exhibit 299: Current account balance
and gross FX reserves
12m rolling, $bn % yoy change in USD values % of GDP, 12m rolling $bn
-25
-20
-15
-10
-5
0
5
Jan-06 Mar-07 May-08 Jul-09 Sep-10
-65
-45
-25
-5
15
35
55
75
Trade balance
(left scale)
Exports
Imports

-7
-4
-1
2
5
8
11
14
Q2-04 Q3-05 Q4-06 Q1-08 Q2-09 Q3-10
-20
-10
0
10
20
30
40
Current account
FX reserves (right scale)

The 12-month rolling
widened to 2.0% of GDP in
October, from 1.5% of GDP
in September, due mainly to
a sharp increase in the
value of energy imports.
The stock of FX reserves
declined by $1.1bn in
October-November, to
$33.5bn at end-November,
due to net FX sales by the
central bank.

Source: State Statistics Agency, Credit Suisse Note: The latest reserves reading ($33.5bn) is for 30 November.

08 December 2010
Exhibit 300: Hryvnias exchange rates Exhibit 301: Interest rates
UAH REER* (2001 = 100) UAH per USD, spot % p. a.
90
95
100
105
110
115
120
125
130
135
Jan-06 Mar-07 Jun-08 Sep-09 Dec-10
4
5
6
7
8
9
10
UAH REER
UAH (right scale,
reverse order)

0
5
10
15
20
25
Aug-07 Sep-08 Oct-09 Nov-10
0
5
10
15
20
25
NBU Discount rate
T-bill yields, primary, up to 12 months
Interbank lending rate 7-30 day

Volatility of the exchange
rate rose since September,
mainly due to a sharp
narrowing of the balance of
payments surplus. Local
interest rates have been
driven lower by abundant
liquidity and the expansion
of the governments
financing sources. We see
no near-term risk of
proactive policy tightening
by the NBU, due to the
sluggishness of private
consumption.

*Real effective exchange rate, an increase denotes appreciation.
Source: BLOOMBERG PROFESSIONAL
TM

Exhibit 302: FX reserves, interventions Exhibit 303: Monetary aggregates
$bn % year-on-year change
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
Jan-07 Dec-08 Nov-10
20
25
30
35
40 Net FX purchases (left scale)
Stock of gross FX reserves

-5
5
15
25
35
45
55
Jan-07 Apr-08 Jul-09 Oct-10
-5
5
15
25
35
45
55
M0 M2

The change in the direction
of FX interventions since
September 2010 reflects a
deterioration in the current
account. FX sales by the
NBU resumed in
September, amounting to
$1.5bn through November.
The steep deceleration in
monetary aggregates has
reversed, reflecting the
gradual pick-up in economic
activity.

Source: Central Bank, Credit Suisse Source: Central Bank, Credit Suisse

Exhibit 304: Credit to the private sector Exhibit 305: Consolidated budget
% year-on-year change % of GDP, 12-month rolling
-30
-15
0
15
30
45
60
75
90
105
Jan-07 Apr-08 Jul-09 Oct-10
-30
-15
0
15
30
45
60
75
90
105
Total (UAH equivalents)
in local currency
in FX (US$ equivalents)

-6
-4
-2
0
2
4
6
26
28
30
32
34
36
38
Overall balance (left scale)
Revenue (right scale)
Expenditure (right scale)

The volume of bank lending
has stabilized at very low
levels in 2010, having
suffered a dramatic decline
over the crisis period.
Banks continue to report
further increases in the
stock of NPLs, partly due to
tighter reporting standards.
Ukraines fiscal situation is
gradually recovering from
pre-election stress, with the
12-month consolidated
budget deficit dipping below
3% of GDP in October.

Source: Central Bank, Credit Suisse * H2 2009 revenues are net of 1.8% of GDP of SDR conversions;
August 2010 data are net of 1.5% of VAT arrears restructuring.
Source: Economy Ministry, Credit Suisse

08 December 2010
Ukraine: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 12.1 2.7 7.3 7.9 2.1 -15.1 4.3 4.5 5.0
Nominal GDP ($bn) 65.6 81.9 106.4 143.1 179.5 113.5 134.1 151.3 172.4
Population (mn) 47.6 46.9 46.7 46.4 46.1 46.0 45.8 45.7 45.5
GDP per capita ($) 1,377 1,745 2,281 3,086 3,889 2,469 2,927 3,313 3,789
Exchange rate (UAH per USD, end-year) 5.31 5.03 5.06 5.05 7.82 8.05 8.00 7.95 7.90
Exchange rate (UAH per USD, average) 5.32 5.1 5.04 5.04 5.28 8.06 7.95 7.99 7.95
(1)
-1.2 16.8 -2.3 -0.4 -17.3 3.7 8.3 6.2 4.9
NBUs discount rate (% p.a., end-year) 9.00 9.50 9.00 8.00 12.00 10.25 7.75 7.75 7.00
Fiscal data
(2)
-4.4 -2.4 -1.4 -2.0 -3.2 -6.2 -5.5 -3.7 -2.6
General government primary balance (% of GDP)
(2)
-3.4 -1.6 -0.7 -1.5 -2.6 -5.1 -4.0 -2.1 -1.1
Consolidated government debt (% of GDP, end-year) 25.7 21.0 16.0 13.2 15.5 34.3 36.5 38.9 38.3
Broad money supply (M2, % year-on-year change) 32.3 53.9 34.3 50.8 31.0 -5.4 22.8 27.4 26.1
25.4 34.3 45.8 58.2 73.9 78.1 74.3 75.8 77.8
30.6 61.9 71.0 71.0 67.1 2.0 10.8 15.8 16.4
Balance of payments
Current account balance ($bn) 6.8 2.5 -1.6 -5.9 -12.8 -1.7 -3.2 -5.0 -6.6
Current account balance (% of GDP) 10.4 3.1 -1.5 -4.1 -7.1 -1.5 -2.4 -3.3 -3.8
Scheduled debt amortization ($bn)
(3)
1.5 1.4 1.4 1.7 0.9 2.0 2.2 1.1 0.8
Foreign debt ($bn) 30.6 39.6 54.5 82.2 103.2 97.1 94.6 100.7 107.7
Public ($bn) 12.9 13.5 13.8 15.1 19.3 27.1 31.4 38.5 42.7
Private ($bn) 17.8 26.2 40.7 67.1 83.9 70.0 63.2 62.2 65.0
Private debt net of trade credits and inter-company loans ($bn) 9.6 17.1 29.1 53.1 68.4 62.9 56.1 55.8 57.8
Central bank non-gold FX reserves ($bn) 9.3 19.1 21.9 32.0 30.6 25.6 30.8 32.1 35.1
(1) Real effective exchange rate, increase indicates appreciation. (2) Excluding impact of bank recapitalization and transfers to Naftogaz. Estimate for 2011 expenditure includes 0.8% of GDP of
additional allocations for settlement of VAT arrears accumulated in 2010 (3) Scheduled amortization of the public sector.
Source: National Bank of Ukraine, Ministry of Finance, Economy Ministry, State Statistical Office, IMF, IFS, Credit Suisse

08 December 2010
United Arab Emirates: 2011, the year of recovery
The recovery in the UAE economy has proceeded slowly in 2010, with GDP
growth rising just 2.3% on the year. Dubai's troubles with its slumping property market
and cash-strapped, state-owned firms mean a longer road back to health, which is
holding back overall GDP growth in 2010. Key sectors such as construction and real
estate have in fact continued to undergo protracted adjustments. Demand for
purchasing new homes remains weak, as credit conditions are tight and rental prices are
still falling. That said, the real estate market is gradually stabilizing and should begin to
gain traction in 2011-2012 thanks to improving domestic economic and financial
conditions. Meanwhile, exports have rebounded, providing a much-needed lift to growth
this year.
Headway on debt restructuring and higher oil prices have been a boon for
confidence. Dubai World struck a debt-restructuring deal with its creditors in
September. The accord has helped to ease concerns over Dubai's debt crisis, boosting
investor confidence. The eventual resolution of the Dubai World saga should lead to
greater improvements in banking and financial conditions by the end of 2010 and into
2011. As domestic conditions further stabilize and strengthen, we expect the economy to
steadily build momentum. Indeed, activity in the private sector, which has lagged behind
this year, should see greater gains in 2011 as deleveraging by businesses and
households winds down.
Strong public spending and investment, mainly financed by the oil-rich emirate of
Abu Dhabi, will also continue to drive non-oil economic activity. Of note, Abu Dhabi
has launched its own industrial development with a port complex, the landmark Khalifa
Industrial Zone Abu Dhabi (Kizad), which is a step forward in its longer-term objective of
economic diversification. As such, we expect strengthening domestic conditions in 2011
to take up slack from a still soft external environment, driving an acceleration in non-oil
GDP growth to 4.8% from 2.4% in 2010.
After a modest, albeit positive, contribution to overall economic growth in 2010,
we expect growth in the oil sector to gradually pick up over the course of 2011.
Crude oil production has held relatively steady at around 2.3mn barrels per day during
the first ten months of 2010, up 1.6% yoy. OPEC has kept a firm grip on production
levels to support prices, but we expect output to rise as global demand again picks up by
the end of next year. This underpins our projection for oil GDP to expand 4.5% in 2011
after rising 2.0% in 2010. Abu Dhabi has stepped up its drive to increase oil and gas
production, taking advantage of lower contracting costs since 2009. The emirate's oil
and gas industry is also starting to reap the rewards from early experiments with CO2
injection into oil reservoirs and a few new deeper-level gas reservoirs. This should help
free up more natural gas for domestic consumption. Consequently, we see surging oil
and non-oil activities propelling overall GDP growth to 4.7% in 2011 and 5.2% in 2012.
The combination of rebounding oil and non-oil exports as well as relatively moderate
import growth should boost external balances in 2010, in our view, and we expect
additional gains in 2011. Strengthening external demand and higher oil prices have
reignited export growth, which should raise the foreign trade surplus to 28.3% of GDP in
2010. Accordingly, we expect the current account surplus to rise to 11.8% of GDP this year.
Most of the country's non-oil exports ship within the Middle East or to Asia, thereby limiting
the downside risk stemming from ongoing euro zone stress. Still, we expect growth in the
dollar value of merchandise exports to edge back to 11.1% yoy in 2011, after rebounding to
an estimated 24.6% yoy in 2010. Meanwhile we project merchandise imports to grow 11.9%
yoy in dollar terms in 2011. As a result, the foreign trade and current account surpluses
should increase to 27.5% of GDP and 10.6% of GDP in 2011, respectively. If oil prices
average $10/bbl higher than our $85/bbl baseline assumption, the current account surplus
would rise to 15.0% of GDP. If oil prices were instead $75/bbl, we estimate that the current
account surplus would be 5.6% of GDP in 2011. Under our 2012 oil price projection of
$90/bbl, we see the current account surplus at 11.2% of GDP.
Prepared by Bryan Plamondon
of IHS Global Insight for Credit Suisse
Securities (Europe) Limited
Jacqueline Madu
+44 20 7883 4216
Berna Bayazitoglu
+44 20 7883 3431

08 December 2010
We expect fiscal performance to continue to improve in 2011, as revenue
collection benefits from higher oil prices and output and strengthening domestic
economic activity. We estimate that the fiscal balance turned positive in 2010, moving
to a surplus of 2.2% of GDP. We project a rise in the fiscal surplus to 4.4% of GDP in
2011 under our baseline oil price assumption of $85/bbl. We expect government
revenues to grow 16.0% yoy in 2011, powered by both oil and non-oil revenues.
Although the federal budget for 2011 envisions a 6% yoy cut in spending, consolidated
fiscal expenditures will likely hold firm in the near term (along with the federal budget,
the seven individual emirates adopt budgets of their own). Abu Dhabi should continue
with its large public spending and investment program and maintain its fiscal support of
other emirates. We therefore see overall government expenditures rising 6.0% yoy in
2011. If oil prices were to average $75/bbl in 2011 ($10/bbl lower than our baseline), the
fiscal balance would instead be 1.8% of GDP. On the other hand, if oil prices average
$10/bbl higher, fiscal surplus would amount to 6.5% of GDP in 2011.
Dubai passed a major hurdle by reaching a debt-restructuring settlement with
Dubai World's creditors in September, ushering in a fresh wave of confidence in
the emirate. Dubai's stock market has surged higher, and the emirate's credit risk has
eased. Under the deal, Dubai World will emerge from the restructuring process with
about $14.4bn in total debt. The Dubai government has offered enhanced options for
repayment in terms of maturity, repayment rate, and guarantees while ensuring that
creditors are paid in full over the next five to eight years. Moreover, Dubai and the Abu
Dhabi-backed federal government have shown their support and commitment to Dubai
World by taking equity stakes and committing $9.5bn to the company. Having been
absent from the international markets since announcing its debt troubles in November
2009, the government of Dubai heralded its return to the capital markets by raising
$1.25bn in a sovereign bond issue that was four-times oversubscribed. The accord
places the emirate back on a sustainable medium-term growth path, in our view.
Although credit remains tight, the eventual resolution of the Dubai World saga
should lead to greater improvements in lending conditions by 2011 in our view.
Private sector credit has continued to decline on a year-on-year basis, falling 2.4% in
August, but the pace of decline has eased in the past two months. Credit to the private
sector certainly remains tight as banks have had to tighten lending criteria and boost
provisions for non-performing loans (NPLs) to cover their exposure to cash-strapped
local and regional firms like Dubai World. In addition, rising provisions for NPLs have
continued to hold back lending growth. Nevertheless, the outlook has brightened thanks
to the recent progress on Dubai World's debt restructuring. We think credit growth
should accelerate to 9.4% in 2011.
We do not see any significant risk to the dirham's dollar peg at present. Inflation
remains tame, albeit on an upward trend in recent months. It reached an 18-month high
of just 1.8% in October. Food prices have been a key driver of inflation, stemming from
rising global prices and seasonal spikes associated with Ramadan during
August/September, but we expect some softening in the near term. In addition,
economic activity has been slow to recover from the crisis and broad money supply
growth has advanced at single-digit rates, indicating that underlying inflationary
pressures are muted at present.
Consumer prices will likely continue to accelerate on a year-on-year basis through the
end of 2010 and into 2011 as the pace of the recovery picks up, but inflation should
remain moderate in our view. Moreover, although housing prices have already undergone
their worst declines, soft demand and new supplies of both commercial office space and
residential housing are contributing to continued weakness. We see inflation rising 4.5% on
an average annual basis in 2011 after edging up just 1.0% on average in 2010.

08 December 2010
Exhibit 306: Real GDP and select demand-side components
-15
-10
-5
0
5
10
15
20
25
30
35
2004 2005 2006 2007 2008 2009E 2010F 2011F 2012F
-5
0
5
10
15
20
Exports
GDP (right)
With Dubai's ongoing
property market slump and
cash-strapped, state-owned
firms, 2010 did not feel like
much of a recovery year in
the UAE. Activity was
mainly fueled by Abu
Dhabi's fiscal spending and
resurgent exports. Private
consumption and
investment spending lagged
behind. Nevertheless, we
see the UAE economy
steadily building momentum
in 2011, with GDP growth
rising to 4.7%.

Source: UAE Ministry of Economy, IHS Global Insight

Exhibit 307: Crude oil output Exhibit 308: Oil and non-oil GDP
mn barrels per day % year-on-year change
2.0
2.2
2.4
2.6
2.8
3.0

-10
-5
0
5
10
15
20
25
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
E
2
0
1
0
F
2
0
1
1
F
2
0
1
2
F
Oil GDP
Non-oil GDP
Real GDP

We expect the oil sector to
expand 4.5% in 2011 after
an estimated 2.0% rise this
year. Crude oil output
should trend higher as
global demand again
gathers pace by the end of
2011, helping to fuel oil
sector growth. We see non-
oil GDP rising 4.8%, as
improved financial
conditions combined with
continued fiscal stimulus
jump-start activities in the
non-oil sectors.

Note: Thin line indicates IHS Global Insight estimates or forecasts
Source: International Energy Agency, IHS Global Insight
Source: UAE Ministry of Economy, IHS Global Insight

% of GDP
15
20
25
30
35
40
2004 2005 2006 2007 2008E 2009E 2010F 2011F 2012F
-10
-5
0
5
10
15 Revenues
Expenditures
Fiscal balance, right

After moving back into
surplus in 2010, the fiscal
surplus should edge higher
in 2011 to 4.4% of GDP,
according to our estimates.
While government revenues
will be supported by strong
gains in both oil and non-oil
income, expenditures will
likely hold firm in our view,
as Abu Dhabi continues
with its strong public
spending and investment
and provides support to
other emirates.

Source: UAE Central Bank, IHS Global Insight

08 December 2010
% year-on-year change in dollar values
-60
-40
-20
0
20
40
60
80
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10
Exports
Imports
Exports, which have
rebounded sharply this
year, should continue to see
healthy gains in 2011 as
well. We forecast the dollar
value of merchandise
exports to rise 11.1% yoy in
2011, after climbing 24.6%
yoy in 2010. We forecast
imports will grow 11.9% yoy
in dollar terms next year,
continuing their strong
growth on the back of rising
domestic demand.

Note: Thin line indicates IHS Global Insight estimates or forecasts.
Source: Direction of Trade Data (IMF), IHS Global Insight

Exhibit 311: Current account and trade balance
% of GDP
0
5
10
15
20
25
30
35
2004 2005 2006 2007 2008 2009E 2010F 2011F 2012F

Trade balance

Thanks to the gains in trade
from higher oil prices and
rebounding external
demand, the headline
external balances should
rise in 2010, in our view.
We expect the trade and
current account surpluses
to increase to 28.3% of
GDP and 11.8% of GDP,
respectively, this year. We
expect them to stay
relatively steady as a
percentage of GDP in 2011
before edging up in 2012.

Source: UAE Central Bank, IHS Global Insight

Exhibit 312: Consumer prices Exhibit 313: Money supply
% annual average change % year-on-year change
0
2
4
6
8
10
12
14
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
F
2
0
1
1
F
2
0
1
2
F

-20
-10
0
10
20
30
40
50
60
70
M1
M2

CPI inflation hit an 18-
month high in October, but
it remains relatively tame at
1.8% yoy. Moreover, broad
money supply has
advanced at single-digit
annual rates, indicating that
underlying inflationary
pressures are muted at
present. Inflation should
remain moderate in our
view, rising from an average
annual rate of 1.0% this
year to 4.5% in 2011.

Source: UAE Ministry of Economy, IHS Global Insight Note: Thin line indicates IHS Global Insight estimates or forecasts
Source: IMF, IHS Global Insight

08 December 2010
United Arab Emirates: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 15.6 13.1 13.0 6.2 7.4 -3.0 2.3 4.7 5.2
Nominal GDP ($bn) 105.6 138.0 175.2 206.4 254.4 203.3 236.0 265.2 294.4
Population (mn) 3.9 4.1 4.2 4.5 4.8 5.1 5.2 5.3 5.4
GDP per capita ($) 26,850 33,747 41,433 45,991 53,388 40,123 45,516 50,030 54,412
CPI inflation (% year-on-year change) na na na na na -0.3 2.8 4.5 4.6
Exchange rate (AED per USD, end-year)

3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67
Exchange rate (AED per USD, average)

3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67
3-month deposit rate (%, average) 1.6 3.6 5.2 5.1 2.8 2.4 2.2 2.2 3.3
Fiscal data
General government fiscal balance (% of GDP) -0.4 7.8 11.7 9.1 12.1 -2.3 2.2 4.4 5.7
General government primary balance (% of GDP) -0.4 9.0 12.7 11.9 16.3 2.8 6.8 8.5 9.6
Balance of payments
Net FDI Inflows ($bn) 7.8 7.1 1.9 -0.4 -2.1 1.3 3.9 5.7 6.0
Total external debt service ($bn)

3.4 5.0 8.8 14.3 13.2 12.8 13.4 13.2 13.9
Foreign debt ($bn)

24.2 38.3 82.9 131.2 143.8 151.0 162.6 162.7 164.5
Source: Central Bank of UAE, UAE Ministry of Economy, IMF, United Nations, IHS Global Insight

08 December 2010
Non-Japan Asia

08 December 2010
China: Normalization accelerated
CPI inflation is likely to still surprise on the upside, as we revise up CPI inflation
from 5% to 5.3% for 2011, while the market consensus stands at 3%. The rise of
inflation is expected to be driven by four factors: 1) food inflation, 2) wage hike related
service inflation, 3) commodity inflation and 4) adjustments in utility and fuel prices. Food
inflation is projected to contribute about four percentage points to headline CPI, while
service inflation is likely to be the new concern. The labour shortage is spreading from
the manufacturing sector to the services sector, which has a much better pricing power
to pass through the increase. We expect CPI inflation to peak around mid- 2011, but the
softening after that is likely to be mild. We would stress that inflations duration is more
important than how high inflation will ultimately reach. It is our view that the medium of
inflation over the next decade may be around 4% as against 2% in the past decade. For
a fast growing emerging market economy, trend inflation at around 4% is not very
problematic in our view, but everyone impacted, including the market and decision
makers, must go through an adjustment period, which has now begun. We think
monetary policy stance must now return to normal.
We expect the normalization in monetary conditions to be faster and stronger
than most currently forecast. We look for a 225bps hike in the one-year deposit rate
and a 210bps rise in the lending rate between now and the end of 2011, as consensus is
looking for about 75bps. We expect the yield curve to steepen, with the longer duration
rising twice as fast as the short duration rates. We expect the required reserve ratio to
be raised by 200bps by end-2011. We forecast the new lending quota for 2011 to be set
between RMB6-6.5trn, and M2 growth between 13.5-14.5%. These are compared to
RMB7.5trn and about 19% for 2010, respectively. Despite our aggressive forecast for
central bank action, we would argue that this is a process of monetary normalization
instead of tightening. Even after such a rate hike and decline in lending quota
materialize, the figures are still more accommodative than during the pre-crisis era.
While the monetary policy stance has shifted from adequately loose (loose
biased) to prudent (neutral), fiscal policy remains active (expansionary) for
2011. Beijing is likely to reduce a wide range of taxes including raising the entry level for
the individual tax, in an effort to boost consumption. Infrastructure investment is likely to
be robust in the first year of the 12th five-year plan, though this time around, the central
government is likely to fund most projects. The government will subsidize seven new
industries, such as alternative energy, new materials, etc. Meanwhile, the MoF has
terminated tax exemptions for foreign and joint ventures, putting them at the same basis
as domestic companies.
Despite some tightening in monetary policy, we have revised up our GDP growth
forecasts to 10.1% for 2010 and 9.2% for 2011, from the previous 9.8% and 8.9%,
respectively. We introduce our 2012 growth projection of 9%. In a broad picture, we
expect export growth to moderate along with the shrinkage of the current account
surplus, though by no means collapsing. This is likely to be partially compensated for by
a pick-up in investment, as the country enters into a new investment cycle fuelled by the
12th five-year-plan. Private consumption is likely to remain robust, supported by the
salary increase and tax cut. However, until the next super factor (similar to joining WTO
and the housing boom in the last cycle), we believe China is unlikely to return to double-
digit growth on a sustained basis. We look for urbanization as the next super factor, but
it may take a few years to show its full capacity. The success of urbanization will be
defined not by the number of farmers moving to the towns, but whether they have
money in their pockets when they make the move. That said, we think the infrastructure
projects in the rural areas, production-line relocation and the rapid salary increase
among the migrant workers are all integral parts of Chinas strategy. Setting up a system
to allow rural areas access to bank credit is also critical.
Dong Tao
+852 2101 7469

08 December 2010
Merchandise export growth is projected at 9.9% for 2011, slower than the
estimated 27.8% for 2010, but not excessively bad. The feedback from export
manufacturers suggests that orders flows went down since August (when the global
double-dip fear heightened) but it seems to have stabilized recently. We note that
factories have turned cautious in taking orders due to concerns of not being able to hire
enough workers to complete them, while incurring surging material costs. Imports are
expected to strengthen, partially reflecting the rising commodity prices, but also fuelled
by a pick-up in machinery demand. We expect Chinas current account surplus to shrink
from 5.4% of GDP in 2010 to 4.3% in 2011.
The property sector appears to be the swing factor to the economy in 2011, but we
expect lackluster results. Transaction volumes continue to shrink, after a temporary
rally in September. The authorities launched a package of new measures, including
raising the down-payment ratio, restricting non-resident purchasing, and threatening the
launch of property taxes. These measures, arguably the most severe housing policy
seen over the past 15 years, have sidelined buyers, while supply has surged. However,
developers have refused to cut prices, resulting in a sharp fall in transaction volume. On
balance, we look for some form of correction, with average prices possibly down 10-
15%, but we do not believe it is THE TIME for a long awaited deep correction yet.
Large negative real interest rates will continue to liquidate bank deposits and a bulk of
that is expected to end up in the property market. In our observation, Beijings
sentiments about the housing sector are mixed worried about prices rising too fast on
the one hand, yet worried about prices falling sharply on the other. Key focus should be
on developers cash flows, in our view.
Beijing has clearly adopted a strategy to increase the real exchange rate through
salary increases, instead of nominal exchange rate appreciation, as the main
policy tool for economic transformation. We believe this strategy is sound in the long
run as it helps boost domestic consumption (though inflationary), and contributes to
global rebalancing. We expect about 4-5% RMB appreciation against the USD in 2011,
based on the current rate. This is probably not enough to satisfy the demand from the
rest of the world, especially from the US Congress. In our view, an escalation of trade
war rhetoric is highly likely. Some calculated and minor trade sanctions launched by the
US against Chinese products are likely, with possible retaliation from China. We do not
anticipate an across-the-board trade war at this time.
The 12th five-year plan will kick off from 2011, the essence of which can be
summarized into one word - Transformation. Details of the plan have yet been made
public and are subject to approval by the National Peoples Congress in March. We
expect the government to de-emphasize the annual growth target and the 8% growth
benchmark, which has been deemed critical for social stability. The focus will likely shift
to the distribution of growth benefits, in favour of workers and the publics well being in
general. Promoting economic transformation through domestically-driven means has
been placed as the top priority. Industrial policy is leading towards new energy, new
materials, new IT technology, alternative energy, bio-technology, high-end machinery
and more fuel-efficient automobiles. Urbanization, developing inland economies, and
improving agricultural productivity are also set as priorities.
Moodys revised up Chinas foreign currency sovereign debt rating to Aa3 (from
A1) in November, and maintains a positive outlook. The rating agency cited five
main reasons for the upgrade: (1) a resilient economic performance; (2) an effective
stimulus program and the unwinding of it; (3) lack of erosion in government financial
credit fundamentals; (4) a strong external payment position; and (5) an expectation that
China and the US will manage trade and currency regime tension constructively. We do
not anticipate S&P (AA+, stable) or Fitch (AA+, stable) to make upgrades in rating nor
outlook in the near term.

08 December 2010
Exhibit 314: CPI inflation Exhibit 315: Interest rates
-3
-2
-1
0
1
2
3
4
5
6
7
M
a
r
-
0
9
J
u
n
-
0
9
S
e
p
-
0
9
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
S
e
p
-
1
0
D
e
c
-
1
0
M
a
r
-
1
1
J
u
n
-
1
1
S
e
p
-
1
1
D
e
c
-
1
1
Headline CPI (% yoy)
Real one-year deposit rate (%)
Nominal one-year deposit rate (%)
Forecast

2
3
4
5
6
7
8
9
S
e
p
-
0
8
D
e
c
-
0
8
M
a
r
-
0
9
J
u
n
-
0
9
S
e
p
-
0
9
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
S
e
p
-
1
0
D
e
c
-
1
0
M
a
r
-
1
1
J
u
n
-
1
1
14
15
16
17
18
19
20
21
22
23
24
One-year lending rate (%, LHS)
One-year deposit rate (%, LHS)
Requi red Reserves ratio (%, RHS)
Forecast
We revise up our year-
average CPI inflation
forecast from 5% to 5.3%
for 2011.
We look for hikes of 225bps
in the one-year deposit rate
and 210bps in the lending
rate between now and the
end of 2011.

Source: NBS, CEIC, Credit Suisse Source: PBoC, Credit Suisse

Exhibit 316: RMB loan growth Exhibit 317: Fixed asset investments
New loan growth (RMB trn)
6.5
7.5
9.6
0
2
4
6
8
10
12
2001 2003 2005 2007 2009 2011F
Forecast

0
10
20
30
40
50
60
O
c
t
-
0
7
J
a
n
-
0
8
A
p
r
-
0
8
J
u
l
-
0
8
O
c
t
-
0
8
J
a
n
-
0
9
A
p
r
-
0
9
J
u
l
-
0
9
O
c
t
-
0
9
J
a
n
-
1
0
A
p
r
-
1
0
J
u
l
-
1
0
O
c
t
-
1
0
FAI: Real estate investments (% yoy)
FAI: Infrastructure investments (% yoy)

Even if the 2011 lending
quota is reduced to RMB6-
6.5trn, this would still be
more accommodative than
in the pre-crisis era.
Infrastructure investment is
likely to be robust in the first
year of the 12th five-year
plan, though the central
government is likely to fund
most projects.

Source: PBoC, Credit Suisse Source: NBS, CLIC, Credit Suisse

Exhibit 318: Fiscal policy Exhibit 319: Retail sales
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2001 2003 2005 2007 2009
-1000
-800
-600
-400
-200
0
200
400
600
Fiscal balance (RMB bn, 12m roll sum, RHS)
Govnt Revenue (RMB bn, 12m roll sum, LHS)
Govnt Expendit ure (RMB bn, 12m roll sum, LHS)

10
12
14
16
18
20
22
24
26
2004 2005 2006 2007 2008 2009 2010
Nominal retail sales (% yoy,
3-month mov av.)
Fiscal policy should remain
active (expansionary) in
2011, suggesting continued
tax cuts and investment
spending to support growth.
Private consumption is
likely to remain robust,
supported by salary
increases and tax cuts.

Source: NBS, CLIC, Credit Suisse Source: NBS, Credit Suisse

08 December 2010
Exhibit 320: GDP growth forecasts
Exhibit 321: Next 'super factor':
urbanization
China: Real GDP growth (%)
9.0
9. 2
10. 1
0
2
4
6
8
10
12
14
16
2
0
0
4

2
0
0
5

2
0
0
6

2
0
0
7

2
0
0
8

2
0
0
9

2
0
1
0
F
2
0
1
1
F
2
0
1
2
F
Forecast

0
2
4
6
8
10
12
14
16
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Real GDP
growth (% y oy )
1978-2009
aver age: 10%
10% plus growth: 5 out of 6 years
Super factors: Rural reform& township
enterprises
The slump
post 1989
Asian
financial
crisis
5 years
Market
economy &
FDI
5 years
WTO &
housing boom
Global credit
crisis

We have revised up our
GDP growth forecasts to
10.1% for 2010 and 9.2%
for 2011, and forecast 9%
for 2012.
China is unlikely to return to
sustained double-digit
growth until urbanization
accelerates and becomes
the next super factor, in
our view.

Source: PBoC, Credit Suisse Source: NBS, CEIC, Credit Suisse

Exhibit 322: Merchandise exports Exhibit 323: Property transactions
-40
-30
-20
-10
0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010
China: Exports (% yoy)

0
1000
2000
3000
4000
5000
6000
7000
8000
S
e
p
-
0
7
D
e
c
-
0
7
M
a
r
-
0
8
J
u
n
-
0
8
S
e
p
-
0
8
D
e
c
-
0
8
M
a
r
-
0
9
J
u
n
-
0
9
S
e
p
-
0
9
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
S
e
p
-
1
0
D
e
c
-
1
0
Uni ts sold
per week,
3w mav
Beijing
Shanghai
Shenzhen
Pri mary residenti al propert y sales

We forecast merchandise
export growth of 9.9% in
2011, slower than the
estimated 27.8% in 2010,
but not desperately bad.
We look for property prices
to correct by 10-15% in
2011, but we do not expect a
deeper correction.

Source: Customs Administration, Credit Suisse Source: Soufun.com, Credit Suisse

Exhibit 324: Rising wages Exhibit 325: USDRMB
0
200
400
600
800
1000
1200
1400
1600
1800
1996 1998 2000 2002 2004 2006 2008 2010
Average monthly wage for an
entry job in Dongguan shoe
factories (RMB)

6.55
6.60
6.65
6.70
6.75
6.80
6.85
A
p
r
-
1
0
M
a
y
-
1
0
J
u
n
-
1
0
J
u
l-
1
0
A
u
g
-
1
0
S
e
p
-
1
0
O
c
t
-
1
0
N
o
v
-
1
0
D
e
c
-
1
0
USDRMB

Beijing has adopted a
strategy to increase the real
exchange rate through
salary increases, instead of
through rapid nominal
exchange rate appreciation.
We only expect about 4-5%
RMB appreciation against
the USD in 2011.

Source: Dongguan manufacturers, Credit Suisse Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse

08 December 2010
China: Selected economic indicators
2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 10.1 10.4 11.6 14.2 9.6 9.1 10.1 9.2 9.0
(1)
7.1 6.7 8.6 10.4 8.7 9.6 9.9 10.0 9.7
Growth in real gross fixed capital formation (%)
(1)
13.3 11.0 11.0 11.4 10.2 19.3 10.7 9.6 9.2
Nominal GDP ($bn) 1,937 2,303 2,780 3,459 4,410 4,918 5,696 6,823 8,199
Population (mn) 1,300 1,308 1,314 1,321 1,328 1,335 1,342 1,349 1,355
GDP per capita ($) 1,490 1,761 2,115 2,618 3,321 3,685 4,245 5,059 6,049
Unemployment (% of urban labor force, average year) 4.2 4.2 4.1 4.0 4.2 4.3 4.1 4.0 4.0
CPI inflation (% change in average index for the year) 3.9 1.8 1.5 4.8 5.9 -0.7 3.2 5.3 4.6
Exchange rate (RMB per USD, end-year) 8.28 8.07 7.80 7.29 6.82 6.83 6.65 6.35 6.05
Exchange rate (RMB per USD, average) 8.28 8.19 7.97 7.61 6.96 6.83 6.74 6.50 6.20
REER (% year-on-year change December to December)
(2)
-4.7 4.5 -1.0 3.9 11.7 -6.9 4.4 7.9 6.8
Nominal wage growth (% year-on-year change, average) 14.1 14.6 14.4 18.7 16.6 3.9 20.9 22.1 21.1
1-year lending rate (%, end-year) 5.58 5.58 6.12 7.47 5.31 5.31 6.06 7.66 7.66
3-month interbank rate (%, end-year) 3.6 3.6 2.8 4.4 1.9 1.8 3.1 4.7 4.7
Fiscal data
General government fiscal balance (% of GDP) -1.3 -1.2 -0.8 0.6 -0.4 -2.2 -2.7 -2.0 -2.0
General government primary fiscal balance (% of GDP) -0.6 -0.5 -0.1 1.0 0.0 -1.4 -2.0 -1.2 -1.2
(3)
18.4 17.7 16.6 19.5 17.0 18.6 19.2 18.6 18.2
Balance of payments
Current account (% of GDP) 3.5 7.0 9.0 10.7 9.7 6.0 5.4 4.3 3.6
Net FDI ($bn) 53.1 67.8 60.3 121.4 94.3 34.3 41.1 33.1 27.1
(4)
22.4 21.9 22.1 24.1 27.3 30.6 32.0 30.7 29.4
Foreign debt ($bn, end-year) 263.0 296.5 338.6 389.2 390.2 428.6 519.8 563.5 599.7
Public ($bn)
(5)
105.6 98.7 108.2 119.9 120.6 121.2 121.9 122.6 123.3
Private ($bn) 157.4 197.9 230.4 269.3 269.6 307.4 397.9 440.9 476.4
Central bank gross FX reserves ($bn) 609.9 818.9 1,066.3 1,528 1,946 2,399 2,824 3,229 3,628
Central bank gross non-gold FX reserves ($bn) 605.9 814.7 1,062.0 1,524 1,942 2,389 2,807 3,207 3,602
(1) Calculated based on annual GDP data released by the NBS. (2) Real effective exchange rate: increase indicates appreciation.
(3) Includes Treasury bond and foreign state debt owed by the State Council only. 2010E level is estimated to be 50.3%, including local governments affiliated debt. (4) Scheduled and estimated
amortizations for medium- and long-term public and private sector debt. (5) Public debt defined as direct loans by government, state banks and SOEs, excluding trade credit.
Source: National Bureau of Statistics, Peoples Bank of China, CEIC, Credit Suisse

08 December 2010
Hong Kong: Higher CPI, elevated home prices
Growth moderated further in 3Q10, up only 0.7% on a quarter-on-quarter
seasonally adjusted basis, dragged down by the weakness in fixed investments.
Private consumption was strong, but fixed investments disappointed, with private
construction activity falling 8% qoq, sa. On a yearly basis, 3Q GDP rose 6.8% yoy, but it
was mainly supported by the contribution from net trade. We think sequential growth
may remain slow in 4Q10, but expect it to improve in 2011 upon better global growth
dynamics and the rise of private construction activity. We had revised up our GDP
growth forecasts earlier, and will maintain them at 6.8% for 2010 and 4.8% for 2011.
High food prices from China and rising housing rents have started pushing up
inflation and we expect the up-trend to continue. Raw food inflation was at
1.9%mom in September and 0.8%mom in October, in-line with the rapid increase of food
inflation in China. Private housing rents have also been rising for almost a year, driven
by higher home prices and improved employment conditions. The risk of inflation is to
the upside, in our view, upon higher food prices from China and a positive output gap in
2011. The enforcement of the minimum wage law in mid-2011 would also push up the
prices of lower-end services, in our view. We continue to expect headline CPI inflation to
average 5.3% yoy in 2011 (Consensus 3.1%), with underlying inflation at 3.9% yoy.
Since the announcement of QE2 in early November, USDHKD has not pierced
through the 7.75 strong-side convertibility undertaking to trigger more HKD
liquidity into the banking system. In fact, no net capital inflow was recorded so far in
2010, as the last FX intervention by the HKMA was in 4Q 2009. Since September 2008,
an estimated HKD640bn of foreign liquidity has flowed into Hong Kong. Most of it was
mopped up by the issuance of Exchange Fund papers, leaving HKD149bn in the
Aggregate Balance. We expect HIBOR to remain depressed while the excess liquidity
condition persists, with the real interest rate turning more negative as inflation rises.
The expansion of RMB business in July has led to a surge of RMB deposits and
used up the RMB trade settlement quota in Hong Kong. Since 3Q this year, the
geographical coverage of the RMB trade settlement program has been vastly expanded,
while the purchasing limit of RMB for corporate clients in Hong Kong was removed. The
liberalization has used up the RMB8bn trade settlement quota for the SAR and led to the
surge of RMB deposits in October. The government has strongly stressed that the usage
of the trade settlement quota was for genuine trade purposes to dismiss reports that it
was used for speculative purposes. Overall, we think the amount of RMB deposits and
trade in Hong Kong are still limited, representing a small percentage of total M2 and the
annual merchandise trade flow of China.
The government has strengthened its curbs on property speculation, but we think
prices may remain stubbornly high, supported by low financing costs and a rising
inflation threat. The introduction of a special stamp duty for short-term property
transactions has significantly increased the cost of speculating. These measures,
however, would not have much impact on longer-term investors and end-users, who do
not expect to sell their properties within two years. We do not think a massive sell-off in
the property market is likely in the near term, as owners can rent out their units to cover
mortgage expenses, and expect long-term demand to stay supported by concerns over
rising inflation, low mortgage rates, and the weakening of the USD (HKD).
We expect the fiscal balance to be in surplus for FY 2010/11, boosted by land and
property related income. Land sales have fetched HKD39bn so far in 2010, while
revenue from land exchange is estimated to be about HKD3.6bn. Increased stamp duty
from property sales should provide extra revenue and widen the fiscal surplus further.
Moodys has raised the credit rating of Hong Kong to Aa1, with a positive outlook.
A higher China rating, the prospect of stronger fiscal strength and lessening vulnerability
to external shocks are the rationale for the upgrade. Moodys rating is now in-line with
S&Ps (AA+, stable outlook) and Fitchs (AA, stable outlook).
Christiaan Tuntono
+852 2101 7409
christiaan.tuntono@credit-suisse.com

08 December 2010
Exhibit 326: GDP growth Exhibit 327: Retail sales
-20
-15
-10
-5
0
5
10
15
20
3
Q
0
4
2
0
0
5
3
Q
0
5
2
0
0
6
3
Q
0
6
2
0
0
7
3
Q
0
7
2
0
0
8
3
Q
0
8
2
0
0
9
3
Q
0
9
2
0
1
0
3
Q
1
0
Real GDP (% yoy)
Private consumption (% yoy)
Gross fixed capital formation (% yoy)

-15
-10
-5
0
5
10
15
20
25
30
35
2006 2007 2008 2009 2010
Retail sales by value (% yoy)
Retail sales by volume (% yoy)

Private consumption growth
was strong in 3Q, but fixed
investments disappointed,
with private construction
activity falling 8% qoq sa.
Retail sales continued
strengthening, up 4.4%
mom sa in October.

Source: Census and Statistics Dept., Credit Suisse Source: Census and Statistics Dept., Credit Suisse

Exhibit 328: Food inflation Exhibit 329: CPI private housing rent
-5
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010
-3
0
3
6
9
12
15
China food CPI (% yoy)
Hong Kong food CPI (% yoy. RHS)

-2
0
2
4
6
8
10
O
c
t
-
0
8
J
a
n
-
0
9
A
p
r
-
0
9
J
u
l
-
0
9
O
c
t
-
0
9
J
a
n
-
1
0
A
p
r
-
1
0
J
u
l
-
1
0
O
c
t
-
1
0
CPI: private housing rent (%yoy)

High food prices from China
and rising housing rents
have started pushing
inflation up, and we expect
the up-trend to continue.

