Focus Economics Consensus Forecast - Euro Area

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© FocusEconomics 2010ISSN 2013-9284

Economic Forecasts from the World’s Leading Economists

CONSENSUSFORECAST

FOCUSECONOMICSFOCUSECONOMICSFOCUSECONOMICSFOCUSECONOMICSFOCUSECONOMICS

Euro AreaEuro AreaEuro AreaEuro AreaEuro Area

ContentsContentsContentsContentsContentsSummary .................................... 2

Euro area ................................. 1 2

France ...................................... 2 1

Germany .................................. 2 9

Italy ........................................... 3 7

Spain ........................................ 4 5

Austria ..................................... 5 3

Belgium .................................... 5 9

Finland ..................................... 6 5

Greece ..................................... 7 1

Ireland ...................................... 7 7

Netherlands ............................ 8 3

Portugal ................................... 8 9

Slovakia ................................... 9 5

Slovenia ................................. 101

Cyprus ................................... 107

Luxembourg .......................... 109

Malta ....................................... 111

Notes .......................................113

Order Form .............................114

November 2010Publication date: 2 November 2010

Information available: up to and including 31 October

Forecasts collected: 26 - 29 October 2010

Next edition: 30 November 2010

Arne PohlmanChief Economist

Armando CiccarelliSenior Economist

Gerardo MoránSenior Economist

Ricardo AcevesEconomist

Marcos Felipe CasarinEconomist

Joan Enric DomeneEconomist

Summary November 2010FOCUSECONOMICS

FocusEconomics Consensus Forecast Euro Area | 2

SummaryStrong Euro Clouds Outlook

Arne PohlmanChief Economist

• In Portugal, a budget crisis was averted when the minority govern-ment reached an agreement with the opposition on how to furtherreduce the fiscal deficit in 2011. However, concerns about the fiscalconsolidation process in the Eurozone’s periphery persist. Moreover,the European Council agreed on a new crisis-prevention mechanismthat will also involve the private sector in sharing the burden of res-cuing insolvent countries, which is likely to push borrowing costsfor countries at risk even higher. Meanwhile, recent economic datareports were mixed but, on balance, still positive, as resilient figuresfor Germany compensated for weaker numbers in Southern Europe.However, sluggish growth in the United States and Japan as well asthe strengthening euro are raising doubts about the strength of therecovery going forward.

• Consensus Forecast panellists have raised their 2010 GDP growthforecast for the Euro area by 0.1 percentage points over last monthto the current 1.6%, the fourth consecutive month of improving pros-pects. For 2011, panellists expect the Eurozone economy to expandby 1.4%.

• Inflation forecasts for 2010 remained unchanged at last month’s 1.5%.Moreover, forecasts for 2011 also remain contained at 1.6%, provid-ing the European Central Bank with sufficient time to reach an agree-ment on exiting from the controversial bond purchase programme.

Change in 2010 Inflation Forecast

Note: Change between November and October 2010 in percentage points.Source: FocusEconomics Consensus Forecast.

-0.2 -0.1 0.0 0.1 0.2 0.3 0.4

SloveniaNetherlandsLuxembourg

CyprusFrance

MaltaSlovakia

ItalyFinland

SpainEuro areaGermany

AustriaBelgiumPortugalGreeceIreland

-0.1 0.0 0.1 0.2 0.3

GreeceSpain

ItalyIrelandFrance

BelgiumCyprus

Euro areaAustria

NetherlandsLuxembourg

SlovakiaMalta

PortugalGermanySloveniaFinland

Change in 2010 GDP Growth Forecast

Note: Change between November and October 2010 in percentage points.Source: FocusEconomics Consensus Forecast.

Forecast Changes over last Month

Euro area



On 29 October, leaders of the European Union member states agreed on an amendment ofthe Lisbon Treaty, creating a new permanent crisis-prevention mechanism aimed at avoidingthe repetition of a Greek-style sovereign debt crisis.

GDP 1.6 ↑ 1.4 =

According to a preliminary estimate, inflation inched up from 1.8% in September to 1.9% inOctober.

Inflation 1.5 = 1.6 =

On 26 October, the French parliament approved a plan to reform the pension system, whichraises the retirement age by two years. The reform triggered a wave of nationwide protestsand strikes in the oil sector that brought oil refining and distribution to a virtual standstill.Nonetheless, Finance Minister Christine Lagarde stated that the consequences of protestswill not alter the government’s economic growth forecast for this year.

GDP 1.6 ↑ 1.5 =

Inflation rose from 1.4% in August to 1.6% in September. Inflation 1.6 ↓ 1.5 ↓

Recent data suggest that the recovery shows no signs of cooling. In August, industrialproduction grew 1.7% month-on-month, exceeding even upbeat market expectations.Moreover, unemployment fell below 3 million in October, the lowest level in 18 years,buttressing consumer confidence and supporting household consumption. In addition,business confidence jumped to a new record high, bolstering the notion of acceleratingdomestic demand in the months ahead.

GDP 3.3 ↑ 2.2 ↑

In October, annual inflation remained unchanged at 1.3%, according to preliminary estimates. Inflation 1.1 = 1.4 =

On 14 October, the government approved the draft budget for next year. The budget pavesthe way for a series of spending cuts and tax increases, totalling EUR 25 billion, which werealready approved by the parliament during the summer, including a wage-freeze in the publicsector.

GDP 1.1 ↑ 1.1 =

Preliminary data for October show inflation inching up from September’s 1.6% to 1.7%. Inflation 1.6 = 1.7 =

The economic recovery remains fragile, even though the government’s commitment to cutthe fiscal deficit to 6.0% of GDP in 2011 should restore some confidence in the country’spublic finances. Meanwhile, labour market figures improved for the first time since the thirdquarter of 2007, as the unemployment rate fell from 20.1% in the second quarter to 19.8% inthe third.

GDP -0.4 = 0.4 =

Preliminary figures show that inflation rose from 2.0% in September to 2.2% in October. Inflation 1.6 = 1.4 =

Industrial production rebounded in August, expanding 8.2% over the same month last year.Additional economic indicators point to a resilient recovery, suggesting that the economy isback on track, favoured by a strong external sector, which benefits from healthy growth in thecountry’s main trade partner, Germany.

GDP 1.7 ↑ 1.7 =

Inflation rose from 1.7% in August to 1.9% in September. Inflation 1.5 = 1.6 =

Preliminary estimates confirm that the recovery is gaining steam, as gross domestic productrose 0.5% in the third quarter. In particular, the industrial sector is picking up, with outputrising 7.1% annually in August, which marked the sixth consecutive month of growth.

GDP 1.8 ↑ 1.6 ↓

Inflation rose from 2.9% in September to 3.0% in October, which marked the highest levelsince November 2008. Inflation 1.9 ↑ 1.8 ↑

Indicators across the board point towards sustained growth in the coming quarters, as therecovery in the external sector is filtering to the domestic economy. That said, growth isexpected to decelerate compared to the strong 1.9% quarter-on-quarter expansion tallied inthe second quarter.

GDP 2.4 ↑ 2.5 =

In September, harmonised consumer price inflation increased a notch to 1.4%. Inflation 1.3 = 2.0 =

Spain

Austria

Finland

Belgium

ForecastsCurrent Developments2010 2011

France

Germany

Italy

Euro area



On 4 October, the government presented the budget draft for 2011, which aims at reducingthe fiscal deficit to 7.0% of GDP next year, following on an estimated 7.8% of GDP deficit thisyear. Final numbers for the 2009 deficit will be published by 15 November. The final deficitnumber is expected to be corrected from the current 13.6% of GDP to 15.5% of GDP.

GDP -3.8 = -2.2 ↓

Inflation rose from 5.5% in August to 5.6% in September. Inflation 4.3 ↑ 1.8 ↑

On 6 October, international credit rating agency Fitch downgraded Ireland’s rating from A+ toAA-, as the cost of the Irish banking sector bailout is expected to weigh heavily on thecountry’s finances going forward.

GDP -0.3 ↑ 1.4 ↓

Inflation swung from minus 0.1% in July to a positive 0.2% in August. Inflation -0.9 ↑ 0.7 =

In August, the country continued to benefit from strong growth in the industrial sector, withoutput expanding 7.3% annually. Moreover, additional data confirm the healthy state of theeconomy, with unemployment at the lowest level in over a year.

GDP 1.9 ↑ 1.7 =

Inflation rose a notch from 1.5% in August to 1.6% in September. Inflation 1.0 = 1.3 ↓

Government and opposition reached an agreement on the draft budget for 2011 after bondmarkets reacted nervously to the political stalemate, pushing borrowing costs to a temporaryhigh on 29 October. Meanwhile, industrial production continued to recover in August, exitingnegative territory for the first time in two years.

GDP 1.3 ↑ -0.1 ↓

In September, inflation remained unchanged at August’s 2.0%, which represents the highestlevel since October 2008.

Inflation 1.2 = 1.4 ↑

Forecasts2010 2011

Greece

Portugal

Current Developments (continued)

Ireland

Netherlands



Quarterly Data | Economic Growth and Inflation | Q1 2009 - Q4 2011

Inflation, yoy var. of quarterly avg. CPI in %GDP, yoy var. in %

Gross domestic productyoy var. in % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Austria -5.4 -5.7 -3.6 -0.9 0.0 2.4 2.3 2.3 2.6 1.7 1.3 1.3Belgium -3.7 -4.1 -2.7 -0.1 1.7 2.6 2.1 1.4 1.7 1.3 1.4 1.4Cyprus 0.6 -1.8 -2.7 -2.9 -1.3 0.5 - - - - - -Finland -9.1 -9.7 -8.1 -5.2 0.0 3.7 3.8 4.2 4.0 3.0 2.6 2.3France -3.9 -3.1 -2.7 -0.5 1.2 1.7 1.8 1.5 1.6 1.3 1.3 1.4Germany -6.6 -5.5 -4.4 -2.0 2.0 3.7 3.7 3.9 3.8 1.9 1.7 1.6Greece -1.0 -1.9 -2.5 -2.5 -2.3 -3.7 -4.5 -4.5 -4.1 -2.6 -1.5 -0.4Ireland -9.2 -7.8 -7.4 -5.8 -0.8 -1.8 0.9 0.5 1.1 1.5 2.0 1.0Italy -6.5 -6.2 -4.7 -2.8 0.5 1.3 1.1 1.2 1.2 1.1 1.1 1.3Luxembourg -5.4 -8.1 -3.1 2.1 2.8 5.3 - - - - - -Malta -1.5 -2.9 -1.8 1.8 4.2 3.9 - - - - - -Netherlands -4.5 -5.3 -3.7 -2.2 0.6 2.2 2.3 2.1 1.7 1.3 1.4 1.4Portugal -3.8 -3.1 -2.3 -1.0 1.8 1.5 1.1 1.3 0.2 0.0 0.0 -0.7Slovakia -5.7 -5.5 -4.9 -2.6 4.8 4.7 2.9 2.7 3.0 3.0 3.5 3.6Slovenia -8.4 -9.4 -8.8 -5.7 -1.1 2.2 1.8 1.0 2.5 2.3 1.5 3.3Spain -3.5 -4.4 -3.9 -3.0 -1.3 -0.1 -0.1 0.1 0.1 0.1 0.6 1.0Euro area -5.2 -4.9 -4.0 -2.0 0.8 1.9 1.8 2.0 1.9 1.2 1.1 1.2

2009 2010 2011

-8

-4

0

4

8

Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11

Euro area France GermanyItaly Netherlands Spain

-2

0

2

4

6

Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11

Euro area France GermanyItaly Netherlands Spain

Inflation, yoy var. of quarterly avg. CPI in % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Austria 1.1 0.1 -0.1 0.6 1.3 1.8 1.7 1.8 1.8 1.6 1.8 1.7Belgium 1.6 -0.2 -1.2 -0.2 1.2 2.4 2.6 2.4 2.1 1.8 2.0 2.1Cyprus 1.0 0.5 -1.0 0.9 2.5 2.0 3.1 - - - - -Finland 2.4 1.7 1.2 1.2 1.5 1.4 1.3 1.8 2.1 2.0 2.1 2.1France 0.7 -0.2 -0.5 0.4 1.5 1.8 1.6 1.6 1.4 1.4 1.6 1.7Germany 0.8 0.3 -0.2 0.4 0.8 1.1 1.2 1.4 1.4 1.4 1.5 1.5Greece 1.8 0.8 0.8 2.0 3.0 5.1 5.6 4.8 4.2 2.2 0.7 0.6Ireland 0.2 -1.6 -2.6 -2.8 -2.4 -2.1 -1.2 -0.8 -0.1 0.4 0.6 0.9Italy 1.4 0.9 0.1 0.7 1.3 1.6 1.7 1.7 1.6 1.5 1.6 1.7Luxembourg 0.2 -0.7 -0.7 1.3 2.8 2.8 2.7 - - - - -Malta 3.5 3.4 0.9 -0.3 0.9 - - - - - - -Netherlands 2.2 2.1 1.3 1.0 0.6 0.4 0.7 1.3 1.4 1.0 1.5 1.4Portugal 0.0 -1.1 -1.6 -0.7 0.3 1.0 0.6 2.9 1.4 1.4 1.3 1.4Slovakia 3.4 2.2 1.2 0.7 0.8 1.2 2.0 2.1 2.5 3.2 3.3 3.4Slovenia 1.9 1.0 0.1 0.8 1.5 1.3 1.8 2.2 2.3 2.2 1.9 2.1Spain 0.5 -0.7 -1.0 0.2 1.2 1.6 1.9 2.0 1.9 1.6 1.2 1.3Euro area 1.0 0.2 -0.4 0.4 1.1 1.5 1.7 1.8 1.8 1.6 1.6 1.6

2009 2010 2011



Gross Domestic Product, annual variation in % GDP Growth, 2010

Note: Gross domestic product, real annual variation in %.Sources: National statistical institutes and Eurostat.

Notes and sources

-4 -2 0 2 4

GreeceSpain

IrelandCyprus

SloveniaItaly

PortugalMalta

FranceEuro area

AustriaBelgium

NetherlandsLuxembourg

FinlandGermanySlovakia2008 2009 2010 2011 2012 2013 2014

Austria 2.2 -3.9 1.7 1.7 2.0 2.0 2.0Belgium 1.0 -2.8 1.8 1.6 1.9 2.1 2.0Cyprus 3.6 -1.7 -0.1 1.4 - - -Finland 0.9 -8.0 2.4 2.5 2.6 2.5 2.4France 0.2 -2.5 1.6 1.5 1.8 1.8 2.0Germany 1.0 -4.7 3.3 2.2 1.9 1.9 2.1Greece 2.0 -2.0 -3.8 -2.2 1.0 1.8 2.0Ireland -3.5 -7.6 -0.3 1.4 2.4 2.8 3.0Italy -1.3 -5.1 1.1 1.1 1.2 1.4 1.4Luxembourg 0.0 -3.4 2.2 2.5 - - -Malta 1.7 -1.5 1.5 1.9 - - -Netherlands 1.9 -3.9 1.9 1.7 1.8 2.0 2.0Portugal 0.0 -2.6 1.3 -0.1 1.0 1.5 1.6Slovakia 6.4 -4.7 3.4 3.4 3.9 4.2 4.2Slovenia 3.7 -8.1 1.1 2.1 3.1 3.2 3.3Spain 0.9 -3.7 -0.4 0.4 1.3 1.7 1.9Euro area 0.6 -4.1 1.6 1.4 1.6 1.8 1.8

-6

-4

-2

0

2

4

Euro area France Germany Italy Spain Netherlands

2008 2009 2010 2011

20,000

25,000

30,000

35,000

40,000


2008 2009 2010 2011

GDP per capita, EUR GDP per capita, 2010

Note: GDP per capita in current EUR. Chart excludesLuxembourg due to methodological inconsistencies.Sources: National statistical institutes, central banks andEurostat.

Notes and sources

10,000 17,500 25,000 32,500 40,000

SlovakiaMalta

PortugalSloveniaGreeceCyprus

SpainItaly

Euro areaGermany

FranceIreland

BelgiumFinlandAustria

Netherlands 2008 2009 2010 2011 2012 2013 2014Austria 33,957 32,802 33,669 34,639 35,760 36,983 38,255Belgium 32,378 31,609 32,543 33,407 34,404 35,513 36,630Cyprus 21,853 21,266 21,153 21,606 - - -Finland 34,752 32,088 33,034 34,338 35,727 37,074 38,424France 31,227 30,574 31,067 31,824 32,731 33,679 34,741Germany 30,218 29,222 30,209 31,328 32,439 33,587 34,873Greece 21,311 21,073 21,088 20,927 21,278 21,785 22,416Ireland 37,169 32,764 31,721 31,741 32,352 33,200 34,209Italy 26,298 25,401 25,616 26,233 26,930 27,714 28,533Luxembourg 81,332 76,505 78,681 80,739 - - -Malta 13,839 13,830 14,308 14,827 - - -Netherlands 36,166 34,705 35,591 36,558 37,729 38,951 40,237Portugal 16,200 15,800 16,094 16,250 16,537 16,954 17,428Slovakia 11,824 11,520 12,436 13,066 13,830 14,612 15,423Slovenia 19,620 16,190 17,523 18,267 19,279 20,473 21,829Spain 23,582 22,487 22,576 22,799 23,206 23,761 24,406Euro area 28,195 27,258 27,767 28,470 29,260 30,127 31,040



Private Consumption Growth, 2010

Note: Private consumption.Sources: National statistical institutes and Eurostat.

