Saudi ArabiaBusiness and economic outlook

Quarterly update - December 2012Final analysis by Nenad Pacek

Contents

• Executive summary• Important facts• Economic fundamentals• Strategic view of the market• Corporate sales and profit trends• Growth trends and drivers• Household consumption trends• Gross fixed investment trends• Government spending trends• Inflation rate and interest rates• Currency issues• Political update• Forecast table – selected indicators

Executive summary

• For 82% of multinationals Saudi is the biggest business priority in MEA• Saudi Arabia is one of the fastest growing markets in the world for multinational

companies – 2011 and 2012 were strong years for business – this year 96% of companies are growing in Saudi and almost 75% are growing in double digits (see results of our fresh corporate sales and profit survey later in this slide set)

• This is the best result of any market in MEA (including Turkey)• But growing revenues and especially profits in Saudi will get progressively more

difficult/complicated for at least two reasons• First, competition will intensify as companies step up their growth activities • Second, real GDP, household spending and government spending will get just a little bit

softer in 2013 and 2014 • In 2012, all sectors have predominantly grown revenues in double digits, but only

consumer goods (but not food/beverages) and pharma/health have managed to predominantly grow profits in double digits

• In 2013, except for IT and industrial B2B, companies expect predominantly double digit revenue growth. Overall profit expectations are stronger than 2012, but probably too optimistic considering rising competition and softer than expected demand

Executive summary II

• As more oil comes on stream in Brazil, Iraq and Sub Saharan Africa, and global growth stays weak, some potential decline of high oil prices could push our base case forecast further down (remember that oil prices are currently too high based on global demand and supply dynamics)

• For now, we largely stick to our previous real GDP growth forecast for 2013 and 2014 at 4.6% each year (down from 7% in 2011 and estimated 5.5% in 2012)

• Household spending will grow 5.5% and corporate spending by 6.8% next year• Following a big boost in government spending in 2011 of over 11%, Saudi is

returning to more moderate spending of just over 6% in 2013 • Growth will remain solid in 2013-2014 due to high oil output (and price), strong

private and government spending, a double digit increase in lending, strong FDI inflows, and loose monetary policy

• Inflation will be 4.6% in 2012 and 4.2% in 2013• Lending should accelerate further when mortgage law details are announced

Important facts

• The largest economy/GDP in the MENA region• 6th largest GDP per capita after Qatar, UAE, Kuwait, Israel and Bahrain• Population around 29m, will keep growing by about 1m people every year;

60% aged below 30; there are seven cities with over 1 million people• Largest proven oil reserves in the world (21% of the total) or 265bn barrels (to

last up to 100 years with current technologies)• Currently producing just over 10.0m b/d, but full capacity is 12.5m b/d (and

some 80m barrels are in storage)• Oil accounts for 88% of export earnings, 86% of government revenue, 56% of

GDP• Gas reserves are 4% of world total – currently developing large gas fields plus

looking at developing shale gas resources• Reserves of silver, zinc, phosphates, gold, copper, and bauxite• Increasingly seeking to diversify the economy, but this will be a long-term and

uncertain process, despite all new government spending

Economic fundamentals

• Public debt is low at just over 12% of GDP – very low by international standards (it was over 100% of GDP 12 years ago) but will rise a little due to recent extra government spending

• External debt is low at just under 20% of GDP (very low by international standards; countries get into debt trouble at around 70% of GDP), but will increase marginally in the coming years as lending activity picks up more

• Foreign assets are now estimated at over $600bn after a recent strong rise — among the highest in the world and will exceed $650bn by the end of 2013

• The current account is in a healthy surplus (over 23% of estimated GDP in 2012)• The latest estimate is that at current high government spending rates, Saudi needs

oil at $85/b to balance the increased budget, but if spending keeps increasing at this pace it will need a $95 oil price to balance the budget in 2015

• The country currently earns over $1bn per day in oil revenues and earns annually some $30-35bn from non-oil exports