Source: Census and Statistics Dept., NBS, Credit Suisse Source: Census and Statistics Dept., Credit Suisse

Exhibit 330: USDHKD Exhibit 331: Monetary base
7.74
7.75
7.76
7.77
7.78
7.79
7.80
7.81
7.82
J
a
n
-
0
9
A
p
r
-
0
9
J
u
l
-
0
9
O
c
t
-
0
9
J
a
n
-
1
0
A
p
r
-
1
0
J
u
l
-
1
0
O
c
t
-
1
0
USDHKD
Strong side convertibi lity undertaking
2009 2010

0
200
400
600
800
1,000
1,200
J
u
n
-
0
8
S
e
p
-
0
8
D
e
c
-
0
8
M
a
r
-
0
9
J
u
n
-
0
9
S
e
p
-
0
9
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
S
e
p
-
1
0
D
e
c
-
1
0
Aggregate Balance (HKD bn)
Exchange Fund Papers (HKD bn)
Coins in circulation (HKD bn)
Cert . of deposit (HKD bn)
Excess liqudiit y
has leveled
Exchange Fund
papers issuance
increased but
leveled lat ely

USDHKD has not pierced
through the 7.75 strong-side
convertibility undertaking in
2010 to trigger more HKD
liquidity into the banking
system.

Source: CEIC, Credit Suisse Source: HKMA, CEIC, Credit Suisse

08 December 2010
Exhibit 332: RMB deposit Exhibit 333: RMB trade settlement
0
50
100
150
200
250
2006 2007 2008 2009 2010
RMB deposit in Hong Kong (RMB bn)

China: RMB settlement for cross-border
trade (RMB bn)
0
10
20
30
40
50
60
J
a
n
-
1
0
F
e
b
-
1
0
M
a
r
-
1
0
A
p
r
-
1
0
M
a
y
-
1
0
J
u
n
-
1
0
J
u
l
-
1
0
A
u
g
-
1
0
S
e
p
-
1
0

The expansion of RMB
business in July has led to a
surge in RMB deposits and
has used up the RMB trade
settlement quota in Hong
Kong.

Source: HKMA, Credit Suisse Source: PBoC, Credit Suisse

Exhibit 334: Property prices Exhibit 335: HIBOR
20
30
40
50
60
70
80
90
100
110
120
1995 1997 1999 2001 2003 2005 2007 2009
Cent aline property price index (July
1997 = 100)

0
1
2
3
4
5
6
7
8
2000 2002 2004 2006 2008 2010
0
50
100
150
200
250
300
350
Aggregate Bal ance (HKD bn, RHS)
3M HIBOR (%)
3M USD LIBOR (%)
Fed fund target rate (%)

The government has
strengthened its curb over
property speculation, but we
think prices may remain
stubbornly high, supported
by low financing costs and
the rising inflation threat.

Source: Centaline Property Agency Ltd., Credit Suisse Source: HKMA, CEIC, Credit Suisse

Exhibit 336: Land sales in FY2010/11 Exhibit 337: Fiscal account
Date Location
Premium
(HKD bn)
11-May-10 Tung Chung, Lantau Island 3.4
24-May-10 Fanling, New Territories 1.3
8-Jun-10 Ho Man Tin, Kowloon 10.9
28-Jul-10 Nicholson Road, The Peak 10.4
17-Aug-10 Houng Hom Bay 3.5
17-Aug-10 Ex-CAS trainign Center, Ho Man Tin 4.1
31-Aug-10 Ede Road, Kowloon Tong 1.3
29-Sep-10 Fan Leng Lau Road 0.5
12-Oct-10 Ede Road, Kowloon Tong 1.6
3-Nov-10 Inverness Road, Kowloon Tong 2.2
39.2

10
12
14
16
18
20
22
24
26
28
07/08 08/ 09 09/10 10/ 11F 11/12F 12/ 13F
Gov revenue (% of GDP)
Gov expenditure (% of GDP)
Overall balance (% GDP)
7.7% 0.1% 1.1% 0.2% -0.4% -0.3%
Forecast

Land sales have generated
HKD39.2bn in fiscal
revenue, turning the
FY2010/11 fiscal balance
into surplus, according to
our estimates.

Source: Lands Dept., Credit Suisse Source: Treasury Dept., Credit Suisse

08 December 2010
Hong Kong: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

Real GDP growth (%)
8.5 7.1 7.0 6.4 2.2 -2.8 6.8 4.8 4.8
7.0 3.0 6.0 7.8 2.4 -0.4 5.3 4.2 4.3
2.5 4.1 7.0 4.2 0.8 -1.8 7.1 7.2 7.4
21.3 20.9 21.5 21.4 19.9 20.1 20.2 20.7 21.2
Nominal GDP ($bn)
165.9 177.8 189.2 207.2 214.8 209.3 226.2 244.5 260.4
Population (mn)
6.8 6.8 6.9 6.9 7.0 7.0 7.1 7.1 7.1
GDP per capita ($)
24,400 26,007 27,504 29,828 30,695 29,785 32,067 34,521 36,615
Unemployment (% of labor force, end-year)
6.5 5.3 4.4 3.4 3.8 5.5 4.0 3.8 3.5

0.3 1.4 2.3 3.8 2.1 1.3 2.8 5.3 4.2
-0.4 0.9 2.0 2.0 4.3 0.5 2.4 5.3 3.8
Exchange rate (HKD per USD, end-year)
7.77 7.75 7.78 7.78 7.75 7.76 7.80 7.80 7.80
Exchange rate (HKD per USD, average)
7.79 7.78 7.77 7.78 7.78 7.75 7.80 7.80 7.80
REER (% year-on-year change December to December)
(1)
-4.3 1.3 -4.0 -5.9 1.0 -3.5 1.8 5.3 3.8
-1.2 0.8 1.5 2.6 1.0 -1.0 3.0 7.0 7.0
3-month HIBOR (%, end-year)
0.3 4.2 3.9 3.5 1.0 0.1 0.3 0.3 1.0
Fiscal data

1.7 1.0 4.0 7.7 0.1 1.1 0.2 -0.4 -0.3
1.7 1.1 4.0 7.7 0.1 1.1 0.2 -0.4 -0.3
18.8 16.9 15.5 14.6 18.8 17.8 18.0 17.9 18.0
(2)
2.0 1.8 1.5 1.2 1.0 1.2 1.9 2.3 2.4

Broad money supply (HKD M2, % of GDP)
171.0 168.4 188.4 203.2 193.0 220.1 223.0 233.0 253.0
Broad money supply (HKD M2, % year-on-year change)
4.8 5.5 19.2 18.1 -1.3 10.7 10.2 12.9 15.6
146.7 142.7 135.0 125.7 125.0 163.3 198.3 199.2 209.2
5.1 4.2 0.5 2.1 3.2 26.8 32.1 8.6 11.8
147.6 146.1 139.9 140.0 143.3 157.3 181.3 186.1 194.4
3.7 6.0 1.8 9.7 6.2 6.5 25.4 10.9 11.3
Balance of payments

190.2 198.7 205.5 207.3 212.6 193.8 219.9 224.4 233.6
181.3 186.2 194.1 196.4 202.4 186.7 212.7 217.8 227.0
Exports (goods and non-factor services, % increase in $ value)
16.3 12.0 10.0 10.8 6.0 -11.2 22.6 10.3 10.9
Imports (goods and non-factor services, % increase in $ value)
17.2 10.1 10.7 11.2 6.5 -10.1 23.2 10.7 11.0
15.7 20.2 22.9 25.6 30.6 24.5 21.1 19.4 20.0
Current account (% of GDP)
9.5 11.3 12.1 12.4 14.3 11.7 9.3 7.9 7.7
Net FDI ($bn)
-11.7 6.4 0.1 -6.8 3.1 5.0 5.0 5.9 5.8
Scheduled external debt amortization ($ bn)
(3)
14.0 8.5 14.2 18.6 13.3 10.3 11.4 11.8 11.9

Foreign debt ($bn, end-year)
(4)
30.6 44.9 54.0 85.6 50.1 39.7 44.2 43.2 42.2
Public ($bn)
1.6 1.8 2.1 2.2 2.3 1.7 1.8 1.7 1.6
Private ($bn)
28.9 43.1 51.9 83.3 47.9 38.0 42.4 41.5 40.5
18.4 25.2 28.5 41.3 23.3 19.0 19.5 17.7 16.2
9.7 12.7 13.9 19.9 11.0 9.8 8.9 7.9 6.9
123.6 124.3 133.2 152.7 182.5 262.3 300.6 338.5 377.1
123.5 124.2 133.2 152.7 182.5 262.3 300.6 338.5 377.1
(1) Real effective exchange rate, increase indicates appreciation. (2) Also includes debt issued under the Government Bond Program. Excludes debt guaranteed by the government.
(3) Scheduled and estimated amortizations for total medium- and long-term public and private sector debt. (4) Non-bank foreign debt to Hong Kong entities.
Source: Census and Statistics Department, Hong Kong Monetary Authority, CEIC, Credit Suisse

08 December 2010
India: Good for now...
Recent data support our view that growth does not seem as dismal as suggested
by the industrial production readings. The weakness in recent industrial production
readings has understandably worried many. In India: Is economic activity stalling?, 29
October, we examined a host of less-looked-at proxies for activity and concluded that
overall activity did not look as dismal as the industrial production data suggested.
Indeed, incoming data, such as the manufacturing and services PMI, have been
relatively robust for November, the manufacturing PMI climbed up for the second
consecutive month (up by 1.2 points) to 58.4, and the services PMI jumped almost 4
points to 60.1 (Exhibit 338). After a brief bout of weakness, merchandise exports too
rose at a good pace in seasonally adjusted month-on-month terms in September and
October. The recent 3Q calendar year GDP showed that the services sector was doing
quite okay (unsurprisingly, industrial sector GDP growth was weaker because it is based
on industrial production data).
With comfort on the growth front, we expect RBI to maintain its tightening stance.
Given the very weak industrial production numbers, many have argued that the RBI will
pause for an extended period. But in our judgment, RBI is not viewing the underlying
growth momentum as worryingly weak. And hence the central bank is likely to focus on
containing inflationary expectations, although the central bank is arguably almost
certainly closer to the end of the tightening cycle.
We maintain our call for another 75bps of hikes between now and August 2011.
In last months policy review, the RBI indicated that that it was unlikely to hike rates in
the immediate future. We dont expect a hike in either the December or possibly even
the January review. But we are penciling in one 25bps hike by the end of this financial
year (March 2011) and another 50bps of hikes in the first half of 2011 (fiscal year
beginning April).
We expect growth to moderate in 2011. We have lowered our GDP growth forecast to
7.7% from 8%, as we expect higher interest rates (from the policy rate hikes to date), to
a lesser extent real appreciation of the INR (the REER as of September was up 14%
from its long-term average) and higher oil prices to impact growth with a lag (India: Livin
on a prayer, 19 November). Our 2011 GDP growth forecast is at the lower end of
consensus expectations.
We have raised our average WPI inflation forecast for 2011. From the current
reading of 8.6% yoy for October, WPI inflation is likely to head lower in the next quarter
helped by favorable base effects. But thereon, we expect it to inch up and to average
6.5% yoy in 2011 (fiscal year beginning April), up from our previous estimate of 4.8%.
The upward revision is mainly due to the higher rise in global commodity prices that we
expect (we estimate that around 40% of the WPI by weight is closely correlated with
global commodity prices).
In level terms, food prices (WPI food) have not yet corrected at all. In India: Food
price inflation not just a one-off, 12 February 2010, we highlighted that year-on-year
food price inflation was likely to come off sharply as a result of favorable base effects
and that this could lead to a mistaken impression that high food prices were just a one-
off issue. Indeed, food price inflation (as measured by WPI food) has moderated sharply
from 20.8% yoy at the end of 2009 to 10.8% in October, and many have viewed this as a
welcome development. But we note that in level terms, WPI food has not budged
downward at all (Exhibit 343).

Devika Mehndiratta
+65 6212 3483
devika.mehndiratta@credit-suisse.com
Robert Prior-Wandesforde
+65 6212 3707
robert.priorwandesforde@credit-suisse.com

08 December 2010
Households inflation expectations for the year ahead are in double digits at
11.9%. There is a disconnect between WPI inflation and consumers inflationary
expectations as surveyed by the RBI. The latest survey (2Q calendar-year 2010)
showed expectations for 3Q at 11.4% and at 11.9% for a year ahead. In contrast, the
widely tracked WPI inflation is 8.6% and is likely to head lower. We think inflation
expectations are this high because (1) food prices in level terms are still quite elevated,
and prices of such frequently purchased products most influence consumers inflationary
expectations, and (2) in general, true overall inflation on the ground is still likely elevated
as high food prices are probably still working their way through the system. Remember
that the WPI is an imperfect measure of actual inflation facing the consumer because it
reflects prices of industrial inputs and commodities more than finished consumer goods.
We think that the central bank is mindful of the risk that elevated inflationary
expectations could lead to higher wage growth and hence more generalized inflation,
and that is a key reason why we expect further tightening of monetary policy.
Is the extreme tightness in banking system liquidity here to stay? Concern has
arisen about the consistently large amounts that banks are borrowing from the RBI (on
average, INR1trn through most of November) at the repo window and the consequent
spurt in the interbank call rate to above the policy repo rate (6.25%). The extreme
tightness in banking liquidity eased somewhat at the very beginning of December, but as
of 6 December, banks borrowings from the RBI were again large at INR1.1trn (Exhibit
346). As we argued in India: Livin on a prayer, 19 November, we think that this extreme
tightness is likely to ease in magnitude as the government does some extra spending
with the extra revenues that it earned from the 3G telecom license auctions in
particular. But although we expect the large liquidity deficit to ease in the coming
months, we think that the liquidity of banks in general will remain tight rather than
easy because (1) the government is unlikely to be able to fully spend out all of the
extra revenues that it has garnered, and (2) unless capital inflows surprise on the
upside, we expect net forex inflows to remain modest as a result of the elevated current
account deficit.
The 2011 central government fiscal deficit is likely to move higher again to around
5.4% of GDP. In 2010, the government got lucky with unanticipated revenues to the
tune of 1% of GDP from the telecom auctions this one-off windfall should disappear in
2011. Expenditure reform would get a boost if the government were to make the bold
move of removing diesel price controls (theres been a lot of talk about this recently), but
we think that the likelihood of this reform being implemented in full is low in the near
future. Although many seem to be assuming that net government debt issuance will not
be any higher next year, we think that it could end up so unless the government chooses
to keeps a chunk of its existing cash balance for funding in 2011 instead of using it for
undertaking extra expenditure this year.
RBIs exchange rate stance would depend on domestic liquidity. We maintain our
view that the INR is likely to appreciate modestly through March 2012. Our March 2012
estimate for the USDINR of 42.5 assumes that portfolio inflows remain strong,
particularly with ongoing disinvestments, and that the USD weakens against the euro.
But the reason we do not expect significant appreciation is that we expect the current
account deficit to remain elevated at around 3% of GDP. We think that the RBI will
continue to be relatively hands-off, as it has been so far this year, but this could very well
change depending on how the domestic liquidity situation pans out. That is, if the
governments extra spending does not come in as expected and, as a result, the
banking system remains very short of liquidity, the RBI is likely to then step in to stem
any appreciation pressure in a bid to ease domestic liquidity.

08 December 2010
Exhibit 338: PMI Exhibit 339: Exports and imports
Index level USD mn, seasonally adjusted
40
45
50
55
60
65
70
Dec-05 Mar-07 May-08 Aug-09 Nov-10
Manufacturing PMI
Servicees PMI

0
5000
10000
15000
20000
25000
30000
35000
Apr-04 Jun-06 Aug-08 Oct-10
Merchandise exports*
Merchandise imports*

Recent PMI readings for
both the manufacturing and
service sectors have been
quite robust.
After a brief soft patch,
exports picked up in
September-October.
Imports softened, on the
other hand.

Source: Marlkit economics, Credit Suisse Source: CEIC, Credit Suisse

Exhibit 340: Employment outlook
Exhibit 341: Inflation expectations
RBI survey
Diffusion index, % % yoy
0
20
40
60
2
Q

'
0
8
3
Q

'
0
8
4
Q

'
0
8
1
Q

'
0
9
2
Q

'
0
9
3
Q

'
0
9
4
Q

'
0
9
1
Q

'
1
0
2
Q

'
1
0
3
Q

'
1
0
4
Q

'
1
0
1
Q
'
1
1
Net employment outlook (%)*

11.4
4
6
8
10
12
14
S
e
p
-
0
6
J
u
n
-
0
7
M
a
r
-
0
8
D
e
c
-
0
8
S
e
p
-
0
9
J
u
n
-
1
0
Inflation expectation for quarter ahead

Hiring intentions continue to
be nearly as strong as in
early 2008.
Consumers inflation remain
quite elevated.

* A +ve no. indicates an increase in hiring intentions over the
previous quarter. Quarters are for calendar years.
Source: Credit Suisse, Manpower Inc. Survey
Source: RBI, Credit Suisse

Exhibit 342: WPI inflation forecast Exhibit 343: WPI food
% yoy Index level
-5
5
15
A
p
r
-
0
6
A
p
r
-
0
7
A
p
r
-
0
8
A
p
r
-
0
9
A
p
r
-
1
0
A
p
r
-
1
1
WPI inflation
Forecast

80
100
120
140
160
180
Apr-05 Aug-06 Jan-08 May-09 Oct-10
WPI food (primary + manufactured)

One of the reasons for
consumers still-high
inflation expectations is still-
elevated food prices.

Source: CEIC, Credit Suisse Source: CEIC, Credit Suisse

08 December 2010
Exhibit 344: Call rate and policy rates Exhibit 345: 10-year gsec yield
% %
0
4
8
12
Apr-07 Jul-08 Sep-09 Dec-10
Repo rate
Call rate*
Reverse repo rate

3
4
5
6
7
8
9
10
Apr-04 Dec-05 Aug-07 Apr-09 Dec-10
10-yr gov. bond yield

We expect another 75bps of
hikes in key policy rates by
mid-2011.


Exhibit 346: Banking system liquidity to remain as tight?
INRbn
-1000
-200
600
1400
Jan-01 Apr-02 Jul-03 Oct-04 Jan-06 Apr-07 Jun-08 Sep-09 Dec-10
The large deficit in banking
liquidity is likely to ease in
coming months as the
government does some
extra spending.
But, in general, liquidity is
likely to remain tight rather
than easy.

Source: CEIC, Credit Suisse

Exhibit 347: Net FII inflows Exhibit 348: USD/INR
USDbn, 3m rolling sum INR per USD
-2
2
6
10
14
18
22
26
Net FII inflow in debt
Net FII inflow in equity

35
40
45
50
55
Apr-04 Dec-05 Aug-07 Apr-09 Dec-10
USD/INR

We expect the INR to
appreciate further against
the USD but only modestly.
To the extent that the RBI
caps, appreciation pressure
would depend on whether
or not domestic liquidity
eases from current very
tight conditions.


08 December 2010
India: Selected economic indicators
(Fiscal year beginning April)
(1)
2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%)
(2)
7.5 9.5 9.7 9.2 6.7 7.4 8.4 7.7 7.5
Growth in agricultural GDP (%) 0.0 5.2 3.7 4.7 1.6 0.2 5.0 3.0 3.0
Growth in industrial GDP (%) 10.3 9.3 12.7 9.5 3.9 9.3 7.1 6.8 6.3
Growth in services GDP (%) 9.1 11.1 10.2 10.5 9.8 8.5 9.9 9.4 9.2
Nominal GDP ($bn) 721 837 947 1,229 1,208 1,332 1,619 1,937 2,296
Population (mn) 1,096 1,117 1,137 1,154 1,171 1,189 1,204 1,220 1,236
GDP per capita ($) 658 749 833 1,065 1,032 1,121 1,345 1,598 1,868

WPI inflation (% year-on-year change, fiscal year March over March) 5.4 4.1 6.8 7.7 1.5 10.2 6.4 7.5 5.6
WPI inflation (% change in average index for the year) 6.5 4.4 6.5 4.8 8.1 3.6 8.5 6.5 6.3
Exchange rate (INR per USD, end-year) 43.8 44.6 43.6 40.0 50.7 44.9 44.5 42.5 41.0
Exchange rate (INR per USD, average) 45.0 44.3 45.2 40.1 46.1 47.3 45.5 43.4 41.7
REER (% year-on-year change, March over March)
(3)
2.3 4.6 0.0 3.2 -13.8 18.4 3.5 6.0 3.0
Repo rate (%, end-year)
(4)
6.00 6.50 7.50 7.75 5.00 5.00 6.50 7.00 7.00
Reverse repo rate (%, end-year)
(4)
4.75 5.50 6.00 6.00 3.50 3.50 5.50 6.00 6.00
Fiscal data

(5)
-7.2 -6.5 -5.4 -5.0 -8.6 -9.9 -7.7 -7.8 -7.4
General government budget balance (% of GDP) excl. disinvestment receipts -7.3 -6.5 -5.4 -5.0 -8.6 -10.3 -8.2 -8.3 -7.9
Central government fiscal balance (% of GDP)
(5)
-3.9 -4.0 -3.3 -2.6 -6.0 -6.5 -5.0 -5.4 -5.0
Central government budget balance (% of GDP) excl. disinvestment receipts -4.0 -4.0 -3.3 -2.6 -6.0 -7.0 -5.6 -5.8 -5.5
Central government primary fiscal balance (% of GDP) 0.0 -0.4 0.2 0.9 -2.6 -3.2 -1.7 -2.1 -1.8
Central government revenue (% of GDP) 11.5 9.7 10.3 11.8 9.8 9.6 11.1 9.9 10.0

Balance of payments


(% of GDP) -0.3 -1.2 -1.0 -1.4 -2.4 -2.9 -3.4 -3.2 -2.3

Foreign debt ($bn) 133.0 138.1 172.3 224.4 224.5 262.3 297.3 337.3 379.3
(1) The years above are fiscal years beginning in April and ending in March i.e., 2010 refers to the period of April 2010-March 2011, also written as FY2010/11. (2) Revised GDP series with
base 2004-05. All historical ratios expressed as % of GDP may appear smaller because the revised GDP values in the new series (with base year of 2004) are higher. (3) Real effective
exchange rate: an increase indicates appreciation. (4) The RBI uses a mix of instruments, such as the repo rate, reverse repo rate, CRR (cash reserve ratio), etc. (5) Effective from 2010, the
central government includes proceeds from disinvestments as revenue in calculating the fiscal deficit.
Source: Ministry of Finance, Reserve Bank of India, CSO, CEIC, Credit Suisse
08 December 2010
Indonesia: When boring is good
Boring is not often a word used to describe Indonesias macroeconomic
developments but has actually been the most appropriate term for a little while
now. Although this might sound like an insult, to be boring is actually very good news for
a country with such a chequered and volatile economic past. Economic growth has
proved remarkably stable in the past couple of years, in stark contrast to Indonesias
ASEAN partners; inflation, although up from the lows of 2009, has remained extremely
well behaved by past standards; Indonesia enjoys a very low government budget deficit;
the current account has remained in persistent surplus; the rupiah has traded in a
relatively tight range and Bank Indonesia (BI) has left policy interest rates unchanged for
a record 16 months. No wonder then that both the local bond and equity markets have
been amongst the best performing in the world over the past 18 months or so.
The question is does this represent a permanent shift in the economy that warrants
a structural rerating of Indonesian markets or something more temporary. Given the
scale of the international shocks that have buffeted the economy over the past couple of
years, it is tempting to favor the first explanation and indeed this might well be right. We
are, however, left at least intellectually dissatisfied by such a conclusion as it is difficult to
pinpoint exactly what would cause quite such a fundamental change.
We note plenty of balance sheet adjustment but much less action from the
government in the way of fundamental economic reform. The Asian crisis of 1997-
98 provided such a shock that all sectors of the economy were forced to undertake
significant restructuring of their balance sheets. Companies and households
deleveraged hugely, external debt collapsed and the government improved its
underlying fiscal position. With the financial transformation seemingly complete, the
private sector has been spending again partly with the help of the banking sector which
has cleaned up its books as well. But while the extent of balance sheet adjustment has
impressed, the amount of radical, government-led economic reform has disappointed. In
particular, the country still has deeply inflexible labor and product markets.
The precise reasons for the much improved performance may not be completely
clear, but BI appears intent on testing Indonesias brave new economic world to its
limits. Together with Bangko Sentral ng Pilipinas, BI is the only major Asian Central Bank
not to have raised policy interest rates at all during the current upturn. True, the real policy
rate is at least positive in Indonesia, unlike in several other countries in the region, but only
just the headline inflation rate was 6.3% in November against a BI rate of 6.5%.
The only action BI has taken to date was to raise the Statutory Reserve Ratio from
7.5% to 10.5% with effect from 1 November. This might seem aggressive but was
accompanied by a statement from the central bank that it was reluctant to see lending
growth, which is running at more than 20%, slow from here. It also pointed out that from
1 March 2011 it would impose penalties on banks with a loan-to-deposit ratio of less
than 78% (the national average is around 80%). The implication would seem to be
therefore that commercial banks must on average lend more relative to their deposit
base, while also having to tie up a greater proportion of their deposits with the central
bank. A slightly confusing message we would have thought.
The apparent reluctance to raise policy rates comes despite the fact that inflation
is currently above BIs 4-6% target range for end-2010. As a result, many are arguing
that BI has fallen behind the curve and needs to act quickly to head off a more serious
rise in inflationary pressures. We tend to agree. It is better to be safe than sorry,
particularly when so much is at stake. A renewed inflationary spike would undoubtedly
unravel much of the positive sentiment directed at Indonesia right now. It would also
postpone the all important move to investment grade status that the rating agencies are
edging towards. In early December, Moodys announced that it was reviewing the
countrys Ba2 foreign and local-currency rating. A single upgrade would leave the
country just one notch from the promised land.
+65 6212 3707

08 December 2010
We expert 100bps of policy rate increases next year. In our view we are still at least
three months away from a policy rate hike. We expect the first 25bp increase to come in
March, followed by another 50bps of hikes in Q2, with a further 25bp increase in Q3.
This is premised on inflation rising to around 8% by the middle of the year, averaging
7.5% in 2011 as a whole unchanged from our previous projections. The pick-up in
inflation is most likely to reflect a combination of higher commodity prices, lower fuel
subsidies for four-wheelers (currently being debated in parliament) and the impact of
stronger demand. The main downside risk emanates from a fall in food price inflation
thanks perhaps to more favorable weather conditions. We emphasize that if inflation
were to peak at 8%, this would be low by Indonesias past standards, just about keeping
the structural bull argument alive.
GDP growth looks set to remain robust. After 6% average GDP growth in 2010, we
continue to look for something similar in 2011 (5.8%), while our first stab at growth in
2012 is for a trend-like 5.5% as the impact of the rate increases feed through. In our
September 2010 Emerging Markets Quarterly, we noted that the growth in motor cycle
sales had halved to a still strong 30% or so, since when it has halved again to around
13% yoy. This might reflect the waning impact of the previous interest rate reductions.
We see little reason to panic, however, as consumer confidence remains elevated, while
the draft budget has set out plans for a sizeable boost to infrastructure spending in
2011. Although history suggests the latter is unlikely to be met in full, it should provide
some support to activity.
We doubt the government will achieve its longer-term growth objective. The
president has stated his aim of achieving average GDP growth of 6.6% over the
remaining four years of his term, but this looks too much of a stretch to us. We suspect
that immediate, significant structural reform designed to encourage a quick step-up in
private investment growth would be necessary to achieve such GDP expansion on a
sustained basis. In our view, the required radical action wont be forthcoming from the
current government and the danger is that policy conditions are kept too loose for too
long to stimulate a temporary cyclical bounce in activity. If this happens, then much
higher inflation than we currently envisage and a return to sizeable internal and external
deficits are the most likely economic consequences.
Indonesias sovereign bond market has enjoyed the most remarkable rally in the
past 18 months. Even though the policy rate has remained unchanged for the vast
majority of this period and inflation has moved higher, the ten-year yield has fallen by the
best part of 300bps since mid-2009. Some of the rally may be justified by the countrys
surprisingly favorable fiscal numbers, but the large part of the move is likely to reflect a
torrent of foreign money trying to find a more rewarding home than it can in the West.
Foreigners now own a record 30% of the government bond market and nearly the same
proportion of SBIs (short-term government certificates). Until recently the result was that
the Indonesian bond curve was inverted up to the eight-year tenor. This seems fine as
long as global risk appetite remains strong and Indonesias economic fundamentals are in
good shape, but we note a danger of a very sharp move in rates and the rupiah if
confidence wanes. With this in mind further measures to control capital inflows look highly
likely. In particular, BI has indicated that it might reintroduce caps on so-called vostro
accounts held by foreigners. This could involve a return to the pre-global crisis cap of 30%
of total capital that domestic banks are allowed to accept from non-residents.

08 December 2010
Exhibit 349: Equities up, yields down Exhibit 350: Surging inflows
1,000
1,500
2,000
2,500
3,000
3,500
4,000
01/09 07/09 01/10 07/10
6
7
8
9
10
11
12
13
14
Equity Index
10-yr bond yld
Index %

-4
-2
0
2
4
6
8
04 05 06 07 08 09 10
Inward FDI
Inward Portfolio
USD bn

Indonesias equity market
has been amongst the best
performers in Asia over the
past 18 months, while the
same is also true of bonds.
This partly reflects
fundamental factors,
although we suspect strong
foreign portfolio inflows
searching for a more
rewarding home than
available in the West has
also played an important
role.


Exhibit 351: Indonesia has enjoyed an improving growth/inflation trade-off
-5
-4
-3
-2
-1
0
1
2
3
03 04 05 06 07 08 09 10
GDP growth - core CPI inflation
% points
Evidence of a structural
improvement in the
Indonesian economy is
offered by this chart,
showing an improving
growth/inflation trade-off.
Why exactly this should
have happened remains
difficult to explain, however.
We expect at least a
temporary deterioration in
the relationship over the
coming year.


Exhibit 352: Slowing sales Exhibit 353: Robust confidence, but
-60
-40
-20
0
20
40
60
80
100
02 03 04 05 06 07 08 09 10
Motorcycle sales
Motor Vehicle sales
% y-o-y

60
70
80
90
100
110
120
130
140
150
02 03 04 05 06 07 08 09 10 11
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Consumer Conf.
Consumer Exp. (RHS)
Inde % yoy

Both two-wheeler and four-
wheeler sales growth has
slowed in recent months,
albeit from very high levels.
This may reflect the waning
impact of previous rate
reductions.
Consumer confidence is
well above its long-term
average, although the
relationship with private
consumption growth is
weak.


08 December 2010
Exhibit 354: Rapidly rising Loan ratio Exhibit 355: Loan demand still strong
50
55
60
65
70
75
80
85
04 05 06 07 08 09 10
Loan/Deposit rate
%

10
20
30
40
50
60
70
80
90
00 01 02 03 04 05 06 07 08 09 10
Demand for new loans*
%

Bank Indonesia is keen to
see commercial banks loan-
to-deposit ratio rise further.
The central bank has
indicated that it would
penalize those banks with a
ratio of less than 78% (and
more than 100%) while also
raising the Statutory
Reserve Ratio. Loan
demand at least looks to
remain strong.

Source: Credit Suisse, CEIC * Bank Loan Survey. Two quarter moving average.

Exhibit 356: Inflationary risks remain
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
04 05 06 07 08 09 10 11
3
4
5
6
7
8
9
10
11
GDP growth (LHS, advanced 9 months)
Core CPI (RHS)
% Yr % Yr
The past few years have
seen a decent leading
relationship from GDP
growth to the core CPI. The
latter is proving surprisingly
slow to pick up this time,
although we continue to
believe that the inflationary
risks are on the upside.
Core inflation is likely to
move up to 5-6% in coming
months.


Exhibit 357: Falling behind the curve Exhibit 358: Spot the difference
2
4
6
8
10
12
14
16
18
20
03 04 05 06 07 08 09 10
6
7
8
9
10
11
12
13
14
CPI (LHS)
BI rate
% % yoy

70
80
90
100
110
120
130
140
00 02 04 06 08 10
70
80
90
100
110
120
130
Nominal Ex. Rate*
Real Ex. Rate (RHS)*
Index Inde

Bank Indonesia is
traditionally highly
responsive to inflationary
developments but is proving
slower than normal to act.
We expect the first policy
rate hike in March with a
total of 100bps of hikes in
2011 as a whole.
The countrys relatively high
inflation rate has seen the
real trade-weighted
exchange rate rise sharply
over the past decade, in
contrast to the nominal rate.

Source: CEIC, Credit Suisse * Trade weighted exchange rate. BIS measure.

08 December 2010
Indonesia: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 5.0 5.7 5.5 6.3 6.0 4.5 6.0 5.8 5.5
Nominal GDP ($bn) 255.5 284.5 365.3 431.1 507.5 542.0 689.1 812.2 921.5
Population (mn) 216.4 219.9 222.7 225.6 228.5 231.4 234.1 237.0 239.8
GDP per capita ($) 1,181 1,294 1,640 1,911 2,221 2,343 2,943 3,428 3,843

Exchange rate (IDR per USD, end-year) 9,290 9,830 9,020 9,419 10,950 9,400 8900 8550 8550
Exchange rate (IDR per USD, average) 8,985 9,751 9,141 9,164 9,757 10,356 9050 8700 8550
(1)
-8 11.9 8 -6.8 -6.6 14.0 2.0 10.0 -2.0
Nominal wage growth (% year-on-year change)
(2)
16.6 8.5 6.2 4.9 7.6 5.0 4.0 7.0 8.0
Overnight rate (%, end-year)
(3)
7.43 12.75 9.75 8.00 9.25 6.50 6.50 7.50 7.50
Fiscal data
(4)

General government fiscal balance (% of GDP) -1.0 -0.5 -0.9 -1.3 -0.1 -1.6 -1.8 -1.6 -1.5
General government primary fiscal balance (% of GDP) 1.7 1.8 1.5 0.8 1.7 0.1 -0.1 -0.3 0.0
General government revenue (% of GDP) 17.6 17.9 19.1 17.9 19.8 15.1 15.2 16.4 17.0
(5)
54.7 47.0 39.5 34.2 29.5 31.2 31.5 31.3 31.0

Domestic credit (% year on year change) -17.6 15.5 8.8 16.2 14.3 12.2 9.0 18 11
Domestic credit to the private sector (% of GDP) 26.4 26.4 24.6 25.5 26.5 25.0 25.7 27.9 29
Balance of payments
(6)


(% of GDP) 0.6 0.1 3.0 2.4 0.0 2.0 1.0 0.6 0.7
Net FDI inflows ($bn) -1.5 5.3 2.2 2.3 3.4 1.9 8.8 7.5 8.0
Scheduled external debt amortization ($bn) 15.1 14.4 14.0 14.4 15.5 17.1 17.0 17.0 17.0

Foreign debt ($bn) 137.0 130.7 128.7 136.6 149.1 172.9 190.0 200.0 210.0
Public ($bn) 82.7 80.1 75.8 80.6 86.6 99.3 112.0 118.0 123.0
Private ($bn) 54.3 50.6 52.9 56.0 62.6 73.6 78.0 82.0 87.0
Central bank net non-gold FX reserves ($bn) 35.0 33.1 41.1 55.0 49.6 63.6 93.0 113.0 123.0
(1) Real effective exchange rate, increase indicates appreciation. (2) Nominal wage: manufacturing. (3) BI changed its policy target from 1m SBI rate to overnight rate in 2008. (4) Refers to
central government. The government assumed an oil price of $61 per barrel for 2009 in its revised budget announced in June 2009. (5) Excludes SOE and BI debt. (6) BoP numbers from 2004
onwards have been revised; exports & imports include credits & debits on net income, respectively, in 2000-03.
Source: Bank Indonesia, Ministry of Finance, Central Bureau Statistics, CEIC, World Bank, Credit Suisse

08 December 2010
Korea: Growth resumes, inflation rises
Koreas growth has been strong to date. GDP growth in the first three quarters of
2010 exceeded market expectations at 6.5% yoy, driven by a rebound in domestic
demand, inventory restocking, and a sharp rebound in exports. Growth in the rest of the
year should increasingly be led by private sector activity, as fiscal stimulus is withdrawn.
We expect private sector activity to remain the main growth driver in 2011, as
momentum becomes self-sustained.
We believe that Koreas growth pace has been slowing since August. Industrial
production fell 0.4% mom in September and 4.2% mom in October, on a seasonally
adjusted basis. Actual exports fared better, rebounding sequentially in October,
suggesting resilience in external demand. We, however, remain concerned about the
near-term momentum of Koreas industrial activity, as the leading indicator dipped to
128.7 in October after five consecutive months of increases, while the manufacturing
confidence index dropped to 91 in December. We think these signals suggest that a
rapid pick-up in momentum is unlikely in the near term.
We believe global growth should improve in 2011, giving support to Koreas
exports and economy. The US ISM new orders index, which rebounded to 58.9 in
October and 56.6 in November, is the first leading index to suggest a pick-up in
industrial momentum in the US. This gives support to our strategists view that global
core demand should pick up into 2011 from its lows in June and July 2010. Our US
economics team has raised its 2011 GDP growth forecast for the US to 3.3%, reflecting
the support from QE2. Stabilising macro economic data coming out of China are also
supportive of our positive outlook.
We expect better production activity to improve employment conditions and the
income level. The unemployment rate fell to 3.5%-3.7% on a seasonally adjusted basis
in recent months, and we expect employment conditions to improve further in 2011,
providing support to private consumption. Also, a still accommodative interest rate level
should help keep corporate financing costs low, supporting the steady growth in capital
investment activity. We think that construction activity remains slow, although civil
engineering projects under government sponsorship still provide a certain level of
support. On the other hand, investments in machinery have been robust, helped by
improved corporate earnings, access to financing through the bond market, and a
stronger KRW that eases the cost of imported capital goods. This trend of capital
investment is likely to continue, in our view, though at a more moderate pace.
But there are risks lurking behind our optimism, especially those pertaining to
North Korea. The ongoing skirmishes between North and South Korea are likely to be a
swing factor for the economy next year. While we think that the likelihood of an all-out
war remains low, the current situation is fluid and the way in which the tensions evolve
will depend on the diplomatic finesse of the relevant forces. Outside of the Korean
peninsula, the risk of excessive monetary normalisation in China, in the event of a
stubbornly high inflation trend, may put pressure on Chinas property sector and real
economy. This could affect Chinas demand for machinery, to which Korea is sensitive.
The sovereign debt problem in peripheral Europe is another risk that may affect the
stability of the euro zone and the global economy. In our view, the impact of these
contingent risks remains hard to quantify at this point, but they have kept us alert to the
possible downside to the Korean economy.
We expect CPI inflation to be driven up further in 2011 by the continued strength
in economic activity and still accommodative policy rates. CPI inflation was 4.1%
yoy in October and moderated to 3.3% yoy in November as food price pressures
dissipated. We still expect headline CPI inflation to remain elevated at about 3.6% yoy in
December. Core CPI inflation, which excludes food and energy prices, remained at
about 1.9% yoy in October, but the risk is that it may accelerate into 2011. We think that
Dong Tao
+852 2101 7469
Christiaan Tuntono
+852 2101 7409

08 December 2010
inflation will continue to trend up for the following reasons: 1) the output gap should
close in 2H 2010 and turn positive in 2011, in our view, on continued strength in
consumption, fixed investments and export growth; 2) global raw material prices could
rise next year, should QE2 from the US stimulate the commodity markets; and 3) we
expect the policy rate level to remain largely accommodative next year, as we estimate
the neutral rate to be 3.8%-4.0% (the 10-year average since 2000), compared with our
end-2011 policy rate forecast of 3.5%.
We think that the Bank of Korea will continue normalising monetary conditions
over the next 12 months, with the pace likely to accelerate if external risks lessen
and the domestic economy continues on a stronger uptrend. The BoK raised its
base lending rate for the second time this year to 2.5% after the 16 November meeting.
We think the hike was in response to the October CPI inflation data, which exceeded the
2%-4% target set by the central bank. We think that the hike underscored the BoKs
increased vigilance on inflation, and its intention to contain inflation expectations and
pre-empt the pass-through of higher food prices to other areas of the economy. We
expect the BoK to raise its base lending rate by another 100bp in 2011, raising the
policy rate to 3.5% by end-2011. The risk of further increases does exist, in our view,
and will depend on how the trajectory for growth and inflation evolves next year.
Koreas current account surplus should remain supported in 2011, but is likely to
narrow as import demand rises. We expect the current account surplus to rise to
US$38.6bn (3.9% of GDP) in 2010 and then moderate to US$32.3bn (2.8% of GDP) in
2011. In view of the strong rebound in external trade flows this year (we forecast about
27% yoy), we expect both export and import growth to slow to around 10% yoy in 2011,
but with import growth remaining more resilient in view of an expected rise in global raw
material prices and demand from the domestic economy. We believe that the rise in
prices and import volumes should narrow the trade balance and current account surplus.
Barring a significant reversal in global financial market sentiment and a much
worse than expected rise in geopolitical risk, we believe Koreas capital and
financial accounts should also remain supported in 2011. The positive outlook for
the Korean economy and its interest rate trajectory, along with QE2 in the US, should
attract foreign portfolio investments into Korea. The government and the BoK are aware
of the risk, and have been vocal about imposing capital control measures to slow hot
money inflows. It is widely expected that the Korean authorities may re-impose the 14%
withholding tax on bond-investment returns for foreigners, and local media have
reported that the government is already in talks with legislators on this issue. We think
the government may start with this measure, should capital inflows surge beyond its
tolerance level on a resumption of global risk appetite. Inflows from foreign currency
loans, especially short-term loans, should become more moderate, in our view, given the
control measures launched in June this year limiting the FX exposure of foreign and
domestic financial institutions.
A sanguine balance of payments outlook and the influx of foreign capital could
further strengthen the KRW, in our view. We expect the government and BoK to allow
moderate KRW appreciation, especially if import prices rise, but we do not expect a
substantial pace of appreciation. We maintain our forecast that USDKRW will be 1,120
at end-2010 and 1,050 at end-2011. Also, the KRW has been weak against the JPY,
with KRWJPY hovering around 7.0-7.4 since May this year. Expectations of a weaker
JPY in 12 months time may cause the cross to rise, chipping away some of the
advantages that Korean companies have been enjoying lately. We are not overly
concerned about its impact on Koreas exports, as the cross should still remain at
around 8 by end-2011, in our view, below its 10-year average.
Outlook for Koreas sovereign ratings appears stable. Adjustment remain unlikely
over the next six months, in our view. Korea is currently rated A1 (Moodys), A (S&P)
and A+ (Fitch), with a stable outlook.