Notes and sources

Private Consumption, annual variation in %2008 2009 2010 2011 2012 2013 2014

Austria 0.7 0.4 0.9 1.0 1.5 1.7 1.7Belgium 1.5 -0.3 1.3 1.1 1.7 2.0 1.9Cyprus 8.4 -3.0 -1.5 1.8 - - -Finland 1.7 -1.9 2.1 1.9 2.2 2.4 2.5France 0.6 0.6 1.4 1.2 1.6 2.0 2.2Germany 0.7 -0.2 0.1 1.2 1.2 1.6 1.7Greece 2.3 -1.8 -3.5 -3.6 0.0 0.6 1.6Ireland -1.5 -7.0 -0.9 1.1 2.1 2.4 2.8Italy -0.8 -1.8 0.5 0.7 1.1 1.5 1.6Luxembourg 3.2 -0.7 1.0 2.2 - - -Malta 5.1 1.3 1.1 1.9 - - -Netherlands 1.1 -2.5 0.5 1.0 1.3 1.6 1.7Portugal 1.8 -1.0 1.5 -0.4 0.5 1.3 1.5Slovakia 6.1 -0.7 0.5 1.9 3.6 4.0 4.3Slovenia 3.0 -0.6 -0.2 1.9 2.2 2.9 3.0Spain -0.6 -4.3 0.8 0.1 1.1 1.4 1.7Euro area 0.4 -1.1 0.7 0.9 1.3 1.7 1.8

-4 -2 0 2 4

GreeceCyprusIreland

SloveniaGermany

NetherlandsItaly

SlovakiaEuro area

SpainAustria

LuxembourgMalta

BelgiumFrance

PortugalFinland

-6

-4

-2

0

2


2008 2009 2010 2011

Investment, annual variation in % Investment Growth, 2010

Note: Gross fixed investment, real annual variation in %.Sources: National statistical institutes and Eurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 1.0 -8.1 -1.8 1.9 3.2 3.7 3.5Belgium 2.9 -5.3 -1.2 2.4 3.1 3.3 2.9Cyprus 8.6 -12.0 -6.3 -0.3 - - -Finland -0.4 -14.7 0.6 4.6 4.8 4.3 4.2France 0.1 -7.1 -1.9 2.2 3.0 3.5 3.7Germany 2.5 -10.1 5.4 3.6 2.9 3.9 4.0Greece -7.4 -13.9 -10.8 -5.5 1.9 3.5 3.8Ireland -14.3 -31.0 -17.0 0.5 2.8 4.0 3.4Italy -4.0 -12.2 1.5 1.3 2.0 2.6 2.9Luxembourg -0.1 -14.9 1.6 3.8 - - -Malta -21.7 -18.8 5.6 5.7 - - -Netherlands 5.1 -12.7 -3.2 3.7 2.8 3.1 3.3Portugal -1.8 -11.9 -3.9 -2.6 2.1 2.9 3.0Slovakia 1.8 -10.5 2.3 3.6 5.3 5.0 4.9Slovenia 8.5 -21.6 -4.4 4.5 3.9 4.3 4.5Spain -4.8 -16.0 -7.2 -1.5 2.0 2.8 3.1Euro area -1.0 -11.3 -0.5 2.2 2.8 3.2 3.2

-18 -12 -6 0 6

IrelandGreece

SpainCyprus

SloveniaPortugal

NetherlandsFranceAustria

BelgiumEuro area

FinlandItaly

LuxembourgSlovakia

GermanyMalta

-18

-12

-6

0

6


2008 2009 2010 2011



2008 2009 2010 2011 2012 2013 2014Austria 1.3 -9.3 4.8 3.8 3.7 3.4 3.5Belgium -0.8 -12.1 3.0 2.0 3.2 3.9 3.5Cyprus -0.1 -7.5 -2.1 4.6 - - -Finland 0.8 -18.0 6.8 5.4 4.8 4.5 4.8France -2.7 -12.1 5.2 2.9 3.2 3.6 3.7Germany 0.6 -15.5 9.2 3.6 2.7 3.2 3.3Greece -4.0 -9.2 -4.1 -0.1 2.6 3.6 3.0Ireland -2.2 -4.5 -2.1 0.8 4.2 4.6 4.9Italy -3.5 -17.5 5.7 2.4 2.1 1.7 1.7Luxembourg -5.3 -15.8 4.8 3.1 - - -Malta -6.3 1.5 1.6 1.7 - - -Netherlands 1.5 -7.4 6.8 2.6 2.4 2.8 2.9Portugal -4.1 -8.1 1.4 1.1 1.7 1.8 1.7Slovakia 7.4 -13.1 17.0 7.5 6.6 7.0 6.4Slovenia 2.5 -17.4 3.7 3.5 4.0 3.9 3.9Spain -7.1 -16.2 0.5 0.9 2.7 2.6 2.8Euro area -1.8 -14.8 5.2 2.5 2.4 2.7 2.9

-5 0 5 10 15 20

GreeceIrelandCyprus

SpainPortugal

MaltaBelgiumSlovenia

LuxembourgAustriaFrance

Euro areaItaly

NetherlandsFinland

GermanySlovakia

-24

-16

-8

0

8

16


2008 2009 2010 2011

Industrial Production, annual variation in % Industrial Production Growth, 2010

Note: Industrial production, real annual variation in %.Sources: National statistical institutes and Eurostat.

Notes and sources

Unemployment, % of active population Unemployment, 2010

Note: Average unemployment rate for the year.Sources: National statistical institutes and Eurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 3.8 4.8 4.5 4.3 4.4 4.5 4.4Belgium 7.0 7.9 8.7 8.7 8.2 8.0 7.7Cyprus 3.6 5.3 6.3 6.4 - - -Finland 6.4 8.2 8.5 8.0 7.6 7.3 7.1France 7.8 9.4 9.9 9.8 9.5 9.0 8.6Germany 7.8 8.2 7.7 7.3 7.0 6.6 6.3Greece 7.7 9.4 12.2 14.1 13.6 13.1 12.9Ireland 6.3 11.8 13.7 13.6 12.1 11.3 10.7Italy 6.8 7.8 8.5 8.6 8.1 8.1 7.7Luxembourg 4.4 5.7 5.9 5.7 - - -Malta 5.9 6.9 7.1 7.0 - - -Netherlands 3.9 4.9 5.5 5.3 4.9 4.7 4.6Portugal 7.6 9.5 10.9 11.2 10.8 10.5 10.1Slovakia 8.7 13.9 14.3 13.5 11.8 10.6 10.3Slovenia 4.3 6.4 7.4 6.8 6.3 5.6 5.3Spain 11.3 18.0 20.1 20.3 18.9 17.8 16.8Euro area 7.6 9.4 10.1 10.1 9.7 9.6 9.2

0 6 12 18 24

AustriaNetherlandsLuxembourg

CyprusMalta

SloveniaGermany

FinlandItaly

BelgiumFrance

Euro areaPortugalGreeceIreland

SlovakiaSpain

3

6

9

12

15

18

21


2008 2009 2010 2011



Fiscal Balance, % of GDP Fiscal Balance, 2010

Note: Fiscal balance as % of GDP.Sources: National statistical institutes, finance ministries andEurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria -0.4 -3.4 -4.5 -4.0 -3.2 -2.3 -2.1Belgium -1.2 -6.0 -5.0 -4.5 -3.8 -3.3 -3.1Cyprus 0.9 -6.1 -6.8 -7.0 - - -Finland 4.2 -2.2 -3.4 -2.4 -1.4 -1.4 -1.6France -3.3 -7.5 -7.7 -6.3 -5.1 -3.6 -3.0Germany 0.0 -3.1 -4.2 -3.4 -2.8 -2.2 -1.8Greece -7.7 -13.6 -8.6 -7.6 -5.5 -3.4 -2.5Ireland -7.3 -14.3 -19.3 -13.6 -7.9 -7.1 -6.1Italy -2.7 -5.3 -5.0 -4.3 -3.7 -3.5 -3.2Luxembourg 2.9 -0.7 -3.3 -3.3 - - -Malta -4.5 -3.8 -4.2 -3.8 - - -Netherlands 0.7 -5.3 -6.1 -4.6 -3.9 -3.3 -3.0Portugal -3.0 -9.3 -7.7 -6.0 -4.4 -3.6 -3.7Slovakia -2.3 -6.8 -7.4 -5.6 -3.9 -2.6 -2.2Slovenia -1.7 -5.5 -5.9 -4.4 -3.4 -2.3 -1.9Spain -4.1 -11.2 -9.4 -7.0 -5.7 -4.6 -3.6Euro area -2.0 -6.3 -6.3 -5.2 -4.2 -3.3 -2.7

-20 -15 -10 -5 0

IrelandSpain

GreecePortugalFrance

SlovakiaCyprus

Euro areaNetherlands

SloveniaItaly

BelgiumAustria

GermanyMalta

FinlandLuxembourg

-15

-10

-5

0

5


2008 2009 2010 2011

Public Debt, % of GDP Public Debt, 2010

Note: Public debt as % of GDP.Sources: National statistical institutes, finance ministries andEurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 62.6 66.5 70.5 72.8 74.5 75.5 75.7Belgium 89.8 96.8 99.6 100.9 102.6 102.7 102.4Cyprus 48.4 56.2 62.1 66.4 - - -Finland 34.2 44.0 49.3 51.8 51.9 53.1 53.5France 67.5 77.6 83.1 87.9 89.3 87.6 87.3Germany 66.0 73.2 78.6 79.9 77.4 79.3 79.8Greece 99.2 115.1 132.4 141.5 147.0 147.6 150.7Ireland 43.9 64.0 83.4 98.6 98.6 99.2 102.2Italy 106.3 116.0 118.5 119.6 121.0 121.7 121.7Luxembourg 13.7 14.5 18.7 21.1 - - -Malta 63.7 69.1 70.7 71.8 - - -Netherlands 58.2 60.9 65.2 68.3 69.3 69.6 70.6Portugal 65.3 76.1 83.2 88.7 91.7 93.6 95.4Slovakia 27.7 35.7 - - - - -Slovenia 22.6 35.7 - - - - -Spain 39.7 53.2 64.9 72.0 76.4 79.1 80.3Euro area 69.4 78.7 85.3 88.4 88.6 89.0 89.1

0 25 50 75 100 125 150

Luxembourg

Finland

Cyprus

Spain

Netherlands

Austria

Malta

Germany

France

Portugal

Ireland

Euro area

Belgium

Italy

Greece

25

50

75

100

125


2008 2009 2010 2011



Inflation, annual average variation of consumer prices in % Inflation, 2010

Note: Annual average variation of consumer prices in %.Cyprus, Germany, Portugal, Slovakia and Slovenia refer tonational consumer price indices (CPI). All other countries arebased on harmonised index of consumer prices (HICP).Sources: National statistical institutes, central banks andEurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 3.2 0.4 1.5 1.6 1.7 1.8 1.8Belgium 4.5 0.0 1.9 1.8 1.9 1.8 1.9Cyprus 4.4 0.2 2.6 2.4 - - -Finland 3.9 1.6 1.3 2.0 2.0 1.7 1.7France 3.2 0.1 1.6 1.5 1.7 1.7 1.8Germany 2.6 0.3 1.1 1.4 1.5 1.6 1.6Greece 4.2 1.3 4.3 1.8 1.1 0.9 1.2Ireland 3.1 -1.7 -0.9 0.7 1.4 1.7 1.9Italy 3.5 0.8 1.6 1.7 1.9 1.9 2.0Luxembourg 4.1 0.0 2.4 1.9 - - -Malta 4.6 1.7 1.9 2.1 - - -Netherlands 2.2 1.0 1.0 1.3 1.7 1.5 1.6Portugal 2.6 -0.9 1.2 1.4 1.1 1.5 1.6Slovakia 4.6 1.6 1.2 2.6 3.0 2.6 2.6Slovenia 5.7 0.9 1.7 2.2 2.3 2.5 2.7Spain 4.1 -0.2 1.6 1.4 1.3 1.5 1.7Euro area 3.3 0.3 1.5 1.6 1.7 1.7 1.7

-2 0 2 4 6

IrelandNetherlands

GermanyPortugalSlovakiaFinland

Euro areaAustria

ItalyFrance

SpainSloveniaBelgium

MaltaLuxembourg

CyprusGreece

-2

0

2

4

6


2008 2009 2010 2011

10-year Bond Rate, % 10-year Bond Rate, 2010

Note: 10-year bond rate in %, end of period.Sources: National central banks and European Central Bank(ECB).

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 4.3 3.9 3.0 3.4 4.3 4.4 4.4Belgium 4.4 3.9 3.0 3.4 3.5 3.9 4.4Cyprus 4.6 4.6 4.6 4.9 - - -Finland 3.7 3.6 3.0 3.5 3.6 3.9 4.3France 3.4 3.6 2.8 3.2 4.0 5.2 5.2Germany 2.9 3.3 2.6 3.2 3.2 3.7 4.2Greece 5.1 5.5 4.6 4.7 5.4 5.5 5.6Ireland 4.6 4.9 4.1 4.6 5.6 6.3 6.5Italy 4.5 4.1 3.7 4.0 4.4 5.1 5.5Luxembourg - - - - - - -Malta 4.8 4.5 4.2 5.1 5.0 4.9 4.9Netherlands 3.6 3.4 2.6 3.3 3.4 3.8 3.9Portugal 4.0 3.9 5.3 4.9 5.1 5.2 4.9Slovakia - - - - - - -Slovenia - - - - - - -Spain 3.9 3.8 4.2 4.5 4.7 4.9 4.9Euro area 3.9 3.9 2.3 3.1 3.6 4.0 3.9

2 3 4 5 6

Euro area

Netherlands

Germany

France

Finland

Belgium

Austria

Italy

Ireland

Spain

Malta

Cyprus

Greece

Portugal

2

3

4

5


2008 2009 2010 2011



Current Account Balance, % of GDP Current Account Balance, 2010

Note: Current account balance as % of GDP.Sources: National statistical institutes and Eurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 3.3 2.3 2.7 3.0 2.4 2.4 2.2Belgium -2.9 0.3 1.3 1.3 0.8 1.9 2.3Cyprus -17.7 -7.9 -7.7 -7.3 - - -Finland 2.9 2.7 1.6 1.8 1.8 1.9 1.9France -2.3 -1.9 -2.0 -1.9 -2.2 -1.9 -1.9Germany 6.7 4.9 5.1 5.3 5.1 4.6 4.5Greece -14.6 -11.2 -9.9 -7.9 -5.2 -3.6 -3.4Ireland -5.2 -2.9 -0.5 0.1 0.6 -0.5 -0.5Italy -3.6 -3.2 -3.2 -2.7 -2.6 -2.5 -2.3Luxembourg 5.3 6.8 4.6 5.0 - - -Malta -5.6 -3.9 -5.7 -6.2 - - -Netherlands 4.6 5.0 6.0 5.7 5.5 5.8 5.7Portugal -11.6 -10.0 -9.6 -8.5 -7.9 -7.6 -7.0Slovakia -6.5 -3.2 -3.1 -3.2 -3.8 -3.7 -3.5Slovenia -6.1 -1.0 -1.0 -1.7 -1.4 -1.0 -1.0Spain -9.7 -5.5 -4.5 -3.5 -3.7 -3.6 -3.6Euro area -1.7 -0.8 -0.4 -0.1 0.2 0.2 0.3

-12 -8 -4 0 4 8

GreecePortugalCyprus

MaltaSpain

ItalySlovakiaFrance

SloveniaIreland

Euro areaBelgiumFinlandAustria

LuxembourgGermany

Netherlands

-10

-5

0

5

10


2008 2009 2010 2011

Exports, annual variation in % Export Growth, 2010

Note: Nominal annual variation in % of merchandise exports.Sources: National statistical institutes and Eurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 2.3 -19.9 9.7 8.2 10.6 9.0 6.6Belgium 2.0 -17.3 8.9 6.0 4.4 3.1 3.0Cyprus 9.9 -19.1 4.6 8.4 - - -Finland -0.2 -31.3 9.8 8.2 9.3 9.6 8.1France 2.8 -17.5 10.8 6.5 7.7 7.0 6.4Germany 0.7 -18.4 16.9 9.8 8.8 8.2 7.8Greece 13.6 -22.7 3.9 6.2 6.9 5.1 6.3Ireland -3.1 -4.3 3.0 3.3 3.6 3.1 2.1Italy 1.1 -20.9 8.2 6.0 7.0 6.9 5.8Luxembourg 8.1 -23.1 6.6 7.1 - - -Malta -4.0 -11.5 -0.3 6.7 - - -Netherlands 6.8 -17.0 12.4 6.2 7.8 6.7 5.0Portugal 1.7 -18.7 3.0 5.0 5.5 7.4 7.6Slovakia 13.3 -16.4 11.0 11.9 10.2 7.4 7.4Slovenia 1.9 -19.6 8.4 16.0 6.3 3.9 2.9Spain 3.7 -15.9 11.0 6.4 8.6 8.8 7.5Euro area 3.8 -18.3 10.4 7.7 7.4 7.5 7.0

-5 0 5 10 15 20

MaltaIreland

PortugalGreeceCyprus

LuxembourgItaly

SloveniaBelgiumAustriaFinland

Euro areaFrance

SpainSlovakia

NetherlandsGermany

-30

-20

-10

0

10

20


2008 2009 2010 2011



Imports, annual variation in % Import Growth, 2010

Note: Nominal annual variation in % of merchandise imports.Sources: National statistical institutes and Eurostat.