• It continues to be very dependent on oil prices but even in case of a sharp fall in prices it would be able to maintain good spending for several years

Strategic view of the market

• With a number of politically turbulent markets in MENA struggling in terms of growth, all corporate eyes are on Saudi, which is seen as a market with manageable (but still unpredictable) political risk, higher economic growth and strong sales potential

• Saudi is compensating for weaker sales growth elsewhere and this will continue• However, competitive and pricing pressures are rising and will continue to rise• Companies are drilling deeper into the market, focusing on boosting local presence,

boosting sales and external affairs staff, accelerating spending on brand-building and business development – there is an overall increase in the allocation of resources

• Saudi remains one of the most strategic markets in the emerging markets space as a sales destination and is treated as one of the top five corporate priorities in CEEMEA

• Executives expect solid growth in household, corporate and government spending to continue in 2013-2014 but are aware of the oil price risk

• Opportunities exist in many areas, including minerals and mining (phosphates, aluminium), power, water, petrochemicals, transport, education, ports and airports, logistic centres, railways, IT, and healthcare/biotech

• In case of a very sharp fall in oil prices, many opportunities will diminish or evaporate

Corporate sales and profit trends – all sectors

• Saudi Arabia is among the world‘s best growth markets for companies, especially when it comes to revenue growth

• 2011 was a strong year but 2012 has generated even higher growth rates for most multinationals

• In 2011 just over half of multinationals recorded double digit revenue growth, but this year almost 75% of companies will grow in double digits

• Profit growth overall is weaker than sales growth but still among the best in the world – over 40% of companies are growing profits in double digits, just slightly less than in 2011

• Saudi Arabia is set to remain the number 1 growth market in this region in 2013, and still among the best markets globally

• Corporate expectations for 2013 are strong• Over 60% of multinationals expect double digit sales growth and some 55%

expect double digit profit growth in 2013• However, companies should be aware of rising competition in the next few

years and should proactively manage expectations from HQs

2010-2011 revenues and profits, including expectations about 2012 as seen in Dec 2011

Corporate sales and profits in 2012 and expectations for 2013, based on June and Dec 2012

results

Consumer goods companies – sales and profit trends

• 2011 was a good year for consumer goods companies, which grew on average by between 10% and 20% (the best sectoral performance last year)

• 2012 is proving to be better than corporate expectations – almost 90% of companies expect over 10% sales growth and about half of companies will grow even more than 20% vs. 2011

• Over 70% of companies will grow their profits this year in double digits• Expectations for 2013 are good but weaker than actual 2012 results –

over 55% of companies expect to grow their sales and profits in double digits while the rest expect high single digit profit growth

• Companies count on some softening of domestic demand as the impact of a massive 2011 fiscal stimulus program partly goes away, but also as competition from all corners of the world accelerates to unprecedented levels

Food/beverage companies – sales and profit trends

• Food and beverage firms were mostly growing between 5-10% in 2011• 2012 is better than corporations expected – some 45% of multinationals will

grow their revenues more than 20% vs. 2011, while virtually everyone else will grow in high single digits

• However, profit growth (in line with our previous warnings) is worse than companies expected – less than 30% of multinationals are growing their profits in double digits, 15% have flat profit growth and the rest is a mix of various single digits

• Profit pressure is coming from rising competition, higher raw material prices and in some segments even government imposition of price controls (to prevent social rebellion some of our clients were asked by the government not to raise prices of basic food staples this year)

• 2013 expectations are a mix of single and double digit both for sales and profit growth

Industrial B2B companies –sales and profit trends

• For B2B industrial firms, sales were up largely between 5-10% in 2011• Almost 60% of firms are growing revenues over 20% this year, which is

better than initial corporate expectations• But profit growth is not as good and is coming under more pressures from

rising competition• 2013 revenue expectations are solid but softer than actual 2012 results,

with less than half of multinationals planning to grow in double digits (predominant expectations for sales growth are high single digits)

• 2013 profit expectations are mixed, with rising profit margin pressures due to rising competition not only from multinationals but also from medium sized firms from developed markets as well as various new competitors originating in emerging markets