08 December 2010
Exhibit 359: Growth has been strong
to date
Exhibit 360: The leading indicator is
suggesting a slowdown
% yoy contribution to GDP growth
-8
-6
-4
-2
0
2
4
6
8
10
2004 2005 2006 2007 2008 2009 2010
Real GDP
Net trade
Domestic demand
Forecast

-30
-20
-10
0
10
20
30
40
2003 2004 2005 2006 2007 2008 2009 2010
-10
-5
0
5
10
15
20
Manufacturing production (% yoy)
Leading indicator index (% yoy, RHS)

GDP growth in the first
three quarters of 2010
exceeded market
expectations.
The leading indicator
dipped in October after five
consecutive months of
rises, raising concern about
near-term industrial
momentum.

Source: Bank of Korea, Credit Suisse Source: OECD, Ministry of Knowledge Economy

Exhibit 361: Stronger US ISM
Exhibit 362: Growth momentum
should improve
20
25
30
35
40
45
50
55
60
65
70
M
a
y
-
0
7
S
e
p
-
0
7
J
a
n
-
0
8
M
a
y
-
0
8
S
e
p
-
0
8
J
a
n
-
0
9
M
a
y
-
0
9
S
e
p
-
0
9
J
a
n
-
1
0
M
a
y
-
1
0
S
e
p
-
1
0
US ISM manufacturing index
US ISM new orders index

-5
-4
-3
-2
-1
0
1
2
3
4
3
Q
0
8
2
0
0
9
3
Q
0
9
2
0
1
0
3
Q
1
0
2
0
1
1
3
Q
1
1
Real GDP (% QoQ, sa)
Forecasts

The US ISM new orders
index is the first leading
index suggesting a pick-up
in industrial momentum in
the US.
We expect that global
growth will improve in 2011,
giving support to Koreas
exports and economy.

Source: Institute of Supply Management, Credit Suisse Source: BoK, MoKE, Credit Suisse

Exhibit 363: Employment conditions
should improve
Exhibit 364: Steady growth in fixed
investments expected
2.5
3.0
3.5
4.0
4.5
5.0
5.5
2004 2005 2006 2007 2008 2009 2010
Unemployment rate (%, unadjusted)
Seasonally-adjusted (%)

-10
-5
0
5
10
15
2
0
0
6
3
Q
0
6
2
0
0
7
3
Q
0
7
2
0
0
8
3
Q
0
8
2
0
0
9
3
Q
0
9
2
0
1
0
3
Q
1
0
Real GDP (% yoy)
Gross fixed capital formation (% yoy)

We expect employment
conditions to improve
further in 2011, providing
support to private
consumption.
A still accommodative
interest rate level should
help keep corporate
financing costs low,
supporting the steady
growth in capital investment
activity.

Source: National Statistical Office, Credit Suisse Source: Bank of Korea, Credit Suisse

08 December 2010
Exhibit 365: CPI inflation should rise
in 2011
Exhibit 366: Policy rate normalization
should continue
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
2002 2004 2006 2008 2010
Consumer price index (% yoy)
Core CPI (% yoy)
Forecast

-3
-2
-1
0
1
2
3
4
5
6
2002 2004 2006 2008 2010
Base rate (%)
CPI inflation (% yoy)
Real base rate (%)
Forecast

CPI inflation will likely be
driven by the continued
strength in economic
activity and global raw
material prices.
We expect the BoK to raise
its base lending rate by
another 100bp in 2011,
raising the policy rate to
3.5% by end-2011.

Source: BoK, Credit Suisse Source: BoK, Credit Suisse

Exhibit 367: Sanguine BoP outlook
Exhibit 368: Inflows from FX loans
should moderate
-60
-40
-20
0
20
40
60
80
2004 2005 2006 2007 2008 2009 2010
Current account
Financial account
Overall balance

0
50
100
150
200
250
300
350
400
450
2004 2006 2008 2010
Short-term external debt outstanding (USD bn)
Long-term external debt outstanding (USD bn)

Medium-term BoP
fundamentals will likely stay
positive, even with a
narrower current and
financial account surplus.
Inflows from foreign
currency loans, especially
short-term loans, should
become more moderate,
given the control measures
launched in June this year.

Source: BoK, Credit Suisse Source: BoK, Credit Suisse

Exhibit 369: Further strength for the
KRW expected
Exhibit 370: Low KRWJPY helps
Korean corporates
REER index rebased to 2000=100
60
65
70
75
80
85
90
95
100
105
110
115
120
125
130
2000 2002 2004 2006 2008 2010
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
KRW REER index
USDKRW (inverted RHS)
A
p
p
r
e
c
i
a
t
i
o
n

5
6
7
8
9
10
11
12
13
14
2007 2008 2009 2010
KRWJPY

We maintain our forecast
that USDKRW will be 1,120
by end-2010 and 1,050 by
end 2011.
A stronger KRWJPY should
have limited impact on
Koreas exports, as we
expect the cross will remain
below its 10-year average in
the medium-term.

Source: CEIC, Credit Suisse Source: the BLOOMBERG PROFESSIONAL service, Credit Suisse

08 December 2010
Korea: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

Real GDP growth (%) 4.6 4.0 5.2 5.1 2.3 0.2 6.0 4.8 4.3
Nominal GDP ($bn) 722.0 845.2 952.0 1049.6 932.0 823.9 994.8 1,139.3 1,225.7
Population (million) 48.0 48.1 48.3 48.5 48.6 49.8 50.6 50.7 50.9
GDP per capita ($) 15,030 17,557 19,712 21,661 19,174 16,552 19,676 22,467 24,098
Exchange rate (KRW per USD, end-year) 1,035 1,010 930 935.8 1,262.0 1,168 1,120 1,050 1,100
Exchange rate (KRW per USD, average) 1,145 1,024 955 928.9 1,098.7 1,277 1,148 1,085 1,075
(1)
11.2 6.7 6.0 -6.0 -30.2 5.3 0.6 3.0 -7.9
Nominal wage growth (% year-on-year change) 6.5 6.4 5.6 5.9 3.1 -0.7 7.3 5.2 5.6
Overnight base rate (%, end year) 3.25 3.75 4.50 5.00 3.00 2.00 2.50 3.50 4.25
Fiscal data
Consolidated government fiscal balance, (% of GDP)
(2)
1.5 1.9 2.1 2.7 0.3 -4.3 -2.4 -0.8 -0.3
Consolidated government primary balance, (% of GDP)
(2)
2.5 3.1 3.4 4.6 1.9 -2.7 -0.7 0.8 1.3
Consolidated government expenditure, (% of GDP)
(2)
27.9 28.1 28.6 27.2 29.1 31.9 29.2 27.1 26.0
Consolidated government debt, (% of GDP, end-year)
(2)
25.3 29.8 33.8 36.3 36.3 41.4 40.0 37.5 35.4
84.9 87.1 95.1 99.6 109.1 108.7 112.6 116.5 123.3
1.3 7.4 14.7 12.4 14.9 2.4 12.5 12.0 12.8
Balance of payments
Current account balance ($bn) 28.2 15.0 5.4 5.9 -5.8 42.7 38.6 32.3 30.4
Current account balance (% of GDP) 3.9 1.8 0.6 0.6 -0.6 5.2 3.9 2.8 2.5
Net FDI inflows ($bn) 4.5 2.0 -4.5 -13.8 -15.6 -9.1 -17.1 -16.1 -15.1
(3)
18.7 20.5 17.9 35.4 39.1 30.5 33.7 34.3 35.2
Foreign debt ($bn)
(4)
172.3 187.9 260.1 383.2 377.9 401.9 411.5 422.0 431.6
Public ($bn)
(5)
23.5 22.0 28.4 61.3 61.8 80.3 83.8 87.3 90.8
Private ($bn) 148.7 165.9 231.7 321.8 316.1 321.6 327.7 334.7 340.8
Central bank net non-gold FX reserves ($bn)
(6)
199.0 210.4 238.9 262.2 201.2 270.0 307.9 344.6 377.3
(1) Real effective exchange rate (CPI-deflated); increase indicates appreciation. (2) General government statistics as interpreted by the Korea government. (3) Scheduled amortizations of
medium- and long-term external debt of both the public and private sectors. (4) Liabilities vis--vis non-residents (i.e., includes FX-denominated and local-currency debt).
(5) Includes government and central bank. (6) Central bank forex reserves minus monetary authorities other liabilities.
Source: Bank of Korea, National Statistical Office, Ministry of Strategy and Finance, CEIC, Credit Suisse

08 December 2010
Malaysia: A short-lived contraction?
We recently cut our real GDP growth forecast for 2010 to 7% from 7.5%. Real GDP
growth slowed to 5.3% yoy in Q3, dragged down by weak exports and lower government
spending. Our own seasonally adjusted estimate suggests that sequential growth fell
0.7% on a quarter-on-quarter basis in Q3, the first decline since March 2009. The fall
was not unique to Malaysia within Asia, and we expect sequential growth to rebound
modestly in Q4, mainly supported by domestic demand. Our forecast path suggests that
year-on-year real GDP growth will fall to low single digits in the next one to two quarters.
Similarly, we believe industrial production and nominal export growth are likely to remain
weak on a year-on-year basis and could turn negative in the coming months.
Our 2011 real GDP growth forecast remains unchanged at 5.2%. As detailed in our
report Malaysia in 2011: Investment to the rescue? (8 November 2010), we expect
investments from the Economic Transformation Programme (ETP) to help boost growth
in the next two years, with the majority of them from government-linked companies. For
example, Petronas, the state-owned oil company, plans to invest more domestically to
improve oil recovery from mature oil fields and to build a new regasification terminal in the
next 1-2 years. To support this, the government recently announced more tax incentives,
including cutting the petroleum income tax to 25% from 38%, for companies to explore
less-profitable oil fields. The government estimates that this will result in forgone
revenue of about RM8bn (2.8% of GDP) in the near term, but will add an average of
RM2.5bn (0.9% of GDP) per year over the next 20 years. The recent improvement in
Chinas PMI and the US ISM index, if sustained, also bodes well for a gradual recovery
in Malaysias exports and industrial production from around the end of Q1 2011.
The fiscal deficit will remain high in 2011, in our view. The government seems to
prioritize growth over fiscal consolidation. It expects the budget deficit to GDP ratio to
remain high at 5.4% in 2011 compared with its estimate of 5.6% in 2010. This is the
highest among the Non-Japan Asian economies we cover except for India. We also think
the government will most likely overspend in 2011, especially given that the general
election is approaching. The budgeted 2.3% cut in government salaries and allowances is
unlikely to happen, in our view, as these expenses have never grown less than 4% per
year in the past decade. The additional committees that the government plans to set up for
the ETP might also lead to an overrun in expenses, while budgeted subsidies could be too
conservative if fuel or food prices come in higher than the government expects.
We expect Bank Negara Malaysia (BNM) to resume rate hikes in Q4 2011. BNM
started normalizing monetary conditions relatively early in the recovery cycle, which
should give it more scope to keep the policy rate unchanged for longer while the
uncertainties surrounding the European debt problems remain. Moreover, the domestic
inflation outlook remains benign, in our view. The government hiked fuel and sugar
prices twice in H2 2010, but only modestly. We do not expect any significant hikes in fuel
prices before the next election, which is consistent with the governments high subsidies
budgeted for 2011. We pencil in two small hikes in fuel prices in 2011, which add about
0.7pp in total to our end-2011 inflation forecast, bringing it up to 2.7%. On monetary policy,
we expect one more hike of 25bps toward the end of 2011 and another 50bps in 2012,
bringing the policy rate to 3.5% by end-2012. The timing of rate hikes might be brought
forward if the government hikes fuel prices by more than we expect or credit growth
accelerates across the board.
We expect the ringgit to appreciate further in the medium term. We expect the
current account surplus to remain strong at about RM30bn (10% of GDP) in 2011, while
FDI and other investments are likely to increase further if the government continues with
its reforms. In the near term, we expect BNM to continue to intervene in the FX market
to keep the ringgit stable against its trading partners, given that export and industrial
production momentum have slowed substantially. We think BNM will allow further
appreciation when it is more confident that private investment has picked up on a
sustained basis.
Kun Lung Wu
+65 6212 3418
kunlung.wu@credit-suisse.com

08 December 2010
Exhibit 372: External vs. domestic
demand
-15
-10
-5
0
5
10
15
20
Real GDP (% qoq, saar)
Real GDP (% yoy)
CS forecast

85
95
105
115
125
Sep-07 Jun-08 Mar-09 Dec-09 Sep-10
Real exports of goods and services
sa (Index, Jun-07=100)
Real domestic demand sa (Index,
Jun-07=100)

Real GDP growth fell on a
quarter-on-quarter basis.
This was led by weakness
in external demand, while
domestic demand has been
the main driver of growth in
recent quarters.


Exhibit 373: Exports vs. industrial
production
Exhibit 374: Exports vs. US ISM
manufacturing new orders
70
75
80
85
90
95
100
105
110
115
120
Exports (index, in nominal RM)
Industrial producti on index

20
30
40
50
60
70
80
Feb-04 Nov-05 Aug-07 May-09 Feb-11
-30
-20
-10
0
10
20
30
40
ISM manufacturing new orders
(index, 3mma, 3m lead)
Exports (3mma, % yoy, RHS)
Exports and industrial
production have not grown
since March. We expect
growth momentum to
remain weak in the near
term before picking up
toward the end of Q1 2011.


Exhibit 375: Sentiment Exhibit 376: Commodity prices
Index, Dec-05=100
50
60
70
80
90
100
110
120
130
Business conditions index
Consumer sentiment index

50
100
150
200
250
300
350
Dubai oi l spot (Index)
Crude palm oil spot (Index)
Rubber prices (Index)

We expect domestic
demand to continue to be
the main driver of growth in
2011. Positive sentiment
and higher commodity
prices should help support
private consumption growth,
while the Economic
Transformation Programme
should help boost
investment.

Source: CEIC, Credit Suisse Source: the BLOOMBERG PROFESSIONAL service, Credit
Suisse

08 December 2010
Exhibit 377: Trade balance
Exhibit 378: Budgeted vs. actual
operating expenditure
-2
0
2
4
6
8
10
12
Major commodity trade balance (RM bn)
Trade bal ance ex commodi ty (RM bn)

40
60
80
100
120
140
160
180
2000 2002 2004 2006 2008 2010
Budgeted operating expendi ture
(RM bn)
Actual operating expenditure
(RM bn)

The non-commodity trade
balance has moved into
deficit in recent months. We
expect this trend to continue
as domestic demand
gradually becomes a more
important driver of growth.
We expect the government
to overspend in 2011, much
like what happened in the
past decade. The
government will likely
prioritize growth over fiscal
consolidation, given that the
general election is
approaching.


Exhibit 379: Inflation vs. credit
momentum Exhibit 380: Inflation vs. policy rate
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
CPI (3mma, % mom, sa)
Loan outstanding (3mma, % mom, sa)

-4
-2
0
2
4
6
8
10
CPI inflati on (% yoy)
Policy rate (%)
CS forecast
Credit and CPI inflation
momentum have picked up
modestly in recent months,
but they have remained at
manageable levels.
We expect the central bank
to keep the policy rate
unchanged well into 2011
as growth momentum has
slowed significantly and the
uncertainties surrounding
the European debt crisis
remain.


Exhibit 381: Foreign bond ownership Exhibit 382: Central bank FX reserves
USD billions
0
20
40
60
80
100
120
0
5
10
15
20
25
30
Foreign ownership of government
bonds and BNM bills (RM bn)
% share of government bonds and
BNM bil ls (RHS)

60
80
100
120
140
160
Nov-07 May-09 Nov-10
Net forward FX purchases
On balance sheet FX reserves
Total FX reserves ($ bn)
Foreign holdings of
government securities, in
nominal ringgit terms, have
surpassed their pre-crisis
peak.
However, given the recent
weakness in growth, the
central bank is likely to
continue intervening in the
FX market to slow currency
appreciation and build up
reserves.

Source: CEIC, Credit Suisse Source: the BLOOMBERG PROFESSIONAL service, Credit
Suisse

08 December 2010
Malaysia: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

Real GDP growth (%)
(1)

6.8 5.3 5.8 6.3 4.6 -1.7 7.0 5.2 5.8
9.8 9.1 6.5 10.8 8.5 0.7 7.0 7.2 6.2
3.6 5.0 7.9 9.2 0.8 -5.6 8.6 9.0 8.5
21.0 20.5 20.8 21.6 19.5 20.1 19.7 20.0 20.1
Nominal GDP ($bn)
124.7 138.0 156.6 186.8 222.3 193.0 239.2 282.2 323.9
Population (mn)
25.9 26.5 26.8 27.2 27.5 27.89 28.3 28.8 29.4
GDP per capita ($)
4,877 5,252 5,876 6,889 8,022 6,920 8,466 9,790 11,010

2.1 3.3 3.1 2.4 4.4 1.1 2.2 2.7 2.5
1.5 3.1 3.6 2.0 5.4 0.6 1.7 2.6 2.5
Exchange rate (MYR per USD, end-year)
3.80 3.78 3.53 3.31 3.46 3.42 3.08 2.92 2.85
Exchange rate (MYR per USD, average)
3.80 3.79 3.67 3.44 3.33 3.52 3.21 2.99 2.88
(2)
-3.1 4.9 2.7 -1.0 0.1 -2.4 9.0 4.0 2.0
(3)

4.3 7.1 9.5 7.3 2.9 -4.3 12.4 6.3 6.0
Overnight policy rate (%, end-year)
(4)

2.70 3.00 3.50 3.50 2.50 2.00 2.75 3.00 3.50
Fiscal data
(5)

General government budget balance (% of GDP)
-4.4 -4.2 -3.5 -3.7 -4.8 -7.0 -5.4 -5.5 -4.2
-2.1 -2.0 -1.3 -1.7 -3.1 -4.9 -3.3 -3.3 -2.0
25.3 24.7 25.0 25.4 26.4 30.3 26.7 25.5 23.9
General government revenue (% of GDP)
21.0 20.5 21.5 21.7 21.6 23.3 21.4 20.0 19.7
45.7 43.8 42.2 41.5 41.4 53.3 52.5 52.3 51.1

131.0 129.5 132.8 129.7 125.8 149.6 142.3 142.3 140.4
12.3 8.3 13.0 9.5 11.9 9.1 7.5 10.0 9.0
127.5 122.4 119.0 113.4 115.3 137.0 131.7 128.1 123.5
3.2 5.8 6.9 6.5 17.4 9.0 8.6 7.0 6.5
111.9 110.8 107.7 105.3 100.7 118.3 116.2 114.1 112.6
6.5 9.1 6.8 9.2 10.4 7.8 11.0 8.0 9.0
Balance of payments

115.4 117.6 116.5 110.4 103.2 96.4 96.3 93.2 93.0
95.0 95.2 94.3 90.1 80.2 74.9 78.7 77.5 77.6
22.1 12.1 12.7 13.0 11.3 -19.0 23.8 14.1 14.6
23.3 10.2 13.2 13.9 5.9 -19.0 30.3 16.2 14.9
15.1 20.7 26.2 29.7 38.9 31.8 26.8 29.8 33.5

(% of GDP)
12.1 15.0 16.7 15.9 17.5 16.5 11.2 10.6 10.4
2.6 1.0 0.0 -2.7 -7.8 -6.5 -1.3 -1.0 -0.7
4.8 4.6 4.3 5.2 6.2 6.2 6.5 6.5 6.5

Foreign debt ($bn)
52.8 52.3 52.3 56.7 68.1 68.1 70.4 70.9 70.5
Public ($bn) 25.5 22.8 21.4 18.6 23.1 24.9 27.7 27.2 25.5
Private ($bn) 27.3 29.5 30.9 38.1 45.0 43.2 42.7 43.7 45.0
Foreign debt (% of GDP)
42.3 37.9 33.4 30.4 30.6 35.3 29.4 25.1 21.8
36.7 32.4 27.5 27.4 29.7 36.6 30.5 26.9 23.4
(6)
65.9 69.9 82.2 101.1 91.2 95.4 104.7 113.7 123.7
(1) Real GDP from 2001 has been rebased to 2000 = 100. (2) Real effective exchange rate, increase indicates appreciation. (3) Salaries and wages in the manufacturing sector. (4) BNM
changed the policy rate from the intervention rate to the overnight rate in May 2004. (5) Refers to the federal governments financial position. The government assumed an oil price of $70 per
barrel for 2009 in its revised budget announced in November 2008. (6) Not including forward FX purchases.
Source: Bank Negara Malaysia, CEIC, Credit Suisse

08 December 2010
Philippines: From very dovish to dovish
The sequential fall in 3Q GDP was mostly government-led; survey indicators for
private sector sentiment remain positive. 3Q GDP contracted 0.5% qoq, seasonally
adjusted, driven by a 6% qoq drop in government consumption (-6.1% yoy) and what we
believe was a government-led 5% qoq drop in fixed investments. Having spent heavily
ahead of the election in 1H 2010, the government slashed spending in 3Q in a bid to
meet its fiscal deficit target for the year. The sequential decline in private consumption is
disconcerting, but we think it is likely to prove to be a one-off given that consumer
sentiment for the quarter ahead jumped in 3Q to an all-time high of +15.3 from -1.8 in
2Q. Also, with our expectation for stable global growth, remittances, which rose by an
average of 9.5% yoy in 3Q compared with 6.8% in 2Q, should remain reasonably robust,
supporting domestic consumption.
The Philippines rating upgrade
1
was well-deserved, but there is still a long road
ahead. While the upgrade came sooner than we expected, it was well-deserved, in our
view. What seems to have been generally unnoticed is that the Philippines has
managed to cut its government debt to GDP ratio significantly, from 80.5% in 2004 to an
estimated 55% in 2010. While the Philippines government debt to GDP ratio has
consistently been higher than its peers (excluding India), now Malaysia is on the brink of
taking that unenviable spot! Having said that, much of the improvement in the
Philippines ratio has been driven by expenditure restraint rather than by lifting tax
revenues. While we expect the government to be able to meet its 2010 fiscal deficit
target of PHP325bn (3.8% of GDP), we think it is likely to overshoot its 2011 target of
3.2% (we forecast 3.5%).
Constraints on government spending could keep GDP growth in 2011 sluggish. As
we mentioned in Philippines: Sluggish tax revenues = spending compression (29
September 2010), we believe private investment could grow at an above-trend pace in
2011. But, with government spending likely to be under tight control in 2011, we expect
GDP growth in 2011 of 4% (down from our previous forecast of 4.4%, reflecting slower
3Q 2010 growth). As a result of the latter, we have also lowered our 2010 GDP growth
forecast, to 6.9% from 7.4%. For 2012, we look for real GDP growth of 5.3%, assuming
that GDP expands at a trend-like quarter-on-quarter pace.
End-2011 inflation forecast revised higher. We have lowered our end-2010 inflation
forecast to 2.9% yoy from 3.4% to reflect the rather benign readings through October.
These low readings were partly due to what we think was a temporary drop in power
tariffs. Indeed, the latest reading for November shows a jump back up in electricity
tariffs. Also, domestic food prices seem to be inching up slowly now. Given possibly
higher global commodity prices (including rice) and possible upward revisions to
transport fares (see below), we have raised our end-2011 inflation forecast to 5.3, which
now exceeds the central banks (BSP) upper target of 5% in 4Q 2011 (whereas
previously we saw inflation only touching the upper target).
But no alarm bells, yet. While we think there are upside risks to inflation, particularly
from transport fares (the possible implementation of a 12% VAT on highway tolls, a
pending over 200% increase in the South Luzon Expressway toll, and a possible
revision to MRT fares), it is not very clear whether or when all of these will be
implemented. As of now, we see inflation inching up towards end-2011 to possibly a little
over the central banks target, but not alarmingly so.
The BSP is likely to hike only gradually. The BSP has been issuing very dovish
comments. We sensed a slight change in tone in its policy statement last month, but the
central bank still sounds far from hawkish. It seems to us more a shift from very dovish
to dovish, but with now a tinge of alertness about inflation (rightly so, in our opinion).
We maintain our view that the central bank will hike only gradually, starting probably in
mid-2011 to raise policy rates by 50bps in 2011 and by another 50bps in 2012.

1
In November, Standard & Poor's upgraded the Philippines sovereign foreign long-term rating by one notch to BB from BB-.
Devika Mehndiratta
+65 6212 3483

08 December 2010
Exhibit 383: GDP growth Exhibit 384: Recent decline govt-led
% %
-0.5
6.5
-2
0
2
4
6
8
10
M
a
r
-
0
6
S
e
p
-
0
6
M
a
r
-
0
7
S
e
p
-
0
7
M
a
r
-
0
8
S
e
p
-
0
8
M
a
r
-
0
9
S
e
p
-
0
9
M
a
r
-
1
0
S
e
p
-
1
0
Real GDP gr, % qoq*
Real GDP gr, % yoy

-10
-5
0
5
10
15
M
a
r
-
0
6
S
e
p
-
0
6
M
a
r
-
0
7
S
e
p
-
0
7
M
a
r
-
0
8
S
e
p
-
0
8
M
a
r
-
0
9
S
e
p
-
0
9
M
a
r
-
1
0
S
e
p
-
1
0
Investments GDP gr, % qoq*
Gov. consumption GDP gr, % qoq*

The quarter-on-quarter fall
in 3Q GDP seemed to be
mostly government-led.
After having spent heavily in
1H 2010, the government
hit the brakes on spending
in 3Q to meet the fiscal
deficit target.


Exhibit 385: Government debt
%
50
55
60
65
70
75
80
85
2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F
Central government debt (% of GDP)
The Philippines recent
rating upgrade was well-
deserved, in our view.


Exhibit 386: Tax revenues and
spending Exhibit 387: Fiscal deficit
PHP bn, seasonally adjusted %
60
80
100
120
140
Tax revenues
Government expenditure

1
2
3
4
5
2003 2005 2007 2009 2011F
Fiscal deficit, % of GDP

But the government still
needs to find ways to lift
revenues.
In 2011, we think the fiscal
deficit might exceed the
governments target.


08 December 2010
Exhibit 388: Inflation components Exhibit 389: Inflation and policy rates
% %
-1.0
0.0
1.0
2.0
3.0
Jul-06 Aug-07 Sep-08 Oct-09 Nov-10
Headline CPI, % mom
Core CPI, % mom

0
2
4
6
8
10
12
14
16
J
a
n
-
0
5
J
a
n
-
0
6
J
a
n
-
0
7
J
a
n
-
0
8
J
a
n
-
0
9
J
a
n
-
1
0
J
a
n
-
1
1
CPI, % yoy
Reverse repo rate (%)
F'cast

We have raised our 2011
inflation forecast, given the
risks of pending upward
revisions to transport fares
and global commodity
prices.
But we expect BSP to raise
rates only gradually.


Exhibit 390: Sentiment Exhibit 391: Exports
Diffusion index, % USD mn, 3mma
-40
-20
0
20
40
60
Mar-06 Sep-07 Mar-09 Sep-10
Business expectations - next quarter
Consumer expectations - next quarter

0
1000
2000
3000
4000
5000
6000
Total merchandise exports
Electronics exports
Other exports

Consumer sentiment has
continued to move up and is
at all time-highs.
Exports have performed
well so far, driven by
electronics. But the US
semi-conductor industrys
book-to-bill ratio has
moderated in recent
months.


Exhibit 392: Remittances Exhibit 393: Exchange rate
3mma, % yoy Peso per USD
-10
0
10
20
30
40
Jul-01 Oct-03 Feb-06 May-08 Sep-10
Remittances
Average (Apr '01 - Apr '10)

40
45
50
55
60
Jan-02 Mar-04 Jun-06 Sep-08 Dec-10
Peso per USD

Remittances continue to be
reasonably robust.
We expect the peso to
appreciate against the USD
to 41 by end-2011.


08 December 2010
Philippines: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 6.4 5.0 5.4 7.1 3.7 1.1 6.9 4.0 5.3
Growth in real fixed investment (%) 1.3 -6.6 3.9 10.9 2.7 -0.4 16.4 1.5 3.1
Fixed investment (as % of GDP) 16.1 14.4 14.0 14.7 14.7 14.7 16.0 15.6 15.3
Nominal GDP ($bn) 86.9 98.9 117.7 144.8 166.5 160.7 189.1 217.9 251.8
Population (mn) 83.6 85.3 87.0 88.7 90.5 92.1 93.7 95.4 97.1
GDP per capita ($) 1,040 1,160 1,354 1,633 1,841 1,745 2,017 2,284 2,592

Exchange rate (PHP per USD, end-year) 56.3 53.1 49.1 41.4 47.5 46.2 43.5 41.0 40.0
Exchange rate (PHP per USD, average) 56.2 55.0 51.3 45.9 44.7 47.8 45.0 42.1 40.5
(1)
1.8 14.3 5.6 14.8 -7.3 2.6 9.5 4.0 4.4
(2)
3.6 8.5 7.9 4.5 5.3 2.2 3.4 4.7 5.0
Overnight borrowing rate (%, end-year) 6.75 7.50 7.50 5.25 5.50 4.00 4.00 4.50 5.00
Fiscal data
(3)

Central government budget balance (% of GDP) -3.9 -2.8 -1.2 -1.6 -1.3 -3.9 -3.8 -3.5 -3.3
Central government budget balance (incl. privatization receipts, % of GDP) -3.8 -2.7 -1.1 -0.2 -0.9 -3.9 -3.7 -3.4 -3.2
Central government primary fiscal balance (% of GDP) 1.5 2.8 4.0 2.5 2.3 -0.3 0.1 0.3 0.0
Gross government debt (% of GDP) 80.5 71.8 66.4 55.8 56.9 56.8 55.0 54.4 52.3
Net central government debt (% of GDP) 72.0 63.2 57.9 47.8 49.9 50.3 48.5 47.9 45.9

Domestic credit (% year-on-year change) 8.9 -4.2 4.8 3.6 14.0 7.4 8.0 6.0 7.6
Domestic credit to the private sector (% year-on-year change) 9.3 -2.2 7.4 4.8 13.0 8.1 8.0 6.0 7.5
Balance of payments
Exports (goods and non-factor services, % year-on-year change in $ value) 10.6 4.6 18.3 11.9 -2.2 -17.9 23.9 9.2 9.2
(4)
0.1 1.7 2.8 -0.6 -0.6 1.3 1.0 1.4 1.6
(5)
4.9 3.6 4.7 3.9 6.2 4.1 4.4 5.3 5.1

Foreign debt ($bn) 54.8 54.2 53.4 54.9 53.9 54.6 57.0 58.0 59.1
Public ($bn) 37.9 36.5 37.1 37.7 40.3 43.1 45.0 45.9 46.8
Private ($bn) 17.0 17.7 16.3 17.3 13.5 11.4 12.0 12.1 12.3
Central bank gross FX reserves, including forward FX purchases ($bn) na 18.9 29.1 44.5 39.4 57.8 65.3 72.8 75.8
(6)
13.0 15.9 20.0 30.2 32.7 38.8 43.0 50.0 58.0
(1) Real effective exchange rate, increase indicates appreciation. (2) Nominal minimum wage in non-agricultural sector. Figures from 2005 onwards also include cost of living allowance and
daily equivalent of 13
th
month pay. (3) Refers to national government fiscal accounts, except where the public sector is indicated. (4) 2007 number includes a large direct investment abroad in
the amount of $2.7bn. (5) Includes medium- and long-term private- and public-sector external principal payments. (6) Not including forward FX purchases.
Source: Bangko Sentral Ng Pilipinas, Department of Finance, CEIC, Credit Suisse

08 December 2010
Singapore: Another roller-coaster ride
The biomedical sector should drive a rebound in GDP in Q4 2010. On a quarter-on-
quarter seasonally adjusted annualized basis, real GDP fell by a record 18.7% in Q3, but
this followed annualized rises of 45.6% in Q1 and 27.3% in Q2. A business expectations
survey suggested that electronics output is likely to weaken further in the near term, but
the recent rebound in biomedical production should help prevent a further drop in
sequential real GDP growth. We expect real GDP to rebound 10.5% on a seasonally
adjusted annualized basis in Q4 (13.5%-14% yoy). However, given the sharper-than-
expected fall in output in Q3, we are shaving our full-year real GDP growth forecast to
15.2% from 15.5%.
We are raising our 2011 real GDP growth forecast to 4.7% from 4.2%. This reflects a
more positive global growth outlook in 2011. Our US economics team recently raised its
2011 real GDP growth forecast to 2.8% from 2.5% (annual average), reflecting the
additional quantitative easing from the Fed. The recent improvement in the manufacturing
PMIs of the US, China, and the larger economies in Europe also suggests that global
growth momentum is likely to pick up going into 2011. While we are somewhat more
upbeat than we were, we expect sequential growth in Singapore to remain below trend in
early 2011 before moving back to trend by mid-2011 (the actual growth path is likely to be
more volatile due to the biomedical sector). The sovereign debt problem in the peripheral
European economies remains a concern, while fiscal tightening in much of the world is
also likely to have a negative impact on growth. As a result, our forecast remains closer to
the lower end of the governments forecast range of 4%-6%.
Getting ready for elections. The next general election will need to be held by February
2012. The prime minister noted at the end of October that the Electoral Boundaries
Review Committee had been convened. This suggests that there is a good chance that
the election will be called in the next few months, possibly after the 2011 Budget is
announced in February. We expect more macro-prudential measures aimed at the
property sector in 2011, while the direction of immigration policies (i.e., the pace of inflows
of foreign workers) will probably hinge on the margin of victory achieved by the current
administration in the election, in our view.
We expect a fiscal surplus of 0.8% of GDP for FY2010, against the 1% of GDP deficit
budgeted. Government revenues are likely to come in much higher than expected, thanks
in part to the surge in betting revenues from the two new casinos, stamp duties from
property transactions, and higher goods and services tax revenues from the rebound in
retail sales. With these gains, we expect the government to announce more special
transfers (growth dividends or special bonuses) in its 2011 Budget, targeted at lower
income groups. Such transfers, along with the recently announced bonus for the civil
servants and the rebound in wages, should help boost private consumption growth.
We expect year-on-year inflation to peak at 4.4% in December, before halving to
around 2% by end-2011. Our seasonally adjusted estimates indicate that inflation
momentum has slowed in recent months. However, the recent rise in food and fuel prices,
the hike in Electronic Road Pricing rates, and a less favorable base effect suggest that
inflation will rise further in the near term. We expect year-on-year inflation to peak at 4.4%
in December and to remain above 3% in H1 2011, but it should fall toward 2% by end-
2011 as the base effect from higher car prices tapers off.
Monetary policy will likely retain a tightening bias. The Monetary Authority of
Singapore (MAS) tightened policy further in October by increasing the pace of the
appreciation of the trade-weighted exchange rate. We think this was a pre-emptive
measure to contain the risk of a wage-price spiral resulting from a tight labor market,
particularly in the services sector. It also helps mitigate imported inflation from higher
commodity prices and the spill-over from abundant global liquidity. We think the current
monetary policy stance is enough to keep inflation within the MAS forecast path of 2%-3%
(annual average) in 2011. However, the MAS might still tighten policy further in April if
growth or commodity prices surprise on the upside.
Kun Lung Wu
+65 6212 3418

08 December 2010
Exhibit 394: Industrial production Exhibit 395: Real GDP growth
70
90
110
130
150
Industri al production (IP)
IP ex biomedical output

-30
-20
-10
0
10
20
30
40
50
Real GDP (% qoq, saar)
Real GDP (% yoy)
CS forecast

excluding the biomedical
sector has not grown since
May, and we expect it to
remain sluggish in the rest
of 2010.
However, the rebound in
the biomedical sector
should drive a recovery in
sequential growth in Q4.


Exhibit 396: Share of regional visitor
arrivals Exhibit 397: Retail sales
4.0
4.2
4.4
4.6
4.8
5.0
Aug-06 Aug-08 Aug-10
Singapore's share of visitor arrivals to
non-Japan Asia (%)
Singapore's share of visitor arrivals to
non-Japan Asia (%, 3mma)

90
95
100
105
110
115
120
125
130
Retail sales ex motor (Index, sa)
Retail sales (Index, sa)

Singapores has gained
market share against its
regional peers in visitor
arrivals, partly thanks to the
two new integrated resorts
and various sports events.
Strong visitor arrivals, an
improved labor market
outlook, and domestic
income growth helped
support the recovery in
retail sales (ex motor
vehicles).


Exhibit 398: Nominal earnings Exhibit 399: Employment outlook
% expecting to hire less % expecting to cut
5.8
-10
0
10
20
30
Nominal monthly earnings (% qoq, saar)
Nominal monthly earnings (% yoy)

-40
-20
0
20
40
60
80
Mar-08 Dec-08 Sep-09 Jun-10 Mar-11
Net employment outlook (%)

Nominal earnings growth
moderated in September.
But a tight labor market,
particularly in the services
sector, suggests that the
pressure on wages remains
on the upside.

Source: CEIC, Credit Suisse Source: Manpower Inc., Credit Suisse

08 December 2010
Exhibit 400: Manufacturing PMI vs.
real GDP growth
Exhibit 401: Real GDP vs. world trade
volume*
40
45
50
55
60
Dec-00 Apr-04 Aug-07 Dec-10
-15
-10
-5
0
5
10
15
20
25 Singapore manufacturing PMI
Real GDP (% yoy, RHS)

-10
-5
0
5
10
15
20
1983 1987 1991 1995 1999 2003 20072011F
Si ngapore real GDP (% yoy)
World trade volume (% yoy)

Singapores manufacturing
PMI rose for the second
consecutive month in
November, in line with the
recent improvement in the
global PMIs.
This bodes well for a pick-
up in Singapores exports
and industrial production
momentum (ex biomed),
most likely by Q2 2011.

Source: CEIC, Credit Suisse *2011 world trade forecast based on IMFs World Economic Outlook
Update on July 2011. 2011 real GDP based on our own forecast.
Source: IMF, CEIC, Credit Suisse

Exhibit 402: Property prices
Exhibit 403: Construction contracts
awarded
Index
80
100
120
140
160
180
200
Private property price index
Property rental index
HDB resale price index

0
10
20
30
40
-20
0
20
40
Private construction contracts awarded
Public construction contracts awarded
Real constructi on GDP (% yoy, RHS)

Property prices continued to
rise in Q3, albeit at a more
gradual pace. We expect
more macro-prudential
measures from the
government, possibly after
the elections, to contain
further increases in property
prices.
The recent rise in private
construction contracts
awarded suggests that
construction GDP might
pick up in 2011.


Exhibit 404: Inflation momentum Exhibit 405: Inflation forecasts
2.8
-4
0
4
8
12
CPI (3m/3m seasonally-adj usted
annualised rate, %)
CPI ex housing, transport (3m/3m
saar, %)

-2
0
2
4
6
8
Dec-06 Mar-08 Jun-09 Sep-10 Dec-11
CPI inflati on (% yoy)
CS forecast

Inflation momentum has
slowed in recent months,
although inflation remains
higher than the historical
average.
We expect year-on-year
inflation to peak in
December at about 4.5%
and to gradually fall to 2%
by end-2011.