Notes and sources

2008 2009 2010 2011 2012 2013 2014Austria 4.0 -18.5 8.9 7.2 9.0 8.6 6.0Belgium 5.6 -20.3 8.3 5.7 4.6 4.6 4.4Cyprus 15.9 -23.2 2.6 5.5 - - -Finland 3.8 -29.0 8.7 7.8 9.6 11.4 8.4France 5.3 -17.8 8.3 6.2 8.2 7.5 6.0Germany 3.5 -17.2 16.1 9.4 8.6 8.5 8.7Greece 8.3 -27.8 -2.8 -5.5 2.6 3.6 4.4Ireland -10.3 -21.4 0.7 2.4 4.1 3.0 3.9Italy 2.6 -21.9 7.3 4.7 6.3 7.7 5.7Luxembourg 11.5 -24.6 1.5 3.1 - - -Malta -2.8 -16.5 7.6 7.1 - - -Netherlands 9.1 -17.7 14.1 6.3 7.4 5.3 4.5Portugal 7.1 -20.2 2.0 4.0 4.1 3.4 5.1Slovakia 13.3 -20.1 12.4 11.6 11.2 8.2 7.4Slovenia 6.1 -26.1 9.1 16.7 6.4 3.0 3.2Spain 0.6 -26.2 8.2 3.0 6.6 5.3 6.3Euro area 8.4 -21.6 10.4 6.7 6.5 7.1 6.6

-5 0 5 10 15 20

GreeceIreland

LuxembourgPortugalCyprus

ItalyMaltaSpain

FranceBelgiumFinlandAustria

SloveniaEuro area

SlovakiaNetherlands

Germany

-50

-25

0

25


2008 2009 2010 2011

| 13

Euro area November 2010FOCUSECONOMICS

FocusEconomics Consensus Forecast

Euro areaOutlook improves


Euro area

LONG-TERM TRENDS | 5-year averages

• On 29 October, leaders of the European Union member states agreedon an amendment to the Lisbon Treaty, creating a new permanentcrisis-prevention mechanism aimed at avoiding the repetition of aGreek-style sovereign debt crisis.

• The second GDP estimate confirmed that the economy expanded 1.0%in the second quarter. The result represented the fastest pace in fouryears. On the back of the positive result, Consensus Forecastpanellists upgraded their growth forecast by 0.1 percentage pointsand now see the economy expanding 1.6% in 2010. For 2011, thepanel sees economic growth reaching 1.4%, which is unchanged fromlast month’s forecast.

• According to a preliminary estimate, inflation inched up from 1.8% inSeptember to 1.9% in October. Panellists expect inflation to average1.5% this year, which is unchanged from last month’s projection. In2011, the panel expects inflation to inch up to 1.6%.

FISCAL POLICY | European Commission unveils new set of fiscal rulesOn 29 October, the European Council agreed to amend the Lisbon Treaty andcreate a new permanent crisis-prevention mechanism, aimed at maintainingfinancial stability in the region.

The proposed new mechanism will entail the creation of a permanent “bail-out”facility, providing support to countries hit by a Greek-style debt crisis in thefuture. The new facility will replace the existing EUR 750 billion IMF-backedtemporary fund (the so-called European Stabilisation Mechanism), which wascreated in May in the wake of the Greek crisis and which will expire in 2013.

Moreover, according to the new provisions, an “orderly default” process shouldbe implemented, in a way that will also involve the private sector (i.e. bond-holders) in sharing the burden of rescuing insolvent countries. The proposalswill require the modification of the existing Lisbon Treaty, as they go againstthe so-called “no bail-out” clause. Details on how to implement treaty changeswill be discussed in the coming months and should be ready for the next meet-ing of the European Council in December.

In addition, EU leaders agreed on a set of measures aimed at tightening bud-get rules for EU countries. According to the new set of rules, sanctions forcountries exceeding the deficit (3% of GDP) and debt thresholds (60% of GDP)set in the Stability and Growth Pact (SGP) will be punished at an earlier stagein the surveillance process, compared to the existing framework. Moreover,EU leaders stressed that stronger attention should be paid to the debt crite-rion, in addition to the current focus on the deficit criterion.

Finally, member states will be also assessed on a “scoreboard” of internal andexternal macroeconomic indicators in order to assess risks stemming from

2000-04 2005-09 2010-14Population (million): 318 327 335GDP (EUR bn): 7,316 8,791 9,824GDP per capita (EUR): 23,025 26,891 29,333GDP growth (%): 1.9 0.8 1.7Fiscal Balance (% of GDP): -2.1 -2.5 -4.3Public Debt (% of GDP): 68.8 70.5 88.1Inflation (%): 2.2 2.0 1.7Current Account (% of GDP): -0.1 -0.5 0.0

Fiscal Deficit vs Public Debt | % of GDP

Note: Annual fiscal deficit and public debt as percentage of GDP.Source: Eurostat and FocusEconomics Consensus Forecast.

0

2

4

6

8

1995 1999 2003 2007 2011 2015

%

60

70

80

90

Fiscal Deficit Public Debt

%

| 14



divergences among EU members. Countries with “serious imbalances” will beput in a so-called “excessive imbalances position”, ultimately leading to sanc-tions in case of persistent imbalances.

REAL SECTOR | Second estimate confirms Q2 growthSecond estimates for GDP growth published on 6 October confirmed that, inthe second quarter, the economy expanded 1.0% over the first quarter as pre-viously reported. The reading came in line with market expectations and markedthe strongest quarterly reading since the second quarter of 2006. On an an-nual basis, the Euro zone economy expanded 1.9%, the strongest annual re-sult since the second quarter of 2008.

The second GDP release reflected a deterioration in the contribution to growthof domestic demand, while the contribution from the external sector improvedfrom the previous estimate. Private consumption expanded 0.2% over the pre-vious quarter, which was down from the initial 0.5% estimate, while gross fixedinvestment rose 1.5%, down from the earlier 1.8% estimate. That said, a largercontribution from inventories helped offset slower growth in consumption andinvestment.

In the external sector, growth in both exports and imports was revised downfrom the previous estimate. However, according to the revision, exports (firstestimate: +4.4% quarter-on-quarter; second estimate: +4.3% qoq) grew morethan imports (first estimate: +4.4% qoq; second estimate: +4.0% qoq). As aconsequence, the net contribution from the external sector to overall quarterlygrowth rose from the 0.06 percentage points initially reported to 0.17 percent-age points.

Despite the persistent turmoil owing to the fiscal crisis in Europe, the economyshould continue to grow, with Consensus Forecast participants expecting GDPto expand 0.4% in the third quarter, which is a notch below the 0.5% expansionexpected by the European Commission. Nevertheless, strong downward riskspersist, as most of the countries in the Euro zone are applying severe fiscalconsolidation programmes after fiscal deficits reached unsustainable levels andthe strong rally of the euro might hinder exports growth in the months to come.

Consensus Forecast panellists anticipate GDP expanding 1.6% this year, whichis 0.1 percentage points above last month’s projection. For 2011, the panelexpects the economy to expand 1.4%.

REAL SECTOR | Industrial production steps up in August

In August, industrial production expanded 1.0% over the previous month inseasonally adjusted terms. The result was up from the 0.1% rise recorded inJuly (previously reported: +0.0% month-on-month) and beat market expecta-tions, which had anticipated a 0.7% increase. On an annual basis, industrialproduction expanded 7.9%, which was up from the 7.2% increase recorded inJuly. That said, the positive annual figure was still favoured by a low calculationbase, as industrial production had contracted 15.0% in August 2009.

The main drivers behind the monthly reading were capital goods, which rose+3.0% month-on-month, as well as production of durable consumer goods,which was up 1.8% over the previous month. As a result of the positive monthlyreading, annual average growth in industrial production climbed back into posi-tive territory after 21 consecutive negative readings, rising from a 0.6% drop inJuly to a 1.1% increase in August.

GDP by Type Q2 2010 | variation in %

Note: Quarter-on-quarter changes of seasonally adjusted gross domesticproduct in %.Source: Eurostat and FocusEconomics calculations.

0.2

0.5

0.8

1.0

1.5

4.0

4.3

0.0 1.0 2.0 3.0 4.0 5.0

Private consumption

Governmentconsumption

Domestic demand

GDP

Gross fixedinvestment

Exports

Imports

%

Gross Domestic Product | variation in %

Note: Quarter-on-quarter changes of seasonally adjusted GDP in %.Source: Eurostat and FocusEconomics Consensus Forecast.

0.7

-0.4 -0.5

-1.8

-2.5

-0.1

0.40.2 0.3

1.0

0.40.3

-3.0

-2.0

-1.0

0.0

1.0

2.0

Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10

%

Industrial Production | variation in %

Note: Month-on-month changes of seasonally adjusted industrial productionand annual average growth rate in %.Source: Eurostat.

1.1

-0.4

1.6

-0.8

2.1

-0.6

1.8

0.7

1.2

-0.1

0.1

1.0

0.5

-1.0

0.0

1.0

2.0

3.0

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

%

-20.0

-15.0

-10.0

-5.0

0.0

5.0

%

MoM s.a. (left scale)

Annual average YoY (right scale)

| 15



Consensus Forecast panellists see industrial production expanding 5.2% thisyear, which is down 0.8 percentage points from last month’s forecast. For 2011,the panel anticipates industrial production to accelerate to 2.5%.

OUTLOOK | Economic sentiment rises more than expected in OctoberThe Economic Sentiment Indicator (ESI) published by the European Commis-sion rose 0.9 points in October, stepping up from the 103.2 points recorded inSeptember to 104.1 points. The figure overshot market expectations, whichhad seen the ESI rising to only 103.5 points.

At the current level, the index remains above its long-term average of 100points for a fourth consecutive month, after having fallen below the thresholdfor two straight months in May and June. Values greater than 100 indicate anabove-average economic sentiment, whereas values below 100 indicate a be-low-average position.

The increase was led by a more optimistic sentiment in industry and construc-tion. Improving order books, in particular for exports, fuelled economic senti-ment in the industrial sector. Meanwhile, the sentiment gauge remained un-changed in the other three categories composing the index (consumers, retailtrade and services).

MONETARY SECTOR | Inflation picks up in SeptemberConsumer prices in the Euro zone rose 0.2% over the previous month in Sep-tember, which mirrored the result seen in the previous month. As a conse-quence of the monthly increase, annual headline inflation stepped up from1.6% in August to 1.8%, which confirmed a previous estimate released byEurostat on 30 September and marked the highest level in nearly two years.

The monthly rise was driven by higher prices for clothing, which added 6.5%over the previous month, as well as for education, which added 0.6% overAugust. On an annual basis, the increase of consumer prices reflected theimpact of higher energy prices, which rose 7.7% over the same month lastyear, with the sub-category relative to fuel for transport rising 10.9%.

Meanwhile, the core inflation index, which does not include prices for energyand unprocessed foods, rose 0.2% over the previous month. Despite the monthlyincrease, annual core inflation remained unchanged at August’s 1.0%.

At the current level, inflation remains under the rate of just below 2.0% aimedat by the European Central Bank (ECB). Accordingly, the ECB left the refinanc-ing rate unchanged at 1.0% for the fifteenth consecutive time at its last meetingon 7 October, in a decision widely expected by the market. ECB PresidentJean Claude Trichet maintains that the current monetary policy stance is ap-propriate, as the ECB expects inflationary pressures to remain moderate overthe medium-term horizon, as recovery in the region continues at a moderateand uneven pace.

More recent data point to a situation of rising inflation. According to a prelimi-nary estimate released by Eurostat on 29 October, inflation rose 1.9% over thesame month the previous year, which if confirmed would mark an increasecompared to September’s reading.

Consensus Forecast participants see inflation averaging 1.5% this year, whichis unchanged from last month’s forecast. For 2011, the panel anticipates aver-age inflation rising to 1.6%.

Economic Sentiment

Note: The Economic Sentiment Indicator (ESI) is based on surveys addressedto the manufacturing, services, retail trade and construction sectors, as wellas to consumers. Values above 100 indicate an above-average economicsentiment, whereas values below 100 indicate a below-average position.Source: European Commission.

60

70

80

90

100

110

120

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Poin

ts

Inflation | Consumer Price Index

Note: Year-on-year and monthly variation of consumer price index in %.Source: Eurostat.

0.0

0.20.1

0.3

-0.8

0.3

0.9

0.5

0.10.0

-0.3

0.2 0.2

-1.0

-0.5

0.0

0.5

1.0

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

%

-1.0

0.0

1.0

2.0

%

monthly (left scale)

annual (right scale)

| 16



Economic Indicators | 2005 - 2014

Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 324 325 327 329 330 331 333 335 337 338GDP per capita (EUR) 25,181 26,303 27,521 28,195 27,258 27,767 28,470 29,260 30,127 31,040GDP (EUR bn) 8,146 8,554 9,002 9,265 8,987 9,202 9,483 9,797 10,139 10,500Economic Growth (GDP, annual var. in %) 1.7 3.0 2.8 0.6 -4.1 1.6 1.4 1.6 1.8 1.8Domestic Demand (annual variation in %) 2.0 3.0 2.6 0.3 -3.4 1.3 1.2 1.8 1.8 1.9 Private Consumption (annual var. in %) 1.8 2.2 1.7 0.4 -1.1 0.7 0.9 1.3 1.7 1.8 Government Consumption (ann. var. in %) 1.6 2.1 2.2 2.4 2.4 - - - - - Fixed Investment (annual variation in %) 3.4 5.7 4.6 -1.0 -11.3 -0.5 2.2 2.8 3.2 3.2Industrial Production (annual variation in %) 1.4 4.2 3.7 -1.8 -14.8 5.2 2.5 2.4 2.7 2.9Unemployment (aop, % of active population) 9.0 8.4 7.5 7.6 9.4 10.1 10.1 9.7 9.6 9.2Fiscal Balance (% of GDP) -2.5 -1.3 -0.6 -2.0 -6.3 -6.3 -5.2 -4.2 -3.3 -2.7Public Debt (% of GDP) 70.1 68.3 66.0 69.4 78.7 85.3 88.4 88.6 89.0 89.1Monetary and Financial Sector Money (annual variation of M3 in %) 7.3 9.9 11.6 7.6 -0.2 - - - - -Inflation (HICP, eop annual variation in %) 2.2 1.9 3.1 1.6 0.9 - - - - -Inflation (HICP, ann. average variation in %) 2.2 2.2 2.1 3.3 0.3 1.5 1.6 1.7 1.7 1.7Producer Prices (annual variation in %) 4.4 3.8 4.7 1.2 1.0 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.41 3.90 4.38 3.89 3.87 2.35 3.08 3.61 3.95 3.92Stock Market (Eurostoxx 50, var. in %) 21.3 15.1 6.8 -44.3 21.0 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) 0.2 -0.1 0.1 -1.7 -0.8 -0.4 -0.1 0.2 0.2 0.3Current Account Balance (EUR bn) 15.4 -8.9 8.9 -162 -67.6 -41.3 -10.3 15.1 22.2 27.8Trade Balance (EUR bn) 43.3 10.6 47.5 -18.3 38.4 36.5 53.1 75.1 86.5 98.3Exports (EUR bn) 1,222 1,398 1,518 1,576 1,288 1,421 1,531 1,645 1,768 1,892Imports (EUR bn) 1,179 1,387 1,471 1,594 1,249 1,382 1,473 1,570 1,682 1,793Exports (annual variation in %) 8.7 14.4 8.6 3.8 -18.3 10.4 7.7 7.4 7.5 7.0Imports (annual variation in %) 14.4 17.7 6.0 8.4 -21.6 10.4 6.7 6.5 7.1 6.6

Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -4.0 -2.0 0.8 1.9 1.8 2.0 1.9 1.2 1.1 1.2Economic Growth (GDP, qoq variation in %) 0.4 0.2 0.3 1.0 0.4 0.3 0.3 0.4 0.5 0.5 Private Consumption (s.a. qoq var. in %) -0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 Fixed Investment (s.a. qoq var. in %) -1.1 -1.2 -0.3 1.5 0.3 0.3 0.3 0.4 0.5 0.6Industrial Production (annual variation in %) -14.4 -7.4 4.7 9.0 5.3 4.2 2.4 1.4 1.4 2.9Unemployment (aop, % of active population) 9.7 9.9 9.9 10.0 10.1 10.1 10.1 10.1 10.0 9.9Inflation (HICP, ann. average variation in %) -0.4 0.4 1.1 1.5 1.7 1.8 1.8 1.6 1.6 1.6ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.3710-year Bond Yield (%, eop) 3.87 3.87 3.99 3.70 3.50 2.35 2.48 2.71 2.89 3.08Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30

Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) 1.8 4.2 7.7 9.2 9.8 8.2 7.2 7.9 - -Industrial Production (s.a. mom var. in %) 2.1 -0.6 1.8 0.7 1.2 -0.1 0.1 1.0 - -Unemployment (% of active population) 9.9 9.9 10.0 10.0 10.0 10.0 10.0 10.0 10.1 -Consumer Confidence Index -15.8 -17.4 -17.3 -15.0 -17.8 -17.3 -14.0 -11.4 -11.0 -11.0Econ. Sent. Indicator (100-point threshold) 96.0 95.9 97.9 100.6 98.4 98.9 101.1 102.3 103.2 104.1Inflation (HICP, mom variation in %) -0.8 0.3 0.9 0.5 0.1 0.0 -0.3 0.2 0.2 -Inflation (HICP, eop annual variation in %) 1.0 0.9 1.4 1.5 1.6 1.4 1.7 1.6 1.8 1.9Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 17



Real Sector | Gross Domestic Product

-6

-3

0

3

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

G7Euro area

-6

-3

0

3

6

1990 1995 2000 2005 2010

Euro areaG7World

-4

-2

0

2

4

Jul Oct Jan Apr Jul Oct

2010

2011-1

0

1

2


2010

2011

-20

-10

0

10

1996 2001 2006 2011

Euro area G7

-2

0

2

4

1996 2001 2006 2011

Euro area G7

0

1

2

3

Jun Sep Dec Mar Jun Sep

MaximumConsensusMinimum

-1

0

1

2

3



3 | GDP 2010 | evolution of forecasts 4 | GDP 2011 | evolution of forecasts

5 | Consumption | % variation 6 | Investment | % variation

Real GDP growth in % 2 | Real GDP | Q1 07-Q4 11 | % variation

7 | Consumption | evolution of fcst 8 | Investment | evolution of forecasts

1 | Real GDP | 1990 - 2014 | % variation

General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allreal sector data are from Eurostat. See below for details. Forecasts arebased on the FocusEconomics Consensus Forecast.

1 GDP, real annual variation in %. Source: Eurostat.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %.Source: Eurostat.3 GDP, evolution of 2010 forecasts during the last 18 months.4 GDP, evolution of 2011 forecasts during the last 18 months.5 Private consumption, annual variation in %, 1996-2014. Source:Eurostat.6 Gross fixed investment, annual variation in %, 1996-2014. Source:Eurostat.7 Private consumption, evolution of 2010 and 2011 forecasts since July2009.8 Gross fixed investment, evolution of 2010 and 2011 forecasts sinceJuly 2009.9 Industrial production, annual variation in %. Source: Eurostat.10 Unemployment, % of active population, 1995-2014. Source: Eurostat.11 General government balance, % of GDP, 1995-2014. Source: Eurostat.12 Industrial production, evolution of 2010 and 2011 forecasts since July2009.13 Unemployment, evolution of 2010 and 2011 forecasts since July 2009.14 General government balance, evolution of 2010 and 2011 forecastssince July 2009.

Notes and sources

Individual Forecasts 2010 2011Allianz 1.8 1.7Barclays Capital 1.7 1.7BBVA 1.6 1.2BMO Capital Markets 1.6 1.5BNP Paribas 1.7 1.1Citigroup 1.5 1.1Commerzbank 1.6 1.5Credit Agricole 1.6 1.2Credit Suisse 1.7 2.5DekaBank 1.6 1.4Deutsche Bank 1.5 1.0DZ Bank 1.7 1.2Experian 1.5 1.5Goldman Sachs 1.7 1.8ING 1.6 1.4Instituto Flores de Lemus 1.6 0.9Intesa Sanpaolo 1.6 1.7JPMorgan 1.7 1.5Lloyds TSB 1.5 1.4Nomura 1.7 1.6RBS 1.6 1.0Raiffeisen Research 1.7 1.2UBS 1.7 1.9Unicredit 1.6 1.3Summary Minimum 1.5 0.9Maximum 1.8 2.5Median 1.6 1.4Consensus 1.6 1.4History 30 days ago 1.5 1.460 days ago 1.3 1.490 days ago 1.2 1.4Additional Forecasts European Commission (Sep. 2010) 1.7 -ECB (Sep. 2010) 1.4 - 1.8 0.5 - 2.3IMF (Oct. 2010) 1.7 1.5

| 18



Real Sector | Additional forecasts

-4

0

4

8


20102011

-7

-6

-5

-4


20102011

-12

-8

-4

0

4

1995 2000 2005 2010

Euro area G7

4

6

8

10

12

1995 2000 2005 2010

Euro area G7

-20

-10

0

10

1990 1995 2000 2005 2010

Euro area G7

9

10

11

12


20102011

14 | Fiscal Balance | evolution of fcst

11 | Fiscal Balance | % of GDP

12 | Industry | evolution of forecasts

9 | Industry | % variation

13 | Unemployment | evolution of fcst

10 | Unemployment | % of active pop.

Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Allianz 0.6 0.8 -0.9 2.5 6.7 3.6 10.0 9.9 -6.4 -5.4 - -Barclays Capital 0.7 1.3 -1.1 2.0 2.1 4.6 10.0 9.5 -6.3 -4.9 - -BBVA 0.7 1.1 -1.3 1.0 - - 10.1 10.2 -6.8 -5.5 - -BMO Capital Markets - - - - - - 10.0 9.7 - - - -BNP Paribas 0.8 0.6 -0.6 2.0 7.0 0.8 10.0 10.3 -6.3 -5.1 - -Citigroup 0.4 0.7 -1.2 1.6 1.4 1.8 10.0 9.7 -6.2 -4.9 86.7 89.0Commerzbank 0.8 0.9 -0.5 3.8 - - 10.0 10.4 - - - -Credit Agricole - - - - - - 10.0 9.9 -5.9 -4.9 84.3 87.6Credit Suisse 0.9 1.7 -0.3 3.2 5.4 2.8 - - -6.0 -4.6 - -DekaBank 0.7 0.8 -0.7 1.8 - - 10.1 10.6 -6.8 -5.0 - -Deutsche Bank 0.7 0.3 -1.2 1.0 - - 10.1 10.4 -6.0 -4.7 - -DZ Bank 0.6 1.1 -0.7 2.2 - - 10.3 10.1 -6.5 -5.3 90.1 91.8Experian 0.3 0.8 -0.6 2.1 - - 10.3 10.1 - - - -Goldman Sachs - - - - - - 10.3 10.3 -6.1 -4.8 - -ING 0.8 1.1 -0.8 2.6 4.0 3.5 - - -6.5 -5.5 84.3 88.0Instituto Flores de Lemus 0.8 0.6 4.8 1.3 2.7 -0.2 10.7 10.4 - - - -Intesa Sanpaolo 0.7 1.0 -0.8 2.4 6.6 1.9 10.1 9.9 -6.7 -5.9 - -JPMorgan 0.5 0.9 -0.7 3.3 6.5 1.9 10.0 9.9 -6.8 -5.5 - -Lloyds TSB 0.5 0.7 -1.0 1.6 5.9 4.1 10.1 10.3 -6.4 -5.3 - -Nomura 0.6 0.9 -0.8 2.2 - - 10.1 10.3 -6.1 -5.3 85.0 88.3RBS 0.6 0.6 -0.8 1.9 6.7 1.7 10.2 10.2 -6.5 -5.2 85.0 89.0Raiffeisen Research 0.8 1.1 0.1 2.9 7.0 2.5 10.0 9.8 -6.6 -6.1 84.7 88.5UBS 0.9 1.0 -0.3 4.0 6.2 3.4 9.9 9.6 -5.5 -4.2 82.7 84.9Unicredit 0.6 0.6 -1.1 1.7 - - 10.1 10.1 -6.5 -5.2 - -Summary Minimum 0.3 0.3 -1.3 1.0 1.4 -0.2 9.9 9.5 -6.8 -6.1 82.7 84.9Maximum 0.9 1.7 4.8 4.0 7.0 4.6 10.7 10.6 -5.5 -4.2 90.1 91.8Median 0.7 0.9 -0.8 2.1 6.2 2.5 10.1 10.1 -6.4 -5.2 84.9 88.4Consensus 0.7 0.9 -0.5 2.2 5.2 2.5 10.1 10.1 -6.3 -5.2 85.3 88.4History 30 days ago 0.6 0.8 -0.6 2.2 6.0 2.6 10.2 10.2 -6.4 -5.3 84.7 87.760 days ago 0.2 0.8 -1.7 2.1 6.5 2.7 10.2 10.2 -6.4 -5.3 84.1 87.490 days ago 0.1 0.8 -1.9 2.0 6.9 2.7 10.2 10.2 -6.5 -5.4 - -

Unemployment% of active pop.

Public Debt% of GDP

Fiscal Balance% of GDP

Industry% variation

Consumption % variation

Investment% variation

| 19



Monetary Sector | Inflation and Exchange Rate

0.8

1.0

1.2

1.4

1.6

1.8



1.0

1.2

1.4

1.6

1.8



0.8

1.0

1.2

1.4

1.6

1990 1995 2000 2005 2010

General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allmonetary and external sector data are from Eurostat and European CentralBank (ECB). Forecasts based on the FocusEconomics ConsensusForecast.

15 Inflation, annual average variation in harmonised index of consumerprices (HICP) in % (aop). Source: Eurostat.16 Quarterly inflation, year-on-year variation in harmonised index ofconsumer prices (HICP) in % (aop). Source: Eurostat.17 Inflation, evolution of 2010 forecasts during the last 18 months.18 Inflation, evolution of 2011 forecasts during the last 18 months.19 Exchange rate, USD per EUR (eop). Source: ECB.20 Quarterly exchange rate, USD per EUR (eop). Source: ECB.21 Exchange rate, evolution of 2010 forecasts during the last 18months.22 Exchange rate, evolution of 2011 forecasts during the last 18months.

1.2

1.3

1.4

1.5

1.6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

0

1

2

3



0

1

2

3



-1

0

1

2

3

4

1995 2000 2005 2010

Euro area G7

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

Euro areaG7

Notes and sources

Inflation and Exchange Rate 16 | Inflation | Q1 07-Q4 11 | in % 15 | Inflation | 1995 - 2014 | in %

18 | Inflation 2011 | evolution of fcst 17 | Inflation 2010 | evolution of fcst

19 | Exchange Rate | 1990 - 2014 20 | Exchange Rate | Q1 07-Q4 11 |

21 | Exchange Rate 2010 | evol. of fcst 22 | Exchange Rate 2011 | evol. of fcst

Individual Forecasts 2010 2011 2010 2011Allianz 1.5 1.6 1.40 1.45Barclays Capital 1.6 1.9 - -BBVA 1.6 1.7 1.40 1.30BMO Capital Markets 1.5 1.8 - -BNP Paribas 1.6 1.6 1.34 1.20Citigroup 1.5 1.7 1.44 1.39Commerzbank 1.5 1.7 1.35 1.28Credit Agricole 1.6 1.5 1.42 1.30Credit Suisse 1.6 1.6 - -DekaBank 1.5 1.4 1.24 1.24Deutsche Bank 1.6 1.7 1.30 1.35DZ Bank 1.5 1.4 1.27 1.35Experian 1.4 1.5 1.12 1.15Goldman Sachs 1.5 1.5 1.35 1.38ING 1.5 1.7 1.40 1.40Instituto Flores de Lemus 1.6 1.8 - -Intesa Sanpaolo 1.5 1.7 1.27 1.29JPMorgan 1.5 1.1 1.30 1.25Lloyds TSB 1.5 1.6 1.27 1.25Nomura 1.6 1.9 1.35 1.35RBS 1.6 1.8 1.32 1.22Raiffeisen Research 1.5 1.6 1.40 1.20UBS 1.6 1.8 1.25 1.10Unicredit 1.5 1.7 1.43 1.46Summary Minimum 1.4 1.1 1.12 1.10Maximum 1.6 1.9 1.44 1.46Median 1.5 1.7 1.35 1.30Consensus 1.5 1.6 1.33 1.30History 30 days ago 1.5 1.6 1.27 1.2660 days ago 1.5 1.6 1.23 1.2290 days ago 1.5 1.6 1.21 1.21Additional Forecasts Eur. Comm. (Sep. 2010) 1.4 - - -ECB (Sep. 2010) 1.5 - 1.7 1.2 - 2.2 - -IMF (Oct. 2010) 1.6 1.5 - -

Consumer Prices% var.

Exchange RateUSD per EUR

| 20



Monetary Sector | Interest Rates

0

2

4

6

Nov Jan Mar May Jul Sep Nov


0.0

1.0

2.0

3.0



0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

Euro areaJapanUnited States

0

2

4

6

8

2000 2005 2010

Euro areaUnited StatesJapan

General:Long-term chart period from 2000 to 2014 unless otherwise stated. Allmonetary and external sector data are from Eurostat and European CentralBank (ECB), Fed and BoJ. Forecasts based on the FocusEconomicsConsensus Forecast.

23 Interest rate, policy rate in %. Source: ECB.24 Quarterly interest rate, policy rate in %. Source: ECB, Fed and BoJ.25 Interest rate, evolution of 2010 ECB refinancing rate forecastsduring the last 18 months.26 Interest rate, evolution of 2011 ECB refinancing rate forecastsduring the last 18 months.27 Interest rate, 3-month rate in % (eop). Source: ECB, Fed and BoJ.28 Interest rate, 3-month rate in % (eop). Source: ECB, Fed and BoJ.29 Interest rate, evolution of 2010 3-month Euribor forecasts during thelast 18 months.30 Interest rate, evolution of 2011 3-month Euribor forecasts sinceNovember 2009.