Pharma/health care companies – sales and profit trends

• Pharma/healthcare firms were growing mainly in double digits last year, with 40% growing by 15% or more

• This year is also strong, with almost 80% of companies growing in double digits (both revenues and profits)

• 2013 revenue expectations in this sector are even stronger than actual 2012 results – companies expect continued investments in the health care sector to keep sales growth in good double digits

• 2013 profit growth expectations are very good, but there are some profit margin pressures building up as well as some receivables issues

IT – sales and profit trends

• IT firms were growing 10% on average in 2011, but some were growing around 5% and some around 15%

• 2012 is very similar with companies equally split between low single digit revenue growth and the 15-20% range

• However, companies are reporting that it takes a very long time to get deals signed as well as rising receivables collection delays

• Profit growth is worse this year than revenue growth (one third are not growing their profits while the rest are growing profits in single digits)

• Expectations are much stronger for 2013 as companies expect more government and private sector spending on IT

• Companies expect improvement with both revenue and profit growth next year, but still a large proportion of companies expect single digit growth

2012 revenue and profit expectations by sector, based on Dec 2012 survey

2013 revenue and profit expectations by sector, based on Dec 2012 survey

Growth trends and drivers

• GDP growth most likely accelerated to just over 7% in 2011 (this will be revised and reconfirmed probably only in 2013) on the back of a 23% increase in government spending (total spending was $214bn)

• Owing to higher oil prices and high oil output, our growth forecast for 2012 is still 5.5% (official revision and reconfirmation to follow most likely only in 2014)

• Many factors have driven growth over the last few years and all this has supported very good corporate results

• Growth drivers in the last two years include: a high oil price, high oil output, consumer and corporate confidence, ultra loose monetary policy with negative real interest rates, a massive government spending program in 2011 and robust in 2012, return of double digit lending growth (currently around 15% yoy) as monetary authorities injected liquidity into the system and banks returned to profits, and solid non-oil sector growth

Growth trends and drivers II – 2012 and beyond

• Post “Arab spring” government spending measures initiated in 2011 (with a positive impact also on 2012) include: construction of half a million new homes, higher welfare benefits, investment in health infrastructure, a special bonus of two monthly salaries for public sector employees, higher minimum public sector wages, more jobs in the public sector, and cash injections into banks to enable banks to write off debts and stimulate lending (the latter succeeded)

• This $130bn spending boost from last year continued to help growth in 2012, but not as much as last year and this is the principal reason why we expect growth to be slightly slower this year than in 2011 (many other drivers of growth will stay)

• We continue to believe that growth will slip below 5% in 2013 due to the weakening global outlook, some moderation of the oil price as well as some moderation of household and government spending (while corporate spending should stay as good as in 2012)

• Real GDP growth will reach 4.6% next year and there is both upside potential and downside risk largely centred around the oil price (which remains unpredictable considering substantial speculation in the futures markets but also potential further acceleration of political risks in the Middle East)

Growth trends and drivers III

• As more oil comes on stream in Brazil, Iraq and Sub Saharan Africa and global demand stays weak, some potential decline of high oil prices could push our base case forecast further down (remember that oil prices are currently too high based on global demand and supply dynamics)

• If the oil price stays above $90 per barrel by 2014 (which is possible), real GDP growth in 2014 will be the same as in 2013

• Over the medium term, growth will be largely driven by government spending as part of a massive $400bn+ spending plan until 2014, which includes: large transport infrastructure projects; construction of hospitals, schools and houses; new economic cities; petrochemical and refining facilities; aluminium production; four gas fields

• Even if oil prices would fall to what many oil majors say in private is the “real price of oil”—around $55—Saudi Arabia should be able to maintain relatively high levels of spending in the short term (1-2 years) if it chooses to tap into its large foreign assets, but many capital projects would be delayed

Growth trends and drivers IV

• If the Iran issue calms down during 2013 or if there is another round of global economic panic, we maintain our view from back in March that oil prices could quickly retreat to the $70-90 range (or in a panic sell-off by speculators, to even less than that)