08 December 2010
Singapore: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
National accounts, population, and unemployment
Real GDP growth (%) 9.2 7.4 8.6 8.5 1.8 -1.3 15.2 4.7 5.4
Nominal GDP ($bn) 112.7 125.4 145.1 176.8 193.3 182.3 230.5 267.0 302.3
Population (mn) 4.3 4.4 4.6 4.8 5.0 5.0 5.1 5.2 5.2
GDP per-capita ($) 26,419 28,481 31,626 36,539 38,759 36,544 45,410 51,823 57,807

CPI inflation (% year-on-year change, December over December) 1.3 1.3 0.8 3.7 5.5 -0.5 4.4 2.0 2.2
Exchange rate (SGD per USD, end-year) 1.63 1.66 1.53 1.44 1.44 1.40 1.31 1.23 1.18
Exchange rate (SGD per USD, average) 1.69 1.67 1.59 1.51 1.41 1.45 1.36 1.27 1.20
REER (% year-on-year change, December to December)
(1)
-0.1 0.0 1.3 2.3 6.0 -3.1 5.0 4.5 3.0
Nominal wage growth (% year-on-year change) 3.6 3.5 3.2 6.2 5.4 -2.6 6.3 2.7 4.2
3-month SIBOR (%, end-year) 1.4 3.3 3.4 2.4 1.0 0.5 0.4 0.4 0.9
Fiscal data

Central government fiscal balance (% of GDP) -0.1 0.7 0.0 2.8 -0.3 -0.3 0.8 -0.1 0.3
Central government primary fiscal balance (% of GDP)
(2)
-0.8 -0.2 0.6 2.7 1.1 -0.9 0.0 -0.1 -0.3

111.4 108.1 116.6 115.1 125.2 142.8 131.3 134.3 136.1
6.1 6.4 19.1 14.1 11.6 10.6 8.8 10.2 9.0
72.4 62.1 62.7 69.8 75.6 91.2 83.6 84.7 86.7
2.9 -5.9 11.5 28.7 11.2 16.9 8.5 9.2 10.0
97.7 90.9 86.4 87.4 98.0 103.2 97.4 96.3 96.8
4.4 2.0 4.9 16.9 15.2 2.0 11.7 6.6 8.0
Balance of payments

(3)
19.3 26.7 35.1 47.2 35.8 32.4 48.6 50.0 58.5

Central bank gross FX reserves, including forward FX transactions ($bn) na na 196.0 227.2 214.6 244.3 300.0 330.0 370.0
(4)
112.0 115.0 137.0 163.4 177.3 187.2 229.8 249.8 279.8
(1) Real effective exchange rate, increase indicates appreciation. (2) Operating revenue minus total expenditure. (3) Current account data were revised in early 2008, leading to a downward
revision of around 6pp of GDP in the 2007 current account balance. The adjustment mostly reflected revisions to the income balance. (4) Not including forward FX purchases.
Source: Monetary Authority of Singapore, CEIC, Credit Suisse

08 December 2010
Taiwan: Growth remains supported in 2011
Taiwans growth has been strong to date, driven by the rebound in domestic
demand, restock of inventory, and rapid recovery of exports. Even factoring in the
low statistical base, achieving GDP growth of over 12% yoy during the first nine months
of 2010 was impressive and represented a notable expansion. Domestically, the strong
rebound in investment activities and inventory level reflected the rapid return of private
confidence in the economy and rebound in tech exports. Consumption demand has also
improved as the unemployment rate has steadily trended down from its peak in 2H09.
External demand has recovered rapidly, with the monthly export amount now almost
doubling from the depressed level after the crisis.
The economy has entered a soft-patch following its surge from the trough, but we
see signs of improvement in recent data releases. Actual exports rose 6% and 7.6%
on a month-on-month seasonally adjusted basis in October and November, respectively,
leading the external sector from its plateau seen over the past six months. Export orders
and industrial production also performed well in October, up 0.8%mom and 4%mom,
respectively, on a sequential basis. Besides, the PMI has also recovered to 51.7 in
November, after three consecutive months in the contractionary territory. Although the
leading indicators continued to show weakness, we think Taiwans economy could be
making a turn for the better after months of slower momentum.
We think global growth should improve in 2011, giving more support to Taiwans
exports and the economy. We base our view on the recent signs of strength witnessed
in the US and Chinese economies, and expect a re-strengthening of global economic
activities in 2011. We currently expect Chinas GDP to record 9.2% growth next year.
The sequential growth in 3Q GDP and the stabilizing macro indicators coming out for 4Q
are supportive to our outlook. Our US economics team has also revised up its forecast
for US GDP growth in 2011. The re-launch of quantitative easing by the Fed is expected
to stimulate asset prices and aim to improve the employment conditions in the US. Our
strategists are optimistic on the outlook for global industrial production, expecting it to
exit the summer snooze and to pick up into 2011.
A still accommodative interest rate level and improving employment conditions
would be the support behind further domestic demand strength. With the export
sector rising out of the current soft-patch, we think domestic demand should be
supported and regain further momentum. A still accommodative monetary condition,
despite the clear intention of the central bank to normalize, would help keep financing
costs low for capital investments. The labor market should continue improving as well,
as the export sector recovers, investments pick up, and asset market prices continue to
rise on the back of better growth prospect and capital inflows. We expect the
unemployment rate to lower further to 4% by end-2011.
Inflationary pressure in Taiwan is still contained, in our view, despite the recent rise
driven by food prices. Recent CPI inflation has been pushed up by the surge in food
prices in conjunction with bad weather and a low statistical base. Headline inflation was at
1.53% yoy in November, up from 0.56% yoy in October, but core inflation stayed tame at
below 1% yoy. We do not think the pressure of consumer price inflation is a key
consideration for the central bank yet. We think a potential threat to Taiwans current
benign inflation profile could stem from imported items such as food and energy products,
but that would be more effectively offset by TWD strength than higher interest rates.
Christiaan Tuntono
+852 2101 7409

08 December 2010
We think the central bank will keep normalizing the policy rate over the next 12
months, when the global economy gathers momentum. We believe the CBCs
intention to prevent a prolonged period of an excessively loose monetary condition has
not changed. If economic activities continue to improve as we envision, we think the
CBC would be more confident about the sustainability of economic growth, and continue
its effort to rein in monetary conditions. We expect the central bank to raise the
rediscount rate by 75bp in 2011 to about 2.375% by the end of 2011.
Monetary conditions should remain largely accommodative next year, fueling
asset price inflation. Despite the normalization, the rediscount rate would still stay
below its tenyear average of 2.5% and its high of 4.75% by end-2011. This would help
capital investments, but at the same time, fuel the rise of asset price inflation, especially
in the property sector. Property prices have risen about 20% yoy in the Taipei area, and
we continue to see upside risk in view of the low rates and excess liquidity inflows
coming from the rest of the world. We expect the government to continue launching
more administrative measures to manage real estate credit, stem speculative pressures,
and prevent the inflow of foreign capital into the sector.
Taiwans current account surplus is expected to stay supported in 2011. As an
export-oriented economy, Taiwan has been recording a positive current account surplus
persistently for years. Assuming global demand improves, we expect Taiwans exports
to resume an upward sequential growth trend in 2011. We expect the current account
surplus to be narrower in 2010 when compared to 2009, at about 8.5% of GDP
($36.6bn), and be maintained at around 6.8% of GDP ($33.9bn) in 2011. Although
export and import growth is likely to slow visibly to around 10% yoy next year, versus
over 30% - 40% yoy in 2010, we still expect the trade balance to remain supported.
On the financial and capital account, we think QE2 and a sanguine outlook on
Taiwans fundamentals should continue to attract foreign investments, but the
possibility of more capital control measures may slow down the inflows. Barring a
significant correction in global investment sentiment, we think the expectation of higher
interest rates and stronger TWD in 2011 would keep foreign investments into Taiwans
bonds, equities and bank deposits positive. The government and the central banks,
however, have been launching capital control measures to tackle such inflows, and we
think this would keep the pace of foreign inflows in check. On 9 November, the Financial
Supervisory Commission has re-imposed limits on the purchases of long-term
government bonds by foreigners. In our view, the authority has concluded that foreigners
have been using long-term government bonds as their instruments to speculate on TWD
strength, and hence has re-imposed a limit on it.
A sanguine balance of payments outlook and the inflow of foreign capital would
pose further strength for the TWD. We expect the Taiwanese authorities to allow a
certain extent of TWD appreciation, especially if import prices rose on the back of higher
global food and energy prices, but do not expect a substantial pace of appreciation. We
currently expect the TWD to USD rate to be at 30 at the end of 2010 and at 28.4 at the
end of 2011.
The KMT won three out of the five municipal mayoralty elections on 27 November,
including that of strategically important Taipei, but its support level has declined.
Although the KMT was able to secure Taipei and had a 3:2 lead over the DPP in the
elections, it received 5% or about 400 thousands less votes across the island than the
DPP. This is a reversal from the majority that the KMT had won in the 2008 presidential
election and 2009 three-in-one election. We think the KMT may need to initiate some
bold reforms, including on the economic front, ahead of the 2012 presidential election, in
order to reverse the publics sentiment and to regain support.
We do not expect changes in Taiwans ratings over the next six months. Taiwan is
currently rated at Aa3 (Moodys), AA- (S&P) and A+ (Fitch), with a stable outlook.
08 December 2010
Exhibit 406: Growth has been strong
to date
Exhibit 407: Recent macro data show
signs of improvement
% yoy contribution to GDP growth
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
GDP growth
Domestic demand
Net trade
Projection

10
15
20
25
30
35
40
2005 2006 2007 2008 2009 2010
70
80
90
100
110
120
130
Export orders ($ bn, 3m mav)
Industrial production (2006=100, RHS)

Achieving GDP growth of
over 12% yoy during the
first nine months of 2010
was impressive and
represented a notable
expansion.
Export orders and industrial
production picked up on a
sequential basis in October.

Source: DGBAS, Credit Suisse Source: CEIC, Credit Suisse

Exhibit 408: The leading indicators are
recovering
Exhibit 409: Domestic demand is
expected to strengthen
Indexed to Q1 2007=100, seasonally adjusted
20
25
30
35
40
45
50
55
60
65
70
M
a
y
-
0
7
S
e
p
-
0
7
J
a
n
-
0
8
M
a
y
-
0
8
S
e
p
-
0
8
J
a
n
-
0
9
M
a
y
-
0
9
S
e
p
-
0
9
J
a
n
-
1
0
M
a
y
-
1
0
S
e
p
-
1
0
US ISM manufacturing index
US ISM new orders index

60
70
80
90
100
110
120
130
2007 2008 2009 2010
Private consumption
Fixed investment

Recent signs of strength
witnessed in the US
economy suggest a re-
strengthening of global
economic activities in 2011.
Domestic demand should
be supported and regain
further momentum.

Source: CEIC, Credit Suisse Source: DGBAS, Credit Suisse

Exhibit 410: Employment condition is
improving
Exhibit 411: Inflation pressure is still
contained
3.5
4.0
4.5
5.0
5.5
6.0
6.5
2003 2004 2005 2006 2007 2008 2009 2010
Unemployment rate (%)
Seasonally-adjusted rate (%)

-3
-2
-1
0
1
2
3
4
5
6
7
2005 2006 2007 2008 2009 2010
Consumer price index (% yoy)
Core CPI (% yoy)

The labor market should
continue improving, as the
export sector recovers,
investments pick up, and
asset market prices
continue to rise.
Inflationary pressure is still
contained, despite the
recent rise driven by food
prices.


08 December 2010
Exhibit 412: The CBC would continue
normalizing policy rate
Exhibit 413: Threat of asset price
inflation still exists
Sinyi residential property price index (2001=100)
0
1
2
3
4
5
6
2001 2003 2005 2007 2009 2011
Taiwan rediscount rate (%)
Taiwan overnight rate (%)
US Federal Funds rate (%)
Projection

120
130
140
150
160
170
180
190
200
210
220
2005 2006 2007 2008 2009 2010
Taipei Taipei County

We now expect the CBC to
raise the rediscount rate by
75bps in 2011 to about
2.375%.
Monetary conditions should
remain largely
accommodative next year,
fueling asset price inflation.

Source: CBC, Federal Reserves Bank, Credit Suisse Source: CEIC, Credit Suisse

Exhibit 414: BoP outlook is sanguine
Exhibit 415: Trade balance should
remain supported
4 quarter rolling sum (% of GDP)
-10
-5
0
5
10
15
20
2000 2002 2004 2006 2008 2010
Financial account
Overall balance

-20
-15
-10
-5
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010
-60
-40
-20
0
20
40
60
80
100
Trade balance ($ bn, LHS)
Exports (% yoy)
Imports (% yoy)
Positive BoP and an
improved economic
prospect should attract
capital inflows.
Although trade growth
would slow, we expect the
trade balance to remain
supported in 2011.


Exhibit 416: Some TWD strength
expected in 2011
Exhibit 417: The KMTs support level
has declined
Result of the five municipal mayoralty election
29
30
31
32
33
34
35
36
2000 2002 2004 2006 2008 2010
USDTWD
TWD strength

Political party Number of votes %
DDP 3,772,373 49.9%
KMT 3,369,052 44.5%
All political parties 7,141,425 94.4%
Others 422,692 5.6%

We expect USDTWD to be
at 30 at the end of 2010 and
at 28.4 at the end of 2011.
The KMT won three out of
the five municipal mayoralty
elections, but its support
level has declined.

Source: CEIC, Credit Suisse Source: Central Election Commission, Credit Suisse

08 December 2010
Taiwan: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

Real GDP growth (%) 6.2 4.7 5.4 6.0 0.7 -1.9 10.0 4.4 4.5
Growth in real private consumption (%) 5.2 2.9 1.5 2.1 -0.9 1.1 3.5 3.3 3.0
Nominal GDP ($bn) 340.5 365.4 376.7 393.0 400.4 377.4 430.9 494.4 520.2
Population (mn) 22.7 22.8 22.9 23.0 23.0 23.1 23.2 23.3 23.3
GDP per capita ($) 15,006 16,047 16,465 17,117 17,380 16,330 18,586 21,256 22,291
CPI inflation (% year-on-year change, December over December) 1.6 2.2 0.7 3.3 1.3 -0.2 1.0 2.2 2.5
CPI inflation (% change in average index for the year) 1.6 2.3 0.6 1.8 3.5 -0.9 1.0 2.0 2.4
Exchange rate (TWD per USD, end-year) 31.9 32.8 32.6 32.4 32.8 32.0 30.0 28.4 30.3
Exchange rate (TWD per USD, average) 33.4 32.1 32.5 32.9 31.5 33.1 31.8 29.2 29.4
(1)
2.2 1.0 -2.6 -4.1 -2.2 2.5 5.8 3.4 -8.8
Nominal wage growth (% year-on-year change) 1.1 1.0 1.2 1.8 -6.6 -6.5 3.0 -2.4 -2.9
Rediscount rate (end-year, %) 1.75 2.25 2.75 3.38 2.00 1.25 1.63 2.38 2.63
Overnight rate (%, end year) 1.2 1.5 1.7 2.1 0.9 0.1 0.3 1.4 2.7
Fiscal data
(2)
-2.8 -0.5 -0.6 -0.3 -0.3 -2.2 -1.1 -0.7 -0.4
(2)
-2.0 0.2 0.3 0.6 0.6 -1.6 -0.7 -0.4 0.3
(2)
20.8 20.7 19.5 18.8 19.8 21.6 20.0 19.3 18.6
(2)
47.4 50.6 47.9 43.5 46.2 49.8 46.0 44.0 41.6
118.6 126.0 126.0 124.1 130.1 138.2 134.1 137.0 139.9
12.9 9.7 4.2 3.9 2.5 5.0 6.7 7.5 8.0
Balance of payments
Net FDI inflows ($bn) -5.2 -4.4 0.0 -3.3 -4.9 -3.1 -4.3 -3.3 -2.3
(3)
1.4 0.9 1.7 3.7 6.1 1.6 2.0 2.0 2.0
Foreign debt ($bn)
(4)
80.9 86.7 85.8 94.5 90.4 96.4 101.9 112.8 124.7
Public ($bn)
(5)
5.0 13.9 10.6 3.5 1.5 3.2 3.2 3.2 3.2
Private ($bn) 75.9 72.8 75.2 91.1 88.9 93.2 98.6 109.6 121.5
(6)
236.9 248.6 261.5 265.6 287.0 343.5 385.2 418.8 440.8
(1) Real effective exchange rate (CPI-deflated), increase indicates appreciation. (2) General government statistics as interpreted by the Taiwan government. (3) Scheduled amortizations of
medium- and long-term external debt of both the public and private sectors. (4) Liabilities vis--vis non-residents (i.e., includes FX-denominated and local-currency debt).
(5) Includes government and central bank. (6) Central bank forex reserves minus monetary authorities other liabilities.
Source: Directorate-general of Budget, Accounting and Statistics, Central Bank of China, Ministry of Finance, CEIC, Credit Suisse

08 December 2010
Thailand: Political uncertainty, cooling economy
We expect real GDP to grow 4.3% in 2011, with a stronger 2H than 1H. Economically
speaking, 2010 has been a tale of an easy 1H and difficult 2H, as the global economic
tailwinds that helped exports in 1H ran out of steam in 2H. We think that the sequencing in
2011 might be the reverse a tougher 1H and better 2H, but with less overall growth than
in 2010. The current softening trend, due largely to external demand, is likely to continue in
the beginning of 2011. From then on, however, should the recent signs of global economic
rebound in the US, core Europe and China continue, we think the return of global tailwinds
could push the economy back to trend growth in 2H 2011.
Investment-driven growth unlikely. In contrast with the views expressed by many
observers, we think that 2011 will not be a year of investment-driven growth for two main
reasons
2
: 1) private investment growth in Thailand is dependent on exports, which we
project to grow at a sub-trend rate in the near-term, and 2) political uncertainty should
remain high running up to the general election in late 2011, dragging down investment
further. In addition, while the value of approved FDI applications has rebounded this year,
we believe it will take time before this is translated into actual investment
3
. We expect total
investment to grow at 4%-6% yoy next year, depending on the speed of the global
recovery and the domestic political situation.
Fiscal boost exaggerated. We believe the projected 60% increase in government capital
expenditure in the FY2011 budget plan is misleading in a sense, as the bulk of investment
was put off-budget in FY2010, but put on budget in FY2011. Including off-budget
spending, public investment is in fact lower in FY2011 than in FY2010. We expect the
official budget deficit to widen from 1.1% to 3.7% of GDP in FY2011 due to the inclusion of
capital expenditure in the budget and increase in the current expenditure component.
Government consumption is likely to spike as the general election nears, meaning that the
consumption contribution to growth will be stronger than investment, in our view.
Inflation to accelerate. We expect CPI inflation to average 3.6% in 2011, compared to
3.3% in 2010, for to three reasons: 1) the six subsidy measures that are due to expire at
the end of 2010 would raise CPI inflation by about 1.5pps. However, in practice we expect
that the Ministry of Finance may extend some of the measures or introduce new ones to
avoid a sudden surge in the price level in an election year. Thus, we are less hawkish in
our forecast than otherwise, 2) the recent rise in global food prices have not been fully
reflected in the CPI numbers in our view, and 3) strong credit and money supply growth
should continue next year, adding to price pressure.
Policy rate to normalize, with more hikes in the latter part of the year. We reiterate
our view that the Bank of Thailand (BoT) will continue to normalize rates in order to contain
future inflation pressure and credit growth by hiking 100bp. This would bring the policy rate
to 3% by the end of 2011. BoT is uncomfortable with the current negative real rates and
wants to move preemptively to prevent the possibility of asset speculation. We expect the
BoT to take a gradual approach in hiking rates, taking into account global economic and
domestic political developments.
Currency to appreciate further. We believe the normalization of the policy rate, still-
positive trade balance and FDI inflows should support the currency in 2011. However, sub-
trend export growth in the beginning of 2011 and higher commodity prices should make
the trade surplus narrower. Combining this with political uncertainty and slower GDP
growth, we expect the pace of appreciation to be less rapid than in 2010. We expect the
BoT will continue to resort to FX interventions as the main tools for managing THB and is
unlikely to impose any drastic capital controls given the painful lesson from 2006.

2
For detailed analyses of Thailand investment-export linkages, see Thailands investment recovery: Here to stay? published on
October 14, 2010.
3
On average FDI for expansion of existing facilities take about a year whereas green field projects take 1.5-2 years to materialize.
Santitarn Sathirathai
+65 6212 5675
santitarn.sathirathai@credit-suisse.com

08 December 2010
Exhibit 418: Growth to slow in the near term due to weakening exports
-28
-18
-8
2
12
22
32
42
M
a
r
-
0
3
S
e
p
-
0
3
M
a
r
-
0
4
S
e
p
-
0
4
M
a
r
-
0
5
S
e
p
-
0
5
M
a
r
-
0
6
S
e
p
-
0
6
M
a
r
-
0
7
S
e
p
-
0
7
M
a
r
-
0
8
S
e
p
-
0
8
M
a
r
-
0
9
S
e
p
-
0
9
M
a
r
-
1
0
S
e
p
-
1
0
-6
-4
-2
0
2
4
6
Exports (3mma %yoy)
Industrial Production (3mma %yoy)
OECD G7 lead (3mma %yoy, RHS)

The OECD G7 composite
leading indicator has been a
good predictor of the export
trend, which tends to move
together with industrial
production. The indicator is
still not pointing to a pick
up.

Source: OECD, CEIC, Credit Suisse

Exhibit 419: Cooling investment growth Exhibit 420: FDI boost will take time
-30
-20
-10
0
10
20
30
J
a
n
-
0
5
J
a
n
-
0
6
J
a
n
-
0
7
J
a
n
-
0
8
J
a
n
-
0
9
J
a
n
-
1
0
Private investment index (%yoy)
CAPU (%yoy)

0
100
200
300
400
500
600
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
Net FDI (THB bn)
FDI application approved (THB bn)
CS forecasts

Softer exports continue to
weigh on private investment
growth, which should cool
off further as suggested by
the change in capacity
utilization (CAPU).
Net FDI rebounded, but is
still low compared to the
pre-crisis level and tends to
lag behind the value of
approved FDI applications.


Exhibit 421: Electoral business cycle Exhibit 422: Real GDP forecasts
-15%
-10%
-5%
0%
5%
10%
15%
M
a
r
-
0
0
M
a
r
-
0
1
M
a
r
-
0
2
M
a
r
-
0
3
M
a
r
-
0
4
M
a
r
-
0
5
M
a
r
-
0
6
M
a
r
-
0
7
M
a
r
-
0
8
Government consumption/GDP
(%deviation from trend)

-3
-1
1
3
5
7
9
2004 2005 2006 2007 2008 2009 2010 2011
Investment
Net exports
Consumption
Real GDP (% yoy)
CS forecasts

to GDP ratio often rises
above trend in the periods
preceding general elections.
We expect a shift in relative
growth drivers towards
domestic demand.


08 December 2010
Exhibit 423: Food price inflation risks Exhibit 424: Inflation to accelerate
-40
-30
-20
-10
0
10
20
30
40
50
60
70
J
a
n
-
0
7
J
u
l
-
0
7
J
a
n
-
0
8
J
u
l
-
0
8
J
a
n
-
0
9
J
u
l
-
0
9
J
a
n
-
1
0
J
u
l
-
1
0
0
2
4
6
8
10
12
14
16
18
FAO food price index (%yoy)
CPI food component (%yoy RHS)

100
102
104
106
108
110
112
114
J
a
n
-
0
8
J
u
l
-
0
8
J
a
n
-
0
9
J
u
l
-
0
9
J
a
n
-
1
0
J
u
l
-
1
0
J
a
n
-
1
1
-6
-4
-2
0
2
4
6
8
10
CPI (index)
CPI (%yoy, RHS)
CS forecast
6 measures

Food and Agricultural
Organization (FAO) food
price index often leads the
food component of CPI,
suggesting that the food
inflation may accelerate.
The six subsidy measures
have distorted the current
inflation numbers and their
expirations in 2010 would
make inflation higher next
year.

Source: FAO, CEIC, Credit Suisse Source: CEIC, Credit Suisse

Exhibit 425: Strong credit expansion Exhibit 426: Policy rate normalization
0
2
4
6
8
10
12
14
J
a
n
-
2
0
0
5
J
u
l
-
2
0
0
5
J
a
n
-
2
0
0
6
J
u
l
-
2
0
0
6
J
a
n
-
2
0
0
7
J
u
l
-
2
0
0
7
J
a
n
-
2
0
0
8
J
u
l
-
2
0
0
8
J
a
n
-
2
0
0
9
J
u
l
-
2
0
0
9
J
a
n
-
2
0
1
0
J
u
l
-
2
0
1
0
0
2
4
6
8
10
12
Private credits (%yoy)
Broad money (%yoy, RHS)

-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
J
a
n
-
0
7
J
u
l
-
0
7
J
a
n
-
0
8
J
u
l
-
0
8
J
a
n
-
0
9
J
u
l
-
0
9
J
a
n
-
1
0
J
u
l
-
1
0
J
a
n
-
1
1
J
u
l
-
1
1
-8
-6
-4
-2
0
2
4
6
8
Change in the policy rate (pp)
Real policy rate (% RHS)
CS forecast

Credit growth continues to
be strong, which partly
explains the BoT hawkish
stance and recent
imposition of loan-to-value
regulations in the property
sector.
The negative real policy
rate will prompt more rate
normalization next year,
with the bulk of the hikes
coming in the 2H.


Exhibit 427: Trade Balance Exhibit 428: FX pressure
USD bn EMP index is computed as sum of the % changes in
THBUSD and FX reserves (including fwd position)
-300
-200
-100
0
100
200
300
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
-5
0
5
10
15
20
25
Export of goods & services
Imports of good & services
Trade balance

0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
M
a
r
-
0
8
J
u
n
-
0
8
S
e
p
-
0
8
D
e
c
-
0
8
M
a
r
-
0
9
J
u
n
-
0
9
S
e
p
-
0
9
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
S
e
p
-
1
0
-8
-6
-4
-2
0
2
4
6
8
10
Change in FX reserves/EMP (LHS)
Exchange Market Pressure (EMP index)
political
crisis

Trade balance will likely
narrow due to weaker
exports, and higher
commodity prices.
We expect the appreciation
pressure on THB will
generally continue in 2011,
prompting the BoT to
intervene in the FX markets.

Source: CEIC, Credit Suisse Source: Bank of Thailand, CEIC, Credit Suisse

08 December 2010
Thailand: Selected economic indicators

2004 2005 2006 2007 2008 2009E 2010E 2011F 2012F

Real GDP growth (%)
6.3 4.6 5.1 5.0 2.5 -2.3 8.0 4.3 5.4
6.2 4.6 3.2 1.8 2.9 -1.1 4.1 2.5 4.0
Growth in real fixed investment spending (%)
13.2 10.5 3.9 1.5 1.2 -9.2 10.0 4.2 8.0
25.9 28.9 28.1 26.4 27.4 24.4 24.9 24.9 25.6
Nominal GDP ($bn)
161.1 176.2 207.1 264.7 275.4 263.5 318.3 376.6 420.9
Population (mn)
62.0 62.4 62.8 63.0 63.4 63.5 63.9 64.2 64.5
GDP per capita ($)
2,600.0 2,823.5 3,296.6 4,198.4 4,344.9 4,148.3 4,985.0 5,867.3 6,524.2

3.0 5.8 3.5 3.2 0.4 3.5 3.2 3.7 3.2
2.8 4.5 4.6 2.2 5.5 -0.8 3.3 3.6 3.3
Exchange rate (THB per USD, end-year)
39.2 41.1 35.7 30.2 35.0 33.2 29.5 28.4 28.0
Exchange rate (THB per USD, average)
40.3 40.2 37.9 32.2 33.0 34.3 31.7 29.0 28.2
(1)

-1.7 3.5 11.3 1.2 -3.2 2.5 8.0 3.0 1.3
(2)

2.3 6.9 6.2 3.0 10.2 -2.5 5.0 5.8 4.0
Overnight repo rate (%, end-year)
(3)

2.0 4.0 5.0 3.3 2.8 1.3 2.0 3.0 3.5
Fiscal data
(4)

General government budget balance (% of GDP)
-0.2 0.3 -0.7 -1.6 -1.0 -5.7 -1.0 -3.7 -2.2
1.1 1.6 0.9 -0.3 0.2 -4.5 -1.8 -3.3 -0.6
18.0 18.0 18.1 19.0 17.9 21.7 18.1 19.2 18.8
General government revenue (% of GDP)
17.8 18.3 17.4 17.4 16.9 15.9 17.1 15.5 16.6
(5)

49.5 47.3 42.0 38.3 37.3 45.2 44.0 44.9 44.1

115.1 111.8 109.3 106.9 109.5 117.4 112.5 111.9 109.4
5.8 6.1 8.2 6.3 9.2 6.8 7.0 7.5 6.4
124.5 119.2 108.9 104.2 105.3 110.8 113.0 113.0 110.5
4.7 4.6 1.1 3.9 7.7 4.7 7.5 8.0 6.5
102.0 100.7 95.2 91.8 93.8 96.5 92.5 93.2 92.5
11.3 8.0 4.5 4.8 8.8 2.5 7.0 8.8 8.1
Balance of payments

70.7 73.5 73.8 68.6 75.8 68.6 70.5 65.6 68.6
66.6 75.5 71.0 61.6 74.1 59.1 64.1 60.8 64.3
21.4 13.6 17.9 18.9 14.9 -13.4 24.0 10.1 15.6
26.0 24.0 10.6 10.7 25.3 -23.7 30.9 12.2 17.1
2.8 -7.6 2.3 15.7 2.2 21.9 12.6 8.8 9.1
1.7 -4.3 1.1 5.9 0.8 8.3 4.0 2.3 2.2
5.8 7.5 8.5 8.3 4.4 0.9 5.3 6.6 8.1
8.2 12.6 15.4 19.5 13.2 11.0 10.5 13.0 12.0

Foreign debt ($bn)
58.8 59.3 70.0 74.4 76.1 75.3 79.8 81.3 83.9
Public ($bn)
15.3 15.2 15.4 14.9 14.8 15.4 17.2 17.7 18.3
Private ($bn)
36.4 38.0 46.8 49.7 52.1 54.7 62.5 63.5 65.6
Foreign debt (% of GDP)
36.5 33.6 33.8 28.1 27.6 28.6 25.1 21.6 19.9
51.6 45.8 45.8 41.0 36.5 41.7 35.6 32.9 29.0
49.8 52.1 67.0 87.6 111.0 138.4 177.8 214.3 244.3
Central bank net FX reserves, including forward FX purchases ($bn)
54.4 55.9 73.9 106.7 118.0 154.1 193.5 230.0 260.0
(6)

48.6 50.7 65.3 85.4 108.7 135.5 174.9 211.4 241.4
(1) Real effective exchange rate, increase indicates appreciation. (2) From Labor Force Survey: Average Monthly Wage in the private sector. (3) Through 2006, the policy rate was the 14-day
repo rate. (4) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September. (5) Includes central government, non-financial SOEs and financial
institution development fund. (6) Not including forward FX purchases.
Source: Bank of Thailand, National Economic & Social Development Board, CEIC, Credit Suisse

08 December 2010
Vietnam: In trouble again
First the bad news. Vietnam is again experiencing double-digit consumer price inflation
(11.1% in November), reflecting a combination of 20% food price rises and 15% price
gains in housing and construction. At the same time, the trade deficit has been
deteriorating, exceeding the USD1bn mark for the first time in six months in October,
before hitting USD1.3bn in November. In response, the State Bank of Vietnam raised
the discount rate by 100bps to 8% (and the prime lending rate to 9%) in early November
the first hike since December 2009.
And now the really bad news. In our view, the real problem for the country is that such
signs of overheating are emerging when the economy expanded just 5.3% in 2009 and
has shown year-to-date GDP growth of only 6.5% in 2010 well below what many,
including the government, believe is sustainable for a rapidly emerging economy such
as Vietnam. The implication would seem to be that the growth/inflation trade-off has
deteriorated.
Heavy inward foreign direct investment (FDI) has proved a mixed blessing so far.
Vietnam has certainly succeeded in attracting more than its fair share of inward FDI since
joining the World Trade Organisation in January 2007, as companies have sought to tap
the countrys relatively cheap and educated work force. In the short term, this has led to
higher capital imports, while there is a suspicion that some of the money has also found its
way into the real estate market. The good news is that the capital imports should
effectively turn into exports in years to come, while the FDI has helped fund Vietnams
sizeable current account deficit. We expect the latter to exceed 8% of GDP in 2011.
The penchant for consumer goods is the key problem, in our opinion. The
Vietnamese appear to have a stronger inclination to spend rather than to save, relative
to their more frugal Chinese neighbours, with many of the preferred products sourced
from overseas. In our view, either consumption needs to be capped and/or savings
encouraged if Vietnam is not to keep running into inflation/external deficit difficulties.
A preference for growth over inflation. Nevertheless, notwithstanding the recent
interest rate rise (which is likely to be backed up by a further 100bps move in 2011), we
believe the governments preference generally remains for growth over inflation. As
such, there is a sizeable risk that inflation will move even higher in the short term, the
trade position will deteriorate further and the dong will come under renewed downward
pressure, in our view. We look for another 5% depreciation of the Vietnamese currency
against a generally weak US dollar during the course of 2011.
The National Congress meeting in January needs to be watched. The Communist
Partys national congress is due to be held in January 2011 and needs to be watched
very closely. It seems fairly clear that the volatility of the economy and the associated
stop-go economic policies of the government have proved unpopular in some quarters.
As such, there is a possibility of significant changes to the current leadership team, in
favour of the more conservative wing of the party. If this were to happen, we probably
should not expect too much in the way of divestments, while direct price controls could
come on the agenda and market-friendly reforms would generally take a back seat. We
doubt, however, that significant barriers to inward investment would be erected.
+65 6212 3707

08 December 2010
Exhibit 429: Deteriorating trade deficit Exhibit 430: and rising inflation
Trade balance
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
05 06 07 08 09 10
USDbn

Consumer Prices
0
5
10
15
20
25
30
05 06 07 08 09 10
% yoy

Vietnam recorded two
consecutive monthly trade
deficits in excess of
USD1bn in October and
November 2010, while
inflation is back in double
digits. Things were much
worse in 2008, but clearly
recent developments are
not good news and both
variables could worsen
further from here.

Source: Credit Suisse, CEIC Source: Credit Suisse, CEIC

Exhibit 431: Private consumption as a % of GDP
61
62
63
64
65
66
67
68
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Private consumption share of GDP
% GDP
It seems to us that a key
structural problem for the
country is its relatively high
private consumption and
low savings. Consumer
spending still represents
around two-thirds of GDP,
which in turn gives rise to
plenty of import demand.
Savings and investment
need to be in better balance
to reduce the external
deficit.

Source: Credit Suisse, CEIC

Exhibit 432: IP and retail sales growth Exhibit 433: Exchange rate
0
5
10
15
20
25
30
0
5
0
6
0
7
0
8
0
9
1
0
15
20
25
30
35
40
45
Ind. Prod*
Retail Sales (RHS)*
% %

Dong-US dollar
16,500
17,000
17,500
18,000
18,500
19,000
19,500
20,000
01/09 07/09 01/10 07/10

While industrial production
growth has continued to
hold up well, retail sales
growth has softened
sharply, albeit from very
high rates. Given the
structural imbalances in the
economy, this is not
necessarily bad news. It is
unlikely to be enough,
however, to prevent further
devaluations of the dong,
which we expect to move
through 20,000 against the
USD in 2011.

*3-month moving average of year-on-year rate.
Source: Credit Suisse, CEIC

08 December 2010
Vietnam: Selected economic indicators

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Real GDP growth (%) 7.8 8.4 8.2 8.5 6.3 5.3 6.4 6.2 6.5
Nominal GDP ($bn) 45.5 53.0 61.0 71.2 89.9 92.8 102.0 107.8 117.7
Population (mn) 81.4 82.4 83.3 84.2 85.1 86.0 86.9 87.9 88.8
GDP per capita ($) 558.3 642.8 731.6 845.0 1055.7 1079.1 1,173 1,227 1,326
Exchange rate (VND per USD, end-year) 15,762 15,900 16,055 16,010 17,433 18,472 19,498 20,500 21,600
Exchange rate (VND per USD, average) 15,732 15,847 15,984 16,072 16,526 17,865 18,703 19,999 21,050
(1)
12.5 2.7 11.7 14.6 24.7 -12.3 -2.0 2.0 0.0
Nominal wage growth (% year-on-year change) 14.0 15.3 18.1 21.4 15.0 14.2 13.0 18.0 17.0
Discount rate (%, end year) 3.0 4.5 4.5 4.5 7.5 6.0 7.0 8.0 6.0
Fiscal data
(2)
-4.9 -4.9 -5.0 -5.6 -4.6 -7.0 -5.5 -5.0 -4.8
(2)
-3.8 -4.1 -4.2 -4.5 -3.4 -5.5 -4.5 -3.8 -3.8
(2)
29.9 31.3 31.6 34.9 33.3 35.3 35.6 36.8 36.2
(2)
33.9 35.7 33.7 32.0 34.1 40.7 41.0 40.0 39.0
Balance of payments
Net FDI inflows ($bn) 1.1 1.4 1.8 8.1 13 12 8.0 9.0 7.0
(3)
0.7 1.3 1.2 1.4 1.6 1.7 1.7 2.0 2.2
Foreign debt ($bn)
(4)
13.5 14.2 15.6 19.3 21.8 27.9 32.0 37.0 40.0
Public ($bn)
(5)
12.6 12.6 13.9 16.6 18.8 24.1 27.0 30.0 32.0
Private ($bn) 0.9 1.6 1.7 2.6 3.0 3.8 5.0 7.0 8.0
(6)
7.0 9.1 13.4 23.5 23.9 16.4 15.7 14.7 14.7
(1) Real effective exchange rate (CPI-deflated); increase indicates appreciation. (2) General government statistics as interpreted by the Vietnam government. (3) Scheduled amortizations of
medium- and long-term external debt of both the public and private sector. (4) Liabilities vis--vis non-residents (i.e., includes FX-denominated and local-currency debt). (5) Includes government
and central bank. (6) Central bank forex reserves minus monetary authorities other liabilities.
Source: Ministry of Finance, State Bank of Vietnam, General Statistical Office, CEIC, Credit Suisse

08 December 2010
Long-term sovereign FX debt ratings
(pos) Outlook positive (neg) Outlook negative No sign indicates stable outlook
Moody's S&P Fitch
LATIN AMERICA
Argentina B3 B B
Brazil Baa3 (pos) BBB- BBB- (pos)
Chile Aa3 A+ A
Colombia
(1)
Ba1 (pos) BBB- (pos) BB+ (pos)
Ecuador Caa3 B- B-
El Salvador Ba1 (neg) BB BB (neg)
Mexico Baa1 BBB BBB
Panama Baa3 BBB- BBB- (pos)
Peru Baa3 BBB- (pos) BBB- (pos)
Uruguay
(2)
Ba3 (pos) BB BB (pos)
Venezuela B2 BB- B+
EASTERN EUROPE, MIDDLE EAST & AFRICA
Czech Republic A1 A (pos) A+ (pos)
Egypt Ba1 BB+ BB+
Hungary Baa3 (neg) BBB- (neg) BBB (neg)
Israel A1 A A
Kazakhstan
(3)
Baa1 BBB- BBB-
Nigeria B+ BB- (neg)
Poland A2 A- A-
Romania Baa3 BB+ BB+
Russia Baa1 BBB BBB (pos)
Saudi Arabia
(3)
Aa3 AA- AA-
South Africa A3 BBB+ (neg) BBB+ (neg)
Turkey Ba2 (pos) BB (pos) BB+ (pos)
Ukraine B2 B+ B
United Arab Emirates Aa2
EMERGING ASIA
China Aa3 (pos) A+ A+
Hong Kong Aa1 (pos) AA+ AA+
India
(3)
Baa2 BBB- BBB-
Indonesia Ba2 (pos) BB (pos) BB+
Korea A1 A A+
Malaysia A3 A- A-
Philippines Ba3 BB BB
Singapore Aaa AAA AAA
Taiwan Aa3 AA- A+
Thailand Baa1 BBB+ (neg) BBB (neg)
Vietnam Ba3 (neg) BB (neg) B+
Moody's rating scale S&P rating scale Fitch rating scale

Investment
grade
Sub-
investment
grade
Investment
grade
Sub-
investment
grade
Investment
grade
Sub-
investment
grade
Aa2 Ba1 AA BB+ AA BB+
Aa3 Ba2 AA- BB AA- BB
A1 Ba3 A+ BB- A+ BB-
A2 B1 A B+ A B+
A3 B2 A- B A- B
Baa1 B3 BBB+ B- BBB+ B-
Baa2 Caa1 BBB CCC+ BBB CCC+
Baa3 BBB- BBB-
(1) The S&P rating in the table refers to the rating for the foreign currency sovereign bonds. S&P's foreign currency rating is one notch lower.
(2) Moodys has assigned a positive watch to Uruguays LT soverign FX debt rating since 15 July 2010
(3) The Moodys rating in the table refers to the country ceiling. Moodys foreign currency issuer rating is one notch lower.
Source: Standard & Poors, Moodys and Fitch

0
8

D
e
c
e
m
b
e
r

2
0
1
0
E
m
e
r
g
i
n
g

M
a
r
k
e
t
s

Q
u
a
r
t
e
r
l
y

1
8
3
Long-term sovereign FX debt ratings
Investment Grade
Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3
Moodys Kuwait
Qatar
Slovenia
United Arab Emirates
Botswana-
Chile
China +
Cyprus
Saudi Arabia
(1)
Taiwan

Bahrain
Czech Republic
Israel
Korea
Slovakia

Poland

Malaysia
South Africa

Kazakhstan
(1)

Lithuania
Mexico
Russia
Thailand

India
Morocco
Tunisia

Brazil +
Bulgaria +
Croatia
Hungary
Latvia
Panama
Peru
Romania
AA AA- A+ A A- BBB+ BBB BBB-
S&P Qatar
Slovenia

Kuwait
Saudi Arabia
Taiwan
Chile
China
Slovakia
Bahrain
Cyprus
Czech Republic +
Estonia
Israel
Korea

Botswana
Malaysia
Poland

South Africa
Thailand

Bulgaria
Croatia
Lithuania
Mexico
Russia
Tunisia

Brazil
Colombia +
(2)
Hungary
India
Kazakhstan
Morocco
Panama
Peru +
Fitch Kuwait
Slovenia

Cyprus
Saudi Arabia
China
Czech Republic +
Korea
Slovakia
Taiwan

Bahrain
Chile
Estonia
Israel

Malaysia
Poland
South Africa

Hungary
Lithuania
Mexico
Russia +
Thailand
Tunisia

Brazil +
Bulgaria
Croatia
India
Kazakhstan
Morocco
Panama +
Peru +
Sub-Investment Grade
Ba1 Ba2 Ba3 B1 B2 B3 Caa1 and below
Moodys Colombia +
Egypt
El Salvador
Indonesia +
Turkey +

Philippines
Uruguay +
Vietnam
Lebanon
Sri Lanka
Ukraine
Venezuela

Argentina
Pakistan
Ecuador

BB+ BB BB- B+ B B- CCC+ and below
S&P Egypt
Romania

El Salvador
Indonesia +
Latvia
Philippines
Turkey +
Uruguay
(1)