Notes and sources

Interest Rates

27 | 3-month Rate | 2000 - 2014 | in % 28 | 3-month Rate| Q1 07-Q4 11 | in %

29 | 3-m Rate 2010 | evolution of fcst 30 | 3-m Rate 2011 | evolution of fcst

0

1

2

3

4



0

1

2

3

4

5



0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

Euro areaJapanUnited States

0

2

4

6

2000 2005 2010

Euro areaG7

23 | Interest Rate | 2000 - 2014 | in % 24 | Interest Rate| Q1 07-Q4 11 | in %

25 | Int. Rate 2010 | evolution of fcst 26 | Int. Rate 2011 | evolution of fcst

Individual Forecasts 2010 2011 2010 2011Allianz - - 1.00 1.60Barclays Capital 1.00 1.00 - -BBVA 1.00 1.00 1.02 1.27BMO Capital Markets 1.00 1.00 1.00 1.25BNP Paribas 1.00 1.00 0.90 1.30Citigroup 1.00 1.25 - -Commerzbank 1.00 1.00 1.15 1.40Credit Agricole 1.00 1.00 1.00 1.30Credit Suisse 1.00 1.50 - -DekaBank 1.00 1.00 1.00 1.10Deutsche Bank 1.00 1.00 1.00 -DZ Bank 1.00 1.00 0.90 1.30Experian 1.00 1.50 - -Goldman Sachs - - 1.00 1.20ING 1.00 1.25 0.90 1.60Instituto Flores de Lemus - - - -Intesa Sanpaolo 1.00 1.00 0.88 1.29JPMorgan 1.00 1.00 - -Lloyds TSB 1.00 1.00 0.82 0.69Nomura 1.00 1.75 0.90 2.02RBS 1.00 1.25 - -Raiffeisen Research 1.00 1.00 1.10 1.20UBS 1.00 1.75 0.90 1.85Unicredit 1.00 1.25 1.00 1.55Summary Minimum 1.00 1.00 0.82 0.69Maximum 1.00 1.75 1.15 2.02Median 1.00 1.00 1.00 1.30Consensus 1.00 1.17 0.97 1.37History 30 days ago 1.00 1.38 0.95 1.5060 days ago 1.00 1.42 1.00 1.6590 days ago 1.00 1.46 1.00 1.70

Policy Rate 3-month in % Rate in %

| 21



External Sector | Current Account and Trade Balance

-300

-200

-100

0

100



-3

-2

-1

0

1

2000 2005 2010

Euro area

G7

-200

-100

0

100

200



-20

-10

0

10

20

30

1995 2000 2005 2010-40

-20

0

20

40

1995 2000 2005 2010

-500

0

500

1,000

1,500

2,000

1995 2000 2005 2010

Trade BalanceExportsImports

-60

-40

-20

0

20

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

-200

-100

0

100

2000 2005 2010

General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allmonetary and external sector data are from Eurostat and EuropeanCentral Bank (ECB). Forecasts based on the FocusEconomics Con-sensus Forecast.

31 Current account, balance as % of GDP, 2000-2014. Source:Eurostat.32 Current account, balance in EUR bn, 2000-2014. Source:Eurostat.33 Current account, evolution of 2010 forecasts during the last 18months.34 Current account, evolution of 2011 forecasts since July 2009.35 Quarterly current account balance in EUR bn. Source: Eurostat.36 Trade balance in EUR bn. Source: Eurostat.37 Exports, annual variation in %. Source: Eurostat.38 Imports, annual variation in %. Source: Eurostat.

32 | Current Account | EUR bn

33 | Current Account 2010 | evol. of fcst 34 | Current Account 2011 | evol. of fcst

Notes and sources

Current Account Balance | EUR bn 31 | Current Account | % of GDP

36 | Trade Balance | EUR bn

37 | Exports | variation in % 38 | Imports | variation in %


Individual Forecasts 2010 2011Allianz - -Barclays Capital -46.4 -28.9BBVA -46.4 -19.1BMO Capital Markets - -BNP Paribas -50.0 -20.0Citigroup -44.0 -15.1Commerzbank -45.0 -20.0Credit Agricole -27.8 28.6Credit Suisse -102.1 -87.0DekaBank -79.3 -75.0Deutsche Bank -36.8 0.0DZ Bank - -Experian - -Goldman Sachs 9.3 47.9ING - -Instituto Flores de Lemus - -Intesa Sanpaolo -24.4 22.6JPMorgan -42.0 -17.3Lloyds TSB -27.8 -19.1Nomura -37.1 19.2RBS -55.6 -28.6Raiffeisen Research -46.2 -19.0UBS -23.1 36.5Unicredit -18.5 9.5Summary Minimum -102.1 -87.0Maximum 9.3 47.9Median -43.0 -18.2Consensus -41.3 -10.3History 30 days ago -39.3 -5.260 days ago -30.2 0.190 days ago -25.1 1.9

| 22

France November 2010FOCUSECONOMICS


2000-04 2005-09 2010-14Population (million): 60.1 62.1 64.0GDP (EUR bn): 1,548 1,860 2,102GDP per capita (EUR): 25,752 29,933 32,808GDP growth (%): 2.1 0.8 1.7Fiscal Balance (% of GDP): -2.8 -3.7 -5.2Public Debt (% of GDP): 60.2 67.8 87.0Inflation (%): 2.0 1.7 1.7Current Account (% of GDP): 1.3 -1.2 -2.0

FranceOutlook improves


France


• On 26 October, the French parliament approved a plan to reform thepension system, which raises the retirement age by two years. Thereform triggered a wave of nationwide protests and strikes in the oilsector that brought oil refining and distribution to a virtual standstill.Nonetheless, Finance Minister Christine Lagarde stated that theconsequences of protests will not alter the country’s economicgrowth forecast for this year.

• Consensus Forecast panellists lifted their forecast by 0.1 percentagepoints and now see the economy growing 1.6% in 2010. For 2011, thepanel expects economic growth to moderate to 1.5%.

• Inflation rose from 1.4% in August to 1.6% in September. Panellistsexpect inflation to average 1.6% this year, which is down 0.1percentage points from last month’s estimate. Next year, panellistsanticipate inflation to average 1.5%.

OUTLOOK | French parliament approves reform despite strikesOn 26 October, the French parliament approved President Nicolas Sarkozy’spension reform plan, which will raise the minimum retirement age from 60 to62 and the full retirement age from 65 to 67. In response to these changes,labour unions have announced further strikes, continuing a series of protestssince early September.

In October, strikes were focused in the oil sector and brought French oilrefining and distribution to a virtual standstill. However, with the approval ofthe bill the strikes seem to have turned a corner, as workers at eight of 12refineries voted to return to work by 29 October.

Finance Minister Christine Lagarde stated that the protests and strikes costthe country between EUR 200 million and EUR 400 million (USD 280 - 560million) a day. That said, Lagarde added that the protests would not alter thegovernment’s economic growth forecast for 2010.

The French government expects the economy to grow 1.5% this year.Consensus Forecast panellists are slightly more optimistic and see theeconomy growing 1.6% this year, which is 0.1 percentage points above lastmonth’s projection. For next year, the panel forecasts GDP growth at 1.5%.

REAL SECTOR | Industrial production stalls in AugustIn August, industrial output remained unchanged over the previous month inseasonally adjusted terms. The monthly reading contrasted the 0.8%expansion tallied in July and undershot market expectations of a 0.3% rise.On an annual basis, industrial activity decelerated from a 5.6% rise in July toa 3.2% expansion.


Note: Month-on-month changes of seasonally adjusted industrial production andmoving annual average growth rate in %.Source: National Institute of Statistics and Economic Studies (INSEE) andFocusEconomics calculations.

2.3

-1.1

0.1

1.1

-0.3

2.0

0.2

1.0

-0.2

1.3

-1.6

0.8

0.0

-3.0

-1.5

0.0

1.5

3.0


%

-15.0

-10.0

-5.0

0.0

5.0

%

MoM s.a. (left scale) Annual average YoY (right scale)

| 23



The flat August reading was caused by manufacturing, which remainedunchanged from July and contrasted the previous month’s expansion (July:+1.2% month-on-month). In addition, a 0.1% drop in construction offset a0.1% increase in mining, energy, water and waste management.

Despite the August reading, the trend continued to improve, with annualaverage growth of industrial output jumping from 0.3% in July to 1.5% inAugust, which represents the second positive reading since August 2008.Consensus Forecast panellists see industrial production rising 5.2% thisyear, which is up 0.6 percentage points from last month forecast. For nextyear, panellists expect an expansion of 2.9%.

OUTLOOK | Business confidence improves in SeptemberThe Central Bank’s business sentiment indicator for manufacturers rosefrom 101 points in August to 102 points in September after four consecutivemonths without a change in business confidence. At the current level, theindex is just slightly above its long-term average of 100.

While inventories of final goods declined slightly, order books increasedmarkedly and returned to a level comparable to that observed before summer2008. In addition, capacity utilisation rose significantly and activity in the servicesector rose sharply, buttressed by strong growth in temporary work andtransport.

More recent data for the economic climate in the manufacturing industrycorroborate the improving outlook implied by the Central Bank’s indicator.The business sentiment measurement elaborated by the National StatisticalInstitute (INSEE) rose to 102 points in October from September’s 99 points,which continues the upward trend in place since March 2009 that was onlybriefly interrupted in June this year. The rise contrasted market expectations,which anticipated sentiment to fall to 98 points.

The Central Bank’s monthly index of business activity (MIBA) expects theeconomy to expand 0.3% in the third quarter, which is 0.1 percentage pointsbelow the forecast elaborated by INSEE in its quarterly economic outlookfrom October. Consensus Forecast panellists maintain a slightly moreoptimistic view and see the economy growing 0.4% in the third quarter of2010.

OUTLOOK | Consumer confidence improves unexpectedly in OctoberIn October, the index of consumer sentiment from the National StatisticalInstitute (INSEE) rose to minus 34 points from minus 35 points registered inSeptember. The unexpected rise contrasted market expectations, which hadseen sentiment deteriorating to minus 37 points. Despite the increase,consumer confidence remains well below its long-term average level of minus19.

In October, households’ perceptions of unemployment improved, butremained above the long-term average. The sub-index regarding the generaleconomic situation in the next 12 months improved from minus 47 points inSeptember to minus 44 in October, while the sub-index regarding the personalfinancial situation in the next 12 months improved from minus 19 points tominus 17 points.

Consensus Forecast panellists expect private consumption to grow 1.4%this year before decelerating moderately to 1.2% in 2011.

Business Sentiment

Note: Value of monthly business sentiment indicator index; long-term aver. at 100.Source: Banque de France (BdF).

60

80

100

120


long-term average

Poin

ts

Consumer Confidence

Note: Value of monthly consumer confidence index; long-term average at minus 18.Source: National Institute of Statistics and Economic Studies (INSEE).

-50

-40

-30

-20

-10


long-term average

Poin

ts

| 24



MONETARY SECTOR | Inflation accelerates in SeptemberIn September, consumer prices fell 0.1% over the previous month, whichcontrasted the 0.2% rise seen in August. Despite the monthly drop, annualinflation rose from 1.4% in August to 1.6%, which was below marketexpectations of a 1.8% increase.

According to the National Statistical Institute (INSEE), the September readingwas driven by a drop in the prices for services, which fell 0.8% over theprevious month. The drop was only partially offset by the increase in the priceof manufactured products (+0.7% mom).

The core inflation index, which excludes more volatile categories such as oil,fruits and vegetables, remained flat in September, taking annual core inflationfrom August’s 0.8% reading to 0.6%. Finally, annual average harmonisedinflation (HICP) increased from 1.2% in August to 1.4%.

Consensus Forecast panellists expect inflation to average 1.6% in 2010,which is down 0.1 percentage points from last month’s forecast. Next year,panellists expect inflation to average 1.5%.


Note: Year-on-year and month-on-month var. of consumer price index in %.Source: National Institute of Statistics and Economic Studies (INSEE).

-0.2

0.1

0.3

0.5

0.3

0.1

-0.3

0.2

-0.10.0

0.1

0.6

-0.2

-0.6

-0.3

0.0

0.3

0.6


%

-1.0

0.0

1.0

2.0

%

monthly (left scale) annual (right scale)

| 25




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 61.4 61.8 62.1 62.4 62.8 63.2 63.6 64.0 64.4 64.8GDP per capita (EUR) 28,112 29,244 30,507 31,227 30,574 31,067 31,824 32,731 33,679 34,741GDP (EUR bn) 1,726 1,806 1,895 1,950 1,921 1,964 2,025 2,096 2,170 2,252Economic Growth (GDP, annual var. in %) 1.9 2.2 2.3 0.2 -2.5 1.6 1.5 1.8 1.8 2.0Domestic Demand (annual variation in %) 2.6 2.5 3.1 0.2 -0.5 0.9 1.2 2.0 2.2 2.3 Private Consumption (annual var. in %) 2.6 2.4 2.4 0.6 0.6 1.4 1.2 1.6 2.0 2.2 Government Consumption (ann. var. in %) 1.2 1.3 1.5 1.6 2.8 - - - - - Fixed Investment (annual variation in %) 4.4 4.1 6.5 0.1 -7.1 -1.9 2.2 3.0 3.5 3.7Industrial Production (annual variation in %) 0.2 1.3 1.2 -2.7 -12.1 5.2 2.9 3.2 3.6 3.7Retail Sales (annual variation in %) 3.7 2.7 3.6 3.5 -4.6 - - - - -Car Registrations (mn) 2.1 2.0 2.1 2.1 2.3 - - - - -Housing Starts (mn) 0.41 0.42 0.43 0.40 0.33 - - - - -Hourly Wages (annual var. in %) 3.1 3.0 2.9 3.1 2.9 1.7 2.2 2.7 2.7 2.8Unemployment (aop, % of active population) 9.3 9.3 8.4 7.8 9.4 9.9 9.8 9.5 9.0 8.6Fiscal Balance (% of GDP) -2.9 -2.3 -2.7 -3.3 -7.5 -7.7 -6.3 -5.1 -3.6 -3.0Public Debt (% of GDP) 66.4 63.7 63.8 67.5 77.6 83.1 87.9 89.3 87.6 87.3Monetary and Financial Sector Inflation (CPI, annual variation in %) 1.5 1.5 2.6 1.0 0.9 - - - - -Inflation (HICP, annual variation in %) 1.8 1.7 2.8 1.2 1.0 - - - - -Inflation (HICP annual average variation in %) 1.9 1.9 1.6 3.2 0.1 1.6 1.5 1.7 1.7 1.8Inflation (PPI, annual variation in %) 3.5 2.9 5.2 -0.2 -3.0 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.37 4.03 4.50 3.44 3.60 2.80 3.20 4.03 5.18 5.23Stock Market (variation of CAC 40 in %) 23.4 17.5 1.3 -42.7 22.3 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) -0.4 -0.5 -1.0 -2.3 -1.9 -2.0 -1.9 -2.2 -1.9 -1.9Current Account Balance (EUR bn) -7.3 -9.2 -18.9 -44.0 -36.8 -38.7 -38.4 -47.1 -40.6 -42.1Trade Balance (EUR bn) -37.7 -44.4 -58.8 -72.2 -58.2 -52.5 -56.4 -62.0 -65.7 -69.1Exports (EUR bn) 357 391 401 413 340 377 402 433 463 493Imports (EUR bn) 394 435 460 485 399 432 458 496 533 565Exports (annual variation in %) 5.0 9.6 2.7 2.8 -17.5 10.8 6.5 7.7 7.0 6.4Imports (annual variation in %) 9.6 10.4 5.7 5.3 -17.8 8.3 6.2 8.2 7.5 6.0

Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -2.7 -0.5 1.2 1.7 1.8 1.5 1.6 1.3 1.3 1.4Economic Growth (GDP, qoq s.a. var. in %) 0.3 0.6 0.2 0.7 0.4 0.3 0.3 0.4 0.4 0.4Unemployment (aop, % of active population) 9.6 9.8 9.9 9.9 9.7 9.7 9.7 9.7 9.7 9.5Inflation (HICP annual average variation in %) -0.5 0.4 1.5 1.8 1.6 1.6 1.4 1.4 1.6 1.7ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.3710-year Bond Yield (%, eop) 3.62 3.60 3.42 3.55 2.67 2.80 2.79 2.93 3.10 3.20Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30

Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) 3.4 4.4 7.5 8.4 8.1 5.4 5.6 3.2 - -Industrial Production (s.a. mom var. in %) 2.0 0.2 1.0 -0.2 1.3 -1.6 0.8 0.0 - -Unemployment (% of active population) 9.9 9.9 9.9 9.9 9.9 9.9 10.0 10.0 - -Consumer Conf. (long-term avg. -19) -31 -33 -34 -37 -38 -39 -38 -37 -35 -34Business Sentiment (long-term avg.100) 102 102 103 101 101 101 101 101 102 -Inflation (CPI, mom variation in %) -0.2 0.6 0.5 0.3 0.1 0.0 -0.3 0.2 -0.1 -Inflation (CPI, annual variation in %) 1.1 1.3 1.6 1.7 1.6 1.5 1.7 1.4 1.6 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 26




-3

-2

-1

0

1

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

France G7

-6

-3

0

3

6

1990 1995 2000 2005 2010

France G7World

-2

0

2

4



-1

0

1

2

3



-20

-10

0

10

1990 1995 2000 2005 2010

France G7-2

0

2

4

6

1990 1995 2000 2005 2010

France G7

0.5

1.0

1.5

2.0


2010

2011

-4

-2

0

2

4


2010

2011

Individual Forecasts 2010 2011Asterès 1.7 1.5BBVA 1.6 1.4BMO Capital Markets 1.5 1.9BNP Paribas 1.6 1.2Citigroup 1.6 1.2Credit Agricole 1.5 1.4Credit Suisse 1.7 2.5DekaBank 1.7 1.8Deutsche Bank 1.5 1.0DZ Bank 1.7 1.4Experian 1.5 1.6Goldman Sachs 1.6 2.1ING 1.4 1.5Intesa Sanpaolo 1.5 1.7JPMorgan 1.6 1.5Lloyds TSB 1.5 1.6Nomura 1.6 1.8Raiffeisen Research 1.6 1.4Société Générale 1.5 1.5Toronto-Dominion Bank 1.5 1.4UBS 1.7 1.9Unicredit 1.5 1.4Xerfi 1.3 0.9Summary Minimum 1.3 0.9Maximum 1.7 2.5Median 1.5 1.5Consensus 1.6 1.5History 30 days ago 1.5 1.560 days ago 1.4 1.590 days ago 1.4 1.6Additional Forecasts European Commission (Sep. 2010) 1.6 -IMF (Oct. 2010) 1.6 1.6OECD (May 2010) 1.7 2.1






General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allreal sector data are from the National Statistical Institute (INSEE, Institutnational de la statistique et des études économiques) and Eurostat.Forecasts based on FocusEconomics Consensus Forecast.