• However, a political escalation in the Middle East (Iran for example) could push prices up again (and this would give a short-term boost to Saudi growth

• Considering its planned increases in government spending, Saudi will probably need an oil price of $95-$100 by 2015-16 (from currently about $85) to execute all spending plans and keep its budget balanced

• However, if the country does not diversify to other energy sources for its domestic consumption as quickly as possible (solar for example), a large increase in domestic energy consumption in the coming years will reduce exports of oil to such an extent that the country could face deep budget deficits and even a series of recessions in 10-20 years – this is a large long-term risk

Growth trends and drivers V – lending and FDI

• Lending will be one of the main pillars of growth in the next two years and over time we also expect more consumer mortgage lending (now that a new mortgage law has been passed and all details should be known in the coming quarters)

• Domestic banks are liquid and they are taking market share from EU, US and UK banks whose lending continues to shrink in Saudi (and many other markets as they face more problems at home)

• Credit growth to the private sector is likely to pick up to 16-17% next year (it is currently growing at just over 15% yoy – a year ago credit was growing by 6%)

• Banks have now made substantial provisions on non-performing loans and with last year’s cash injections from the authorities, continued good credit growth now looks like a very reasonable assumption

• Authorities are likely to allow stronger credit growth during 2013• Non-performing loans officially are now less than 4%, much better than most

emerging markets in CEEMEA• Strong foreign direct investment is also driving growth (we expect annual inflows

of $20-25bn in the next five years)• Last year was a bit weaker with just under $17bn of FDI (from over $28bn in 2010),

but with growing foreign interest we expect FDI to pick up again

Growth trends and drivers VI – the new mortgage law and its implications

• After a decade-long debate, the new mortgage law has finally been approved, but details are still missing and will be released with a delay (usually any new law takes a long time to be finally worked through)

• According to the law, mortgages will for the first time be secured against the value of the property, not against wages

• Due to religious concerns, it is still not clear if mortgage holders will be allowed to be evicted and their homes repossessed in case of non-payment

• Another obstacle to faster mortgage lending growth are high land prices (usually very wealthy families hold large pieces of land – the authorities are deliberating whether to impose an additional tax on land which is not in use)

• Still, we expect a gradual increase in mortgage lending in the next five years, which will boost corporate sales for some companies

• At the moment most lending goes to larger companies, and less to SMEs and consumers

Growth trends and drivers VII – reforms

• The new Crown Prince Salman is seen as more open-minded to further economic reform than the deceased former Crown Prince Nayef, and companies should keep a particular look out for policy or legislation changes in the following areas:– Contract enforcement– Liberalisation of foreign access to the stock exchange– Other changes to foreign direct investment legislation– Further details on the new mortgage law– Policies aimed at creating more employable local graduates– “Saudisation” rules for more senior corporate jobs– A reduction of lending restrictions, especially for SMEs– Energy price increases for companies and households

• The reason some of these reforms might really be implemented this time is the government’s desire to reduce unemployment and social tension

Growth trends and drivers – long-term government plan

• Companies should also be aware of the Saudi long-term growth plan• In the next 15 years, Saudi Arabia wants to double per capita income (which will

be a challenge without much deeper and broader economic diversification) and to cut unemployment by half

• Very seasoned executives will remember that GDP per capita was the same as the United States in the mid-1980s but now it is just $20,500

• The government knows that doubling GDP per capita will require growth of almost 7% per year, which seems unrealistic at this stage unless pushed upwards by major diversification or by exceptionally high oil output/prices

• Average annual growth will be closer to 4.5-5% in the next decade (provided there is no collapse of oil prices) which is still respectable compared to other markets around the world

• Even if these growth targets are missed, the intention is good and it will definitely spill over into more sales opportunities for companies in 2013-15

Household consumption trends

• We expect household spending to grow by at least 6% this year (best case 7%; worst case 5%) – among the best rates in the world