Vietnam
Gabon
Serbia
Venezuela

Nigeria
Sri Lanka
Ukraine

Argentina
Ghana
Lebanon +
Ecuador
Pakistan

Fitch Colombia +
Egypt
Indonesia
Latvia
Romania
Turkey +
El Salvador
Philippines
Uruguay +

Gabon
Nigeria
Serbia

Ghana
Sri Lanka +
Venezuela
Vietnam
Argentina
Lebanon
Ukraine

Ecuador

(1) The Moodys rating in the table refers to the country ceiling. Moodys foreign currency issuer rating is one notch lower.
(2) The S&P rating in the table refers to the rating for the foreign currency sovereign bonds. S&Ps foreign currency rating is one notch lower.
Source: Standard & Poors, Moodys & Fitch + Outlook positive Outlook negative No sign indicates stable outlook

08 December 2010
Key websites
GENERAL WEBSITES
Central bank websites www.zagury.com/cbanks.htm
Central bank websites www.centralbanking.co.uk/links
National statistical offices unstats.un.org
Finance ministry websites www.centralbanking.co.uk/links/mof.htm
Global election calendar www.electionguide.org
LATIN AMERICA
ARGENTINA
Central Bank www.bcra.gov.ar
Ministry of Economy www.mecon.gov.ar
Statistical Office www.indec.gov.ar
Di Tella University www.utdt.edu
News sources www.ambito.com www.cronista.com www.clarin.com www.lanacion.com.ar www.infobae.com
BRAZIL
Central Bank www.bcb.gov.br
Statistics Office www.ibge.gov.br
Ministry of Finance www.fazenda.gov.br
National Treasury www.tesouro.fazenda.gov.br
Brazilian Federal Revenue Service www.receita.fazenda.gov.br
Development, Industry and Trade Ministry www.mdic.gov.br
Planning Ministry www.planejamento.gov.br
Economic Research Official Bureau www.ipea.gov.br
News sources www.valoronline.com.br www.estadao.com.br www.folha.com.br www.oglobo.com www.ibre.fgv.br
CHILE
Central Bank www.bcentral.cl
Office of the President www.gobiernodechile.cl
Ministry of Finance and Office of the Budget www.hacienda.cl www.dipres.cl
Statistical Office www.ine.cl
Pension Fund Regulator www.safp.cl
News sources www.latercera.cl www.emol.com www.elmercurio.cl www.df.cl
National Emergencies Office / Ministry of the Interior www.onemi.cl
COLOMBIA
Central Bank www.banrep.gov.co
Ministry of Finance www.minhacienda.gov.co
Statistical Office www.dane.gov.co
News sources www.elpais.com.co www.elespectador.com www.eltiempo.com
www.larepublica.com.co www.portafolio.com.co
ECUADOR
Central Bank www.bce.fin.ec
Ministry of Finance www.mef.gov.ec
Statistical Office www.inec.gov.ec/web/guest/inicio
News sources www.eluniverso.com www.elcomercio.com www.lahora.com.ec www.vistazo.com www.hoy.com.ec
www.diario-expreso.com www.elmercurio.com.ec
08 December 2010
Key websites
LATIN AMERICA (contd)
EL SALVADOR
Central Bank www.bcr.gob.sv
Finance Ministry www.mh.gob.sv
Legislative Assembly www.asamblea.gob.sv
Bank Superintendence www.ssf.gob.sv
News Sources www.elsalvador.com www.laprensagrafica.com www.elmundo.com.sv www.elfaro.net
MEXICO
Central Bank www.banxico.org.mx
Office of the President www.presidencia.gob.mx
Ministry of Finance www.shcp.gob.mx
Ministry of Energy www.energia.gob.mx
Statistical Office www.inegi.gob.mx
Pension Fund Regulator www.consar.gob.mx
Pemex www.pemex.com
News sources www.elfinanciero.com.mx www.el-universal.com.mx www.reforma.com www.milenio.com
www2.esmas.com/noticierostelevisa - www.economista.com.mx www.cronica.com.mx
www.jornada.unam.mx - www.radioformula.com.mx
PANAMA
Ministry of Finance www.mef.gob.pa
Statistical Office www.contraloria.gob.pa/inec
Bank Superintendence www.superbancos.gob.pa
News sources www.prensa.com www.pa-digital.com.pa www.critica.com.pa www.estrelladepanama.com
www.thepanamanews.com www.elsiglo.com
PERU
Central Bank www.bcrp.gob.pe
Ministry of Finance www.mef.gob.pe
Statistical Office www.inei.gob.pe
New sources www.elcomercioperu.pe www.gestion. pe www.larepublica.pe www.correoperu.pe
URUGUAY
Central Bank www.bcu.gub.uy
Office of the President www.presidencia.gub.uy
Ministry of Finance www.dgi.gub.uy
Statistical Office www.ine.gub.uy
News sources www.observador.com.uy www.larepublica.com.uy www.brecha.com.uy www.espectador.com
VENEZUELA
Central Bank www.bcv.org.ve
Ministry of Finance www.mf.gov.ve
Statistical Office www.ine.gov.ve
Budget Office www.ocepre.gov.ve
National Electoral Committee www.cne.gov.ve
National Development Fund www.fonden.gob.ve
National Foreign Exchange Administration www.cadivi.gob.ve
National Tax and Customs Administration www.seniat.gob.ve
National Public Credit Office www.oncp.gob.ve
News sources www.el-nacional.com www.2001.com.ve www.eluniversal.com www.globovision.com
www.unionradio.com.ve www.abn.info.ve
08 December 2010
Key websites
CZECH REPUBLIC
Czech National Bank www.cnb.cz
Czech Statistical Office www.czso.cz
Ministry of Finance www.mfcr.cz
News sources www.radio.cz www.praguepost.com
EGYPT
Central Bank of Egypt www.cbe.org.eg
Finance Ministry www.mof.gov.eg
Statistics Office www.capmas.gov.eg
News sources www.businesstodayegypt.com english.ahram.org.eg www.almasryalyoum.com/en
GCC
Central Bank of Kuwait www.cbk.gov.kw
Ministry of Finance Kuwait www.mof.gov.kw
Qatar Central Bank www.qcb.gov.qa
Ministry of Finance Qatar www.mof.gov.qa
Saudi Arabian Monetary Agency www.sama.gov.sa
Ministry of Finance Saudi Arabia www.mof.gov.sa/en
Central Bank of the UAE www.centralbank.ae
Ministry of Finance and Industry UAE www.mofi.gov.ae
News sources GCC www.arabianbusiness.com
HUNGARY
National Bank of Hungary www.mnb.hu
Ministry for National Development and Economy www.nfgm.gov.hu
Statistics Office www.ksh.hu
Debt Management Agency www.allampapir.hu
Budapest Stock Exchange www.bse.hu
News sources www.budapesttimes.hu www.portfolio.hu
ISRAEL
Central Bank www.bankisrael.gov.il
Statistics Office www.cbs.gov.il
Ministry of Finance govx.mof.gov.il
News sources www.haaretz.com
KAZAKHSTAN
National Bank of Kazakhstan www.nationalbank.kz
Ministry of Finance mf.minfin.kz
Statistical Agency www.stat.kz
Ministry of Economy and Budget Planning www.minplan.kz
Financial Services Supervisory Agency www.afn.kz
Official site of the president www.akorda.kz
News sources www.kt.kz
NIGERIA
Central Bank of Nigeria www.cenbank.org
Ministry of Finance www.fmf.gov.ng
Debt Management Office www.dmo.gov.ng
Nigerian National Petroleum Corporation www.nnpcgroup.com
News sources www.thisdayonline.com www.allafrica.com
08 December 2010
Key websites
EASTERN EUROPE, MIDDLE EAST & AFRICA (contd)
POLAND
National Bank of Poland www.nbp.pl
Ministry of Finance www.mf.gov.pl
Statistics Office www.stat.gov.pl
Polish Financial Supervision Authorities www.knf.gov.pl
Warsaw Stock Exchange www.wse.com.pl
Parliament www.sejm.gov.pl
News sources www thenews.pl www.polandmonthly.pl www.warsawvoice.pl
ROMANIA
Central Bank www.bnro.ro
Statistics Office www.insse.ro
Ministry of Finance www.mfinante.ro
RUSSIA
Central Bank of Russia www.cbr.ru
Finance Ministry www.minfin.ru
State Statistics Agency www.gks.ru
Economic Expert Group www.eeg.ru
The State Duma www.duma.ru
News sources www.themoscowtimes.com
SOUTH AFRICA
South African Reserve Bank www.reservebank.co.za
National Treasury www.treasury.gov.za
Statistics South Africa www.statssa.gov.za
South Africa Revenue Services www.sars.gov.za
Bureau of Economic Research www.ber.sun.ac.za
Bond Exchange of South Africa www.bondexchange.co.za
Johannesburg Stock Exchange www.jse.co.za
News sources www.businessday.co.za www.mg.co.za www.financialmail.co.za www.thestar.co.za
TURKEY
Central Bank www.tcmb.gov.tr
Treasury www.treasury.gov.tr
Ministry of Finance www.maliye.gov.tr
State Planning Organization www.dpt.gov.tr
State Institute of Statistics www.tuik.gov.tr
News sources www.ntvmsnbc.com.tr www.turkishdailynews.com.tr
UKRAINE
National Bank of Ukraine www.bank.gov.ua
Finance Ministry www.minfin.gov.ua
Economy Ministry www.me.gov.ua
State Statistics Agency www.ukrstat.gov.ua
News sources www.kyivpost.com
08 December 2010
Key websites
EMERGING ASIA
CHINA
Central Bank www.pbc.gov.cn/english
Statistics Office www.stats.gov.cn
Ministry of Finance www.mof.gov.cn
News sources www.chinadaily.com english.peopledaily.com.cn www.xinhuanet.com
HONG KONG
Central Bank www.info.gov.hk/hkma
Statistics Office www.info.gov.hk/censtatd
Treasury Department www.try.gov.hk
News sources www.scmp.com www.thestandard.com.hk www.feer.com
INDIA
Central Bank www.rbi.org.in
Ministry of Finance finmin.nic.in
Government press releases www.pib.nic.in
Ministry of Statistics www.mospi.nic.in
Ministry of Commerce & Industry www.commerce.nic.in
INDONESIA
Central Bank www.bi.go.id
Investment Coordinating Board www.bkpm.go.id
News sources www.thejakartapost.com www.antara.co.id
KOREA
Central Bank www.bok.or.kr
Statistics Office www.nso.go.kr/eng www.mocie.go.kr
Ministry of Finance english.mofe.go.kr
News sources times.hankooki.com english.chosun.com www.koreaherald.co.kr www.koreapost.com
www.theseoultimes.com english.yna.co.kr joongangdaily.joins.com
english.donga.com english.yna.co.kr
MALAYSIA
Central Bank www.bnm.gov.my
Ministry of Finance www.treasury.gov.my/englishversionbaru
Department of Statistics www.statistics.gov.my
News sources thestar.com.my www.nst.com.my www.bernama.com www.theedgedaily.com
PHILIPPINES
Central Bank www.bsp.gov.ph
National Statistics Office www.census.gov.ph
Department of Finance www.dof.gov.ph
Department of Budget and Management www.dbm.gov.ph
News sources www.bworld.com.ph www.inq7.net www.gmanews.tv/business
SINGAPORE
Central Bank www.mas.gov.sg
Department of Statistics www.singstat.gov.sg
Department of Finance www.mof.gov.sg
News sources www.asiaone.com.sg www.channelnewsasia.com
08 December 2010
Key websites
EMERGING ASIA (contd)
TAIWAN
Central Bank www.cbc.gov.tw
Statistics Offices eng.dgbas.gov.tw eng.stat.gov.tw www.moea.gov.tw www.cepd.gov.tw
Ministry of Finance www.mof.gov.tw
News sources www.taipeitimes.com www.chinapost.com.tw www.taiwanheadlines.com
www.etaiwannews.com news.cens.com www.cna.com.tw taiwansnews.net
THAILAND
Central Bank www.bot.or.th
National Statistical Office www.nso.go.th
Ministry of Finance www2.mof.go.th
News sources www.nationmultimedia.com www.bangkokpost.net
VIETNAM
Vietnam Economic News www.ven.org.vn
Ministry of Finance www.mof.gov.vn
World Bank in Vietnam web.worldbank.org.vn
Vietnam Economic Portal www.vnep.org.vn

08 December 2010
Previous publications
From Credit Suisses Economics Team since the last Emerging Markets Quarterly
GLOBAL EMERGING MARKETS
05 Nov 2010 Valuation of emerging markets currencies, B. Bayazitoglu, N. Mustafayev
04 Nov 2010 Emerging Markets Debt Trading Monthly November 2010, A. Agrawal, I. Arsenin, K. Bartholdy, P. Fage, H. Parsons, S. Siddiqui
05 Oct 2010 Emerging Markets Debt Trading Monthly October 2010, A. Agrawal, I. Arsenin, K. Bartholdy, P. Fage, H. Parsons, S. Siddiqui
LATIN AMERICA
ARGENTINA
23 Nov 2010 Argentina: Diversifying into Badlar-linked bonds, I. Arsenin C. Sandy
28 Oct 2010 Argentina: Fluid politics ahead, C. Sandy
BRAZIL
08 Nov 2010 Brazil: High increase in the minimum wage hinders a more rapid reduction in the interest rate, N. Teixeira, N. Calixto, L. Fonseca, D. Lavarda, T. Rabelo
01 Nov 2010 Brazil: Dilma Rousseff is elected president of Brazil, N. Teixeira, N. Calixto, L. Fonseca, D. Lavarda, T. Rabelo
28 Oct 2010 Brazil: Copoms balance of risks for inflation remains positive, N. Teixeira, N. Calixto, L. Fonseca, D. Lavarda, T. Rabelo
15 Oct 2010 Brazil: Imports have accounted for 44% of the growth in the consumption of industrial goods since 2003, N. Teixeira, N. Calixto, L. Fonseca, D. Lavarda, T. Rabelo
04 Oct 2010 Brazil: Presidential election to be decided in 2
nd
round, N. Teixeira, N. Calixto, L. Fonseca, D. Lavarda, T. Rabelo
30 Sep 2010 Brazil: Septembers Inflation Report reinforces our belief in a low risk of an interest rate hike, N. Teixeira, N. Calixto, L. Fonseca, D. Lavarda, T. Rabelo
MEXICO
10 Nov 2010 Mexico: A prudent and patient Dr. Carstens, A. Cervera
VENEZUELA
15 Nov 2010 Venezuela: Trip Notes Additional PDVSA issuance in the near term; devaluation in 2011, C. Reckman
27 Oct 2010 Venezuela: Opposition gains are tentative , C. Reckman,
18 Oct 2010 Venezuela: New PDVSA bonds, I. Arsenin, H. Parsons, C. Reckman,
02 Dec 2010 Central and Southeast Europe: Away from the tremors, G. Hudecz, I. Vesselinov
02 Dec 2010 Central Europe: Re-thinking pension schemes, G. Hudecz
EGYPT
26 Nov 2010 Egypt: Parliamentary election Result is a sure thing, J. Madu
HUNGARY
01 Nov 2010 Hungary: move from overweight to neutral, P. Fage, G. Hudecz
ISRAEL
09 Nov 2010 Israel: Buy USDILS put RKO, H. Parsons, S. Siddiqui, I. Vesselinov
ROMANIA
15 Oct 2010 Romania: Crunch time for the government, I. Vesselinov
RUSSIA
22 Nov 2010 Russia: After the disruptions in summer, we see stronger GDP growth in Q4 and in 2011, S. Voloboev, A. Pogorelov
08 December 2010
EASTERN EUROPE, MIDDLE EAST & AFRICA (contd)
SOUTH AFRICA
01 Nov 2010 South Africa: PMI Still Below 50: Rate Cut On, C. Teixeira
01 Nov 2010 South Africa: Non-Residents Buy Equities Sell Bonds, C. Teixeira
29 Oct 2010 South Africa: Real Credit Growth Turns Positive, C. Teixeira
29 Oct 2010 South Africa: Exports Bounce in September, C. Teixeira
29 Oct 2010 South Africa: Tax Revenue Growth Slows, C. Teixeira
29 Oct 2010 South Africa: Pushed Lower By Electricity Prices, C. Teixeira
27 Oct 2010 South Africa: Consumer Price Inflation Benign, C. Teixeira
27 Oct 2010 South Africa: Macro Policy Remains Prudent, C. Teixeira
26 Oct 2010 South Africa: Tighter Fiscal Stance; Looser Monetary Policy, C. Teixeira
25 Oct 2010 South Africa: Leading Indicator Index Remains Elevated, C. Teixeira
22 Oct 2010 South Africa: Mineral Export Price Index: Further $ Upside, C. Teixeira
01 Oct 2010 South Africa: PMI: South Africa's Falls; China's Rises, C. Teixeira
01 Oct 2010 South Africa: Foreigners Sold Equities in September, C. Teixeira
01 Oct 2010 South Africa: Trade Deficit on Decline in Mining Exports, C. Teixeira
EMERGING ASIA
01 Dec 2010 Asia lead indicator: A first glimmer of hope, R. Prior-Wandesforde
25 Nov 2010 GDP growth lost momentum across the region in 3Q; what's next?, K.L. Wu
27 Oct 2010 Currency appreciation: What it means for Asia, R. Prior-Wandesforde, S. Sathirathai
20 Oct 2010 China rate hike: Implications for rest of Non-Japan Asia, K.L. Wu
04 Oct 2010 Asia's policy rate fate, R. Prior-Wandesforde
CHINA
01 Dec 2010 China: Steady growth and rising inflation November PMI repeats the story of last month, D. Tao
19 Nov 2010 China: PBoC moves again Another 50bp required reserves ratio hike, D. Tao
10 Nov 2010 China: Monetary normalization accelerated, D. Tao
05 Nov 2010 China: Diesel shortage spreads and China is likely to import more diesel and crude oil, D. Tao
03 Nov 2010 China: PBoC seeks guiding monetary condition back to normal condition, D. Tao
01 Nov 2010 China: Further signs of reacceleration October PMI rose to 54.7, D. Tao, C. Tuntono
19 Oct 2010 China: The first rate hike since global financial crisis PBoC raised deposit and lending rates by 25bps, D. Tao
12 Oct 2010 China: Reserve Requirement Ratio reportedly hiked, D. Tao
04 Oct 2010 China: Stronger real estate, increased construction September non-manufacturing PMI at 57.8 (sa), D. Tao
01 Oct 2010 China: Growth risk is abating September PMI surprised on the upside, D. Tao
HONG KONG
13 Nov 2010 Hong Kong: Still running Strong 3Q10 GDP prompts forecast upgrade, C. Tuntono
INDIA
19 Nov 2010 India: Livin' on a prayer?, R. Prior-Wandesforde, D. Mehndiratta
29 Oct 2010 India: Is economic activity stalling?, D Mehndiratta
12 Oct 2010 India: August industrial production - Jumping around, D. Mehndiratta
08 December 2010
KOREA
01 Dec 2010 Korea Market Strategy 2011 outlook: Picking up the right laggards, S. Yun, C. Tuntono
16 Nov 2010 Korea: The BoK raised policy rate by 25bp to 2.5%, turning more vigilant against inflation risk, D. Tao, C. Tuntono
28 Oct 2010 Korea: Strong current account surplus and a rebound in portfolio inflows resulted in another BoP surplus in September, D. Tao, C. Tuntono
MALAYSIA
23 Nov 2010 Malaysia: 3Q GDP growth: Turning negative, what's next?, K.L. Wu
08 Nov 2010 Malaysia in 2011: Investment to the rescue?, K.L. Wu
18 Oct 2010 Malaysia budget: A triumph of hope over experience?, R. Prior-Wandesforde
TAIWAN
23 Nov 2010 Taiwan: Industrial production recovered in October, showing signs of improved momentum, C. Tuntono
18 Nov 2010 Taiwan: Growth stalled, but remains supported in 2011, C. Tuntono
30 Sep 2010 Taiwan: CBC hiked 12.5bp, as expected; continued normalizing interest rates, C. Tuntono
THAILAND
14 Oct 2010 Thailand: Thailands investment recovery: Here to stay?, S. Sathirathai

08 December 2010
Key dates
LATIN AMERICA
ARGENTINA
Start of Congress ordinary sessions 1 March 2011
Gubernatorial and provincial congressional elections in province of Catamarca 11 March 2011
Gubernatorial and provincial congressional elections in province of Chubut 20 March 2011
Gubernatorial and provincial congressional elections in province of Salta 10 April 2011
Mayoral and municipal congress elections in the city of Buenos Aires 6 May 2011
Mandatory presidential primary elections 14 August 2011
Gubernatorial and provincial congressional elections in province of Tucuman 28 August 2011
Presidential and mid-term congressional elections (half of the seats of the Lower House and half of the seats in the Senate) 23 October 2011
Expected date for gubernatorial and provincial congressional elections in the provinces of Santa Fe, Tucuman, Buenos
Aires, Chaco, Cordoba, Corrientes, Entre Rios, Formosa, Jujuy, La Pampa, La Rioja, Mendoza, Misiones, Neuquen, Rio
Negro, San Juan, San Luis, Santa Cruz, and Tierra del Fuego.
Different dates for elections in the above provinces may be set in early 2011
23 October 2011
End of Congress ordinary sessions 30 November 2011
New president is sworn in 10 December 2011
BRAZIL
Monetary policy decision 8 December 2010
Monetary policy decision 19 January 2011
Monetary policy decision 2 March 2011
Monetary policy decision 20 April 2011
Monetary policy decision 8 June 2011
Monetary policy decision 20 July 2011
Monetary policy decision 31 August 2011
Monetary policy decision 19 October 2011
Monetary policy decision 30 November 2011
CHILE
Monetary policy decision 17 February 2011
Monetary policy decision 12 May 2011
COLOMBIA
End of Congress first ordinary sessions 16 December 2010
Start of Congress second ordinary sessions 16 March 2011
End of Congress second ordinary sessions 20 June 2011
Start of Congress first ordinary sessions 20 July 2011
Submission of 2012 budget proposal to Congress July 2011
08 December 2010
Key dates
LATIN AMERICA (contd)
MEXICO
Start of Congress second ordinary sessions 1 February 2011
Publication of the quarterly inflation report 9 February 2011
End of Congress second ordinary sessions 30 April 2011
Publication of the quarterly inflation report 11 May 2011
Monetary policy decision 27 May 2011
Gubernatorial elections in the state of Mexico 3 July 2011
Monetary policy decision 8 July 2011
Publication of the quarterly inflation report 10 August 2011
Monetary policy decision 26 August 2011
Start of Congress first ordinary sessions 1 September 2011
Presentation to Congress of the 2012 budget proposal Early September
Monetary policy decision 14 October 2011
Publication of the quarterly inflation report 9 November 2011
PANAMA
Start of Congress first ordinary sessions 2 January 2011
End of Congress first ordinary sessions 30 May 2011
Start of Congress second ordinary sessions 1 July 2011
End of Congress first ordinary sessions 30 October 2011
PERU
Start of Congress second ordinary sessions 1 March 2011
Presidential and congressional elections
If a second-round vote is needed, it would be held within 30 days after the final first-round results are formally announced.
10 April 2011
End of Congress second ordinary sessions 15 June 2011
Start of Congress first ordinary sessions 27 July 2011
New president is sworn in 28 July 2011
Submission of 2012 budget proposal to Congress August 2011
VENEZUELA
End of Congress second ordinary sessions 15 December 2010
Start of Congress first ordinary sessions 5 January 2011
End of Congress first ordinary sessions 14 August 2011
Start of Congress second ordinary sessions 15 September 2011
Presidential election December 2012
08 December 2010
Key dates
EUROPEAN UNION
EU summit 16-17 December 2010
CZECH REPUBLIC
Czech National Bank Board meeting 22 December 2010
EGYPT
Monetary policy committee meeting 16 December 2010
Monetary policy committee meetings Specific 2011 dates unknown
Presidential election September 2011
HUNGARY
Monetary council meeting 20 December 2010
ISRAEL
Bank of Israel interest rate setting meeting 27 December 2010
Bank of Israel interest rate setting meeting 24 January 2011
Bank of Israel interest rate setting meeting 21 February 2011
Bank of Israel interest rate setting meeting 28 March 2011
Bank of Israel interest rate setting meeting 21 April 2011
KAZAKHSTAN
National Bank of Kazakhstan policy meetings Specific dates unknown
NIGERIA
Monetary policy committee meetings Specific dates unknown
General and presidential elections 9 April 2011
POLAND
Monetary policy council meeting 21-22 December 2010
Monetary policy council meeting 18-19 January 2011
Monetary policy council meeting 15 February 2011
Monetary policy council meeting 15 March 2011
Parliamentary elections October 2011
ROMANIA
Monetary policy committee meeting 5 January 2011
Monetary policy committee meeting 3 February 2011
RUSSIA
Expected approval of the 2011-2013 budget by president 8 December 2010
Possible central banks Board policy meeting 24 December 2010
Parliamentary elections 4 December 2011
Presidential elections 11 March 2012
SOUTH AFRICA
Release of the Quarterly Bulletin 9 December 2010
Monetary policy committee meeting 18-20 January 2011
Budget speech February 2011
Monetary policy committee meeting 22-24 March 2011
Monetary policy committee meeting 10-12 May 2011
Monetary policy committee meeting 19-21 July 2011
Monetary policy committee meeting 20-22 September 2011
Monetary policy committee meeting 8-10 November 2011
08 December 2010
Key dates
EASTERN EUROPE, MIDDLE EAST & AFRICA (contd.)
TURKEY
Monetary policy committee meeting 16 December 2010
Deadline for completion of parliamentary discussions on 2011 budget 31 December 2010
Monthly monetary policy committee meetings in 2011 Mid-month
Release of the quarterly inflation reports in 2011 End-January, end-April, end-July, end-October
Central Bank Governor Yilmaz's term ends 17 April 2011
Parliamentary elections June 2011
Deadline for the submission of the draft 2012 budget to parliament 17 October 2011
Deadline for the parliamentary approval of the 2012 budget 31 December 2011
UKRAINE
Target date for compliance with prior actions ahead of the IMF Board meeting 10 December 2010
IMF Board to approve the first review of the Stand-By Arrangement (on end-September performance criteria) 20-December 2010
Second review of the IMF Stand-by Agreement scheduled (end-December 2010 performance criteria) by 15 March 2011
Third review of the IMF Stand-by Agreement scheduled (end-March 2011 performance criteria) by 15 June 2011
Fourth review of the IMF Stand-by Agreement scheduled (end-June 2011 performance criteria) by 15 September 2011
Fifth review of the IMF Stand-by Agreement scheduled (end-September 2011 performance criteria) by 15 December 2011
Scheduled parliamentary elections by September 2012
EMERGING ASIA

CHINA
Economic Working Conference December 2010
National Peoples Congress March 2011
HONG KONG
2011-12 Budget Speech February 2011
INDIA
RBI policy review 16 December 2010
RBI policy review End-January 2011
Union budget for 2011/12 End-February 2011
RBI policy review Mid-March 2011
INDONESIA
Bank Indonesia Monetary Policy Meeting January 2011
Bank Indonesia Monetary Policy Meeting February 2011
Bank Indonesia Monetary Policy Meeting March 2011
KOREA
Bank of Korea Monetary Policy Meeting 9 December 2010
Bank of Korea Monetary Policy Meeting January 2011
Bank of Korea Monetary Policy Meeting February 2011
Bank of Korea Monetary Policy Meeting March 2011
MALAYSIA
Bank Negara Monetary Policy Meeting 27 January 2011
Bank Negara Monetary Policy Meeting 11 March 2011
PHILIPPINES
Banko Sentral ng Pilipinas Monetary Policy Meeting 30 December 2010
SINGAPORE
Budget 2011 February 2011
Monetary Policy Meeting April 2011
08 December 2010
Key dates

TAIWAN
The sixth round of cross-strait ARATS-SEF talk Mid to late December 2010
Central Bank of China quarterly Monetary Policy Meeting December 2010
Central Bank of China quarterly Monetary Policy Meeting March 2011
THAILAND
Bank of Thailand Monetary Policy Committee Meeting 12 January 2011
Bank of Thailand Monetary Policy Committee Meeting 9 March 2011
VIETNAM