1 GDP, annual variation in %.2 Quarterly GDP (seasonally adjusted), quarter-on-quarter var. in %.3 GDP, evolution of 2010 forecasts during the last 18 months.4 GDP, evolution of 2011 forecasts since July 2009.5 Private consumption, annual variation in %.6 Gross fixed investment, annual variation in %.7 Private consumption, change in 2010 and 2011 forecasts since July2009.8 Gross fixed investment, change in 2010 and 2011 forecasts since July2009.9 Industrial production, annual variation in %.10 Unemployment, % of active population. Source: Eurostat.11 Balance of non-financial public sector, % of GDP.12 Industrial production, evolution of 2010 and 2011 forecasts since July2009.13 Unemployment, evolution of 2010 and 2011 forecasts since July 2009.14 Balance of non-financial public sector, evolution of 2010 and 2011forecasts since July 2009.

Notes and sources

| 27



4

6

8

10

12

1990 1995 2000 2005 2010

France G7

-9

-8

-7

-6


20102011

9.5

10.0

10.5

11.0


20102011

-3

0

3

6


20102011

-10

-8

-6

-4

-2

0

1990 1995 2000 2005 2010

France G7

-20

-10

0

10

1990 1995 2000 2005 2010

France G7








Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Asterès 1.9 2.0 - - 7.8 6.5 9.7 9.1 -6.5 -6.0 85.0 89.0BBVA 1.4 1.2 -2.0 2.2 - - - - - - - -BMO Capital Markets - - - - - - 9.9 9.7 - - - -BNP Paribas 1.3 0.8 -2.1 0.7 5.4 1.6 9.9 10.2 -7.5 -6.0 84.1 88.4Citigroup 1.3 1.0 -1.7 2.6 - - 9.5 9.4 -7.2 -6.0 83.0 87.0Credit Agricole - - - - - - 9.8 9.7 -8.2 -6.3 83.9 88.4Credit Suisse - - - - - - - - -7.5 -6.0 83.6 88.6DekaBank - - - - - - - - -7.7 -5.9 - -Deutsche Bank 1.1 0.6 -2.9 1.3 - - 10.5 10.6 -7.6 -6.2 - -DZ Bank 1.3 1.4 -2.0 2.0 - - 10.2 10.0 -8.0 -6.6 - -Experian 1.3 1.3 -1.0 2.5 - - 10.1 9.9 -8.0 -6.7 - -Goldman Sachs - - - - 2.4 3.0 9.9 9.8 -7.7 -6.3 - -ING 1.3 1.1 -1.7 1.9 - - 9.4 9.3 -8.0 -6.5 - -Intesa Sanpaolo 1.5 1.4 -1.9 2.8 4.8 1.4 9.5 9.7 - - - -JPMorgan - - - - - - - - - - - -Lloyds TSB 1.4 1.1 -1.9 2.5 5.1 2.2 10.1 10.1 -8.3 -6.5 - -Nomura 1.4 1.4 -1.7 2.3 - - 10.2 10.1 -7.6 -6.0 82.8 86.2Raiffeisen Research - - - - - - 9.9 9.7 -8.0 -7.4 78.1 83.6Société Générale 1.3 1.5 -1.8 2.4 - - 9.3 9.2 -7.8 -6.5 84.6 88.9Toronto-Dominion Bank - - - - - - 10.0 9.9 - - - -UBS 1.6 1.7 -1.4 4.2 5.9 4.2 9.8 9.6 -6.8 -5.5 82.4 85.6Unicredit 1.5 1.0 -2.1 1.9 - - 9.8 9.7 -7.7 -6.3 82.9 93.0Xerfi 1.0 0.4 -1.9 1.9 5.1 1.7 9.8 9.8 -8.0 -7.0 84.0 88.0Summary Minimum 1.0 0.4 -2.9 0.7 2.4 1.4 9.3 9.2 -8.3 -7.4 78.1 83.6Maximum 1.6 1.7 -1.0 4.2 5.9 4.2 10.5 10.6 -6.8 -5.5 84.6 93.0Median 1.3 1.1 -1.9 2.3 5.1 1.9 9.9 9.7 -7.7 -6.3 83.3 88.2Consensus 1.4 1.2 -1.9 2.2 5.2 2.9 9.9 9.8 -7.7 -6.3 83.1 87.9History 30 days ago 1.3 1.2 -2.1 2.2 4.6 2.7 9.9 9.9 -7.8 -6.5 83.6 88.860 days ago 1.1 1.1 -2.1 2.2 4.9 3.1 10.1 10.0 -7.9 -6.4 83.7 88.590 days ago 1.1 1.1 -2.2 2.4 3.9 2.9 10.1 10.0 -7.9 -6.4 83.8 88.5



Industry% variation


Public Debt% of GDP


| 28



Monetary Sector | Inflation and Interest Rate

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


0

1

2

3



-1

0

1

2

3



-2

0

2

4

6

1990 1995 2000 2005 2010

FranceG7

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

France

G7

2

3

4

5

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

France

Germany2

4

6

8

10

12

1990 1995 2000 2005 2010

FranceGermany

Notes and sources

Inflation and Interest Rate 16 | Inflation | Q1 07-Q4 11 | in % 15 | Inflation | 1990 - 2014 | in %

19 | 10-year Bond Yield | 1990-2014 20 | 10-year Bond Yield | Q1 07-Q4 11

21 | Policy Rate | Q1 07-Q4 11 | in % 22 | 3-Month Rate | Q1 07-Q4 11


General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allmonetary sector data are from the National Statistical Institute (INSEE,Institut national de la statistique et des études économiques), Bank ofFrance (BdF, Banque de France), Federal Reserve Board (Fed), Bankof Japan (BoJ) and the European Central Bank (ECB). See below fordetails. Forecasts based on FocusEconomics Consensus Forecast.

15 Inflation, annual variation in harmonised index of consumer prices(HICP) in % (eop). Source: INSEE.16 Quarterly inflation, year-on-year variation in consumer price index(CPI) in % (eop). Source: INSEE.17 Inflation, evolution of 2010 forecasts during the last 18 months.18 Inflation, evolution of 2011 forecasts since July 2009.19 10-year benchmark bond yield (eop). Source: ECB, BdF.20 Quarterly10-year benchmark bond yield (eop). Source: ECB, BdF.21 Quarterly policy rate in % (eop). Source: ECB, Fed, BoJ.22 Quarterly 3-month benchmark rate in % (eop). Source: ECB, Fed,BoJ.

Individual Forecasts 2010 2011 2010 2011Asterès 1.7 1.5 2.90 3.40BBVA 1.7 1.6 - -BMO Capital Markets 1.7 1.6 - -BNP Paribas 1.5 1.4 2.65 3.00Citigroup 1.7 1.7 2.85 3.30Credit Agricole 1.5 1.6 - -Credit Suisse 1.6 0.9 - -DekaBank 1.6 1.2 - -Deutsche Bank 1.7 1.5 - -DZ Bank 1.7 1.6 - -Experian 1.8 1.6 - -Goldman Sachs 1.7 1.6 - -ING 1.8 2.1 - -Intesa Sanpaolo 1.5 1.4 2.94 2.69JPMorgan - - - -Lloyds TSB 1.6 1.7 - -Nomura 1.7 1.7 - -Raiffeisen Research 1.7 1.8 - -Société Générale 1.5 1.5 2.95 3.45Toronto-Dominion Bank 1.5 1.4 - -UBS 1.7 1.5 2.50 3.34Unicredit 1.5 1.6 - -Xerfi 1.5 1.2 2.82 3.25Summary Minimum 1.5 0.9 2.50 2.69Maximum 1.8 2.1 2.95 3.45Median 1.7 1.6 2.83 3.28Consensus 1.6 1.5 2.80 3.20History 30 days ago 1.7 1.6 2.71 3.2260 days ago 1.7 1.6 3.12 3.7190 days ago 1.6 1.6 3.16 3.80Additional Forecasts Eur. Comm. (Sep. 2010) 1.6 1.6 - -IMF (Oct. 2010) 1.6 1.6 - -OECD (May 2010) 1.7 1.1 - -

Consumer Prices 10-year Bondvariation in % Rate in %

| 29



-3

0

3

6

1990 1995 2000 2005 2010

France G7

-250

0

250

500

750

1990 1995 2000 2005 2010


-120

-60

0

60



-150

-100

-50

0



-100

-50

0

50

1990 1995 2000 2005 2010

-30

-15

0

15

30

1990 1995 2000 2005 2010

France

G7

-30

-15

0

15

30

45

1990 1995 2000 2005 2010

France G7

-80

-60

-40

-20


20102011




Notes and sources


28 | Trade Balance | evolution of fcst



General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allexternal sector data are from the National Statistical Institute (INSEE,Institut national de la statistique et des études économiques). Forecastsbased on FocusEconomics Consensus Forecast.

23 Current account balance as % of GDP.24 Current account balance in EUR bn.25 Current account in EUR bn, evolution of 2010 forecast during thelast 18 months.26 Current account in EUR bn, evolution of 2011 forecast since July2009.27 Trade balance, imports and exports, in EUR bn.28 Trade Balance in EUR bn, evolution of 2010 and 2011 forecastssince July 2009.29 Exports, annual variation in %.30 Imports, annual variation in %.

Individual Forecasts 2010 2011Asterès - -BBVA - -BMO Capital Markets - -BNP Paribas -41.0 -48.0Citigroup -33.2 -9.5Credit Agricole -35.6 -36.7Credit Suisse - -DekaBank - -Deutsche Bank - -DZ Bank - -Experian -45.6 -45.0Goldman Sachs -31.8 -22.6ING - -Intesa Sanpaolo -50.3 -59.5JPMorgan - -Lloyds TSB - -Nomura - -Raiffeisen Research -37.4 -40.6Société Générale - -Toronto-Dominion Bank - -UBS -37.9 -40.7Unicredit -39.6 -38.7Xerfi -34.3 -42.4Summary Minimum -50.3 -59.5Maximum -31.8 -9.5Median -37.6 -40.6Consensus -38.7 -38.4History 30 days ago -41.8 -42.160 days ago -40.5 -40.090 days ago -44.0 -45.1

| 30

Germany November 2010FOCUSECONOMICS


GermanyOutlook improves


Germany


REAL SECTOR | Industrial output expands more than expectedIn August, industrial production expanded 1.7% in seasonal and calendar ad-justed terms over the previous month. The monthly expansion came in wellabove the 0.1% increase observed in July and overshot market expectations,which had industrial production growing 0.5%.

The strong monthly figure mainly reflected a sharp expansion in manufactur-ing, which grew 1.8% month-on-month, contrasting the 0.2% contraction tal-lied in July. In addition, investment goods production jumped 2.4% over theprevious month (July: -1.0% mom), while durable goods production posted astrong 2.4% increase (July: -0.2% mom).

As a result of August’s reading, the trend in industrial production continued topoints upwards with annual average variation in industrial production jumpingfrom 1.0% in July to 3.4% in August which marked the highest level since Sep-tember 2008.

Consensus Forecast panellists see industrial production rising 9.2% this year,which is 0.8 percentage points up from the last month’s estimate. For 2011, thepanel expects industrial production to rise to 3.6%.

Meanwhile, the Central Bank expects the economy to grow 3.0% this year, upfrom the previous 1.9% estimate.

Consensus Forecast panelists are more optimistic than the Central Bank andsee the economy growing 3.3% this year, which is 0.2 percentage points abovelast month’s projection. For next year, the panel forecasts GDP growth at 2.2%.

• Recent data suggest that the recovery shows no signs of cooling. InAugust, industrial production grew 1.7% month-on-month, exceed-ing even upbeat market expectations. Moreover, unemployment fellbelow 3 million in October, the lowest level in 18 years, buttressingconsumer confidence and supporting household consumption. Inaddition, business confidence jumped to a new record high, bolster-ing the notion of accelerating domestic demand in the months ahead.

• Consensus Forecast participants lifted their forecasts by 0.2 percent-age points over last month’s estimate and now expect the economyto expand 3.3% this year. In 2011, the economy is expected to grow2.2%.

• In October, annual inflation remained unchanged at 1.3%, accordingto preliminary estimates. Consensus Forecast participants see infla-tion averaging 1.1% this year, which is unchanged from last month’sprojection. Next year, inflation should rise to 1.4%.

2000-04 2005-09 2010-14Population (million): 82.5 82.2 81.8GDP (EUR bn): 2,139 2,376 2,657GDP per capita (EUR): 25,938 28,900 32,487GDP growth (%): 1.1 0.6 2.3Fiscal Balance (% of GDP): -3.1 -1.6 -2.9Public Debt (% of GDP): 61.7 68.0 79.0Inflation (%): 1.5 1.7 1.4Current Account (% of GDP): 1.4 6.2 4.9


Note: Month-on-month changes of seasonally adjusted industrial productionand annual average growth rate in %.Source: Federal Statistical Office and FocusEconomics calculations.

1.9 1.9

0.4

-0.3

3.7

1.1

-0.5

0.1

2.9

-0.7

0.8

-0.5

1.7

-1.0

0.0

1.0

2.0

3.0

4.0


%

-20.0

-15.0

-10.0

-5.0

0.0

5.0

%

MoM s.a. (left scale)Annual average YoY (right scale)

| 31



OUTLOOK | Consumer confidence remains steady in NovemberConsumer confidence remains stable, as the economy experiences a consid-erable upswing, sustained by a solid labour market. The forward-looking con-sumer confidence indicator for November, released by the GfK Institute re-mained steady at October’s 4.9 points, confirming consumer sentiment at high-est level since May 2008. The figure nevertheless, fell short of private sectoranalysts’ expectations, which had seen consumer confidence rising further to5.1 points.

While the GfK’s overall consumer confidence indicator refers to November, theinstitute also published three sub-indices (economic expectations, income ex-pectations and propensity to buy), which refer to October. According to thesurvey, economic expectations improved over the previous month, while in-come expectations and buying propensity deteriorated.

The economic expectations index continued its positive trend and rose by 2.5points in October, pushing the index to 56.0 points, which represents the high-est level in more than three years. The optimistic assessment mainly reflecteda rosier view of the economic recovery, aided by the positive trend in the labourmarket, with Consensus Forecast panellists expecting unemployment to de-cline from an average 8.2% in 2009 to an average 7.7% in 2010.

Income expectations did not profit from improving economic prospects and fellby 9.2 points in October to 36.0 points, after rising to a nine-year high in Sep-tember. According to Gfk, the fall may be due to an anticipated rise in electricityprices and the announcement of municipalities to increase fees and charges.

Finally, the propensity to buy declined by 8.2 points in October to 22.5 points,amid less upbeat income expectations. Nevertheless, the sub-index is far aboveits 0-point long-term average.

OUTLOOK | Business confidence climbs to the highest level in more thanthree yearsBusiness confidence continues to rise, suggesting that the recovery will re-main strong. The Ifo Business Climate Index for industry and trade rose to107.6 points in October from 106.8 points in September, defying market ex-pectations, which had expected the index to fall to 106.4 points. The Octoberreading marked the sixth consecutive month of improving sentiment, drivingthe index to the highest level since May 2007.

Business confidence improved as both components increased over the previ-ous month. The current business situation component increased from 109.8points in September to 110.2 points in October, remaining on its positive trendstarted in February. In addition, the business expectations indicator jumpedfrom 103.9 points in September to 105.1 points.

At the sector level, firms in the manufacturing sector reported their currentbusiness situation to be slightly more favourable than in the previous monthand were even more upbeat about their prospects. Meanwhile, businesses inthe construction sector reported a somewhat less favourable current businesssituation compared to September, but they evaluated their future business pros-pects as more positive.

Wholesaling businesses gave a more positive assessment of both their cur-rent and future business situation. Only retail respondents assessed their cur-rent business situation, as well as their future business expectations as less

GfK Consumer Climate

Note: GfK Consumer Climate Index.Source: The GfK Group.