• This is less than almost 8% household spending growth in 2011 but very respectable and driving sales of many consumer goods companies

• The continued expansion of household spending is largely due to the impact of higher government spending (thanks to high oil output and still-good oil prices) spilling over into general liquidity and demand, as unemployment benefits are extended and consumer lending picks up

• Also, decelerating inflation rate (now below 4% yoy) is helping real wage growth and next year an extra monthly salary will be paid due to the Hijri calendar (these factors, among others, will also help preserve good household spending next year)

• Provided there is no collapse of oil prices, we expect Saudi to be able to maintain household spending growth of at least 5% in the next two years

• Retail sales will remain strong in 2013 – the value of point-of-sale transactions (similar to retail sales measurement in other markets) will continue to grow in strong double digits (it is currently growing over 20% yoy and actually accelerated after the summer)

Household consumption trends II –corporate opinions

• “We tried to compensate the increase in raw material prices by passing this extra cost to consumers. But we got the note from the government saying we should forego any price increases on several of our products which are seen as basic consumer food staples. This is not a free market. We are taking an earnings hit because of these price controls. In other words, this tells you that the inflation rate in Saudi is partly artificially low. But we are still growing in all product categories either in high single digits or in very nice double digits. But costs in general are rising and the new fines on companies that employ more expats than locals will put even more pressure on the cost base. At the same time, we constantly see new competitors coming to Saudi with serious expansion. Those who only had distributors on the ground are now opening offices, those who have never sold anything here are hiring distributors, and those with a massive presence are also accelerating their growth initiatives. A good but increasingly tough market to manage especially from an earnings growth stand point.” Regional director ME, food manufacturer

Household spending II – employment trends

• The number of expats has reached over 8 million and is growing faster than the domestic population growth

• At the moment, companies on aggregate report that Saudi citizens usually represent on average between 10% and 15% of their total labour force

• As we announced previously, the latest phase of Saudisation (Nitaqat program) has kicked in as the government is keen to prevent protests – companies are labelled green, yellow and red based on how many Saudis they employ

• The new round of labour reforms will force companies to employ Saudis for more senior corporate positions

• Those labelled red have difficulties renewing work permits for their foreign workers• Those labelled green receive incentives • Officially, unemployment is just over 10% of the work force and over 27% for the

young• Considering how many people applied for unemployment benefits (part of the Hafiz

program) during 2011 public spending boost, official unemployment most likely understates the true unemployment percentage

Gross fixed investment trends

• We expect corporate spending on plant and machinery to again expand by at least some 6.8% in 2013 as double-digit credit growth continues, oil prices support overall liquidity, FDI continues to come in and SMEs continue to do reasonably well

• Non-oil GDP grew 8% last year in real terms, this year it will grow by about 7% and next year 6% -- this is supporting overall corporate spending

• Currently lending to the construction industry, health, utilities, and services is growing more than 40% yoy

• The Purchasing Managers’ Index is in good shape (despite a small deceleration after the summer) and companies continue to report good orders growth

• The risk, as always, is linked to a bigger fall in oil prices• CEEMEA Business Group members also report rising competition and many

companies from different parts of the world are now chasing a well-known pool of existing and potential clients – margin pressures are likely to build up even more in the next couple of years

• On-going government spending in the next few years will spill over into more corporate demand

Gross fixed investment trends II

• The greatest expectations for industrial sales growth are related to: the plastics and packaging industries; petrochemicals, natural gas, and refineries; minerals, metals and mining; utilities infrastructure, power and energy/alternative energies; housing construction, transportation infrastructure; IT; healthcare; and education

• It is essential for companies to increase their local presence, particularly sales/marketing and external affairs staff, to be able to take advantage of these opportunities – and this is what many companies are doing

• Only companies with a strong presence, capabilities and personal contacts will prosper amid growing competitive pressures

• If the implementation of the mortgage law goes well, we expect a surge of foreign investment in the real estate sector in the near future and this could then push annual FDI inflows back to the $25-30bn range