Communist Party 11th Party Congress January 2011

08 December 2010
Balance of payments financing needs
LATIN AMERICA
ARGENTINA
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (including short-term debt amortization) 14.6 15.2 14.9 10.4 22.9 18.9
Funding need (excluding short-term debt amortization) 4.1 3.2 0.6 -5.9 11.8 7.9
Current account deficit -7.7 -7.1 -7.1 -11.3 -4.8 -4.2
FDI outflows 2.7 1.5 1.4 0.6 0.7 0.6
Medium- and long-term debt amortization 9.1 8.8 6.3 4.7 15.9 11.5
Public sector debt amortization 4.6 4.7 4.4 2.8 9.6 6.9
Amortization of debt to IFIs 2.2 2.6 2.2 1.7 1.7 1.6
Expected repayment to Paris Club 3.0
Amortization of debt to other creditors
(1)
2.4 2.2 2.1 1.2 7.9 2.3
Private sector debt amortization 4.5 4.1 1.9 1.9 6.3 4.6
Non-financial private sector 3.5 3.7 1.4 1.4 5.4 4.3
Financial private sector 1.0 0.4 0.5 0.5 0.9 0.4
Short-term debt
(2)
10.5 12.0 14.2 16.3 11.1 11.0
Funding sources (including gross short-term borrowing) 14.6 15.2 14.9 10.4 22.9 18.9
FDI inflows 5.6 6.2 9.1 4.3 2.2 1.5
Net portfolio investments, excl. foreigners purchase of government bonds 2.2 2.4 -6.6 -0.9 0.0 0.0
Government borrowing from IFIs, excluding the IMF and the BIS 1.7 2.4 1.9 3.2 1.2 1.6
Government borrowing excl. IFI lending
(3)
7.4 5.9 2.4 0.2 0.0 0.0
Government borrowing from the IMF -9.5 0.0 0.0 0.0 0.0 0.0
Central bank borrowing from BIS and bilateral lenders -0.7 1.5 3.3 -1.2 -2.0 0.0
Medium-term private sector borrowing 3.1 4.0 1.3 0.7 4.3 3.4
Short-term private sector borrowing 12.0 14.2 16.3 11.1 11.0 10.5
Other capital flows, including capital flight
(4)
-3.2 -8.8 -15.9 -4.2 12.2 3.9
Change in FX reserves net of borrowing from the BIS and bilateral lenders (- indicates increase) -4.0 -12.6 3.1 -2.9 -6.0 -2.0
(1) Including payments to foreign holdings of local law federal government bonds; the data for 2010 include flows related restructuring of defaulted government bonds. (2) The IMFs data
dissemination system reports that Argentina has about $30bn of short-term debt, but our understanding is that this number consists mainly of debt that has been in arrears since 2001 and is not
being serviced. (3) This includes foreigners' purchases of local law federal government bonds. For 2008 and 2009, it includes sale of Boden 2015 to Venezuela. (4) This includes accumulation
of new arrears and capital flight.
Source: Credit Suisse, Central Bank, Ministry of Finance
BRAZIL
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (excluding short-term debt amortization) 58.7 43.7 71.0 44.3 92.6 121.1
Current account deficit -13.6 -1.6 28.2 24.3 51.0 73.3
Public 22.4 11.4 4.2 5.0 6.6 3.8
Private 21.7 26.8 18.1 25.1 26.6 29.9
FDI outflows 28.2 7.1 20.5 -10.1 8.5 14.0
Short-term debt amortization 18.8 20.3 38.9 36.5 31.0 59.3
FDI inflows 18.8 34.6 45.1 25.9 35.0 40.0
Portfolio investments 20.3 42.6 6.8 50.9 55.5 47.0
Stocks 7.7 26.2 -7.6 37.1 38.5 26.0
Fixed income 7.0 13.5 13.8 9.7 13.7 15.0
Government bonds 5.6 2.9 0.5 4.2 3.3 6.0
Borrowing by the government (from other sources than the IMF) 1.5 0.8 1.9 4.6 5.3 2.2
Medium- and long-term borrowing by the private sector 36.8 32.3 29.2 27.1 46.8 43.5
Short-term debt contracted from abroad (gross) 20.3 38.9 36.5 39.4 73.4 97.4
Other capital inflows and errors and omissions 10.3 2.3 -6.5 -20.4 -45.0 -25.7
Change in international net reserves (- indicates increase) -30.6 -87.5 -3.0 -46.7 -47.4 -24.0
08 December 2010
CHILE
$bn 2006 2007 2008 2009 2010E 2011F
Current account deficit -7.2 -7.5 2.5 -4.2 0.3 3.9
FDI outflows 2.2 2.6 8.0 8.0 7.0 8.0
Portfolio outflows 10.1 16.0 11.6 14.0 17.0 5.0
FDI inflows 7.3 12.5 15.2 12.7 17.0 16.0
Portfolio inflows 0.8 -0.5 2.8 2.0 8.3 5.0
External debt issuance 3.3 0.2 4.0 5.0 8.0 12.0
Other loans 11.0 13.8 22.4 19.7 10.2 17.2
Residual 2.7 5.0 12.8 8.6 2.0 0.0
Change in gross reserves (- indicates increase) -2.5 2.5 -6.3 -2.2 -2.1 -2.0
Memo items:
Nominal GDP ($bn) 146.7 164.4 170.5 161.3 190.3 224.4
Source: Credit Suisse, Central Bank
COLOMBIA
$bn 2006 2007 2008 2009 2010E 2011F
Current account deficit 3.0 6.0 6.9 5.0 6.6 8.2
FDI outflows 1.1 0.9 2.3 3.0 1.1 1.0
Public sector 3.8 2.8 1.7 1.1 1.6 1.2
IFIs 0.9 1.4 0.5 0.5 0.7 0.8
Non-IFIs 2.9 1.4 1.2 0.6 0.9 0.5
Private sector 3.4 2.3 2.9 2.3 1.8 1.8
Non-financial private sector 3.0 2.1 2.7 2.0 1.6 1.6
Financial private sector 0.4 0.1 0.2 0.3 0.2 0.2
FDI inflows 7.1 9.0 10.6 7.2 7.7 7.2
IMF lending 0.0 0.0 0.0 0.0 0.0 0.0
IFI lending excluding IMF 2.1 1.9 1.4 2.7 2.0 1.5
Public sector borrowing (excluding IFI lending)* 4.0 3.0 1.0 3.5 3.8 2.2
Net portfolio investments 0.5 0.4 -0.2 -0.1 1.0 0.6
Medium-term non-financial private sector borrowing 2.9 3.1 3.0 2.4 2.0 1.8
Medium-term financial private sector borrowing 0.3 0.8 0.1 0.4 0.2 0.2
Short-term financing 4.3 4.5 5.2 4.5 4.5 4.5
Other capital flows/errors and omissions -4.5 -1.0 0.2 -2.6 -2.5 2.3
Change in FX reserves (- indicates increase) -0.5 -5.5 -3.1 -1.3 -2.9 -3.6
* Including pre-financing
08 December 2010
MEXICO
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (excluding non-market debt amortization) 15.8 20.2 23.6 19.6 18.2 17.6
Current account deficit 4.8 8.7 16.5 6.2 -0.6 1.6
FDI outflows 5.8 8.3 1.2 7.6 11.7 10.0
Medium- and long-term market debt amortization 5.2 3.2 5.9 5.8 7.1 6.0
Public 3.0 2.0 3.7 3.7 5.4 5.4
Private 2.2 1.2 2.2 2.1 1.7 0.6
Public sector non-market debt payments 6.6 5.6 7.6 5.3 4.0 3.6
Private sector non-market debt amortization* 12.6 11.5 20.5 15.2 19.9 20.6
FDI inflows 20.1 29.1 24.9 14.5 19.3 20.0
Medium- and long-term borrowing -9.8 15.1 8.0 14.0 12.4 13.2
Short-term loans 14.0 25.1 19.5 16.2 9.2 13.0
Other -1.7 -26.5 6.7 -0.9 9.0 0.0
Error and omissions 6.1 -2.5 -2.3 -6.0 0.0 0.0
Change in net international reserves (- indicates increase) 1.0 -10.3 -7.5 -5.4 -22.8 -14.4
Memo items:
Nominal GDP ($bn) 952.3 1035.9 1096.2 882.9 1037.7 1164.1
* Reflects credit lines from suppliers, commercial bank loans and external trade loans. We do not have data on the exact original maturity of these loans, but we assume that they were typically
less than one year, so that it fits with the short-term debt definition.
PANAMA
$bn 2006 2007 2008 2009 2010E 2011F
Medium- and long-term market debt amortization 2.1 0.2 0.9 0.2 0.2 0.5
FDI outflows 0.0 0.0 0.0 0.0 0.0 0.0
Funding sources (including net short-term borrowing) 2.6 1.6 3.7 0.8 1.6 2.5
FDI inflows 2.6 1.8 2.4 1.8 2.1 2.5
Portfolio investments -0.1 -0.6 -0.5 -0.5 -0.5 -0.5
Equity 0.0 0.1 0.0 0.0 0.0 0.0
Debt -0.1 -0.8 -0.5 -0.5 -0.5 -0.5
Other investment -1.6 1.3 1.0 -1.0 0.1 0.5
Other 2.1 -0.4 0.5 1.2 -0.3 0.0
Errors and omissions -0.3 -0.5 0.3 -0.7 0.2 0.0
Source: Comptroller's office, Credit Suisse
08 December 2010
PERU
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (excluding short-term debt amortization) -1.3 3.5 8.8 2.3 4.4 3.2
Current account deficit -2.9 -1.4 4.7 -0.2 2.4 0.8
FDI outflows 0.0 0.1 0.7 0.4 0.2 0.4
Public sector 1.1 3.3 2.6 1.4 0.8 0.9
IFIs 0.6 1.0 1.0 1.1 0.6 0.7
Paris Club
(1)
0.4 2.1 0.3 0.3 0.2 0.2
External market debt amortization
(2)
0.1 0.2 1.3 0.0 0.0 0.0
Private sector 0.5 1.5 0.8 0.8 1.0 1.1
FDI inflows 3.5 5.5 6.9 4.8 6.3 6.8
Net portfolio investments -1.5 0.5 0.7 -3.7 0.8 0.7
IFI lending (excluding IMF) 0.5 0.7 1.1 1.1 1.0 1.2
Paris Club lending to Perus government sector 0.1 0.1 0.1 0.2 0.2 0.2
Public sector external bond issuance
(3)
0.0 2.4 0.0 2.0 1.4 1.1
Medium-term private-sector borrowing 0.7 4.4 3.4 1.7 3.5 1.5
Short-term financing 3.4 6.3 6.4 4.6 6.0 6.0
Other -1.5 -2.6 0.0 -0.1 0.8 -3.5
Change in FX reserves (- indicates increase) -3.2 -10.4 -3.5 -1.9 -11.0 -4.5
(1) It includes prepayments to the Paris Club of $1.8bn in 2007. (2) In 2008, it includes an $816mn prepayment of the Brady bonds. (3) It includes issuance to prepay Paris Club debt of $2.1 bn
in 2007.
VENEZUELA
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (excluding short-term debt amortization) -19.2 -17.3 -33.9 -5.6 -10.3 -6.5
FDI outflows 1.5 0.0 1.3 1.8 1.8 1.8
Funding sources (including net short-term borrowing) -19.2 -17.3 -33.9 -5.6 -10.3 -6.5
FDI inflows -0.5 1.0 0.3 -3.1 -1.7 -0.9
Portfolio investments -9.9 2.6 3.0 8.9 1.7 2.7
Equity 0.0 0.1 0.2 0.1 0.1 0.1
Debt -10.0 2.5 2.8 8.9 1.6 2.6
Other capital inflows -7.3 -25.6 -26.9 -18.0 -16.3 -10.9
Commercial loans -4.2 -1.0 -0.3 -4.2 -3.4 -3.8
Other loans -1.0 2.6 -0.7 2.9 7.3 6.8
FX holdings (government deposits abroad) -1.9 -23.3 -18.1 -16.0 -14.2 -8.9
Other lending inflows -0.2 -3.8 -7.8 -0.7 -6.0 -5.1
Other funding sources 5.8 0.7 2.2 1.1 3.2 5.7
Errors and omissions and unspecified capital flight -2.2 -1.7 -3.3 -4.8 -4.6 -4.0
Change in gross reserves (- indicates increase) -5.0 5.7 -9.3 10.3 7.5 1.0
08 December 2010
EASTERN EUROPE, MIDDLE EAST AND AFRICA
CZECH REPUBLIC
$bn 2006 2007 2008 2009 2010E 2011F
Of which: Income deficit 8.0 11.0 17.0 12.2 14.0 17.3
FDI outflows 1.7 1.7 3.8 1.3 0.6 1.8
Medium- and long-term external debt amortization 4.1 3.5 5.0 4.4 4.7 4.9
Short-term external debt amortization 14.6 15.4 22.6 26.1 22.7 20.4
FDI inflows 6.5 11.2 5.8 2.7 7.9 6.8
Net portfolio equity inflows -1.7 -3.3 -1.9 -1.7 -2.2 -2.2
Net portfolio debt inflows 1.6 2.1 1.5 7.8 10.9 4.8
Medium- and long-term borrowing 6.5 6.0 8.6 3.0 3.3 4.9
Short-term borrowing 15.4 22.6 26.1 22.7 20.4 20.4
Net capital transfers (including EU funds) 0.4 1.0 1.8 2.2 2.2 1.5
Financial derivatives -0.3 0.1 -0.7 -0.4 0.0 -0.3
Other items (net errors and omissions) -2.5 -9.9 -6.5 2.2 -2.6 -3.8
Change in reserves (- indicates increase) -1.9 -3.4 -2.1 -4.6 -7.0 0.8
Roll-over ratios: Assumptions
Medium- and long-term debt 1.6 1.7 1.7 0.7 0.7 1.0
Short-term debt 1.1 1.5 1.2 0.9 0.9 1.0
Source: Czech National Bank, Ministry of Finance, IMF, JEDH, Credit Suisse
EGYPT*
$bn 2006 2007 2008 2009 2010 2011F
Current account deficit -1.8 -2.3 -0.9 4.4 3.3 4.5
Short-term debt amortization (excl short-term suppliers' credits) 1.1 0.8 0.6 1.2 1.2 1.1
Net FDI inflows 6.0 10.5 12.1 6.8 5.8 5.0
Net portfolio investments 2.0 -1.5 -2.3 -9.6 7.4 2.5
Of which: Bonds 2.7 -0.6 0.8 -1.0 1.4 0.8
Short-term loans (excluding short-term suppliers' credits) 0.8 0.6 0.7 1.2 1.1 1.2
Short-term suppliers' credits, net 2.5 2.5 2.0 1.6 2.9 1.2
Net other assets -5.1 -10.9 -4.4 3.7 -9.7 -6.5
Net other lending -0.8 0.8 1.0 0.1 2.5 2.5
Errors and omissions -2.0 2.2 -3.0 -1.2 -1.6 0.0
Change in reserves (- indicates increase) -3.3 -5.3 -5.4 3.4 -3.4 -0.5
Short-term debt 0.7 0.9 0.6 0.9 0.7 1.1
*Fiscal year ending June
08 December 2010
HUNGARY
$bn 2006 2007 2008 2009 2010E 2011F
Current account deficit 8.6 9.5 11.3 0.5 -1.3 2.1
FDI outflows 3.9 3.6 0.8 1.7 2.8 2.6
FDI inflows 7.4 5.7 4.5 1.4 0.0 3.8
Net portfolio equity inflows -1.0 -7.6 -3.6 0.1 0.0 -2.4
Net portfolio debt inflows 7.2 5.2 0.5 -4.9 4.2 2.4
Financial derivatives 0.2 1.1 -1.0 0.8 0.9 0.4
Other items (net errors and omissions) -0.9 -0.8 -1.0 -1.1 -1.5 -1.1
IMF-EU-WB funding 9.1 10.0 0.0 0.0
Change in reserves (- indicates increase) -3.0 -2.5 -9.8 -10.3 -4.5 2.6
Short-term debt 1.0 1.6 1.2 1.0 1.1 1.1
Source: National Bank of Hungary, Ministry for National Economy, IMF, JEDH, Credit Suisse
ISRAEL
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (including short-term debt amortization 26.3 32.3 39.1 32.2 33.1 31.6
Funding need (excluding short-term debt amortization) -1.7 0.4 2.9 -1.1 1.2 1.4
Public sector 3.1 2.8 2.6 3.1 4.9 1.6
Private sector 2.6 2.5 1.7 3.3 2.6 4.0
Short-term debt amortizations 28.0 31.9 36.2 33.3 31.9 30.2
Net FDI inflows -0.2 0.2 3.7 2.7 -0.5 1.5
Net portfolio investments 1.1 -2.1 -1.0 -5.1 0.5 0.9
Public sector 2.8 1.3 1.3 3.2 3.3 2.4
Private sector 5.7 7.5 1.6 4.2 2.6 4.0
Short-term debt financing 31.9 36.2 33.3 31.9 31.9 30.2
Errors and omissions -13.7 -11.2 14.3 13.4 0.0 0.0
Change in reserves (- indicates increase) -1.2 0.5 -14.0 -18.1 -4.8 -7.4
Rollover ratios: Assumptions
Medium- and long-term debt
Public sector 0.9 0.5 0.5 1.0 0.7 1.5
Private sector 2.2 3.0 0.9 1.2 1.0 1.0
Short-term debt 1.1 1.1 0.9 1.0 1.0 1.0
Source: IMF, Central Bank, Credit Suisse
08 December 2010
KAZAKHSTAN
$bn 2006 2007 2008 2009 2010E 2011F
Current account deficit 1.9 7.2 -6.3 4.2 -3.7 -4.7
Medium- and long-term debt amortization* 2.5 11.4 15.9 19.4 9.7 10.4
Public sector 0.1 0.1 0.2 0.1 1.0 0.2
Banks 0.9 8.3 10.1 14.8 2.5 3.4
Other sectors 1.5 3.0 5.5 4.5 6.2 6.8
Net FDI inflows 6.6 7.1 14.8 10.5 8.3 8.9
Net portfolio investments -4.5 -4.6 -9.3 3.0 -2.9 -4.0
Banks 16.5 20.5 7.4 4.9 1.5 3.1
Other sectors 4.5 6.7 14.3 9.5 9.4 7.5
Other investments** -8.9 -10.3 -8.1 -6.1 -3.2 -2.4
Errors and omissions -3.1 -3.2 -6.0 -1.3 0.0 0.0
Change in reserves (- indicates increase) -11.1 3.0 -2.2 2.5 -7.0 -7.4
Medium- and long-term debt
Banks 17.5 2.5 0.7 0.3 0.6 0.9
Other sectors 3.0 2.3 2.6 2.1 1.5 1.1
Short-term debt 1.6 0.9 0.9 1.1 1.0 1.0
* Data for 2010 are the government's estimates for scheduled amortizations on all outstanding external debt, and includes some short-term debt amortizations. ** Mainly loans extended to non-
residents.
POLAND
$bn 2006 2007 2008 2009 2010E 2011F
FDI outflows 9.1 5.0 3.4 2.9 3.7 4.8
FDI inflows 19.9 23.0 16.1 11.9 9.6 16.1
Net portfolio equity inflows -5.1 -5.6 1.6 0.9 3.5 5.0
Net portfolio debt inflows 2.8 0.5 -4.5 14.9 24.0 10.0
Financial derivatives -0.7 -1.8 -0.7 -1.6 -0.4 -1.0
Other items (net errors and omissions) -9.4 -17.5 -14.5 -26.1 -17.5 -17.0
Change in reserves (- indicates increase) -5.9 -17.3 3.6 -17.4 -21.8 -7.4
Short-term debt 1.3 1.8 1.1 1.1 1.0 1.0
Source: National Bank of Poland, Ministry of Finance, IMF, JEDH, Credit Suisse
08 December 2010
ROMANIA
$bn 2006 2007 2008 2009 2010E 2011F
Other net capital outflows* 1.2 1.2 1.4 3.7 2.5 0.0
Net FDI inflows 11.0 9.7 13.7 6.1 2.8 6.8
Net portfolio investments -0.2 0.6 -0.7 0.8 1.4 2.5
Other investments 0.3 6.8 -20.8 12.9 -4.7 3.8
Errors and omissions 0.8 -1.0 -2.5 -1.0 0.0 0.0
Program financing** 0.0 0.0 0.0 12.4 12.7 1.6
Short-term debt 1.9 1.6 2.4 0.5 1.0 1.0
* Financial derivatives and other investments, assets position, ** 2009 IFI loan package (IMF/EC/World Bank/EIB/EBRD)
RUSSIA
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (excluding short-term debt amortization) -22.2 0.3 -13.1 61.5 69.4 63.5
FDI outflows 23.2 45.9 55.6 44.5 51.1 45.0
Public 26.5 5.7 7.3 3.1 3.2 3.8
Private 22.9 26.5 27.7 63.3 89.2 70.7
FDI inflows 29.7 55.1 75.0 36.8 47.0 51.0
Portfolio investments 15.7 5.6 -35.4 -2.2 22.8 17.3
Medium- and long-term borrowing 36.3 -21.0 61.7 75.3 70.4 66.9
Short-term loans 56.7 99.7 73.5 52.7 54.1 65.0
Other flows, including errors and omissions -9.7 66.7 -127.1 -24.3 -38.9 -32.4
Change in net international reserves (- indicates increase) -107.5 -148.9 38.9 -3.4 -33.3 -50.2
Source : IMF, IIF, CBR, Credit Suisse
08 December 2010
SOUTH AFRICA
$bn 2006 2007 2008 2009 2010E 2011F
FDI outflows 6.1 3.0 -3.1 1.6 0.7 0.5
Public 1.6 1.3 1.4 1.2 0.7 0.7
Private 0.4 0.5 0.6 0.9 1.1 1.1
Short-term debt amortization
(1)
15.1 20.6 24.0 25.5 21.4 22.6
FDI inflows -0.5 5.7 9.0 5.7 3.7 5.3
Portfolio investments 19.1 10.4 -16.3 11.0 17.0 13.1
Medium- and long-term borrowing by public sector
(2)
1.3 -0.8 -1.2 6.0 8.0 8.2
Medium- and long-term borrowing by private sector
(2)
4.0 13.2 -3.6 5.3 3.0 3.0
Short-term loans 20.6 24.0 25.5 21.4 22.6 24.0
Other
(3)
-3.0 0.1 32.5 -6.7 -9.7 -10.3
Change in gross reserves (- indicates increase) -4.5 -6.8 -3.2 -2.1 -8.4 -1.7
Medium- and long-term debt 2.7 6.9 -2.4 5.4 6.1 6.2
Short-term debt 1.4 1.2 1.1 0.8 1.1 1.1
(1) Includes non-residents' deposits. (2) Estimates based on stock data. (3) Includes residents' portfolio and other investments, transfers and net errors and omissions. Repatriation of $8.6bn
from abroad and net errors and omissions of $10.6bn are behind the unusually large figure in 2008.
TURKEY
$bn 2006 2007 2008 2009 2010E 2011F
External debt amortization 27.0 34.1 37.2 43.4 37.1 33.4
Public (excluding scheduled payments to the IMF) 10.0 8.8 5.4 2.6 6.3 5.3
Of which: Eurobonds 2.5 3.7 3.4 1.9 2.7 1.8
Of which: Medium-term loans 7.5 5.1 1.9 0.7 3.6 3.5
Private 17.0 25.3 31.9 40.8 30.8 28.1
Banks 2.6 3.1 7.2 7.3 4.1 6.2
Non-bank corporates 14.4 22.2 24.7 33.6 26.7 21.9
FDI outflows 0.9 2.1 2.5 1.6 0.0 0.0
Short-term debt amortization
(1)
38.3 42.6 43.1 50.4 49.4 72.0
FDI inflows 20.2 22.0 18.3 8.4 6.5 8.5
Portfolio investments 13.9 6.5 -0.4 4.9 18.0 9.5
Equity 1.9 5.1 0.7 2.8 4.0 2.0
Local bonds 6.1 -3.3 -5.1 -1.7 8.0 2.0
Eurobonds (government) 5.8 4.6 4.0 3.8 6.0 5.5
Loans to public sector (non-IMF) 2.5 3.4 5.2 4.8 5.7 3.2
Medium- and long-term borrowing by private sector 45.1 58.3 55.3 29.8 26.2 26.8
Banks 12.3 10.4 7.9 5.9 6.2 9.3
Non-bank corporates 32.7 48.0 47.4 23.9 20.0 17.5
Short-term loans 42.6 43.1 50.4 49.4 72.0 96.1
Other
(2)
-15.2 -4.2 -6.8 13.3 14.0 10.0
Change in net reserves (- indicates increase) -10.6 -12.0 2.8 -0.8 -11.5 4.2
Change in gross reserves (- indicates increase) -6.1 -8.0 1.1 -0.1 -9.4 6.9
IMF (net) -4.5 -4.0 1.7 -0.7 -2.1 -2.7
Principal payments to the IMF -7.5 -5.1 -1.9 -0.7 -2.1 -2.7
Loans from the IMF 3.0 1.1 3.6 0.0 0.0 0.0
Medium- and long-term debt Banks 4.8 3.4 1.1 0.8 1.5 1.5
Medium- and long-term debt Non-bank corporates 2.3 2.2 1.9 0.7 0.8 0.8
Short-term debt 1.1 1.0 1.2 1.0 1.5 1.3
(1) Short-term debt amortizations are based on the debt stock figures from a year ago; they include the non-residents' deposits. (2) All flows that are not specified above, including residents'
portfolio and other investments abroad, and net errors/omissions.
08 December 2010
UKRAINE
$bn 2006 2007 2008 2009 2010E 2011F
External debt amortization 5.7 8.1 9.7 18.4 14.8 15.5
Public 1.4 1.7 0.9 2.0 2.2 1.1
Private 4.3 6.4 8.8 16.4 12.6 14.5
FDI outflows 0.1 0.7 0.4 0.2 0.2 1.0
Short-term debt 9.6 14.8 23.1 21.3 9.8 9.4
FDI inflows 5.8 9.9 10.4 4.7 6.2 9.0
Short-term borrowing and other flows 14.8 23.1 21.3 9.8 9.4 5.2
Other (including multilateral financing) -10.8 -13.6 5.0 6.7 4.6 5.4
Change in net international reserves (- indicates increase) -2.0 -9.0 0.5 4.8 -5.1 -3.5
EMERGING ASIA
CHINA
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (including short-term debt amortization) -40.8 -134.1 -112.3 -8.8 51.2 154.8
Gross FDI outflows 17.8 17.0 53.5 43.9 63.9 66.9
Medium-long term debt amortization 22.1 24.1 27.3 30.6 32.0 30.7
Short term debt amortization 169.1 196.6 233.1 213.8 260.3 351.3
Funding sources (including gross short-term borrowing) -40.8 -134.1 -112.3 -8.8 51.2 154.8
Gross FDI inflows 78.1 138.4 147.8 78.2 105.0 100.0
Net portfolio inflows -67.6 18.7 42.7 38.7 37.7 37.7
Short term debt borrowing 183.6 220.1 210.8 259.3 349.3 389.3
Medium-long term debt borrowing 36.6 38.3 37.6 36.1 33.2 34.4
Other capital flows and error and omissions -24.5 -87.8 -132.2 -22.6 -49.4 -0.9
Changes in reserves (- indicates increase) -247.0 -461.7 -419.0 -398.5 -424.6 -405.7
Source: Peoples Bank of China, Credit Suisse
HONG KONG
$bn 2006 2007 2008 2009 2010E 2011F
FDI outflows 45.0 61.3 60.0 57.0 56.6 56.0
Medium-long term debt amortization 14.2 18.7 13.3 10.3 11.4 11.8
Gross FDI inflows 45.1 54.5 63.0 62.0 61.6 61.9
Net portfolio inflows -26.8 -2.8 -37.6 -14.5 -22.1 -21.7
Short term loans 365.1 507.9 469.0 504.9 517.1 529.9
Medium-long term debt borrowing 12.7 32.9 7.1 6.5 9.0 10.2
Other capital flows and error and omissions -42.3 -157.1 84.2 34.7 21.3 23.0
Changes in reserves (- indicates increase) -6.0 -14.7 -33.9 -79.8 -38.3 -37.8
Source: Census and Statistics Department, Credit Suisse
08 December 2010
INDIA*
$bn 2006 2007 2008 2009 2010E 2011F
Short-term debt at beginning of period 23.4 31.7 43.8 45.9 43.0 44.0
Net FDI inflows 7.7 15.4 17.5 19.7 11.8 12.3
Portfolio inflows 7.1 29.5 -14.0 32.4 28.0 28.0
Medium- and long-term debt disbursements 44.6 64.0 57.4 61.0 67.6 69.5
Other capital inflows 1.6 20.9 -9.2 -14.2 7.5 4.7
Errors and omissions 0.9 1.5 0.6 - - -
Memo items:
Short-term external debt 23.4 31.7 43.8 45.9 43.0 44.0
Actual and assumed rollover ratios (short-term debt, times) 1.3 1.5 0.9 1.2 1.7 1.8
* Years are fiscal years beginning April. For instance 2009 is April 2009 to March 2010.
Source: Reserve Bank of India, Credit Suisse
INDONESIA
$bn 2006 2007 2008 2009 2010E 2011F
Short-term debt (original maturity) at beginning of period 11.0 12.2 18.7 20.5 21.0 21.5
Unclassified capital outflows and E&O 0.9 6.2 11.6 14.4 8.6 12.0
Net FDI inflows 2.2 2.3 3.4 2.3 8.8 7.5
Portfolio inflows 4.3 5.6 1.7 10.5 17.8 8.0
Portfolio equity inflows 1.9 3.3 0.0 0.8 2.8 1.0
Portfolio debt inflows 2.4 2.2 1.7 9.7 15.0 7.0
Loan disbursements 11.1 13.2 18.3 19.0 18.0 21.0
Short-term debt inflows 12.2 18.7 20.5 21.0 22.0 25.0
Other inflows -0.3 -4.7 -1.1 1.6 1.7 4.0
Memo items:
BI FX reserves, including valuation changes 42.6 56.9 51.6 66.1 95.0 115.0
ST external debt (remaining maturity) 25.0 26.6 34.2 37.6 38.0 38.5
Central bank FX reserves-to-ST external debt (%) 153.7 187.8 145.0 174.0 221.0 250.0
Rollover ratios (MLT debt, times)* 0.8 0.9 1.2 1.1 1.1 1.2
Rollover ratios (ST debt, times)* 1.1 1.5 1.1 1.0 1.1 1.2
*1998-2003 BOP data were based on old classification. Short-term debt figures came from IMF 2008 Article IV Consultation report published September 2008 on Indonesia.
Source: Bank Indonesia, CEIC.
KOREA
$bn 2006 2007 2008 2009 2010E 2011F
Current account deficit -5.4 -5.9 5.8 -42.7 -38.6 -32.3
FDI outflows 8.1 15.6 18.9 10.6 19.6 21.6
FDI inflows 3.6 1.8 3.3 1.5 2.5 5.5
Net portfolio inflows -23.2 -26.1 -2.4 50.7 42.7 49.7
Short-term loans 111.5 146.4 154.4 153.3 160.0 175.0
Medium- and long-term borrowings 27.3 44.2 -24.1 9.0 7.0 12.0
Other capital flows / Errors & omissions -10.5 7.8 36.5 2.9 -9.5 -21.9
Changes in reserves (- indicates increase) -22.1 -15.1 56.4 -69.1 -37.9 -36.7
Source: Credit Suisse, Bank of Korea
08 December 2010
MALAYSIA
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (including short-term debt amortization) 8.8 5.9 -4.7 12.5 23.8 13.0
Funding need (excluding short-term debt amortization) -3.6 -6.2 -21.1 -10.5 1.1 -9.4
Other investment outflows 15.4 13.7 2.4 16.7 19.0 15.0
Short-term external debt (beginning of period) 12.4 12.1 16.5 23.0 22.7 22.4
Other and unclassified items 6.5 9.4 15.4 4.6 8.8 5.4
Funding sources (including gross short-term borrowing) 8.8 5.9 -4.7 12.5 23.8 13.0
Net FDI inflows 0.0 -2.7 -7.8 -6.5 -1.3 -1.0
Short-term external borrowing 12.1 16.5 23.0 22.7 22.4 19.0
Change in net reserves (- indicates increase) -6.9 -13.2 5.5 -3.9 -9.3 -9.0
Memo items:
BNM FX reserves, including forward purchases 82.5 101.1 91.4 96.7 106.0 115.0
Short-term external debt (end of period) 12.1 16.5 23.0 22.7 22.4 19.0
Medium- and long-term external debt 40.1 40.2 45.3 45.4 49.4 46.0
Actual and assumed debt rollover ratios (short-term debt, times) 1.0 1.4 1.4 1.0 1.0 0.8
Source: Bank Negara Malaysia, CEIC, Credit Suisse
PHILIPPINES
$bn 2006 2007 2008 2009 2010E 2011F
Medium- and long-term external debt amortization* 4.7 4.2 6.2 4.1 4.4 5.3
Public sector 3.2 1.3 2.1 2.8
Private sector 2.7 2.9 2.3 2.5
Resident lending abroad 3.1 1.3 -3.2 1.6 1.8 2.0
Currency and deposit outflows 2.6 3.2 3.8 -3.9 3.0 3.0
Trade credits and unclassified items -0.6 1.2 -3.0 5.4 2.0 2.0
Funding sources (including net short-term borrowing) 4.5 2.7 0.0 -1.2 1.3 1.4
Net FDI inflows 2.8 -0.6 1.3 1.6 1.0 1.4
Equity 2.5 3.1 -1.2 -1.1 0.9 1.2
Debt 0.5 1.5 -2.6 1.4 0.9 1.8
Medium- and long-term external borrowing 3.0 7.3 4.0 3.8 4.5 4.5
Of which: government 1.5 1.6 1.3 2.1 2.2 1.9
Net short-term borrowing (including by the BSP) -0.5 0.2 -1.2 -0.5 0.0 0.0
Change in reserves (- indicates increase) -3.8 -8.8 -0.1 -5.3 -6.0 -7.5
Memo items:
BSP FX spot reserves 23.0 33.8 37.1 44.2 50.3 57.8
Short-term external debt (original maturity, eop) 7.7 9.9 8.9 8.4 8.4 8.4
Short-term external debt (remaining maturity, eop) 13.3 15.7 14.4 12.5 12.8 13.7
*Including external debt pre-payments.
Source: BSP, CEIC, IIF
08 December 2010
TAIWAN
$bn 2006 2007 2008 2009 2010E 2011F
FDI outflows 7.4 11.1 10.3 5.9 9.1 10.1
FDI inflows 7.4 7.8 5.4 2.8 4.8 6.8
Net portfolio inflows -18.9 -40.1 -12.5 -10.3 -4.3 -2.3
Short-term loans 72.2 82.6 89.4 70.3 72.9 80.5
Medium- and long-term borrowings 5.8 4.0 2.4 3.8 7.9 8.4
Other capital flows / Errors & omissions -3.8 11.5 16.1 31.2 5.3 -8.6
Changes in reserves (- indicates increase) -6.1 4.0 -26.3 -54.1 -41.7 -33.6
Source: Central Bank of China, Credit Suisse
THAILAND
$bn 2006 2007 2008 2009 2010E 2011F
Funding need (excluding short-term debt amortization) 26.8 7.6 -1.7 -1.0 5.1 14.4
Government 1.4 1.6 1.0 0.9 1.2 1.0
SOEs and private sector 14.0 18.0 12.1 10.2 9.3 12.0
Short-term external debt (beginning of period) 16.5 19.1 21.6 24.2 33.1 37.1
Resident lending abroad 10.3 4.4 -12.3 -2.3 0.0 1.5
Currency and deposit outflows -0.2 0.0 -0.2 -0.2 -1.2 -0.2
Trade credits, unclassified items, residual 3.6 -0.7 -0.7 10.7 7.3 9.7
Net FDI inflows 8.5 8.5 6.0 2.3 5.3 6.6
Portfolio inflows 4.2 -6.7 -2.1 -9.3 10.7 -0.5
Asset (resident flows) -1.4 -9.6 0.4 -12.1 2.1 -1.0
Equity (nonresident flows) 5.2 4.3 -3.8 1.9 2.6 0.0
Debt (nonresident flows) 0.5 -1.4 1.3 1.0 6.0 0.5
External borrowing (excluding short-term borrowing) 24.2 20.4 16.5 21.1 15.0 14.5
Government 1.5 -0.9 1.6 3.4 3.0 1.5
Short-term external borrowing 19.1 21.6 24.2 33.1 41.8 40.8
Change in net reserves (- indicates increase) -12.7 -17.1 -24.7 -24.1 -29.9 -10.0
Memo items:
BoT FX reserves, including forward purchases 67.0 87.6 111.0 138.4 177.8 214.3
Short-term external debt (end of period) 19.1 21.6 24.2 33.1 41.8 40.8
Total external debt 61.0 61.9 65.2 75.3 79.8 81.3
Government debt 5.2 2.8 3.4 5.9 7.7 8.2
Actual and assumed rollover ratios (medium- and long-term debt) 1.6 1.0 1.3 1.9 1.4 1.1
Actual and assumed rollover ratios (short-term debt) 1.2 1.1 1.1 1.4 1.3 1.1
Source: Bank of Thailand, Credit Suisse
08 December 2010
VIETNAM
$bn 2006 2007 2008 2009 2010E 2011F
FDI outflows 0.7 -1.4 -1.5 -3.0 -2.1 -2.1
FDI inflows 2.4 6.7 11.5 10.0 13.0 9.0
Net portfolio inflows 1.3 6.2 0.1 0.2 0.2 0.2
Short-term loans 0.0 0.0 0.0 0.0 0.0 0.0
Medium- and long-term borrowings 2.3 3.4 2.5 1.5 2.4 2.4
Other capital flows / errors and omissions 0.5 0.8 -4.4 -12.8 -9.6 -4.0
Changes in reserves (- indicates increase) -4.4 -10.1 -0.5 7.4 0.8 1.0
Source: State Bank of Vietnam, Ministry of Finance, Credit Suisse
08 December 2010
Government funding needs
LATIN AMERICA
ARGENTINA 2008 2009 2010E 2011F
$ bn % of GDP $ bn % of GDP $ bn % of GDP $ bn % of GDP
Total borrowing requirements 6.0 1.8 13.6 4.4 10.8 3.0 18.6 4.5
Overall fiscal deficit* -4.6 -1.4 1.9 0.6 0.4 0.1 2.1 0.5
Primary fiscal deficit -10.1 -3.1 -4.7 -1.5 -7.2 -2.0 -7.0 -1.7
Interest payments 5.6 1.7 6.6 2.2 7.6 2.1 9.1 2.2
Total amortization payments on medium- and long-term debt 8.3 2.5 8.3 2.7 7.2 2.0 13.4 3.2
Domestic debt 6.1 1.9 6.6 2.2 5.5 1.5 8.8 2.1
External debt 1.9 0.6 1.7 0.6 1.7 0.5 4.6 1.1
Of which: amortization of debt to IFIs 1.9 0.6 1.7 0.6 1.7 0.5 1.6 0.4
Of which: expected repayment to Paris Club 3.0 0.7
Other (lending to provinces and debt buybacks) 2.3 0.7 3.3 1.1 3.3 0.9 3.1 0.7
Funding sources 6.0 1.8 13.6 4.4 11.1 3.1 18.6 4.5
IFIs 2.3 0.7 1.7 0.6 1.2 0.3 1.6 0.4
Withholding of provincial transfers (Bogar) 0.7 0.2 0.7 0.2 0.9 0.3 0.9 0.2
Boden 2015 2.0 0.6
Rollover of debt service due to public sector 1.7 0.6 2.1 0.6 2.8 0.7
Other debt operations with social security agency 1.3 0.4 2.3 0.6 2.1 0.5
Central bank FX reserves 6.6 1.8 10.0 2.4
Debt placed w/public sector entities 1.0 0.3 8.2 2.7 -2.0 -0.6 1.1 0.3
*Federal government
BRAZIL 2008 2009 2010E 2011F
Total borrowing requirement 227.9 13.8 206.0 13.0 238.4 11.8 250.2 10.9
Overall fiscal deficit 23.8 1.4 47.1 3.0 52.4 2.6 56.4 2.8
Debt amortization 204.1 12.4 158.9 10.1 186.0 9.2 193.8 8.1
Domestic debt 199.9 12.1 153.9 9.7 179.4 8.9 190.0 7.9
External debt 4.2 0.3 5.0 0.3 6.6 0.3 3.8 0.2
Funding sources 227.9 13.8 206.0 13.0 238.4 11.8 250.2 10.4
New privatization proceeds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Transfer of privatization proceeds from previous year 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
External bonds 0.5 0.0 4.2 0.3 2.5 0.1 5.0 0.2
IFIs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Project finance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Domestic debt issuance 227.4 13.8 201.8 12.8 235.9 11.7 245.2 10.2
CHILE 2008 2009 2010E 2011F
Total borrowing requirement -5.5 -3.2 12.1 7.5 -1.0 -0.5 -2.4 -1.1
Overall fiscal deficit -7.3 -4.3 7.3 4.5 -1.5 -0.8 -2.9 -1.3
Primary fiscal deficit -8.2 -4.8 6.5 4.0 -2.5 -1.3 -4.0 -1.8
Domestic debt 0.9 0.5 2.3 1.4 0.2 0.1 0.2 0.1
External debt 1.0 0.6 0.5 0.3 0.4 0.2 0.2 0.1
Capitalization of state-owned companies 2.1 1.3
Funding sources 12.1 7.5
Domestic 2.4 1.5
External* 9.7 6.0
*Resources from the Economic and Social Stabilization Fund
08 December 2010
COLOMBIA 2008 2009 2010E 2011F
Overall fiscal deficit* 6.3 2.6 10.3 4.4 12.2 4.3 14.1 4.3
Primary fiscal deficit -1.5 -0.6 2.6 1.1 3.1 1.1 3.3 1.0
Domestic debt 8.0 3.3 5.8 2.5 6.7 2.4 7.3 2.2
External debt 1.7 0.7 1.2 0.5 1.7 0.6 1.2 0.4
Funding sources 16.0 6.6 17.3 7.4 20.7 7.3 22.7 6.9
IFIs 1.8 0.7 2.1 0.9 2.0 0.7 1.5 0.5
External bonds 1.1 0.5 1.5 0.6 3.8 1.3 2.4 0.7
Domestic financing 13.1 5.4 13.8 5.9 14.4 5.1 18.7 5.7
Privatizations and other 0.5 0.2
*Central government
MEXICO 2008 2009 2010E 2011F
Domestic debt 52.7 4.8 49.9 5.7 59.2 5.7 53.5 4.6
External debt 6.6 0.6 3.5 0.4 3.1 0.3 2.3 0.2
Funding sources 59.7 5.5 72.6 8.4 89.3 8.6 87.3 7.5
Domestic 57.2 5.2 63.9 7.3 81.0 7.8 80.3 6.9
External 2.5 0.3 8.7 1.0 8.3 0.8 7.0 0.6
PANAMA 2008 2009 2010E 2011F
Overall fiscal deficit -0.1 -0.4 0.2 1.0 0.2 0.6 0.2 0.5
Domestic debt 0.7 2.9 1.4 5.9 0.4 1.4 0.1 0.3
External debt 0.9 4.0 0.2 0.9 0.2 0.7 0.5 1.8
Buyback of domestic debt 0.0 0.0 1.0 4.2 0.0 0.0 0.0 0.0
Funding sources 1.5 6.5 2.9 11.9 0.7 2.6 0.8 2.6
Issuance of foreign debt 0.7 3.0 1.0 4.2 0.0 0.0 0.5 1.7
IFIs + bilateral debt 0.4 1.6 0.8 3.2 0.0 0.0 0.0 0.0
Issuance of domestic debt 0.5 2.0 1.1 4.5 0.7 2.6 0.3 0.9
08 December 2010
PERU 2008 2009 2010E 2011F
Total borrowing requirements -0.3 -0.3 4.4 3.5 3.2 2.1 2.4 1.4
Issuance of CRPAOs** 0.4 0.3 0.4 0.3 0.2 0.1
Total amortization payments 2.0 1.5 1.6 1.3 1.5 1.0 1.5 0.9
Domestic debt 0.5 0.4 0.3 0.2 0.7 0.5 0.6 0.4
External debt 1.4 1.1 1.4 1.1 0.8 0.6 0.9 0.5
Funding sources -0.3 -0.3 4.4 3.5 3.2 2.1 2.4 1.4
Domestic debt -1.4 -1.1 2.1 1.6 0.9 0.6 0.1 0.1
External Bonds 1.2 0.9 1.4 0.9 1.1 0.6
IFIs 1.1 0.9 1.1 0.9 1.0 0.7 1.2 0.7
*Non financial public sector, inclusive of the financing of public-private partnership infrastructure operations. **Financing of public-private partnership infrastructure operations
VENEZUELA 2008 2009 2010E 2011F
Primary fiscal deficit 3.6 1.1 21.8 6.7 3.2 1.5 3.1 1.4
Domestic debt 4.2 1.3 2.6 0.8 1.6 0.8 2.3 1.0
External debt 2.2 0.7 1.1 0.3 0.5 0.2 1.4 0.6
Funding sources 14.6 4.7 30.3 9.3 8.4 4.1 10.0 4.5
Dollar-denominated debt-placements 4.0 1.3 5.0 1.5 3.0 1.4 5.0 2.3
Bolivar-denominated debt placements 2.3 0.7 10.6 3.3 7.5 3.6 7.5 3.4
Public-sector external assets 8.3 2.6 14.7 4.5 -2.0 -1.0 -2.4 -1.1
*General government, does not include PDVSA.
CZECH REPUBLIC 2008 2009 2010E 2011F
$bn % of GDP $bn % of GDP $ bn % of GDP $ bn % of GDP
General government deficit ESA95 (% of GDP)* 5.9 2.7 11.1 5.8 10.6 5.3 10.1 4.5
Primary deficit 3.5 1.6 8.8 4.6 8.6 4.3 6.3 2.8
Principal payments on maturing bonds 5.0 2.3 5.2 2.7 4.4 2.2 5.8 2.6
Domestic debt 5.0 2.3 5.2 2.7 4.4 2.2 5.8 2.6
External debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Stock of T-bills at the beginning of the period 4.5 2.1 4.2 2.2 4.8 2.4 6.4 2.8
Funding sources 15.4 7.1 20.5 10.7 19.8 9.9 22.3 9.9
Bond issuance 9.9 4.6 13.5 7.0 11.4 5.7 13.0 5.8
Domestic 7.0 3.2 10.6 5.5 8.9 4.5 10.0 4.4
External 2.9 1.3 2.9 1.5 2.5 1.3 3.0 1.3
Stock of T-bills at the end of the period 4.2 1.9 4.8 2.5 6.4 3.2 8.0 3.6
Other international financing 0.7 0.3 0.6 0.3 0.5 0.3 0.3 0.1
Change in cash reserves (- indicates increase) 0.1 0.0 3.8 2.0 -0.3 -0.2 0.5 0.2
Other domestic financing (- indicates repayment) 0.5 0.2 -2.2 -1.1 1.8 0.9 0.5 0.2
Memo item:
GDP ($bn) 217.1 191.7 200.0 224.9
*General government ESA95 deficit
08 December 2010
EGYPT* 2008 2009 2010 2011F
Primary deficit 1.9 1.2 3.4 1.8 4.7 2.1 4.5 1.9
Domestic debt amortization 22.5 13.9 28.4 15.0 46.1 21.1 48.1 19.8
T-bills, stock at beginning of period 21.5 13.3 26.5 14.1 43.3 19.8 46.0 19.0
T-bonds 1.0 0.6 1.9 1.0 2.8 1.3 2.1 0.9
External debt amortization 0.7 0.4 1.4 0.8 1.5 0.7 2.3 0.9
Funding sources 34.2 21.1 42.9 22.7 65.4 29.9 70.6 29.1
Privatization revenues 0.2 0.1 0.0 0.0 0.1 0.0 0.1 0.0
External financing 2.1 1.3 -0.3 -0.2 1.6 0.7 1.0 0.4
Domestic financing 32.0 19.7 47.5 25.1 61.8 28.3 69.6 28.6
T-bills 26.6 16.4 43.3 22.9 48.2 22.1 43.6 18.0
Other bonds/loans 5.4 3.4 4.2 2.2 13.6 6.2 26.0 10.7
Change in cash reserves (- indicates increase) 0.0 0.0 -4.3 -2.3 2.0 0.9 0.0 0.0
Memo item:
GDP ($bn) 162.4 188.9 218.4 242.8
*Fiscal year ending June
HUNGARY 2008 2009 2010E 2011F
Total borrowing requirements 28.9 18.6 30.6 25.0 24.2 18.3 26.0* 19.2*
General government deficit (% of GDP)* 5.7 3.7 5.4 4.4 5.0 3.8 4.1 4.4
Primary deficit -0.6 -0.4 -0.9 -0.7 -0.4 -0.3 -1.3 -0.9
Deficit of state pension system na na na na na na 2.4 1.6
Domestic 10.2 6.6 13.3 10.9 6.6 5.0 4.9 3.3
External (incl repayments to the EU and IMF) 0.0 0.0 1.1 0.9 1.6 1.2 5.8 4.0
Funds used for additional debt repayment na na na na na na 7.4 5.0
Funding sources 28.7 18.6 30.6 25.0 24.2 18.3 33.4 24.2
Bond issuance 16.2 10.5 10.1 8.3 12.5 9.4 11.5 7.8
Domestic 14.0 9.1 8.7 7.1 10.5 7.9 9.5 6.4
External 2.2 1.4 1.4 1.1 2.0 1.5 2.0 1.4
Change in cash reserves (- indicates increase) -8.1 -5.2 3.3 2.7 -0.3 -0.2 -0.5 -0.3
Change in other government assets (- indicates increase) 0.7 0.5 -3.8 -3.1 0.9 0.7 -2.8 -1.9
Transfers from private pension funds na na na na na na 14.1 9.5
Memo item:
GDP ($bn) 154.6 122.1 132.8 147.6
* excluding additional debt repayment from pension fund assets.
08 December 2010
ISRAEL 2008 2009 2010E 2011F
Primary deficit -7.0 -3.4 -0.4 -0.2 -2.8 -1.3 -5.2 -2.2
Domestic 13.5 6.6 10.7 5.4 11.5 5.4 14.8 6.2
External 2.6 1.3 3.1 1.6 4.9 2.3 1.6 0.7
Funding sources 21.0 10.4 26.0 13.3 27.3 12.8 26.1 10.9
Bond issuance 14.2 7.0 19.3 9.9 17.8 8.3 17.0 7.1
Domestic 14.2 7.0 16.1 8.2 14.5 6.8 14.0 5.8
External 0.0 0.0 3.2 1.6 3.3 1.5 3.0 1.3
T-bill issuance 0.6 0.3 2.2 1.1 3.1 1.5 2.5 1.0
Other domestic financing 6.2 3.0 7.6 3.9 6.4 3.0 6.6 2.7
Change in cash reserves* 0.1 0.0 -3.0 -1.5 0.0 0.0 0.0 0.0
Memo item:
GDP ($bn) 203.1 195.8 213.4 239.5
*Positive/negative number indicates a decline/increase in the governments cash reserves.
POLAND 2008 2009 2010E 2011F
General government deficit* 19.5 3.7 31.0 7.2 34.8 7.3 35.9 6.8
Primary deficit 7.9 1.5 19.4 4.5 26.2 5.5 23.7 4.5
Domestic 20.5 3.9 12.8 3.0 35.2 7.4 25.9 4.9
External 3.1 0.6 4.3 1.0 2.9 0.6 1.3 0.2
Funding sources 52.3 9.9 65.1 15.1 89.5 18.8 75.1 14.2
Bond issuance 22.9 4.3 29.8 6.9 58.2 12.2 58.0 11.0
Domestic 19.3 3.7 21.5 5.0 50.4 10.6 50.0 9.5
External 3.6 0.7 8.3 1.9 7.8 1.6 8.0 1.5
Other domestic financing (including privatization proceeds) 10.3 2.0 17.1 4.0 10.0 2.1 5.0 0.9
Memo item:
GDP ($bn) 528.3 430.1 477.2 527.3
* ESA 95 definition.
08 December 2010
ROMANIA 2008 2009 2010E 2011F
Domestic 0.3 0.1 13.7 8.5 4.1 2.6 8.7 5.4
External 0.9 0.4 1.9 1.2 3.0 1.8 1.7 1.1
Funding sources 13.3 6.5 31.4 19.5 25.7 15.8 25.7 16.0
Bond issuance 2.6 1.3 3.0 1.9 8.4 5.2 14.1 8.7
Domestic 1.5 0.7 3.0 1.9 6.9 4.2 8.9 5.5
External 1.1 0.5 0.0 0.0 1.5 0.9 5.2 3.2
T-bill issuance 3.1 1.5 19.6 12.2 7.7 4.7 8.0 5.0
Change in cash reserves** (- indicates increase) 1.4 0.7 5.8 3.6 2.6 1.6 0.3 0.2
Memo item:
GDP ($bn) 204.3 161.1 162.2 161.2
* General government ESA-95 budget deficit.
RUSSIA 2008 2009 2010E 2011F
Total borrowing requirement -61.7 -3.7 79.3 6.5 67.7 4.6 69.0 4.1
Domestic 3.8 0.2 3.1 0.3 9.2 0.6 12.4 0.7
External 3.2 0.2 4.1 0.3 3.4 0.2 4.4 0.3
Funding sources -61.7 -3.7 79.3 6.5 67.7 4.6 69.0 4.1
Bond issuance 10.7 0.6 16.2 1.3 31.0 2.1 57.7 3.4
Domestic 10.7 0.6 16.2 1.3 25.6 1.7 53.1 3.1
External 0.0 0.0 0.0 0.0 5.4 0.4 4.6 0.3
Privatization 0.0 0.0 0.0 0.0 3.0 0.2 10.0 0.6
Other domestic financing -19.7 -1.2 0.2 0.0 0.1 0.0 -6.9 -0.4
Other international financing -2.2 -0.1 0.1 0.0 -2.0 -0.1 -1.5 -0.1
Change in cash reserves -50.5 -3.0 62.9 5.1 35.6 2.4 9.7 0.6
Memo items:
GDP ($bn) 1679.0 1231.9 1485.7 1711.4
*Excluding bank recapitalization
08 December 2010
SOUTH AFRICA* 2008 2009 2010E 2011F
Consolidated budget borrowing requirement 12.7 4.8 30.3 9.7 37.2 10.0 40.3 9.7
Debt amortizations 9.5 3.6 9.3 3.0 17.8 4.8 22.4 5.4
Domestic debt 2.2 0.8 1.7 0.5 1.9 0.5 2.1 0.5
T-bill stock at the end of previous year 6.5 2.5 6.5 2.1 15.5 4.2 19.9 4.8
External debt 0.8 0.3 1.1 0.4 0.4 0.1 0.4 0.1
Funding sources 12.7 4.8 30.4 9.7 37.2 10.0 37.2 9.7
External debt issuance 0.3 0.1 4.1 1.3 2.0 0.5 2.5 0.6
T-bill issuance 7.2 2.7 12.9 4.1 18.5 5.0 22.8 5.5
Net extraordinary receipts 0.6 0.2 0.4 0.1 0.0 0.0 0.0 0.0
Change in cash reserves (- indicates increase) -0.2 -0.1 -3.9 -1.2 -3.0 -0.8 -2.9 -0.7
Memo items:
GDP ($bn), fiscal year* 262 314.2 372.7 415.2
*Fiscal year starting on 1 April of the year specified in the column heading.
TURKEY 2008 2009 2010E 2011F
Government bonds 55.7 7.6 47.9 7.8 81.7 10.9 57.6 6.7
External debt 8.5 1.2 5.4 0.9 7.2 1.0 8.0 0.9
Funding sources 100.5 13.7 106.0 17.2 135.2 18.0 113.9 13.4
Bond issuance 67.4 9.2 84.5 13.7 108.7 14.5 87.7 10.3
Domestic 63.7 8.7 80.7 13.1 102.7 13.7 82.2 9.6
External 3.7 0.5 3.7 0.6 6.0 0.8 5.5 0.6
T-bill issuance 10.8 1.5 9.0 1.5 10.2 1.4 11.2 1.3
Memo item:
GDP ($bn) 735.2 615.8 749.6 852.7
* The difference between the overall fiscal deficit figures here and the central government budget deficit figures presented in the Selected Economic Indicators table for Turkey is due to interest
revenues. The government's interest revenues are included in other financing in this presentation.
08 December 2010
UKRAINE 2008 2009 2010E 2011F
Total amortization payments 1.5 0.8 5.2 4.6 5.6 4.2 5.4 3.6
Domestic debt 0.7 0.4 3.1 2.7 3.4 2.5 4.3 2.8
External debt 0.9 0.5 2.0 1.8 2.2 1.6 1.1 0.7
Naftogaz operational deficit na na 2.8 2.5 1.0 0.7 0.0 0.0
Funding sources 7.1 4.0 14.9 13.1 13.9 10.4 10.8 7.1
External 1.2 0.7 7.2 6.3 6.2 4.6 4.3 2.8
Of which: Eurobonds 0.0 0.0 0.0 0.0 2.0 1.5 2.0 1.3
Domestic financing sources, of which 5.4 3.0 7.4 6.5 6.4 4.8 5.9 3.9
Gross domestic borrowing 4.5 2.5 6.6 5.8 6.1 4.5 5.9 3.9
local currency bonds and bills 4.5 2.5 6.6 5.8 4.0 3.0 4.6 3.0
VAT bonds issuance na na na na 2.1 1.6 1.3 0.9
Drawdowns on fiscal deposits 0.9 0.5 0.8 0.7 0.2 0.1 0.0 0.0
Privatization 0.5 0.3 0.3 0.3 1.3 1.0 0.6 0.4
Memo item:
GDP ($bn) 179.5 113.5 134.1 151.3
*Including Pension Fund and VAT arrears settlement but excluding bank recapitalization costs.
NON-JAPAN ASIA
CHINA 2008 2009 2010E 2011F
Primary fiscal deficit -0.6 0.0 71.2 1.4 111.4 2.0 84.3 1.2
Domestic 72.5 1.6 77.6 1.6 82.3 1.4 85.3 1.3
External 0.2 0.0 0.2 0.0 0.3 0.0 0.3 0.0
Funding sources 90.9 2.1 186.2 3.8 238.3 4.2 224.0 3.3
Domestic 90.9 2.1 186.2 3.8 238.3 4.2 224.0 3.3
Memo items:
GDP ($bn) 4410.3 4917.8 5695.6 6822.8
Average exchange rate (USDCNY) 7.0 6.8 6.7 6.5
HONG KONG 2008 2009 2010E 2011F
Total borrowing requirement 0.2 0.1 -0.8 -0.4 1.5 0.7 2.3 0.9
Overall fiscal deficit -0.2 -0.1 -2.2 -1.1 -0.4 -0.2 1.0 0.4
Primary fiscal deficit -0.3 -0.1 -2.3 -1.1 -0.5 -0.2 1.0 0.4
Domestic 0.2 0.1 0.2 0.1 0.0 0.0 0.0 0.0
External 0.2 0.1 0.2 0.1 0.0 0.0 0.0 0.0
Government bond program 0.0 0.0 1.0 0.5 1.9 0.9 1.3 0.5
Funding sources 0.2 0.1 -0.8 -0.4 1.5 0.7 2.3 0.9
Drawdown on fiscal reserves 0.2 0.1 -1.8 -0.8 -0.4 -0.2 1.0 0.4
Memo items:
Fiscal reserves (year-end, $bn) 63.5 65.6 65.5 64.5
GDP ($bn) 215.3 210.6 226.2 244.5
Average exchange rate (USDHKD) 7.8 7.8 7.8 7.8
08 December 2010
INDIA* 2008 2009 2010E 2011F
General Government fiscal deficit (incl. disinvestment proceeds) 104.8 8.6 131.9 9.9 124.5 7.7 152.2 7.8
Central government fiscal deficit (incl. disinvestment proceeds) 73.1 6.0 87.2 6.5 81.5 5.0 104.6 5.4
Primary fiscal balance 31.8 2.6 42.4 3.2 26.9 1.7 40.5 2.1
Funding sources 117.0 9.6 146.6 11.0 154.3 9.5 174.4 8.9
Domestic 114.8 9.4 143.1 10.7 149.3 9.2 167.8 8.6
Debt issuance 104.0 8.6 130.3 9.8 135.7 8.4 148.6 7.6
Small savings, state provident funds and others
(1)
-0.8 -0.1 12.9 1.0 16.9 1.0 9.3 0.5
Drawdown of cash by central government ('+' indicates a drawdown) 11.6 1.0 0.0 0.0 -3.3 -0.2 -5.2 -0.3
Foreign Borrowings
(2)
2.2 0.2 3.5 0.3 4.9 0.3 6.6 0.3
Memo items:
GDP ($bn) 1215.8 1332.2 1619.3 1937.4
Average exchange rate (USDINR) 46.1 47.3 45.5 43.4
Disinvestment proceeds
(3)
- - 5.5 0.4 8.8 0.5 9.3 0.5
* Fiscal year beginning April. For instance, 2009 is April 2009 to March 2010. (1) 'Others' mainly includes bonds issued to the public. (2) Foreign borrowings are net of repayments (3) The
central government has decided to include proceeds from disinvestments as revenue in calculating the fiscal deficit. Proceeds are to be used to fund certain social sector schemes that lead to
capital formation. This is effective from 2009.
INDONESIA 2008 2009 2010E 2011F
Primary fiscal deficit -8.7 -1.7 -0.5 -0.1 0.7 0.1 2.5 0.3
Amortization 10.7 2.1 10.6 2.0 13.0 2.0 15.0 1.8
Loans 6.5 1.3 6.6 1.2 5.9 0.9 7.0 0.9
Securities 4.2 0.8 4.1 0.7 7.1 1.1 8.0 1.0
Funding sources 11.1 2.2 19.1 3.5 25.4 3.8 28.1 3.4
Loans 4.5 0.9 4.5 0.8 5.7 0.9 7.0 0.9
Program loans 3.0 0.6 2.5 0.5 2.4 0.4 2.5 0.3
Project loans 1.5 0.3 2.0 0.4 3.3 0.5 4.5 0.5
Bond Issuances 13.0 2.6 12.0 2.2 15.5 2.3 18.0 2.2
Of which: foreign 5.2 1.0 3.7 0.7 5.4 0.8 3.0 0.4
Standby loans -1.2 -0.2 0.0 0.0 0.0 0.0 0.0 0.0
Change in other assets (-indicates increase) -5.2 -1.0 2.6 0.5 4.2 0.6 3.1 0.4
Memo items:
GDP ($bn) 510.5 542.2 689.9 819.5
Average exchange rate (USDIDR) 9756.8 10353.9 9050.0 8700.0
KOREA 2008 2009 2010E 2011F
Overall fiscal deficit -2.6 -0.3 35.2 4.3 23.9 2.4 9.3 0.8
Primary deficit -17.8 -1.9 22.3 2.7 6.9 0.7 -9.4 -0.8
Domestic 40.4 4.3 39.0 4.7 48.3 4.9 52.3 4.6
External 2.5 0.3 1.9 0.2 2.2 0.2 2.2 0.2
Funding sources 40.3 4.3 76.2 9.2 74.4 7.5 63.8 5.6
Domestic 37.0 4.0 74.1 9.0 72.0 7.2 61.4 5.4
External 3.3 0.4 2.1 0.3 2.4 0.2 2.4 0.2
Memo items:
GDP ($bn) 932.0 823.9 994.8 1139.3
Average exchange rate (USDKRW) 1098.7 1277.2 1148.0 1085.0
08 December 2010
MALAYSIA 2008 2009 2010E 2011F
Domestic 7.3 3.3 10.3 5.3 7.5 3.1 15.0 5.3
External 0.3 0.1 1.9 1.0 0.3 0.1 1.8 0.6
Funding sources 18.3 8.2 25.6 13.3 20.4 8.5 32.3 11.4
Domestic bonds issuance 18.3 8.2 26.5 13.8 18.8 7.9 27.7 9.8
External loans 0.1 0.1 0.1 0.1 1.3 0.5 0.1 0.0
Change in cash (- indicates increase) -0.1 -0.1 -1.1 -0.5 0.3 0.1 4.5 1.6
Memo items:
GDP ($bn) 222.3 193.0 239.2 282.2
Average exchange rate (USDMYR) 3.3 3.5 3.2 3.0
PHILIPPINES 2008 2009 2010E 2011F
Domestic 5.8 3.5 5.1 3.2 6.4 3.4 7.3 3.3
External 1.8 1.1 2.1 1.3 2.9 1.5 3.8 1.7
Funding sources 9.9 5.9 13.4 8.4 16.4 8.7 18.6 8.5
External borrowing 1.6 1.0 5.3 3.3 5.8 3.0 5.0 2.3
Program and project loans 1.1 0.7 2.0 1.3 1.5 0.8 2.2 1.0
Bonds and other inflows 0.5 0.3 3.2 2.0 4.3 2.3 2.9 1.3
Domestic borrowing 9.6 5.8 6.7 4.2 11.0 5.8 13.6 6.2
Privatization receipts 0.7 0.4 0.0 0.0 0.0 0.0 0.1 0.1
Change in cash (- indicates increase) -2.1 -1.2 1.4 0.9 -0.4 -0.2 -0.1 -0.1
Memo items:
GDP ($bn) 165.9 160.7 189.1 217.9
Average exchange rate (USDPHP) 44.7 47.8 45.0 42.1
TAIWAN 2008 2009 2010E 2011F
Domestic 4.6 1.2 4.6 1.2 5.0 1.2 5.5 1.1
External 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Funding sources 5.8 1.4 13.0 3.5 9.6 2.2 9.2 1.9
Domestic 5.8 1.4 13.0 3.5 9.6 2.2 9.2 1.9
External 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Memo items:
GDP ($bn) 400.4 377.4 430.9 494.4
Average exchange rate (USDTWD) 31.5 33.1 31.8 29.2
08 December 2010
THAILAND* 2008 2009 2010E 2011F
Interest payments 3.3 1.2 3.3 1.3 5.0 -0.8 6.2 0.4
Funding sources 2.7 1.0 14.7 5.7 3.2 1.0 13.7 3.7
Net domestic borrowing 4.4 1.6 14.5 5.6 14.2 4.6 14.5 3.9
Net foreign borrowing -1.0 -0.4 -0.3 -0.1 -1.6 -0.5 -0.7 -0.2
Change in cash (- indicates increase) -0.7 -0.3 0.6 0.2 -9.4 -3.0 -0.2 0.0
Memo items:
GDP ($bn) 276.9 257.9 311.3 368.3
Average exchange rate (USDTHB) 33.0 34.3 31.7 29.0
*Fiscal year ending September.
VIETNAM 2008 2009 2010E 2011F
Domestic 1.7 1.9 1.6 1.7 1.8 1.8 2.0 2.4
External 0.4 0.4 0.4 0.4 0.5 0.5 0.2 0.2
Funding sources 6.1 6.8 8.5 9.1 8.0 7.8 8.7 7.4
Domestic 4.9 5.4 6.9 7.4 5.7 5.8 4.2 5.0
External 1.3 1.4 1.6 1.7 2.3 2.0 4.5 2.4
Memo items:
GDP ($bn) 90.2 93.1 102.0 117.7
Average exchange rate (USDVND) 16461.1 17812.1 19100.0 19750.0
08 December 2010
Summary macroeconomic data: GDP growth