1.0

3.0

5.0

7.0

9.0

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Ifo Business Climate

Note: Ifo Business Climate Index, 2000=100.Source: Ifo Business Survey.

80

85

90

95

100

105

110


| 32



favourable than in September. Nevertheless, retail firms still maintain a healthybusiness sentiment.

MONETARY SECTOR | Inflation remains subdued in OctoberIn October, consumer prices rose 0.1%, according to a preliminary flash esti-mate released on 27 October by the Federal Statistics Office (Destatis). Themonthly increase contrasted the 0.1% drop observed in September, but was inline with market expectation. Annual inflation remained unchanged atSeptember’s 1.3%, which is the highest level since November 2008. At thecurrent rate, inflation is still below the European Central Bank’s definition ofprice stability. Final results will be published on 9 November.

According to the flash report, the main drivers of the October increase werehigher prices for petroleum products, as well as for fruits and vegetables. More-over, annual harmonised consumer price inflation (HICP) followed the devel-opments of the consumer price index (CPI) and remained at September’s 1.3%.

The federal government estimates inflation to average 1.3% this year and 1.4%in 2011, while the Bundesbank expects inflation to rise to 1.2% this year and to1.6% in 2011.

Consensus Forecast panellists see average inflation rising to 1.1% in 2010,which is unchanged from previous month’s forecast. For 2011, panellists ex-pect inflation to reach 1.4%.

EXTERNAL SECTOR | Exports decline in AugustExports fell for a second consecutive month, amid signs of a slowdown in glo-bal demand and a strengthening euro. In August, exports slipped 0.4% in sea-sonally and working day adjusted terms over the previous month. However, themonthly reading came in above the 1.6% contraction observed in July and wasvirtually in line with market expectations of a 0.3% drop. Simultaneously, im-ports grew 0.9% over the previous month, contrasting the 2.2% decline regis-tered in July.

On an annual basis, exports expanded 26.8% in August, up from the 18.6%increase tallied in July. Imports rose 29.2% in August, also above the 24.9%expansion recorded in July. As a result, the trade balance narrowed from EUR9.1 billion in July to EUR 4.6 billion in August, which marked the second lowestlevel so far this year.

Exports are likely to continue expanding on an annual basis, albeit at a moremoderate pace, as slowing global demand and a stronger euro diminish thesales prospects outside the European Union.

Consensus Forecast participants estimate exports to grow 16.9% this year and9.8% in 2011. Even as trade flows are recovering this year, exports will fallshort of the EUR 984 billion level recorded in 2008. Only in 2011, Germanexports will surpass the pre-crisis level with an expected export value of EUR1.0 trillion.

Merchandise Trade | EUR bn

Note: Monthly exports and imports in EUR billion.Source: Federal Statistical Office and FocusEconomics calculations.

0

20

40

60

80

100

120

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Trade Balance Exports Imports


Note: Monthly and annual consumer price index variation in %.Source: Federal Statistical Office and FocusEconomics calculations.

0.1

-0.1

-0.6

-0.1

0.1 0.10.0

-0.1

0.1

0.3

0.8

0.50.4

-1.0

-0.5

0.0

0.5

1.0

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

%

-0.5

0.0

0.5

1.0

1.5

%



| 33




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 82.4 82.3 82.2 82.1 82.0 82.0 81.9 81.8 81.7 81.6GDP per capita (EUR) 27,199 28,271 29,592 30,218 29,222 30,209 31,328 32,439 33,587 34,873GDP (EUR bn) 2,242 2,327 2,432 2,481 2,397 2,476 2,565 2,653 2,744 2,845Economic Growth (GDP, annual var. in %) 0.8 3.4 2.7 1.0 -4.7 3.3 2.2 1.9 1.9 2.1Domestic Demand (ann. var. in %) 0.0 2.4 1.2 1.2 -1.9 2.3 1.6 1.9 1.9 2.2 Private Consumption (ann. var. in %) 0.3 1.4 -0.2 0.7 -0.2 0.1 1.2 1.2 1.6 1.7 Government Consumption (ann. var. in %) 0.4 1.0 1.6 2.3 2.9 - - - - - Fixed Investment (ann. var. in %) 0.9 8.0 4.7 2.5 -10.1 5.4 3.6 2.9 3.9 4.0Industrial Production (ann. var. in %) 2.5 5.3 5.6 0.6 -15.5 9.2 3.6 2.7 3.2 3.3Retail Sales (ann. var. in %) 1.8 1.0 -1.6 2.3 -5.0 - - - - -Car Sales (million) 3.3 3.5 3.1 3.1 3.8 - - - - -Housing Starts (million) 0.24 0.25 0.18 0.17 0.18 - - - - -Disposable Income (ann. var. in %) 1.8 2.4 1.6 3.1 0.4 - - - - -Unemployment (aop, % of active population) 11.7 10.8 9.0 7.8 8.2 7.7 7.3 7.0 6.6 6.3Fiscal Balance (% of GDP) -3.3 -1.6 0.2 0.0 -3.1 -4.2 -3.4 -2.8 -2.2 -1.8Public Debt (% of GDP) 68.0 67.6 65.0 66.0 73.2 78.6 79.9 77.4 79.3 79.8Monetary and Financial Sector Inflation (CPI, annual variation in %) 1.4 1.4 3.1 1.1 0.9 - - - - -Inflation (CPI, annual average variation in %) 1.6 1.6 2.3 2.6 0.3 1.1 1.4 1.5 1.6 1.6Inflation (WPI, annual variation in %) 2.8 3.3 5.9 -4.2 0.2 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.26 3.94 4.34 2.93 3.32 2.63 3.17 3.21 3.73 4.17Stock Market (DAX variation in %) 27.1 22.0 22.3 -40.4 23.8 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) 5.1 6.5 7.7 6.7 4.9 5.1 5.3 5.1 4.6 4.5Current Account Balance (EUR bn) 115 150 188 167 117 126 135 136 127 128Trade Balance (EUR bn) 158 159 198 178 136 159 176 196 215 223Exports (EUR bn) 786 893 977 984 803 939 1,031 1,121 1,214 1,309Imports (EUR bn) 628 734 779 806 667 775 848 921 999 1,086Exports (annual variation in %) 7.5 13.6 9.4 0.7 -18.4 16.9 9.8 8.8 8.2 7.8Imports (annual variation in %) 9.1 16.9 6.1 3.5 -17.2 16.1 9.4 8.6 8.5 8.7

Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -4.4 -2.0 2.0 3.7 3.7 3.9 3.8 1.9 1.7 1.6Economic Growth (GDP, s.a. qoq var. in %) 0.7 0.3 0.5 2.2 0.6 0.5 0.3 0.4 0.4 0.5Domestic Demand (s.a. qoq var. in %) 1.1 -1.6 1.7 1.4 0.3 0.4 0.2 0.2 0.2 0.3 Private Consumption (s.a. qoq var. in %) -1.0 -0.2 -0.1 0.6 0.5 0.3 0.2 0.2 0.2 0.3 Fixed Investment (s.a. qoq var. in %) 0.8 -0.8 1.2 4.7 1.1 1.3 0.4 0.5 0.6 0.7Industrial Production (ann. var. in %) -14.7 -6.4 6.8 13.5 4.7 3.0 3.0 3.4 3.7 4.3Unemployment (aop, % of active population) 8.3 8.1 8.1 7.7 7.5 7.4 7.3 7.3 7.2 7.1Inflation (CPI, annual average variation in %) -0.2 0.4 0.8 1.1 1.2 1.4 1.4 1.4 1.5 1.5ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.3710-year Bond Yield (%, eop) 3.20 3.32 3.10 2.49 2.22 2.63 2.69 2.85 3.01 3.17Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30Current Account Balance (EUR bn) 25.3 47.3 31.7 25.9 35.2 37.9 37.2 37.3 35.9 37.0

Monthly Data Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10Industrial Production (ann. var. in %) 6.0 13.0 13.6 12.6 14.2 7.3 14.4 - - -Industrial Production (s.a. mom var. in %) -0.3 3.7 1.1 2.9 -0.5 0.1 1.7 - - -Retail Sales (ann. var. in %) 1.0 5.8 -3.6 0.2 5.0 2.4 3.1 0.4 - -Unemployment (% of active population) 8.7 8.5 8.1 7.7 7.5 7.6 7.6 7.2 7.0 -GfK Consumer Climate 3.3 3.2 3.4 3.7 3.5 3.6 4.0 4.3 4.9 4.9Ifo Business Climate (2000=100) 95.4 98.3 101.7 101.6 101.9 106.2 106.7 106.8 107.6 -Inflation (CPI, mom variation in %) 0.4 0.5 -0.1 0.1 0.1 0.3 0.0 -0.1 0.1 -Inflation (CPI, annual variation in %) 0.6 1.1 1.0 1.2 0.9 1.2 1.0 1.3 1.3 -Exchange Rate (USD per EUR, eop) 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39 -

| 34




-2

0

2

4

6


2010 2011

0

1

2

3

4

Jul Sep Nov Jan Mar


-1

0

1

2

3

4



-18

-12

-6

0

6

12

1990 1995 2000 2005 2010

Germany G7

-6

-3

0

3

6

1990 1995 2000 2005 2010

Germany G7

World

-2

0

2

4

6

1990 1995 2000 2005 2010

GermanyG7

-4

-2

0

2

4

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

GermanyG7

-1.0

0.0

1.0

2.0


2010 2011






General:Long-term chart period from 1990 to 2014 unless otherwise stated. All realsector data are from the Federal Statistical Office (Destatis, StatistischesBundesamt Deutschland) and the German Central Bank (BBK, DeutscheBundesbank). See below for details. Forecasts based on FocusEconomicsConsensus Forecast.

1 GDP, annual variation in %. Source: Destatis.2 Quarterly GDP (seasonally adjusted), quarter-on-quarter variation in %.Source: Destatis.3 GDP, evolution of 2010 forecasts during the last 18 months.4 GDP, evolution of 2011 forecasts since July 2009.5 Private consumption, annual variation in %. Source: Destatis.6 Gross fixed capital formation, annual variation in %. Source: Destatis.7 Private consumption, change in 2010 and 2011 forecasts since July 2009.8 Gross fixed capital formation, change in 2010 and 2011 forecasts sinceJuly 2009.9 Industrial production, annual variation in %. Source: Destatis.10 Unemployment, % of active population. Source: Destatis.11 Balance of non-financial public sector, % of GDP. Source: BBK.12 Industrial production, evolution of 2010 and 2011 forecasts since July2009.13 Unemployment, evolution of 2010 and 2011 forecasts since July 2009.14 Balance of non-financial public sector, evolution of 2010 and 2011 fore-casts since July 2009.

Notes and sources

Individual Forecasts 2010 2011Allianz 3.3 2.0BBVA 3.2 1.8BHF Bank 3.5 3.0BNP Paribas 3.3 2.1Citigroup 3.4 2.4Commerzbank 3.3 2.0Credit Agricole 3.1 2.1Credit Suisse 3.5 3.2DekaBank 3.4 1.8Deutsche Bank 3.4 1.7DIW Berlin 3.4 2.0DZ Bank 3.6 2.5Experian 3.1 1.9Goldman Sachs 3.1 2.4HWWI 3.4 2.5Ifo Institut 3.5 2.0ING Financial Markets 3.5 2.0Intesa Sanpaolo 3.2 2.2JPMorgan 3.3 2.4Kiel Institute 3.4 1.7M.M.Warburg & CO 3.3 1.8Nomura 3.3 2.5Raiffeisen Research 3.3 2.0UBS 3.3 2.2Unicredit 3.2 1.9Summary Minimum 3.1 1.7Maximum 3.6 3.2Median 3.3 2.0Consensus 3.3 2.2History 30 days ago 3.1 2.060 days ago 2.4 1.990 days ago 2.0 1.8Additional Forecasts European Comission (Sep. 2010) 3.4 1.6IMF (Oct. 2010) 3.3 2.0Central Bank (Aug. 2010) 3.0 -

| 35




-7

-6

-5

-4

-3


2010 2011

-5

0

5

10


2010 2011

7

8

9

10

11


2010 2011

-20

-10

0

10

1990 1995 2000 2005 2010

Germany G7

4

6

8

10

12

1990 1995 2000 2005 2010

Germany G7-10

-5

0

5

1990 1995 2000 2005 2010

Germany G7







Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Allianz 0.2 1.3 - - 10.6 4.4 7.7 7.0 -3.9 -2.8 - -BBVA 0.0 0.9 5.3 2.8 - - - - - - - -BHF Bank 0.2 1.7 5.3 2.9 - - 7.7 7.2 -4.2 -3.5 - -BNP Paribas 0.0 1.4 4.7 3.1 9.4 2.3 7.7 7.4 -4.2 -3.8 - -Citigroup 0.0 2.2 6.3 6.4 - - - - -4.0 -2.9 88.8 89.1Commerzbank 0.1 1.1 5.6 6.7 - - 7.7 7.2 -5.6 -4.5 - -Credit Agricole - - - - - - 7.7 7.2 -4.2 -3.2 75.4 76.7Credit Suisse - - - - - - - - -4.3 -3.2 78.8 81.6DekaBank 0.0 0.9 6.0 2.3 - - 7.7 7.7 -5.5 -4.8 - -Deutsche Bank 0.0 0.5 5.2 2.0 - - 7.8 7.6 -3.9 -3.0 - -DIW Berlin 0.1 1.1 5.7 3.8 - - 7.7 7.5 -4.0 -3.3 - -DZ Bank 0.2 1.7 6.4 4.3 - - 7.7 6.9 -3.7 -3.1 - -Experian -0.2 0.7 5.5 3.0 - - 7.7 - -5.2 -4.0 - -Goldman Sachs - - - - 6.1 3.6 - - -3.6 -2.8 - -HWWI 0.0 1.5 5.1 2.7 10.0 4.0 7.5 7.0 -3.4 -2.1 - -Ifo Institut 0.1 1.4 5.7 3.3 - - 7.7 7.0 -3.8 -2.7 - -ING Financial Markets -0.1 0.8 5.2 3.0 - - 7.7 7.4 -3.3 -3.1 - -Intesa Sanpaolo 0.0 1.0 4.5 3.3 8.8 3.0 7.8 7.7 -4.4 -4.1 - -JPMorgan - - - - - - - - - - - -Kiel Institute 0.6 2.2 5.2 2.9 - - 7.7 7.0 -3.9 -3.4 74.7 75.5M.M.Warburg & CO 0.0 1.0 - - 9.7 3.4 7.8 7.3 -4.3 -3.2 73.5 74.0Nomura 0.0 1.3 6.0 4.6 - - 7.9 7.9 -4.4 -3.7 77.1 78.6Raiffeisen Research - - - - - - - - -5.0 -4.7 78.8 81.6UBS -0.1 0.9 5.0 4.5 10.0 4.5 7.7 7.5 -4.8 -3.8 75.0 76.3Unicredit 0.0 1.1 5.0 2.4 - - 7.7 7.2 -3.5 -2.6 85.0 86.0Summary Minimum -0.2 0.5 4.5 2.0 6.1 2.3 7.5 6.9 -5.6 -4.8 73.5 74.0Maximum 0.6 2.2 6.4 6.7 10.6 4.5 7.9 7.9 -3.3 -2.1 88.8 89.1Median 0.0 1.1 5.3 3.1 9.7 3.6 7.7 7.3 -4.2 -3.2 77.1 78.6Consensus 0.1 1.2 5.4 3.6 9.2 3.6 7.7 7.3 -4.2 -3.4 78.6 79.9History 30 days ago -0.2 1.0 4.4 3.3 8.4 3.3 7.7 7.4 -4.5 -3.6 76.7 77.760 days ago -0.8 0.8 2.0 3.1 7.3 3.5 7.8 7.5 -4.8 -4.0 76.9 79.090 days ago -0.9 0.7 1.7 3.1 6.8 3.7 7.9 7.6 -4.9 -4.1 76.5 78.8

Unemployment % of active pop.

Public Debt % of GDP

Fiscal Balance % of GDP

Industry % variation

Consumption% variation

Investment % variation

| 36



-1

0

1

2

3



0

1

2

3



-2

0

2

4

6

1990 1995 2000 2005 2010

Germany G7

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


2

3

4

5

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

FranceGermanyItaly

0

4

8

12

16

1990 1995 2000 2005 2010

FranceGermanyItaly

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

Germany G7

Inflation and Interest Rate 16 | Inflation | Q1 07 - Q4 11 | in % 15 | Inflation | 1990 - 2014 | in %

19 | 10-year Bond Rate | 1990 - 2014 20 | 10-year Bond Rate | Q1 07 - Q4 11

21 | Policy Rate | Q1 07 - Q4 11 22 | 3-month Rate | Q1 07 - Q4 11



Notes and sources

General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allmonetary sector data are from the Federal Statistical Office (Destatis,Statistisches Bundesamt Deutschland), the German Central Bank (BBK,Deutsche Bundesbank), Bank of France (BdF, Banque de France), Fed-eral Reserve Board (Fed), Bank of Japan (BoJ), and the European Cen-tral Bank (ECB). See below for details. Forecasts based on FocusEconomicsConsensus Forecast.