Gross fixed investment trends III – corporate opinions

• “Our B2B and B2G part of the business is doing well although it is painful to watch how long it takes to close a deal, particularly when it comes to any government contracts. We are putting a tremendous effort into building personal relationships at the right levels and have hired more people to do this. Only this can put us on the inside track within our customer organizations. I expect growth in excess of 10% next year. By the way, we are also struggling to collect receivables and have actually put more administrative staff on handling payment reminders and we have also given our sales team bonuses based on how quickly they collect receivables. We could be growing more if we could just find enough qualified staff.” Regional director, IT company

• “We have gone through a long legal battle to replace our local partner and now the new partner is really bringing value. They are keen to follow our new growth plan for the next five years. We were losing share with the old partner, but now we are gaining it. But the legal issue was long, painful and costly and I advise any companies that are unhappy with their partners to seek deep legal advice before starting any legal proceedings.” Regional director, industrial B2B firm

Government spending trends

• Companies dependent on government spending are likely to see on-going government spending increases, especially if the oil price stays above $85-90

• If it drops below, some projects could be delayed and if it drops down very sharply, many projects could be delayed (if the government does not want to dip into its substantial reserves—see the Economic fundamentals slide)

• The government will spend in excess of $230bn this year and this is supporting many government spending initiatives

• We believe that government spending, after growing over 11% in 2011, is now returning to a more moderate, but still solid growth rate of about 6% per year (which is still among the better spending increases of any country in the world)

• Still-high oil prices and high output will support spending next year since oil revenues are now higher than $1bn per day

• Since 2002, actual government spending usually exceeded the budget by at least 20% (in 2011 by almost 40%)

• We believe that the total pending budget will reach some $240-255bn in 2013, an increase of some 6% over actual 2012 spending (but companies should have a contingency if the government gets cold feet about some projects in case of a sharp fall in oil prices or implementation difficulties)

Government spending trends II

• We expect a budget surplus in 2013 of 6% of GDP, down from an estimated surplus of 12% in 2012

• Companies estimate that Saudi Arabia now accounts for almost 60% of total GCC government spending

• Some budget highlights: over 3,500 km of roads as part of a $10bn allocation for transport infrastructure, $25bn on healthcare (including construction of hospitals), and over $40bn on education (including construction of schools)

• In the medium and long term, there is a strong possibility that the Saudi budget could slip into deficit in about 3-4 years due to ongoing strong increases in government spending and maybe weaker oil prices

• We believe that even in case of sharp falls in the oil price, the government could maintain some spending for a year or two by tapping its large $600bn+ foreign assets

Inflation rate and interest rates

• Inflation is currently 3.8% year on year (down from 4.9%% yoy three months ago) and has been on a deceleration trends as rent and food price increases have moderated

• Inflation has come down from 9.9% in 2008, but is still fairly stubborn• We expect the inflation rate to average 4.5% in 2012 (thanks to deceleration in the

last few months) and 4.2% in 2013• Interest rates are low – the repo is just 2.00% and reverse repo 0.25%• Interbank rates are creeping up but are still exceptionally low and this mild increase

is the result of faster lending growth vs. savings deposit growth• This means that real interest rates are negative (money is technically free), but

average lending rates are still typically between 6.5% and 7.5% at the moment• Interest rates are likely to stay low to encourage growth and through growth, to

reduce social tensions• We also do not expect any tightening of reserve requirements unless credit starts to

exceed 20-25% growth (similar to the lending growth rates Saudi enjoyed in 2007-2008) and if subsequently the inflation rate gets out of control

Currency issues

• The local currency remains pegged to the dollar• This is unlikely to change despite the fact that the inflation rate is higher than in

the US and therefore it is increasing the real value of the currency (and technically making non-oil exports less competitive)

• We are likely to see continued moves towards the creation of a joint central bank for Saudi, Qatar, Kuwait and Bahrain (for now without Oman and UAE)

• A monetary council comprising these four countries is in place and it is possible that the new central bank will be created within two years