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Nominal GDP ($bn)
2010E 2011F 2012F
Real GDP growth (% year on year)
LATIN AMERICA* 4,275.5 4,949.5 5,400.0 6.2 4.4 5.3 5.9 4.4 -1.6 6.5 4.7 4.5
Argentina 362.0 413.9 468.4 9.0 9.2 8.5 8.7 6.8 0.9 9.5 6.0 4.0
Brazil 2,015.0 2,395.0 2,550.0 5.7 3.2 4.0 6.1 5.2 -0.2 7.6 5.0 5.0
Chile 190.3 224.4 253.3 6.0 5.6 4.6 4.6 3.7 -1.5 5.3 5.8 5.0
Colombia 284.7 327.2 362.9 5.3 4.7 6.7 6.9 2.7 0.8 4.1 4.3 4.4
Mexico 1,037.7 1,164.1 1,247.9 4.1 3.2 5.2 3.3 1.5 -6.1 5.3 4.0 3.5
Panama 26.4 29.2 31.2 7.5 7.2 8.5 12.1 10.1 3.2 6.1 6.5 6.7
Peru 152.0 172.4 191.4 5.0 6.8 7.7 8.9 9.8 0.9 8.6 6.5 6.0
Venezuela
(1)
207.4 223.5 295.2 18.3 10.3 9.9 8.2 4.8 -3.3 -1.5 1.5 3.0
EMEA* 5,150.8 5,828.1 6,588.8 7.3 6.3 7.0 6.2 4.3 -3.4 4.1 4.5 4.8
Czech Republic 200.0 224.9 250.9 4.5 6.3 6.8 6.0 3.2 -4.0 2.3 2.6 3.0
Egypt 218.4 242.8 286.6 4.1 4.5 6.8 7.1 7.2 4.7 5.1 5.8 6.0
Hungary 132.8 147.6 169.5 4.9 3.5 4.0 1.0 0.6 -6.3 1.1 2.8 3.3
Israel 213.4 239.5 263.3 5.0 5.1 5.3 5.2 4.2 0.8 3.9 3.8 4.2
Kazakhstan 123.6 142.1 168.4 9.6 9.7 10.7 8.7 3.3 1.2 5.7 5.8 6.0
Nigeria 206.1 238.5 287.0 10.5 6.5 6.0 6.2 6.2 6.8 7.6 7.6 8.0
Poland 477.2 527.3 614.9 5.3 3.6 6.2 6.8 5.0 1.8 3.8 4.0 3.9
Romania 162.2 161.2 199.4 8.5 4.1 7.9 6.3 7.3 -7.1 -2.0 1.5 4.2
Russia 1,485.7 1,711.4 1,927.7 7.2 6.4 8.2 8.5 5.2 -7.9 3.6 4.7 5.2
Saudi Arabia 458.9 516.3 573.2 5.3 5.6 3.2 2.0 4.2 0.6 3.2 4.5 5.1
South Africa 353.1 407.3 438.8 4.6 5.3 5.6 5.5 3.7 -1.8 3.0 3.5 3.6
Turkey 749.6 852.7 942.2 9.4 8.4 6.9 4.7 0.7 -4.7 8.0 4.8 4.4
Ukraine 134.1 151.3 172.4 12.1 2.7 7.3 7.9 2.1 -15.1 4.3 4.5 5.0
United Arab Emirates 236.0 265.2 294.4 15.6 13.1 13.0 6.2 7.4 -3.0 2.3 4.7 5.2
EMERGING ASIA* 10,735.0 12,702.2 14,839.4 8.4 8.6 9.5 10.9 7.1 6.1 9.0 7.6 7.5
China 5,695.6 6,822.8 8,198.7 10.1 10.4 11.6 14.2 9.6 9.1 10.1 9.2 9.0
Hong Kong 226.2 244.5 260.4 8.5 7.1 7.0 6.4 2.2 -2.8 6.8 4.8 4.8
India
(2)
1,619.3 1,937.4 2,296.3 7.5 9.5 9.7 9.2 6.7 7.4 8.4 7.7 7.5
Indonesia 689.1 812.2 921.5 5.0 5.7 5.5 6.3 6.0 4.5 6.0 5.8 5.5
Korea 994.8 1,139.3 1,225.7 4.6 4.0 5.2 5.1 2.3 0.2 6.0 4.8 4.3
Malaysia
(3)
239.2 282.2 323.9 6.8 5.3 5.8 6.3 4.6 -1.7 7.0 5.2 5.8
Philippines 189.1 217.9 251.8 6.4 5.0 5.4 7.1 3.7 1.1 6.9 4.0 5.3
Singapore 230.5 267.0 302.3 9.2 7.4 8.6 8.5 1.8 -1.3 15.2 4.7 5.4
Taiwan 430.9 494.4 520.2 6.2 4.7 5.4 6.0 0.7 -1.9 10.0 4.4 4.5
Thailand 318.3 376.6 420.9 6.3 4.6 5.1 5.0 2.5 -2.3 8.0 4.3 5.4
Vietnam 102.0 107.8 117.7 7.8 8.4 8.2 8.5 6.3 5.3 6.4 6.2 6.5
TOTAL** 20,161.3 23,479.9 26,828.3 7.7 7.1 8.0 8.6 5.8 2.0 7.2 6.2 6.2
EM nominal GDP according to the IMF ($bn)
(4)
9,911.1 11,742.0 13,793.9 16,829.6 20,228.8 19,119.0 22,033.1 24,115.1 26,276.0
EM nominal GDP as a share of Global nominal GDP (%)
(4)
23.6 25.8 28.0 30.3 33.1 33.1 35.6 36.9 38.0
EM PPP GDP according to the IMF ($bn)
(4)
22,509.5 24,823.7 27,689.0 30,928.1 33,415.2 34,397.2 37,161.3 40,004.1 43,124.2
EM PPP GDP as a share of global PPP GDP (%)
(4)
42.8 43.8 45.0 46.4 47.8 49.1 50.2 51.2 52.1
*Aggregates for regions are weighted averages, country data are weighted by their 2010 nominal GDP figures.
**Aggregate emerging markets figures are average of regional data weighted by regional 2010 nominal GDP figures.
(1) Nominal GDP data are based on the official exchange rate of 4.3 for 2010 and a projected rate of 5.16 for 2011. (2) Revised GDP series with base 2004-05. All historical ratios expressed as % of
GDP may appear smaller since the revised GDP values in the new series (with base year of 2004) are higher. (3) Real GDP from 2001 has been rebased to 2000=100. (4) Based on GDP data
(historical and forecast) from the IMFs latest World Economic outlook, but we have amended the group of countries that the IMF classifies as emerging markets to include the Czech Republic, Hong
Kong, Israel, Korea, Singapore and Taiwan; note that the IMFs group of Emerging Market countries includes many (typically small) economies that are not included in our table above.
Source: 2010 Reuters Limited, the BLOOMBERG PROFESSIONAL service, National Statistical Offices, IMF World Economic Outlook, Credit Suisse

08 December 2010

Summary macroeconomic data: Inflation

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
CPI inflation (% change, December over December)
LATIN AMERICA* 6.9 5.8 4.6 5.7 7.6 4.9 6.5 6.2 5.9
Argentina 6.1 12.3 9.9 8.5 7.2 7.7 11.0 10.8 13.0
Brazil 7.6 5.7 3.1 4.5 5.9 4.3 5.8 5.4 4.5
Chile 2.4 3.7 2.6 7.8 7.1 -1.4 3.3 3.0 3.0
Colombia 5.5 4.9 4.5 5.7 7.7 2.0 2.7 3.5 3.7
Mexico 5.2 3.3 4.1 3.8 6.5 3.6 4.4 3.7 3.5
Panama 1.5 3.5 2.2 6.4 6.8 1.6 4.5 3.5 2.9
Peru 3.5 1.5 1.1 3.9 6.7 0.2 2.2 2.6 2.8
Venezuela 19.2 14.4 17.0 22.5 31.9 26.9 28.6 27.7 28.1
EMEA* 7.3 6.2 6.3 8.4 9.9 6.5 6.5 6.2 5.6
Czech Republic 2.8 2.2 1.7 5.4 3.6 1.0 2.0 1.9 1.9
Egypt
(1)
11.6 4.7 7.3 8.6 20.2 9.9 10.1 11.2 10.7
Hungary 5.5 3.3 6.5 7.4 3.5 5.6 4.6 4.3 3.5
Israel 1.2 2.4 -0.1 3.3 3.8 3.9 2.3 2.8 2.9
Kazakhstan 6.7 7.6 8.4 18.8 9.5 6.4 7.7 6.6 5.9
Nigeria 10.0 11.6 8.5 6.6 15.1 13.9 12.0 14.4 11.5
Poland 4.4 0.7 1.4 4.0 3.3 3.5 2.8 2.5 2.5
Romania 9.2 8.7 4.9 6.6 6.3 4.8 8.0 4.2 3.5
Russia 11.7 10.9 9.0 11.9 13.3 8.8 8.4 7.2 6.0
Saudi Arabia 0.6 1.2 2.9 6.5 9.0 4.2 5.7 5.6 4.0
South Africa 1.9 2.0 4.7 7.4 9.0 6.3 3.4 4.6 5.8
Turkey 9.4 7.7 9.7 8.4 10.1 6.5 7.3 6.3 6.6
Ukraine 12.3 10.3 11.6 16.6 22.3 12.3 9.9 10.5 8.4
United Arab Emirates na na na na na -0.3 2.8 4.5 4.6
EMERGING ASIA* 3.5 3.5 3.6 5.4 3.3 2.7 4.6 5.4 4.2
China 2.4 1.6 2.8 6.5 1.2 1.7 4.1 5.5 4.0
Hong Kong 0.3 1.4 2.3 3.8 2.1 1.3 2.8 5.3 4.2
India
(2)
6.7 4.6 7.1 4.0 6.6 6.9 7.5 6.9 6.0
Indonesia 6.4 17.1 6.6 6.6 10.2 2.8 6.5 7.0 5.3
Korea 3.0 2.6 2.1 3.6 4.1 2.8 3.6 3.7 3.4
Malaysia 2.1 3.3 3.1 2.4 4.4 1.1 2.2 2.7 2.5
Philippines 8.6 6.7 4.3 3.9 8.0 4.3 2.9 5.3 5.2
Singapore 1.3 1.3 0.8 3.7 5.5 -0.5 4.4 2.0 2.2
Taiwan 1.6 2.2 0.7 3.3 1.3 -0.2 1.0 2.2 2.5
Thailand 3.0 5.8 3.5 3.2 0.4 3.5 3.2 3.7 3.2
Vietnam 9.5 8.4 6.6 12.6 19.9 6.5 12.0 8.0 7.0
EMERGING MARKETS** 5.2 4.7 4.5 6.2 5.9 4.1 5.5 5.7 4.9
(1) Urban inflation instead of national inflation given lack of historical data. Egyptian fiscal year from 1 July to 30 June so CPI data is June over June (2) WPI inflation (%, December over December)
Source: 2010 Reuters Limited, the BLOOMBERG PROFESSIONAL service, National Statistical Offices, Credit Suisse
08 December 2010

Summary macroeconomic data: Current account balance

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
LATIN AMERICA* 1.5 1.7 1.7 0.5 -0.9 -0.5 -1.0 -1.4 -2.0
Argentina 2.1 2.9 3.7 2.8 2.2 3.7 1.3 1.0 0.5
Brazil 1.8 1.6 1.3 0.1 -1.8 -1.5 -2.5 -3.1 -3.8
Chile 2.2 1.2 4.9 4.5 -1.5 2.6 -0.1 -1.8 -2.2
Colombia -0.8 -1.3 -1.6 -2.9 -2.9 -2.2 -2.3 -2.5 -2.6
Mexico -0.7 -0.6 -0.5 -0.8 -1.5 -0.7 0.1 -0.1 -0.5
Panama -8.0 -5.3 -3.0 -7.3 -12.1 -2.5 -5.5 -6.6 -7.1
Peru 0.0 1.4 3.1 1.3 -3.7 0.2 -1.6 -0.5 -1.9
Venezuela 13.8 17.6 14.4 8.0 12.0 2.6 7.4 6.3 4.2
EMEA* 4.7 6.6 5.3 2.4 2.8 1.5 2.3 1.6 1.2
Czech Republic -5.2 -1.3 -2.5 -3.3 -0.6 -1.1 -2.4 -2.6 -2.3
Egypt
(1)
4.3 3.3 1.6 1.7 0.5 -2.3 -1.5 -1.8 -1.7
Hungary -8.3 -7.4 -7.5 -7.0 -7.3 -0.4 0.9 -1.4 -1.3
Israel 1.7 3.1 5.1 2.9 0.7 3.9 3.0 1.8 0.4
Kazakhstan 0.8 -1.8 -2.4 -6.9 4.7 -3.9 3.0 3.3 3.3
Nigeria 19.8 33.1 25.5 16.8 14.1 13.1 20.6 18.9 17.2
Poland -4.0 -1.2 -2.7 -4.7 -5.1 -1.7 -3.0 -3.1 -3.1
Romania -8.4 -8.6 -10.4 -13.4 -11.6 -4.5 -4.8 -6.0 -6.1
Russia 10.1 11.1 9.6 6.0 6.2 4.0 5.0 3.3 1.8
Saudi Arabia 19.7 28.5 27.8 24.3 27.8 7.1 11.1 13.7 15.5
South Africa -3.0 -3.5 -5.3 -7.2 -7.1 -4.0 -3.5 -4.1 -4.3
Turkey -3.7 -4.6 -6.1 -5.9 -5.7 -2.3 -5.9 -6.2 -6.4
Ukraine 10.4 3.1 -1.5 -4.1 -7.1 -1.5 -2.4 -3.3 -3.8
United Arab Emirates 10.0 17.7 20.6 9.5 8.8 3.9 11.8 10.6 11.2
EMERGING ASIA* 3.4 4.8 6.4 7.4 6.0 5.1 4.1 3.3 3.0
China 3.5 7.0 9.0 10.7 9.7 6.0 5.4 4.3 3.6
Hong Kong 9.5 11.3 12.1 12.4 14.3 11.7 9.3 7.9 7.7
India
(2)
-0.3 -1.2 -1.0 -1.4 -2.4 -2.9 -3.4 -3.2 -2.3
Indonesia
(3)
0.6 0.1 3.0 2.4 0.0 2.0 1.0 0.6 0.7
Korea 3.9 1.8 0.6 0.6 -0.6 5.2 3.9 2.8 2.5
Malaysia 12.1 15.0 16.7 15.9 17.5 16.5 11.2 10.6 10.4
Philippines 1.9 2.0 4.5 4.9 2.2 5.3 5.2 5.0 4.8
Singapore 17.1 21.3 24.2 26.7 18.5 17.8 21.1 18.7 19.4
Taiwan 5.8 4.8 7.0 8.4 6.3 11.3 8.5 6.8 6.2
Thailand 1.7 -4.3 1.1 5.9 0.8 8.3 4.0 2.3 2.2
Vietnam -2.1 -1.1 -0.3 -9.8 -10.3 -8.6 -6.9 -8.2 -7.8
(1) Fiscal year ending in June. (2) Fiscal year beginning in April. (3) Balance of payments numbers from 2004 onwards have been revised; exports and imports include credits and debits on net income,
respectively, in 2000-03.
08 December 2010

Summary macroeconomic data: Exports

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Exports of goods and services (% of GDP)
LATIN AMERICA* 22.0 21.9 21.8 21.5 21.8 18.9 20.4 20.0 20.5
Argentina 26.2 25.9 25.7 25.4 25.1 21.7 22.2 21.8 20.7
Brazil 16.5 15.3 14.5 13.9 14.5 11.5 11.4 11.1 12.7
Chile 40.3 40.9 45.3 46.8 45.3 38.6 41.9 40.4 39.3
Colombia 16.6 16.6 14.9 16.5 17.6 16.3 15.8 14.7 14.3
Mexico 26.6 27.1 27.9 27.9 28.2 27.7 31.0 30.2 31.1
Panama 62.6 68.6 72.8 73.3 70.2 67.9 62.2 62.2 64.7
Peru 21.2 24.8 28.7 29.0 27.6 24.1 25.4 27.3 25.4
Venezuela 30.1 34.3 32.4 28.4 29.3 17.2 30.0 29.8 23.9
EMEA* 39.7 40.8 40.8 40.2 41.8 37.5 38.9 38.7 37.9
Czech Republic 64.5 66.1 70.6 74.9 72.0 61.3 70.0 77.2 85.1
Egypt
(1)
29.1 31.2 31.6 30.3 32.8 24.9 21.3 21.6 21.9
Hungary 62.2 66.3 76.4 81.3 82.5 82.2 84.9 83.7 82.3
Israel 41.2 42.6 42.9 42.5 40.0 34.7 37.5 37.4 38.1
Kazakhstan 52.5 53.5 51.1 49.4 57.2 44.4 51.4 50.8 47.6
Nigeria 44.7 51.7 41.0 40.9 42.3 37.3 46.4 42.4 39.1
Poland 32.3 31.7 34.4 34.2 33.8 33.0 33.8 33.9 34.0
Romania 35.8 33.1 32.2 29.3 30.6 31.2 32.5 41.5 32.9
Russia 34.5 35.2 33.8 30.3 31.4 28.0 29.6 28.4 26.2
Saudi Arabia 52.7 60.9 63.2 64.8 67.8 53.1 52.1 51.7 50.0
South Africa 26.4 27.4 30.0 31.3 35.5 27.3 27.6 26.0 26.1
Turkey 23.3 21.7 22.5 22.3 23.9 23.2 20.6 20.0 20.4
Ukraine 60.6 54.2 47.2 44.7 47.7 47.8 50.6 53.0 54.0
EMERGING ASIA* 43.8 45.9 47.6 47.4 47.8 40.2 43.0 41.1 40.9
China 33.9 36.3 38.2 38.8 35.9 27.1 29.8 27.3 25.4
Hong Kong 190.2 198.7 205.5 207.3 212.6 193.8 219.9 224.4 233.6
India
(2)
17.8 19.4 21.4 20.8 24.0 20.9 20.5 20.0 20.2
Indonesia
(3)
30.6 33.9 31.1 29.9 30.1 24.3 24.2 23.1 24.0
Korea 41.5 39.5 40.1 42.1 54.7 52.4 55.1 52.8 54.0
Malaysia 115.4 117.6 116.5 110.4 103.2 96.4 96.3 93.2 93.0
Philippines 49.3 45.3 45.0 40.9 34.8 29.6 31.2 29.6 27.9
Singapore 219.6 230.0 235.1 219.1 228.9 199.3 203.4 202.8 211.6
Taiwan 61.1 61.4 67.2 70.7 72.3 62.2 73.3 70.3 74.1
Thailand 70.7 73.5 73.8 68.6 75.8 68.6 70.5 65.6 68.6
Vietnam 66.8 69.2 73.7 76.7 77.0 68.0 76.6 78.5 80.6
(1) Fiscal year ending in June. (2) Fiscal year beginning in April. (3) Balance of payments numbers from 2004 onwards have been revised; exports and imports include credits and debits on net income,
respectively, in 2000-03.
08 December 2010

Summary macroeconomic data: Fiscal balance

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
LATIN AMERICA*
-1.0 -1.2 -1.3 -0.8 -0.7 -3.1 -2.1 -2.4 -2.3
Argentina 3.7 2.1 1.9 1.1 0.9 -1.6 -0.5 -0.9 -0.6
Brazil -2.7 -3.4 -3.5 -2.5 -1.9 -3.3 -2.2 -2.9 -2.5
Chile 2.1 4.6 7.7 8.2 4.3 -4.5 0.8 1.3 0.6
Colombia -1.6 -2.1 -2.4 -1.7 -0.6 -2.9 -3.6 -3.6 -3.3
Mexico
(1)
-0.2 -0.1 0.1 0.0 -0.1 -2.3 -2.6 -2.7 -2.0
Panama -4.9 -2.5 0.5 3.5 0.4 -1.0 -0.5 -0.5 -0.6
Peru -1.1 -0.5 1.8 3.1 2.1 -2.1 -0.9 -0.8 -0.5
Venezuela
(2)
2.5 4.1 -1.5 -2.6 -2.7 -8.2 -3.0 -2.7 -6.7
EMEA* 0.5 3.3 3.9 2.1 2.9 -5.9 -3.3 -2.5 -1.8
Czech Republic
(3)
-3.0 -3.6 -2.6 -0.7 -2.7 -5.8 -5.3 -4.5 -3.5
Egypt
(4)
-9.5 -9.6 -8.2 -7.3 -6.8 -6.9 -8.1 -8.3 -7.3
Hungary
(3)
-6.4 -7.9 -9.3 -5.0 -3.7 -4.4 -3.8 -2.9 -2.9
Israel -3.6 -1.8 -0.4 0.4 -2.1 -5.2 -4.1 -3.4 -2.6
Kazakhstan
(5)
2.0 5.1 7.4 4.4 1.8 -1.4 1.5 1.7 2.1
Nigeria 8.3 9.4 7.0 -4.8 -4.5 -10.5 -6.6 -7.4 -6.2
Poland
(3)
-5.4 -4.1 -3.6 -1.9 -3.7 -7.2 -7.3 -6.8 -6.2
Romania
(3)
-1.2 -1.2 -2.2 -2.5 -5.4 -8.3 -7.7 -5.6 -4.1
Russia 4.3 7.5 7.4 5.4 3.9 -6.0 -3.7 -3.1 -2.4
Saudi Arabia 11.4 18.4 21.0 12.2 32.5 -6.1 7.1 8.6 9.2
South Africa
(6)
-1.5 -0.3 0.7 0.9 -1.2 -6.7 -5.2 -4.3 -3.6
Turkey
(7)
-4.1 -0.6 0.0 -1.2 -1.9 -4.9 -3.3 -2.8 -2.5
Ukraine
(8)
-4.4 -2.4 -1.4 -2.0 -3.2 -6.2 -5.5 -3.7 -2.6
United Arab Emirates -0.4 7.8 11.7 9.1 12.1 -2.3 2.2 4.4 5.7
EMERGING ASIA* -2.0 -1.6 -1.2 -0.3 -1.7 -3.7 -3.2 -2.8 -2.6
China -1.3 -1.2 -0.8 0.6 -0.4 -2.2 -2.7 -2.0 -2.0
Hong Kong 1.7 1.0 4.0 7.7 0.1 1.1 0.2 -0.4 -0.3
India
(9)
-7.2 -6.5 -5.4 -5.0 -8.6 -9.9 -7.7 -7.8 -7.4
Indonesia

-1.0 -0.5 -0.9 -1.3 -0.1 -1.6 -1.8 -1.6 -1.5
Korea 1.5 1.9 2.1 2.7 0.3 -4.3 -2.4 -0.8 -0.3
Malaysia
(10)
-4.4 -4.2 -3.5 -3.7 -4.8 -7.0 -5.4 -5.5 -4.2
Philippines -3.9 -2.8 -1.2 -1.6 -1.3 -3.9 -3.8 -3.5 -3.3
Singapore -0.1 0.7 0.0 2.8 -0.3 -0.3 0.8 -0.1 0.3
Taiwan -2.8 -0.5 -0.6 -0.3 -0.3 -2.2 -1.1 -0.7 -0.4
Thailand
(11)
-0.2 0.3 -0.7 -1.6 -1.0 -5.7 -1.0 -3.7 -2.2
Vietnam
(12)
-4.9 -4.9 -5.0 -5.6 -4.6 -7.0 -5.5 -5.0 -4.8
EMERGING MARKETS**
-1.2 -0.3 0.1 0.2 -0.3 -4.2 -3.0 -2.7 -2.3
(1) Narrow definition that excludes off-balance expenditures. (2) Consolidation of Central Government, Non- Financial Public Enterprises,Venezuelan Social Security Institute, Deposit and
Guarantee Fund and The Venezuelan Investment Fund. (3) ESA95 budget balances represent the consolidated fiscal balance of the general government on an accrual. (4) For the consolidated
government which is a broader definition than the budget sector that includes Economic Authorities (i.e. Housing ministry) and the National Investment Bank. (5) Consists of state government
and National Oil Fund. (6) Data for fiscal years starting 1 April. Selected data refer to the governments consolidated fiscal balances from 2009. (7) The definition of the consolidated government
comprises the central government, extra-budgetary funds, state-owned enterprises, social security institutions and the Unemployment Insurance Fund. (8) Net of bank recapitalization costs and
transfers to Naftogaz. 2011 data include 0.2% of GDP of allocations for settlement of VAT arrears. (9) Prior to 2006 and again effective from 2009, these estimates include revenue from
disinvestments (in line with government methodology). (10) Refers to the federal governments financial position. The government assumed an average oil price of $85 per barrel for 2011 in its
2011 budget. (11) Data for central government, based on cash basis prior to 2004, based on fiscal year ending September. (12) General government statistics as interpreted by the Vietnam
government.
08 December 2010

Summary macroeconomic data: Government expenditure

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
LATIN AMERICA*
29.1 30.2 30.8 30.6 31.1 33.1 32.9 32.8 33.5
Argentina 25.2 27.0 27.9 31.4 32.7 36.6 38.3 38.7 37.8
Brazil
(1)
35.6 37.5 38.0 37.1 36.9 38.8 39.3 39.4 40.7
Chile 19.9 19.3 18.1 18.7 21.2 24.9 23.8 23.6 22.1
Colombia 27.7 26.1 26.3 26.5 25.8 27.8 26.8 26.9 27.0
Mexico 20.9 21.2 21.7 21.9 23.5 25.9 25.0 24.2 24.5
Panama 26.0 25.0 24.5 24.7 25.7 26.4 25.6 26.9 26.7
Peru 18.7 18.9 18.2 17.7 18.8 20.9 21.3 21.0 20.7
Venezuela 31.9 33.7 39.4 35.5 35.6 33.0 27.3 27.2 30.8
EMEA* 32.4 32.6 31.9 32.3 32.1 37.6 34.8 33.2 31.7
Czech Republic
(2)
45.1 45.0 43.7 42.5 42.9 46.0 45.4 44.4 43.4
Egypt
(3)
30.1 30.0 33.6 29.8 31.5 33.7 30.3 29.2 27.2
Hungary
(2)
48.7 50.2 52.0 50.0 48.8 50.5 49.5 48.5 47.5
Israel 34.9 34.0 33.3 32.4 32.1 32.1 32.2 31.7 31.0
Kazakhstan
(4)
22.6 27.4 22.3 26.4 33.9 31.7 30.3 30.0 29.1
Nigeria 27.8 29.0 27.1 30.0 29.6 30.7 29.8 29.8 27.7
Poland
(2)
42.6 43.4 43.9 42.2 43.2 44.4 44.4 43.4 42.4
Romania
(2)
33.5 33.5 35.3 36.0 37.6 40.4 38.6 37.5 36.0
Russia 33.5 35.5 32.7 33.1 32.1 40.6 35.1 31.3 28.1
Saudi Arabia 30.4 29.3 29.4 32.3 29.1 42.3 37.7 37.0 36.9
South Africa
(5)
25.4 25.8 25.6 26.0 27.4 32.8 33.2 32.8 32.3
Turkey
(6)
25.1 22.3 23.2 24.2 23.8 28.2 26.2 26.0 25.8
Ukraine 41.1 46.5 45.3 43.8 47.4 48.5 47.8 44.7 42.3
EMERGING ASIA* 18.8 18.5 18.7 19.1 20.4 22.0 21.2 20.1 19.8
China 17.8 18.0 18.2 18.9 20.4 22.6 22.1 20.6 20.3
Hong Kong 18.8 16.9 15.5 14.6 18.8 17.8 18.0 17.9 18.0
India 15.4 13.6 13.6 14.4 15.8 16.2 16.2 15.2 15.0
Indonesia 18.6 18.4 20.0 19.2 19.9 16.7 17.0 18.0 18.5
Korea 27.9 28.1 28.6 27.2 29.1 31.9 29.2 27.1 26.0
Malaysia
(7)
25.3 24.7 25.0 25.4 26.4 30.3 26.7 25.5 23.9
Philippines 18.4 17.8 17.4 17.3 17.1 18.5 18.1 17.7 17.5
Singapore 14.9 13.4 12.6 12.1 14.3 15.3 14.6 15.0 15.2
Taiwan 20.8 20.7 19.5 18.8 19.8 21.6 20.0 19.3 18.6
Thailand
(8)
18.0 18.0 18.1 19.0 17.9 21.7 18.1 19.2 18.8
Vietnam
(9)
29.9 31.3 31.6 34.9 33.3 35.3 35.6 36.8 36.2
EMERGING MARKETS**
24.4 24.6 24.7 24.9 25.7 28.3 27.2 26.2 25.8
(1) Total government expenditure. Includes interest payment. (2) ESA95 budget balances represent the consolidated fiscal balance of the general government on an accrual basis. (3) For the
consolidated government which is a broader definition than the budget sector that includes Economic Authorities (i.e. Housing ministry) and the National Investment Bank. (4) Consists of state
government and National Oil Fund. (5) Data for fiscal years starting 1 April. Selected data refer to the governments consolidated fiscal balances from 2009. (6) For the central government.
(7) Refers to the federal governments financial position. The government assumed an average oil price of $85 per barrel for 2011 in its 2011 budget. (8) Data for central government, based on
cash basis prior to 2004, based on fiscal year ending September. (9) General government statistics as interpreted by the Vietnam government.
08 December 2010