• However, this does not mean that there will be a common currency soon• We believe that the earliest date for an introduction of the common currency is

2016, but various technical and political issues could delay it beyond that year• If the local currency would be floating freely it would probably appreciate

considering large current account surpluses and inflows of capital

Political update

• Despite the usual questions about Saudi succession and the recent death of the Crown Princes Nayef and Sultan, there have been no major surprises

• The Crown Prince is 76-year old Prince Salman• Once Kind Abdullah dies, we expect the succession process to be managed by an

Allegiance Council• The recent promotion of Mohammed bin Nayef to the important post of interior

minister (to succeed his late father) points in the direction of who could be the new King

• His elderly uncle Prince Ahmed resigned from the post of interior minister • Mohammed is the grandson of King Abdulaziz (known as Ibn Saud), the founder

of the country• It looks like the remaining elderly sons of Ibn Saud have decided to accelerate

the promotion of grandsons to key posts and therefore the succession issue seems to be under control

Political update II

• Once King Abdullah dies, the next in line for the Crown Prince (once Salman becomes King) could be indeed Mohammed bin Nayef (he is 53)

• Other candidates include governors of the Eastern province, the governor of Mecca and the head of the National Guard

• Shia protests in the Eastern province (where the largest oil fields are) have escalated since the summer and the authorities have increased security (some officers were asked to come back from their summer vacations)

• Several Shia were shot recently • Any protests in the Eastern province will be crushed • The same applies to any Shia protests in Bahrain and the kingdom could

indeed send the army again to Bahrain if need be• Companies largely continue to ignore political risk in Saudi (the risk is hard

to quantify and even harder to put on a time scale), especially when only developing sales

Saudi Arabia - forecast table

2009 2010 2011 2012 2013 2014

Real GDP growth, % 0.2 4.1 7.1 5.5 4.6 4.6

Household consumption, % 1.6 3.5 8.0 6.0 5.5 5.6

Gross fixed investment, % -3.5 3.5 6.5 6.7 6.8 6.5

Government spending, % 5.2 12 11.5 8.5 6.3 5.5

Exchange rate vs. $ 3.75 3.75 3.75 3.75 3.75 3.75

Inflation rate, %, avg 5.0 5.4 5.0 4.5 4.2 3.5

Budget balance, % of GDP -6.0 6.8 14.0 12.0 6.0 3.0

Current-account balance, % of GDP

5.8 15.5 26.0 23.0 15.0 11.0

Disclaimer, copyright, sources

© 2012 CEEMEA Business Group*

CEEMEA Business Group currently works with senior leaders of over 320 large multinational companies operating in the Central Eastern Europe, Middle East and Africa regions, helping them understand economic and business outlooks globally, regionally and at country levels. Regional and global executives also receive regular advice and updates on best practices for expansion and success in emerging markets. Executive members of the CEEMEA Business Group can also attend regular peer group meetings held throughout Europe and in Dubai. Sources: GSA Global Success Advisors GmbH and CEEMEA Business Group researchBasic data sources come from central banks, own intelligence network, CEEMEA Business Group corporate survey, governments and other public sources. Interpretation, views, forecasts, business quotes and business outlooks by GSA Global Success Advisors GmbH and CEEMEA Business Group.

This material is provided for information purposes only. It is not a recommendation or advice of any investment or commercial activity whatsoever. Global Success Advisors and CEEMEA Business Group accept no liability for any commercial losses incurred by any party acting on information in these materials.

Contact: Nenad Pacek, President and Founder, GSA Global Success Advisors GmbH; Co-founder, CEEMEA Business GroupM: +43 676 646 0607 nenad.pacek@globalsuccessadvisors.eu www.ceemeabusinessgroup.com

*a joint venture betweenDT-Global Business Consulting GmbH, Address: Keinergasse 8/33, 1030 Vienna, Austria,Company registration: FN 331137t and GSA Global Success Advisors GmbH, Hoffeldstraße 5, 2522 Oberwaltersdorf, AustriaCompany registration: FN 331082k