Summary macroeconomic data: Government debt

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Consolidated gross government debt (% of GDP)
LATIN AMERICA*
54.1 49.4 47.8 47.3 46.7 50.4 48.1 48.4 48.4
Argentina
(1)
130.9 88.5 81.6 71.1 57.4 61.6 48.5 44.0 40.4
Brazil
(2)
56.0 56.4 56.4 58.0 57.9 62.9 59.9 61.5 63.3
Chile
(3)
10.7 7.3 5.3 4.1 5.2 6.2 9.0 9.2 8.7
Colombia 53.2 50.8 47.5 43.7 42.8 45.1 45.5 45.4 45.5
Mexico
(4)
35.0 33.8 33.6 33.7 38.8 40.4 38.6 37.8 37.1
Panama 70.4 66.2 61.0 53.7 45.4 45.6 43.2 41.5 40.0
Peru 44.4 37.8 33.0 29.7 24.0 26.7 23.0 21.1 21.3
Venezuela
(5)
42.3 34.9 25.6 26.7 19.0 24.9 39.4 41.9 36.6
EMEA* 42.8 36.1 30.7 27.1 26.7 31.0 31.6 32.6 33.0
Czech Republic
(6)
30.1 29.7 29.4 29.0 30.0 35.4 39.2 41.3 42.6
Egypt
(7)
105.4 108.6 94.3 81.5 73.5 75.5 76.0 74.5 71.2
Hungary
(6)
59.1 61.8 65.7 66.1 72.3 78.4 81.7 77.7 77.9
Israel 95.2 91.5 82.3 75.7 75.5 78.7 78.5 78.2 77.9
Kazakhstan 11.8 10.3 11.9 7.7 8.8 13.7 16.8 18.4 20.9
Nigeria
(8)
53.7 34.5 11.9 12.4 11.7 15.5 18.9 23.7 26.6
Poland
(6)
45.7 47.1 47.7 45.0 47.1 50.9 56.3 60.9 64.7
Romania 22.8 20.4 18.4 19.9 21.8 29.8 35.5 38.2 38.0
Russia 23.9 14.1 9.2 7.4 6.0 7.6 7.7 9.2 10.6
Saudi Arabia 65.4 40.2 27.4 18.5 13.3 16.0 12.8 11.3 10.1
South Africa
(9)
34.6 32.7 30.1 27.5 26.6 32.4 35.7 39.8 40.4
Turkey
(10)
56.6 51.1 45.6 39.6 40.0 46.3 42.5 40.9 39.4
Ukraine 22.9 21.0 16.0 13.2 15.5 34.3 36.5 38.9 38.3
EMERGING ASIA* 34.4 33.4 31.8 32.5 31.0 33.2 32.7 31.9 31.0
China
(11)
18.4 17.7 16.6 19.5 17.0 18.6 19.2 18.6 18.2
Hong Kong
(12)
2.0 1.8 1.5 1.2 1.0 1.2 1.9 2.3 2.4
India 83.6 80.9 77.2 76.1 76.2 76.2 73.2 72.0 70.0
Indonesia
(13)
54.7 47.0 39.5 34.2 29.5 31.2 31.5 31.3 31.0
Korea 25.3 29.8 33.8 36.3 36.3 41.4 40.0 37.5 35.4
Malaysia
(14)
45.7 43.8 42.2 41.5 41.4 53.3 52.5 52.3 51.1
Philippines 80.5 71.8 66.4 55.8 56.9 56.8 55.0 54.4 52.3
Singapore

na na na na na na na na na
Taiwan 47.4 50.6 47.9 43.5 46.2 49.8 46.0 44.0 41.6
Thailand
(15)
49.5 47.3 42.0 38.3 37.3 45.2 44.0 44.9 44.1
Vietnam
(16)
33.9 35.7 33.7 32.0 34.1 40.7 41.0 40.0 39.0
EMERGING MARKETS**
40.7 37.5 34.9 34.3 33.2 36.3 35.7 35.5 35.2
(1) Debt data assumes that Paris Club debt starts to be repaid in 2011. (2) Figures related to the central bank's new methodology, which no longer uses inflation-adjusted GDP. (3) Excludes debt of
the central bank. (4) Includes all contingent liabilities associated with IPAB, Pidiregas, FARAC, financial intermediation and other debtor support programs. (5) Central government, regional
governments, PDVSA and China fund; does not include liabilities of other public institutions such as Central bank, National Development Bank (BANDES), Foreign Trade Bank (BANCOEX), Industrial
Bank of Venezuela (BIV) and Andean Region Development Bank (BANFOANDES). (6) ESA95 budget balances represent the consolidated fiscal balance of the general government on an accrual
basis. (7) For the consolidated government, which is a broader definition than the budget sector that includes Economic Authorities (i.e., Housing ministry) and the National Investment Bank. (8) Narrow
definition that excludes debt of states and local governments. Nigeria reached a deal with the Paris Club in October 2005 which allowed for the paying of arrears and a buyback of debt totaling $12bn in
payments made at the end of 2005 and early 2006; the remaining $18bn in debt was written off. At the end of 2006 Nigeria also called $1.4bn of its par bonds. (9) Data for fiscal years starting 1 April.
Selected data refer to the governments consolidated fiscal balances from 2009. (10) The definition of the consolidated government comprises the central government, extra-budgetary funds, state-
owned enterprises, social security institutions and the Unemployment Insurance Fund. (11) Includes Treasury bond and foreign state debt owed by the State Council only. 2010E level is estimated to
be 50.3% if include local governments affiliated debt. (12) Also include debt issued under the Government Bond Program. Exclude debt guaranteed by the government. (13) Excludes SOE and BI
debt. (14) Refers to the federal governments financial position. The government assumed an average oil price of $85 per barrel for 2011 in its 2011 budget. (15) Includes central government, non-
financial SOEs and financial institution development fund. (16) General government statistics as interpreted by the Vietnam government.
08 December 2010

Summary macroeconomic data: Foreign debt

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Total foreign debt (% of GDP)
LATIN AMERICA* 37.4 26.3 22.0 21.4 19.6 22.8 20.7 18.7 17.2
Argentina 112.6 70.2 58.5 53.5 46.1 48.3 38.1 32.8 28.3
Brazil 33.2 21.4 18.3 18.0 16.7 17.6 14.5 12.4 12.1
Chile 45.5 39.1 33.7 33.9 37.7 45.9 43.9 39.2 35.1
Colombia 33.7 26.3 20.9 21.5 19.2 22.9 20.5 18.8 17.7
Mexico 17.2 15.1 12.3 12.0 11.4 18.4 16.8 15.5 14.8
Panama 50.9 49.0 45.4 42.5 36.9 42.2 38.5 34.9 32.9
Peru 44.7 36.1 31.1 30.9 27.1 28.1 25.9 23.8 21.6
Venezuela 37.5 31.1 22.8 24.7 19.5 22.6 42.5 45.8 38.1
EMEA* 36.9 34.3 35.8 39.0 36.7 44.2 39.9 36.7 33.9
Czech Republic 36.9 36.9 37.0 38.3 42.6 41.0 46.9 43.8 40.6
Egypt
(1)
37.9 32.4 27.6 22.9 20.9 16.7 15.4 14.6 13.0
Hungary 66.4 74.2 86.9 94.9 114.0 128.1 121.2 110.6 99.1
Israel 66.3 57.7 59.3 53.2 42.5 47.0 42.9 38.7 35.2
Kazakhstan 76.3 77.1 92.1 92.9 81.1 104.2 92.6 86.6 78.7
Nigeria 42.3 24.5 2.6 2.9 2.5 3.3 3.0 3.0 2.8
Poland 41.2 39.9 42.2 44.4 50.2 53.2 55.7 54.3 47.2
Romania 38.6 36.8 44.2 50.6 49.3 71.8 73.0 70.8 64.0
Russia 36.1 33.7 31.6 35.7 28.8 37.9 30.3 26.1 23.9
Saudi Arabia 9.0 9.4 11.4 18.9 16.7 22.9 19.2 17.6 16.3
South Africa 20.5 19.7 22.7 26.3 26.3 27.8 23.6 21.5 21.2
Turkey 41.0 35.1 39.2 38.5 37.7 43.6 38.6 36.7 36.9
Ukraine 46.7 48.4 51.2 57.4 57.5 85.5 70.5 66.6 62.5
EMERGING ASIA* 20.0 18.5 18.0 18.4 16.8 18.1 16.8 15.3 14.2
China 12.8 12.2 11.6 11.3 8.8 8.7 9.1 8.3 7.3
Hong Kong 18.4 25.2 28.5 41.3 23.3 19.0 19.5 17.7 16.2
India 18.5 16.5 18.2 18.3 18.6 19.7 18.4 17.3 16.4
Indonesia 53.6 45.9 35.2 31.7 29.4 31.9 27.6 24.6 22.8
Korea 23.9 22.2 27.3 36.5 40.6 48.8 41.4 37.0 35.2
Malaysia 42.3 37.9 33.4 30.4 30.6 35.3 29.4 25.1 21.8
Philippines 63.4 54.8 45.3 37.9 32.3 34.0 30.1 26.6 23.5
Singapore na na na na na na na na na
Taiwan 23.8 23.7 22.8 24.1 22.6 25.5 23.6 22.8 24.0
Thailand 36.5 33.6 33.8 28.1 27.6 28.6 25.1 21.6 19.9
Vietnam 29.7 26.8 25.7 27.1 24.3 30.1 31.4 34.3 34.0
(1) Fiscal year ending in June.
08 December 2010

Summary macroeconomic data: Exchange rates

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Exchange rate, end of period
LATIN AMERICA
Argentina (per USD) 2.97 3.03 3.06 3.15 3.45 3.78 4.02 4.15 4.30
Brazil (per USD) 2.66 2.34 2.14 1.77 2.34 1.74 1.70 1.60 1.80
Chile (per USD) 556 514 514 498 639 507 485 480 500
Colombia (per USD) 2628 2322 2361 2020 2250 2043 1880 1790 1800
Mexico (per USD) 11.26 10.78 10.88 10.87 13.54 13.08 12.20 12.00 12.50
Panama (per USD) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Peru (per USD) 3.28 3.43 3.20 3.00 3.14 2.88 2.80 2.70 2.73
Venezuela (per USD)
(1)
1.918 2.147 2.147 2.147 2.147 2.147 4.300 5.160 5.160
EMEA
Czech Republic (per EUR) 30.4 29.1 27.5 26.5 26.9 26.4 25.0 24.0 24.0
Egypt (per USD) 6.19 5.79 5.76 5.69 5.34 5.59 5.70 5.80 5.70
Hungary (per EUR) 245.1 252.3 251.2 252.3 265.6 270.5 275.0 275.0 275.0
Israel (per USD) 4.32 4.61 4.22 3.86 3.80 3.78 3.62 3.50 3.45
Kazakhstan (per USD) 130.0 133.8 127.0 120.3 120.8 148.5 147.4 140.0 130.0
Nigeria (per USD) 132.4 130.4 128.8 117.9 137.9 149.5 150.5 155.0 148.0
Poland (per EUR) 4.08 3.85 3.83 3.60 4.15 4.11 4.00 3.90 3.80
Romania (per EUR) 3.97 3.68 3.38 3.61 3.99 4.23 4.25 4.15 4.05
Russia (against the basket)
(2)
na 30.9 29.7 29.6 34.7 36.1 35.8 35.1 35.3
Saudi Arabia (per USD) 3.75 3.75 3.75 3.75 3.75 3.75 3.75 3.75 3.75
South Africa (per USD) 5.60 6.30 7.00 6.80 9.50 7.50 6.90 6.80 7.00
Turkey (against the basket)
(3)
1.584 1.467 1.636 1.437 1.827 1.863 1.720 1.770 1.800
Ukraine (per USD) 5.31 5.03 5.06 5.05 7.82 8.05 8.00 7.95 7.90
United Arab Emirates (per USD) 3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67 3.67
EMERGING ASIA
China (per USD) 8.28 8.07 7.80 7.29 6.82 6.83 6.65 6.35 6.05
Hong Kong (per USD) 7.77 7.75 7.78 7.78 7.75 7.76 7.80 7.80 7.80
India (per USD) 43.5 45.1 44.3 39.4 48.8 46.5 44.6 43.0 41.1
Indonesia (per USD) 9,290 9,830 9,020 9,419 10,950 9,400 8,900 8,550 8,550
Korea (per USD) 1,035 1,010 930 936 1,262 1,168 1,120 1,050 1,100
Malaysia (per USD) 3.80 3.78 3.53 3.31 3.46 3.42 3.08 2.92 2.85
Philippines (per USD) 56.3 53.1 49.1 41.4 47.5 46.2 43.5 41.0 40.0
Singapore (per USD) 1.63 1.66 1.53 1.44 1.44 1.40 1.31 1.23 1.18
Taiwan (per USD) 31.86 32.80 32.59 32.43 32.76 32.03 30.00 28.40 30.30
Thailand (per USD) 39.2 41.1 35.7 30.2 35.0 33.2 29.5 28.4 28.0
Vietnam (per USD) 15,762 15,900 16,055 16,010 17,433 18,472 19,498 20,500 21,600
(1) Expressed in strong bolivares for all years, even though the change took place in January 2008. (2) The basket comprises $0.55 and 0.45. Our forecasts for the USDRUB exchange rate
are derived from our basket exchange rate forecasts and Credit Suisse's EURUSD forecasts. (3) The basket exchange rate is the average of USDTRY and EURTRY exchange rates. Our
forecasts for USDTRY are derived from our basket exchange rate forecasts and Credit Suisse's EURUSD forecasts.
08 December 2010

Summary macroeconomic data: Interest rates

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
Interest rate (end-year, %)
LATIN AMERICA* 11.96 12.30 10.06 9.62 11.69 7.23 8.34 9.94 9.00
Argentina Central bank's 7-day repo rate 3.00 6.00 8.25 10.25 13.00 11.50 11.50 12.50 12.50
Brazil Selic rate 17.75 18.00 13.25 11.25 13.75 8.75 10.75 13.50 11.00
Chile Central bank reference rate 2.25 4.50 5.25 6.00 8.25 0.50 3.25 5.00 5.00
Colombia Central bank reference rate 6.50 6.00 7.50 9.50 9.50 3.50 3.00 4.50 4.50
Mexico Central bank reference rate 8.60 8.25 7.00 7.50 8.25 4.50 4.50 4.50 5.50
Panama Central bank reference rate 2.14 2.73 4.14 4.18 2.88 2.54 3.50 3.70 4.00
Peru Central bank reference rate 2.20 3.25 4.50 5.00 6.50 1.25 3.25 4.25 4.25
Venezuela Central bank 30-day CD rate 12.93 11.74 10.20 10.89 17.60 15.00 15.00 15.00 15.00
EMEA* 3.99 5.79 6.98 7.07 8.03 4.57 4.04 4.53 4.78
Czech Republic - CNB 2-week repo rate 2.50 2.00 2.75 3.50 2.25 1.00 0.75 1.50 2.50
Egypt - Overnight deposit rate 10.00 9.50 8.00 8.75 10.50 9.00 8.25 9.00 9.00
Hungary MNB 2-week deposit rate 9.50 6.00 8.00 7.50 10.00 6.00 5.50 5.00 5.00
Israel - Bank of Israel interest rate 3.90 4.50 5.00 4.25 2.50 1.25 2.25 3.00 3.75
Kazakhstan Refinancing rate
(1)
7.00 8.00 9.00 11.00 10.50 7.00 7.00 6.50 6.00
Nigeria Monetary policy rate 15.00 13.00 10.00 9.50 9.75 6.00 6.50 7.00 7.50
Poland 7-day NBP reference rate 6.50 4.50 4.00 5.00 5.00 3.50 3.75 4.50 4.50
Romania - Monetary policy rate
(2)
18.00 7.50 8.75 7.50 10.25 8.00 6.25 6.00 5.00
Russia Overnight deposit rate 0.50 0.50 2.25 2.75 6.75 3.50 2.50 3.00 2.75
Saudi Arabia 3-month deposit rate 1.73 3.75 5.02 4.79 2.89 0.63 0.41 0.55 1.72
South Africa Repo rate 7.50 7.00 9.00 11.00 11.50 7.00 5.50 6.00 7.00
Turkey One-week repo rate
(3)
na 15.35 18.38 16.73 15.64 7.11 7.00 8.00 8.50
Ukraine NBU's discount rate 9.00 9.50 9.00 8.00 12.00 10.25 7.75 7.75 7.00
United Arab Emirates - 3-month deposit rate 1.60 3.60 5.20 5.10 2.80 2.40 2.20 2.20 3.30
EMERGING ASIA* 3.78 4.52 4.11 4.80 2.83 2.37 3.45 4.62 4.74
China 3-month interbank rate 3.60 3.60 2.81 4.43 1.90 1.83 3.08 4.69 4.69
Hong Kong 3-month HIBOR 0.35 4.23 3.90 3.45 0.95 0.13 0.30 0.30 1.00
India Reverse repo rate
(4)
4.75 5.50 6.00 6.00 3.50 3.50 5.50 6.00 6.00
Indonesia Overnight rate
(5)
7.43 12.75 9.75 8.00 9.25 6.50 6.50 7.50 7.50
Korea Overnight call rate 3.25 3.75 4.50 5.00 3.00 2.00 2.50 3.50 4.25
Malaysia Overnight policy rate
(6)
2.70 3.00 3.50 3.50 2.50 2.00 2.75 3.00 3.50
Philippines Overnight borrowing rate 6.75 7.50 7.50 5.25 5.50 4.00 4.00 4.50 5.00
Singapore 3-month SIBOR 1.44 3.25 3.44 2.38 0.96 0.50 0.44 0.44 0.90
Taiwan Rediscount rate 1.75 2.25 2.75 3.38 2.00 1.25 1.63 2.38 2.63
Thailand Overnight repo rate
(7)
2.00 4.00 5.00 3.25 2.75 1.25 2.00 3.00 3.50
Vietnam Discount rate 3.00 4.50 4.50 4.50 7.50 6.00 7.00 8.00 6.00
(1) The central bank 1-month deposit rate equals half of the refinancing rate and until the banking crisis in the Summer of 2007 represented a more effective policy instrument. (2) Prior to 2002:
official discount rate; 2002-2004: reference rate; 2005-2006: rate on one-month deposit-taking operations; 2007: rate on two-week deposit-taking operations; from 2008: rate on one-week
deposit-taking operations. (3) The monetary policy committee changed the definition of the policy rate on 18 May 2010 to the one-week repo rate from central banks overnight borrowing rate
previously. (4) RBI uses a mix of instruments such as the repo rate, reverse repo rate, CRR (Cash Reserve Ratio) etc. (5) BI changed its policy target from 1m SBI rate to overnight rate in 2008.
(6) BNM changed the policy rate from the intervention rate to the overnight rate in May 2004. (7) Through 2006, the policy rate was the 14-day repo rate.
08 December 2010

Summary macroeconomic data: Domestic credit

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
LATIN AMERICA* 50.1 53.7 56.2 58.9 58.9 61.3 61.6 62.2 62.5
Argentina 33.8 30.7 26.6 24.7 22.2 23.5 24.3 22.4 21.2
Brazil 69.3 77.6 83.0 87.2 87.6 90.2 90.1 91.1 92.2
Chile 66.9 68.3 67.3 73.8 82.1 87.1 90.6 91.7 85.7
Colombia 29.4 30.3 31.2 32.0 33.8 34.5 34.6 34.5 34.1
Mexico 33.2 32.0 32.9 33.5 31.8 34.7 35.3 36.6 37.4
Panama 92.4 90.2 86.9 97.1 92.6 88.8 94.4 94.0 93.4
Peru 14.4 15.7 13.7 13.6 16.9 18.0 17.8 17.8 17.6
Venezuela 10.5 12.6 15.8 21.6 19.8 21.8 20.1 18.7 18.4
EMEA* 39.5 40.5 41.7 46.1 49.6 55.5 54.5 55.7 57.6
Czech Republic 44.7 43.5 48.6 53.2 57.7 62.8 61.5 61.1 61.7
Egypt
(1)
87.0 86.7 82.5 71.3 63.8 66.7 64.2 64.1 63.3
Hungary 46.2 51.7 57.3 62.0 69.0 71.8 68.8 67.6 69.5
Israel 76.8 78.0 73.8 79.5 82.1 78.1 75.8 77.1 74.8
Kazakhstan 21.0 24.7 32.5 41.0 33.5 35.5 34.2 34.4 33.4
Nigeria 17.7 15.9 4.1 13.0 20.4 32.0 33.0 33.6 33.2
Poland 28.4 30.3 34.6 40.3 50.9 53.1 54.9 57.0 59.3
Romania 16.8 20.7 24.0 34.7 40.1 46.4 48.0 48.9 50.3
Russia 24.9 20.6 21.5 25.0 26.0 29.7 28.7 29.2 31.5
Saudi Arabia 35.4 38.3 37.2 41.2 41.7 52.3 45.7 44.6 44.7
South Africa 75.6 79.4 87.5 92.2 94.6 91.5 90.3 93.3 96.6
Turkey 41.4 47.6 46.6 49.7 51.7 61.9 67.1 72.9 76.9
Ukraine 31.3 35.1 46.4 61.1 82.1 88.5 81.9 83.9 86.6
EMERGING ASIA* 112.9 109.0 108.2 107.9 107.2 120.8 123.4 119.6 117.5
China 140.0 131.6 130.3 129.1 123.6 143.4 146.7 137.6 131.2
Hong Kong 146.7 142.7 135.0 125.7 125.0 163.3 198.3 199.2 209.2
India
(2)
66.5 70.5 70.8 73.5 79.8 84.8 87.4 91.8 96.8
Indonesia 34.0 32.5 29.4 28.8 26.3 26.0 25.6 26.6 26.5
Korea 87.4 91.4 99.9 101.8 112.6 113.5 115.6 117.4 122.1
Malaysia 127.5 122.4 119.0 113.4 115.3 137.0 131.7 128.1 123.5
Philippines 53.7 46.1 43.5 40.9 41.8 43.3 42.2 41.5 40.3
Singapore 72.4 62.1 62.7 69.8 75.6 91.2 83.6 84.7 86.7
Taiwan 139.5 146.0 143.4 139.4 146.3 156.1 150.1 151.8 153.7
Thailand 124.5 119.2 108.9 104.2 105.3 110.8 113.0 113.0 110.5
Vietnam 60.8 69.8 75.0 95.9 94.3 98.0 104.8 114.1 119.0
(1) Fiscal year ending in June. (2) Fiscal year beginning in April.
Source: IMF International Financial Statistics, 2010 Reuters Limited, the BLOOMBERG PROFESSIONAL service, National Statistical Offices, Credit Suisse
08 December 2010

Summary macroeconomic data: Domestic credit to the
private sector

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
LATIN AMERICA* 24.0 26.6 29.4 34.3 37.7 39.5 45.3 47.4 49.1
Argentina 10.5 11.7 13.0 14.5 13.7 13.5 13.3 12.6 11.9
Brazil 27.1 31.5 35.7 42.5 48.3 52.5 65.3 69.7 73.8
Chile 62.3 64.3 63.7 69.7 79.3 70.3 69.4 70.2 65.6
Colombia 19.0 19.9 23.1 26.1 27.5 26.0 27.1 27.5 27.6
Mexico 18.4 19.0 20.2 22.8 23.5 24.4 23.6 24.0 24.5
Panama 93.6 95.9 103.1 108.4 112.7 110.6 119.9 122.9 124.3
Peru 20.0 21.2 19.9 23.0 27.4 28.0 28.0 28.5 28.6
Venezuela 11.0 13.1 17.0 23.8 21.7 24.3 22.0 19.5 17.4
EMEA* 32.0 35.4 39.7 45.1 49.1 52.6 51.0 51.7 53.2
Czech Republic 32.6 37.0 51.1 48.0 52.5 54.3 53.1 52.8 53.3
Egypt
(1)
53.6 50.0 47.4 44.1 41.3 37.3 34.7 34.3 33.6
Hungary 42.8 48.8 53.6 60.2 67.6 70.2 66.8 65.6 68.1
Israel 84.9 89.7 86.3 87.9 90.0 84.5 86.3 84.5 82.0
Kazakhstan 26.5 37.2 50.9 61.2 52.5 56.0 51.6 51.8 51.2
Nigeria 13.4 13.8 13.8 24.5 33.2 41.3 34.8 31.9 30.1
Poland 26.2 28.1 32.4 38.5 49.0 49.8 50.0 50.7 51.9
Romania 15.6 19.9 27.0 35.9 38.7 41.0 41.1 42.5 44.9
Russia 24.1 25.7 30.9 37.7 41.3 44.7 41.9 42.0 43.7
Saudi Arabia 32.3 35.6 34.6 38.6 39.9 50.3 43.8 42.7 42.8
South Africa 67.4 72.6 81.2 86.5 86.7 82.2 81.3 84.0 87.0
Turkey 15.2 21.9 25.5 29.3 31.8 36.0 42.3 47.8 51.5
Ukraine 25.4 34.3 45.8 58.2 73.9 78.1 74.3 75.8 77.8
EMERGING ASIA* 96.3 92.7 91.6 92.8 93.1 106.4 109.4 107.5 106.9
China 119.8 111.0 108.1 108.6 106.1 128.6 132.5 126.5 122.4
Hong Kong 147.6 146.1 139.9 140.0 143.3 157.3 181.3 186.1 194.4
India
(2)
44.9 50.1 52.2 55.6 57.2 58.6 61.4 65.3 69.4
Indonesia 26.4 26.4 24.6 25.5 26.5 25.0 25.7 27.9 29.0
Korea 84.9 87.1 95.1 99.6 109.1 108.7 112.6 116.5 123.3
Malaysia 111.9 110.8 107.7 105.3 100.7 118.3 116.2 114.1 112.6
Philippines 29.6 25.9 25.1 23.8 24.2 25.2 24.6 24.1 23.4
Singapore 97.7 90.9 86.4 87.4 98.0 103.2 97.4 96.3 96.8
Taiwan 118.6 126.0 126.0 124.1 130.1 138.2 134.1 137.0 139.9
Thailand 102.0 100.7 95.2 91.8 93.8 96.5 92.5 93.2 92.5
Vietnam 38.7 44.3 48.8 64.1 62.3 65.9 71.6 79.2 84.0
(1) Fiscal year ending in June. (2) Fiscal year beginning in April.
Source: IMF International Financial Statistics, 2010 Reuters Limited, the BLOOMBERG PROFESSIONAL service, National Statistical Offices, Credit Suisse
08 December 2010

Summary macroeconomic data: Fixed Investment

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
(% of GDP)
LATIN AMERICA* 17.8 18.6 19.6 20.9 22.1 20.0 21.8 22.9 24.1
Argentina 17.7 19.8 21.6 22.6 23.1 20.6 21.7 22.2 22.8
Brazil 16.1 15.9 16.4 17.4 19.1 16.5 19.6 21.4 23.2
Chile 20.9 24.5 24.0 25.5 29.2 25.1 28.4 30.0 31.5
Colombia 18.8 20.2 22.6 23.9 24.3 23.4 26.3 27.7 28.9
Mexico 19.7 20.5 21.4 22.2 22.8 21.8 21.1 21.2 21.5
Panama 17.2 17.1 18.3 23.1 26.2 23.8 24.1 24.3 24.5
Peru 17.8 18.6 20.6 23.2 27.1 24.5 27.8 30.3 32.7
Venezuela 20.3 25.5 30.0 34.7 32.1 30.4 29.4 29.1 28.6
EMEA* 19.3 19.4 20.4 22.7 22.9 20.4 20.5 20.7 20.9
Czech Republic 25.8 24.9 24.6 24.3 24.0 23.3 21.7 21.4 21.8
Egypt
(1)
16.4 17.9 18.7 20.9 22.3 18.9 18.6 17.8 17.1
Hungary 25.1 25.6 23.8 23.9 23.9 23.8 23.4 22.9 22.3
Israel 17.3 18.5 17.2 18.9 18.4 16.3 16.7 16.8 16.6
Kazakhstan 25.1 28.0 30.2 30.0 26.8 28.2 31.9 33.5 34.9
Nigeria 7.6 5.8 8.3 9.3 8.4 7.4 7.2 7.4 7.5
Poland 18.1 18.2 19.7 21.6 22.1 22.0 20.6 19.8 18.8
Romania 21.8 23.7 25.6 30.2 31.9 25.6 24.0 24.3 24.9
Russia 20.9 20.1 21.2 24.2 25.4 18.7 19.4 20.1 20.9
Saudi Arabia 16.7 16.5 17.5 20.5 19.5 24.7 21.3 20.7 20.7
South Africa 15.9 16.8 17.8 19.3 20.8 21.7 21.0 21.1 21.5
Turkey 20.3 21.0 22.3 21.4 19.9 19.5 22.0 22.7 23.5
Ukraine 19.1 22.2 24.5 28.2 27.9 17.1 18.8 19.5 13.9
EMERGING ASIA* 33.7 34.2 34.2 33.9 35.2 38.0 38.7 38.1 37.8
China 40.6 41.0 40.7 39.5 41.7 46.7 47.6 46.3 45.4
Hong Kong 21.3 20.9 21.5 21.4 19.9 20.1 20.2 20.7 21.2
India
(2)
28.8 30.4 31.4 33.0 32.6 33.0 33.4 33.7 34.1
Indonesia 22.4 23.6 24.1 24.9 27.7 31.1 31.8 32.2 32.5
Korea 29.2 28.9 28.7 28.5 29.3 29.2 29.4 29.2 29.3
Malaysia 21.0 20.5 20.8 21.6 19.5 20.1 19.7 20.0 20.1
Philippines 16.1 14.4 14.0 14.7 14.7 14.7 16.0 15.6 15.3
Singapore 23.1 21.1 22.0 23.7 27.9 28.7 26.4 27.4 28.0
Taiwan 22.8 22.4 22.3 22.0 21.1 18.9 21.0 21.1 21.2
Thailand 25.9 28.9 28.1 26.4 27.4 24.4 24.9 24.9 25.6
Vietnam 33.3 32.9 33.4 38.3 34.6 34.5 34.7 35.8 36.6
(1) Fiscal year ending in June. (2) Fiscal year ending in March.
Source: 2010 Reuters Limited, the BLOOMBERG PROFESSIONAL service, National Statistical Offices and Credit Suisse
08 December 2010
Summary macroeconomic data: FX reserves

2004 2005 2006 2007 2008 2009 2010E 2011F 2012F
LATIN AMERICA* 194.5 220.3 266.8 393.8 436.6 482.2 568.3 617.8 649.5
Argentina 19.6 28.1 32.0 46.2 46.4 48.0 54.0 56.0 58.0
Brazil 52.5 53.2 85.2 179.4 192.8 237.3 287.8 311.8 324.8
Chile 16.0 17.0 19.4 16.9 23.2 25.4 27.5 29.5 31.5
Colombia 13.2 14.6 15.1 20.6 23.7 25.0 27.9 31.5 33.0
Mexico 61.5 68.7 67.7 78.0 85.4 90.8 113.7 128.1 142.5
Panama
(1)
na na na na na na na na na
Peru 12.6 14.1 17.3 27.7 31.2 33.1 44.1 48.6 49.1
Venezuela 19.1 24.6 30.1 25.0 33.9 22.5 13.3 12.3 10.5
EMEA* 447.9 628.1 890.4 1,264.9 1,329.4 1,349.1 1,505.7 1,669.8 1,809.0
Czech Republic 28.4 29.6 31.5 34.9 37.0 41.6 48.6 47.8 50.0
Egypt
(2)
14.1 18.5 21.8 27.4 33.0 29.7 33.1 33.6 35.8
Hungary 16.0 18.6 21.6 24.1 33.9 44.2 48.7 46.1 47.0
Israel 26.6 27.9 29.1 28.6 42.5 60.6 72.8 76.5 80.0
Kazakhstan 8.5 6.1 17.8 15.8 17.9 20.6 27.4 34.4 40.8
Nigeria 16.9 28.3 42.0 51.3 52.8 42.4 32.5 31.5 33.5
Poland 36.8 42.6 48.5 65.8 62.2 79.6 101.4 108.8 120.0
Romania 16.4 21.1 28.1 37.3 36.5 40.8 43.4 50.4 52.7
Russia 120.8 175.9 295.6 466.8 411.7 416.7 450.0 500.2 515.2
Saudi Arabia 86.4 150.3 221.1 300.9 437.9 405.3 460.2 531.9 605.5
South Africa 13.2 18.6 23.1 29.6 30.6 35.3 40.1 43.9 45.9
Turkey 36.0 50.5 60.9 73.3 71.0 70.7 77.7 82.0 86.3
Ukraine 9.3 19.1 21.9 32.0 30.6 25.6 30.8 32.1 35.1
EMERGING ASIA* 1,583.9 1,837.6 2,247.0 2,962.6 3,337.8 4,063.2 4,754.9 5,390.8 5,998.3
China 605.9 814.7 1,062.0 1,523.8 1,941.6 2,389.4 2,806.5 3,207.2 3,602.2
Hong Kong 123.5 124.2 133.2 152.7 182.5 262.3 300.6 338.5 377.1
India
(3)
137.0 145.9 192.4 299.7 242.1 261.1 293.6 329.3 360.3
Indonesia 35.0 33.1 41.1 55.0 49.6 63.6 93.0 113.0 123.0
Korea 199.0 210.4 238.9 262.2 201.2 270.0 307.9 344.6 377.3
Malaysia
(4)
65.9 69.9 82.2 101.1 91.2 95.4 104.7 113.7 123.7
Philippines
(4)
13.0 15.9 20.0 30.2 32.7 38.8 43.0 50.0 58.0
Singapore
(4)
112.0 115.0 137.0 163.4 177.3 187.2 229.8 249.8 279.8
Taiwan 236.9 248.6 261.5 265.6 287.0 343.5 385.2 418.8 440.8
Thailand
(4)
48.6 50.7 65.3 85.4 108.7 135.5 174.9 211.4 241.4
Vietnam 7.0 9.1 13.4 23.5 23.9 16.4 15.7 14.7 14.7
EMERGING MARKETS** 2,226.3 2,685.9 3,404.2 4,621.3 5,103.8 5,894.4 6,828.9 7,678.5 8,456.8
*Sum for countries within region.
**Aggregate emerging market figures are the sum of regional data.
(1) Panama is officially dollarized and does not have FX reserves. (2) Fiscal year ending in June. (3) End-March of the following year; for instance, data for 2009 refers to end-March 2010.
(4) Not including forward FX purchases.

EMERGING MARKETS ECONOMICS AND FIXED INCOME STRATEGY
Kasper Bartholdy
Head of Strategy and Economics
+44 20 7883 4907

LATIN AMERICA ECONOMICS
Alonso Cervera
Head of Non-Brazil
Latin America Economics
+52 55 5283 3845
Mexico, Chile
Carola Sandy
+1 212 325 2471
Argentina, Peru, Colombia
Casey Reckman
+1 212 325 5570
Venezuela, Panama, El Salvador
Lorraine White
+1 212 538 4311
lorraine.white@credit-suisse.com
Research Analyst
Nilson Teixeira
Head of Brazil Economics
+55 11 3841 6288
nilson.teixeira@credit-suisse.com
Leonardo Fonseca
+55 11 3841 6348
leonardo.fonseca@credit-suisse.com
Brazil
Daniel Lavarda
+55 11 3841 6352
daniel.lavarda@credit-suisse.com
Brazil
Tales Rabelo
+55 11 3841 6353
tales.rabelo@credit-suisse.com
Brazil
EASTERN EUROPE, MIDDLE EAST & AFRICA ECONOMICS
Berna Bayazitoglu
Head of EMEA Economics
+44 20 7883 3431
Turkey, South Africa
Sergei Voloboev
+44 20 7888 3694
Russia, Ukraine, Lebanon
Ivailo Vesselinov
+44 20 7883 8057
Kazakhstan, Israel, Romania

Jacqueline Madu
+44 20 7883 4216
Egypt, GCC, Nigeria
Gergely Hudecz
+44 20 7883 9589
Czech Republic, Hungary, Poland
Natig Mustafayev
+44 20 7888 1065
natig.mustafayev@credit-suisse.com

Alexey Pogorelov
+7 495 967 8772
alexey.pogorelov@credit-suisse.com
Russia
NON-JAPAN ASIA ECONOMICS
Dong Tao
Head of Non-Japan Asia Economics
+852 2101 7469
China, Korea
Christiaan Tuntono
+852 2101 7409
christiaan.tuntono@credit-
suisse.com
Hong Kong, Taiwan

+65 6212 3707
India, Indonesia, Vietnam
Devika Mehndiratta
+65 6212 3483
India, Philippines
Santitarn Sathirathai
+65 6212 5675
santitarn.sathirathai@credit-suisse.com
Thailand
Kun Lung Wu
+65 6212 3418
Malaysia, Singapore
STRATEGY
Igor Arsenin
Head of Latin America Strategy
+1 212 325 6437
igor.arsenin@credit-suisse.com
Paul Fage
Head of EMEA Strategy
+44 20 7883 7994
paul.fage@credit-suisse.com
Ashish Agrawal
Asia Strategy
+65 6212 3405
ashish.agrawal@credit-suisse.com
Helen Parsons, CFA
+1 212 538 8889
helen.parsons@credit-suisse.com
Strategy
Saad Siddiqui
+44 20 7888 9464
saad.siddiqui@credit-suisse.com
Strategy
Ray Farris
Head of FX Strategy
+44 20 7888 2529
ray.farris@credit-suisse.com
Olivier Desbarres
+65 6212 3367
olivier.desbarres@credit-suisse.com
FX Strategy
Daniel Katzive
+1 212 538 2163
daniel.katzive@credit-suisse.com
FX Strategy

Disclosure Appendix
Analyst Certification
The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this
report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will
be directly or indirectly related to the specific recommendations or views expressed in this report.
Important Disclosures
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail, please refer to
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Credit Suisses policy is to publish research reports as it deems appropriate, based on developments with the subject issuer, the sector or the market that
may have a material impact on the research views or opinions stated herein.
The analyst(s) involved in the preparation of this research report received compensation that is based upon various factors, including Credit Suisse's total
revenues, a portion of which are generated by Credit Suisse's Investment Banking and Fixed Income Divisions.
Credit Suisse may trade as principal in the securities or derivatives of the issuers that are the subject of this report.
At any point in time, Credit Suisse is likely to have significant holdings in the securities mentioned in this report.
As at the date of this report, Credit Suisse acts as a market maker or liquidity provider in the debt securities of the subject issuer(s) mentioned in this report.
For important disclosure information on securities recommended in this report, please visit the website at https://firesearchdisclosure.credit-suisse.com or call +1-212-538-7625.
For the history of any relative value trade ideas suggested by the Fixed Income research department as well as fundamental recommendations provided by
the Emerging Markets Sovereign Strategy Group over the previous 12 months, please view the document at http://research-and-
analytics.csfb.com/docpopup.asp?ctbdocid=330703_1_en. Credit Suisse clients with access to the Locus website may refer to http://www.credit-
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For the history of recommendations provided by Technical Analysis, please visit the website at http://www.credit-suisse.com/techanalysis.
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Emerging Markets Bond Recommendation Definitions
Buy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate.
Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.
Corporate Bond Fundamental Recommendation Definitions
Buy: Indicates a recommended buy on our expectation that the issue will be a top performer in its sector.
Outperform: Indicates an above-average total return performer within its sector. Bonds in this category have stable or improving credit profiles and are
undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expected to outperform on a total-return basis. These
bonds may possess price risk in a volatile environment.
Market Perform: Indicates a bond that is expected to return average performance in its sector.
Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or they may
be stable credits that, we believe, are overvalued or rich relative to the sector.
Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector.
Restricted: In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an
investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.
Not Rated: Credit Suisse Global Credit Research or Global Leveraged Finance Research covers the issuer but currently does not offer an investment view
on the subject issue.
Not Covered: Neither Credit Suisse Global Credit Research nor Global Leveraged Finance Research covers the issuer or offers an investment view on the
issuer or any securities related to it. Any communication from Research on securities or companies that Credit Suisse does not cover is factual or a
reasonable, non-material deduction based on an analysis of publicly available information.
Corporate Bond Risk Category Definitions
In addition to the recommendation, each issue may have a risk category indicating that it is an appropriate holding for an "average" high yield investor,
designated as Market, or that it has a higher or lower risk profile, designated as Speculative and Conservative, respectively.
Credit Suisse Credit Rating Definitions
Credit Suisse may assign rating opinions to investment-grade and crossover issuers. Ratings are based on our assessment of a company's creditworthiness
and are not recommendations to buy or sell a security. The ratings scale (AAA, AA, A, BBB, BB, B) is dependent on our assessment of an issuer's ability to
meet its financial commitments in a timely manner. Within each category, creditworthiness is further detailed with a scale of High, Mid, or Low with High
being the strongest sub-category rating: High AAA, Mid AAA, Low AAA obligor's capacity to meet its financial commitments is extremely strong; High
AA, Mid AA, Low AA obligor's capacity to meet its financial commitments is very strong; High A, Mid A, Low A obligor's capacity to meet its financial
commitments is strong; High BBB, Mid BBB, Low BBB obligor's capacity to meet its financial commitments is adequate, but adverse
economic/operating/financial circumstances are more likely to lead to a weakened capacity to meet its obligations; High BB, Mid BB, Low BB obligations
have speculative characteristics and are subject to substantial credit risk; High B, Mid B, Low B obligor's capacity to meet its financial commitments is
very weak and highly vulnerable to adverse economic, operating, and financial circumstances; High CCC, Mid CCC, Low CCC obligor's capacity to meet
its financial commitments is extremely weak and is dependent on favorable economic, operating, and financial circumstances. Credit Suisse's rating opinions
do not necessarily correlate with those of the rating agencies.

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