15 Inflation, annual average variation in consumer price index (CPI) in%. Source: Destatis.16 Quarterly inflation, year-on-year variation in consumer price index(CPI) in %. Source: Destatis.17 Inflation, evolution of 2010 forecasts during the last 18 months.18 Inflation, evolution of 2011 forecasts since July 2009.19 10-year benchmark bond yield (eop). Source: BBK, BdF, ECB.20 10-year benchmark bond yield (eop). Source: BBK, BdF, ECB.21 Policy rate (eop). Source: BoJ, ECB, Fed.22 3-month market rate (eop). Source: BoJ, ECB, Fed.

Individual Forecasts 2010 2011 2010 2011Allianz 1.1 1.5 2.70 3.10BBVA 1.1 1.3 - -BHF Bank 1.0 1.3 - -BNP Paribas 1.1 1.4 2.30 2.70Citigroup 1.2 1.7 2.50 3.00Commerzbank 0.9 1.4 2.00 3.00Credit Agricole 1.2 1.5 2.70 3.75Credit Suisse 1.4 1.4 - -DekaBank 1.1 1.6 2.30 3.20Deutsche Bank 1.2 1.5 3.60 -DIW Berlin 1.1 1.5 3.30 3.60DZ Bank 1.1 1.4 - -Experian 1.0 1.2 3.40 -Goldman Sachs 1.1 1.5 3.30 3.80HWWI 1.0 1.5 2.40 3.00Ifo Institut 1.1 1.6 - -ING Financial Markets 1.0 1.6 2.40 3.00Intesa Sanpaolo 1.1 1.4 2.22 2.80JPMorgan 1.1 0.7 2.30 -Kiel Institute 1.1 1.6 - -M.M.Warburg & CO 1.0 1.2 2.70 3.20Nomura 1.1 1.7 - -Raiffeisen Research 1.1 1.2 - -UBS 1.2 2.0 2.40 3.20Unicredit 1.1 1.4 2.25 3.00Summary Minimum 0.9 0.7 2.00 2.70Maximum 1.4 2.0 3.60 3.80Median 1.1 1.5 2.40 3.05Consensus 1.1 1.4 2.63 3.17History 30 days ago 1.1 1.4 2.67 3.3460 days ago 1.1 1.4 2.95 3.5890 days ago 1.1 1.4 3.06 3.68Additional Forecasts Euro. Comm. (Sep. 2010) 1.1 1.5 - -IMF (Oct. 2010) 1.3 1.4 - -Central Bank (Aug. 2010) 1.2 1.6 - -

Consumer Prices 10-year Bond variation in % Rate in %

| 37




-40

-20

0

20

40

1990 1995 2000 2005 2010

Germany G7

0

50

100

150

200

250



0

50

100

150

200



0

300

600

900

1,200

1,500

1990 1995 2000 2005 2010


-20

-10

0

10

20

30

1990 1995 2000 2005 2010

Germany G7

-50

0

50

100

150

200

1990 1995 2000 2005 2010-3

0

3

6

9

1990 1995 2000 2005 2010

Germany G7

20

30

40

50

60

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11







Individual Forecasts 2010 2011Allianz 127 144BBVA - -BHF Bank 125 160BNP Paribas 136 141Citigroup 128 125Commerzbank 130 151Credit Agricole 111 141Credit Suisse 119 123DekaBank 92 87Deutsche Bank 134 128DIW Berlin 123 123DZ Bank 140 135Experian 138 160Goldman Sachs 106 87HWWI 125 140Ifo Institut 128 142ING Financial Markets - -Intesa Sanpaolo 135 153JPMorgan - -Kiel Institute - -M.M.Warburg & CO 130 150Nomura - -Raiffeisen Research 130 116UBS 140 186Unicredit 119 113Summary Minimum 92 87Maximum 140 186Median 128 140Consensus 126 135History 30 days ago 126 13460 days ago 129 13790 days ago 130 138

Notes and sources

General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allexternal sector data are from the Deutsche Bundesbank. Forecasts basedon FocusEconomics Consensus Forecast.

23 Current account balance as % of GDP.24 Current account balance in EUR bn.25 Current account in EUR bn, evolution of 2010 forecast during the last18 months.26 Current account in EUR bn, evolution of 2011 forecast since July2009.27 Quarterly current account balance, in EUR bn.28 Trade balance, imports and exports, in EUR bn.29 Exports, annual variation in %.30 Imports, annual variation in %.

| 38

Italy November 2010FOCUSECONOMICS


ItalyOutlook improves


Italy


• On 14 October, the government approved the draft budget for nextyear. The budget paves the way for a series of spending cuts and taxincreases totalling EUR 25 billion, which were already approved bythe parliament during the summer, including a wage-freeze in thepublic sector.

• Amid a continued recovery in industrial production and strong read-ings in business and consumer sentiment, Consensus Forecastpanellists lifted last month’s growth estimate by 0.1 percentage pointsand now see the economy growing 1.1% in 2010. For 2011, the panelexpects the economy to grow 1.1%.

• Preliminary data for October show inflation inching up fromSeptember’s 1.6% to 1.7%. Panellists see inflation averaging 1.6% in2010, unchanged from last month’s forecast. Next year, panellistssee inflation averaging 1.7%.

REAL SECTOR | Industrial production rises unexpectedlyIn August, industrial output increased 1.6% over the month before in season-ally-adjusted terms. The figure came in above the 0.3% increase recorded inJuly and contrasted market expectations of a 0.1% drop.

At a sector level, the improvement compared to the previous month was led bythe all-important manufacturing sector, the only one to record a better perfor-mance compared to July. Manufacturing jumped 2.0% over the previous month,up from the 0.2% month-on-month increase recorded in July. Mining and quar-rying dropped 4.0% mom, contrasting the 4.8% mom increase recorded in Julyand, finally electricity, gas and water supply fell 2.8% mom (July: +5.4% mom).

On an annual basis, industrial output rose a calendar adjusted 9.5%, whichwas up from the previous month’s 5.6% increase. The result marked the sharpestincrease since December 1997, but was favoured by a low calculation base,as industrial output had plunged 18.0% in August 2009. As a consequence ofthe positive monthly reading, the trend continued to improve, as the annualaverage growth in industrial production stepped up from minus 1.9% in July tominus 0.5%.

Consensus Forecast panellists see industrial production growing 5.7% this year,which is 0.7 points above last month’s projection. For 2011, panellists see in-dustrial production growing 2.4%.

OUTLOOK | Consumer confidence surprises to the upsideThe index of consumer sentiment from the Institute for Studies and EconomicAnalyses (ISAE, Istituto di Studi e Analisi Economica) jumped from 107.2 pointsin September to 107.7 points in October, a result that surprised market ana-lysts, which had seen confidence dropping to 106.5 points. The monthly figure

2000-04 2005-09 2010-14Population (million): 57.2 59.2 60.7GDP (EUR bn): 1,292 1,510 1,638GDP per capita (EUR): 22,581 25,516 27,005GDP growth (%): 1.5 -0.4 1.2Fiscal Balance (% of GDP): -2.8 -3.4 -3.9Public Debt (% of GDP): 106 108 121Inflation (%): 2.5 2.1 1.8Current Account (% of GDP): -0.7 -2.7 -2.7


Note: Month-on-month changes of seasonally adjusted industrial productionand annual average growth rate in %.Source: National Statistical Institute (ISTAT) and FocusEconomicscalculations.

-1.9

1.0

0.5 0.3 0.2

1.0

0.60.3

1.01.1

1.9

-0.7

1.6

-3.0

-1.5

0.0

1.5

3.0


%

-20

-15

-10

-5

0

5

%



| 39



marked the strongest confidence result since the beginning of the year, butnonetheless confirmed that confidence remains below its long-term averagevalue of 113.

The consumer sentiment gauge rose, as households maintained a more up-beat assessment of the country’s economic situation. In particular, the generalindex relative to the opinion on the country’s situation inched up compared tothe previous month, while short-term expectations and expectations relative tothe developments in the labour market were unchanged compared to the pre-vious month. On the other hand, respondents to the survey expressed a lessupbeat assessment of their personal finances, as more households expectedtheir personal financial situation to deteriorate in the months to come, leadingto deteriorating prospects on purchases of durable goods.

OUTLOOK | Business confidence unexpectedly rises in OctoberIn October, the manufacturing sentiment index published by the Institute forStudies and Economic Analyses (ISAE, Istituto di Studi e Analisi Economica)rose to 99.8 points. The figure came up from the revised 98.6 points recordedin August (previously reported: 98.4 points) and confirmed the upward trend inbusiness sentiment in place since March 2009. The result contrasted marketexpectations, which had seen business sentiment inching down to 98.5, andmarked the strongest result since May 2008, thus confirming the notion thatbusiness confidence is now back to pre-crisis levels.

According to ISAE, the improvement in business sentiment was led by a moreoptimistic assessment of demand, in particular from the external sector. In ad-dition, the evaluation of current production improved compared to the previousmonth. Meanwhile, businesses’ expectations relative to future production con-tinued to rise, as manufacturers expect orders to increase going forward. Fi-nally, contrasting the positive outlook on production expectations, respondentsto the survey maintain less optimistic opinions relative to the developments ofthe general economy in the months to come.

The Ministry of the Economy sees the economy growing 1.2% this year and1.3% in 2011, while the Central Bank is less optimistic and sees the economyexpanding 1.0% both in 2010 and 2011. Consensus Forecast panellists seethe economy expanding 1.1% in 2010, which is up 0.1 percentage points fromlast month’s forecast. The panel expects a 1.1% increase also in 2011, which isunchanged from last month’s forecast.

MONETARY SECTOR | Inflation inches up in OctoberAccording to a preliminary report released on 29 October, consumer prices(including tobacco) rose 0.2% over the previous month in October, which con-trasted the 0.2% price drop recorded in September. As a result of the monthlyincrease, annual inflation inched up from September’s 1.6% to 1.7%, slightlyabove market expectations which saw inflation remaining unchanged.

Higher prices for alcoholic beverages as well as for education were the maindrivers behind the monthly price increase. Meanwhile, annual averageharmonised inflation (HICP) increased from 1.3% in September to 1.5%, whichis the highest level since August 2009.

Consensus Forecast panellists expect inflation to average 1.6% this year, whichis unchanged from last month’s forecast. Next year, panellists see inflationaveraging 1.7%, which also unchanged from last month’s forecast.

Business Confidence

Note: Value of monthly business confidence index.Source: Institute for Studies and Economic Analyses (ISAE).

60

80

100

120


Poin

ts

Note: Monthly consumer confidence index; long-term average at 113.Source: Institute for Studies and Economic Analyses (ISAE).

Consumer Confidence

90

100

110

120


long-term average

Poin

ts


Note: Year-on-year and month-on-month var. of consumer price index in %.Source: National Statistical Institute (ISTAT).

0.1

0.0

0.1

0.4

0.1

0.0

0.2

-0.2

0.2

0.4

0.2

0.3

0.1

-0.4

-0.2

0.0

0.2

0.4


%

0.0

0.5

1.0

1.5

2.0

%



| 40




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 58.5 58.8 59.1 59.6 59.9 60.1 60.4 60.7 60.9 61.2GDP per capita (EUR) 24,451 25,282 26,148 26,298 25,401 25,616 26,233 26,930 27,714 28,533GDP (EUR bn) 1,429 1,485 1,546 1,568 1,521 1,540 1,584 1,633 1,688 1,745Economic Growth (GDP, annual var. in %) 0.8 2.1 1.4 -1.3 -5.1 1.1 1.1 1.2 1.4 1.4Domestic Demand (annual variation in %) 1.3 1.5 1.1 -1.2 -3.5 0.7 0.7 0.9 1.5 1.3 Private Consumption (annual var. in %) 1.1 1.2 1.1 -0.8 -1.8 0.5 0.7 1.1 1.5 1.6 Government Consumption (ann. var. in %) 1.9 0.5 0.9 0.8 0.6 - - - - - Fixed Investment (annual variation in %) 1.4 3.1 1.3 -4.0 -12.2 1.5 1.3 2.0 2.6 2.9Industrial Production (annual variation in %) -0.7 3.5 1.8 -3.5 -17.5 5.7 2.4 2.1 1.7 1.7Retail Sales (annual variation in %) 1.0 2.0 1.1 -2.3 -0.2 - - - - -Car Registrations (mn) 2.2 2.3 2.5 2.2 2.2 - - - - -Disposable Income (annual var. in %) 2.5 3.7 3.4 0.0 -2.5 -1.1 0.2 0.8 1.0 1.0Hourly Wages (annual % var.) 2.5 3.1 2.2 3.7 3.0 1.8 2.1 2.6 2.8 2.8Unemployment (aop, % of active population) 7.7 6.8 6.1 6.8 7.8 8.5 8.6 8.1 8.1 7.7Fiscal Balance (% of GDP) -4.3 -3.3 -1.5 -2.7 -5.3 -5.0 -4.3 -3.7 -3.5 -3.2Public Debt (% of GDP) 106 107 104 106 116 119 120 121 122 122Monetary and Financial Sector Inflation (CPI, annual average var. in %) 2.0 2.1 1.8 3.3 0.8 - - - - -Inflation (HICP, annual variation in %) 2.1 2.1 2.8 2.4 1.1 - - - - -Inflation (HICP, annual average var. in %) 2.2 2.2 2.0 3.5 0.8 1.6 1.7 1.9 1.9 2.0Inflation (PPI, annual variation in %) 3.5 3.6 5.3 -0.5 -1.5 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.92Benchmark BTP 10-year Yield (%, eop) 3.50 4.21 4.67 4.49 4.12 3.75 3.99 4.37 5.09 5.51Stock Market (var. of FTSE MIB in %) 15.5 16.0 -7.0 -49.5 19.5 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) -1.7 -2.6 -2.4 -3.6 -3.2 -3.2 -2.7 -2.6 -2.5 -2.3Current Account Balance (EUR bn) -23.6 -38.3 -37.7 -56.8 -49.4 -49.6 -43.5 -41.7 -42.0 -39.8Trade Balance (EUR bn) 0.5 -10.2 3.2 -2.1 1.7 2.1 7.2 11.8 10.1 11.0Exports (EUR bn) 299 333 366 370 292 316 335 359 383 406Imports (EUR bn) 299 343 362 372 291 312 327 347 374 395Exports (annual variation in %) 5.7 11.1 9.9 1.1 -20.9 8.2 6.0 7.0 6.9 5.8Imports (annual variation in %) 8.9 14.8 5.7 2.6 -21.9 7.3 4.7 6.3 7.7 5.7

Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -4.7 -2.8 0.5 1.3 1.1 1.2 1.2 1.1 1.1 1.3Economic Growth (GDP, s.a. qoq var. in %) 0.4 -0.1 0.4 0.5 0.3 0.3 0.3 0.3 0.4 0.5Unemployment (aop, % of active population) 7.4 7.8 8.1 8.3 8.3 8.4 8.4 8.3 8.2 8.1Inflation (HICP, annual average var. in %) 0.1 0.7 1.3 1.6 1.7 1.7 1.6 1.5 1.6 1.7ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.37Benchmark BTP 10-year Yield (%, eop) 4.10 4.12 3.98 4.10 3.88 3.75 3.81 3.90 3.98 3.99Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30

Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) -0.5 3.3 7.3 7.9 7.6 8.3 5.6 9.5 - -Industrial Production (s.a. mom var. in %) 1.9 0.3 0.2 1.0 1.0 0.6 0.3 1.6 - -Retail Sales (annual variation in %) -0.9 -0.3 0.2 -0.2 -0.8 0.5 0.7 0.6 - -Cons. Confidence Index (long-term avg. 113) 111.6 107.6 106.3 107.8 105.4 104.5 105.6 104.1 107.2 107.7Business Confidence Index 93.2 94.7 95.3 95.9 96.2 96.3 98.1 99.4 98.6 99.8Inflation (CPI, mom variation in %) 0.1 0.1 0.3 0.4 0.1 0.0 0.4 0.2 -0.2 0.2Inflation (CPI, annual variation in %) 1.3 1.2 1.4 1.5 1.4 1.3 1.7 1.6 1.6 1.7Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 41



-3

-2

-1

0

1

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

Italy

G7


-6

-3

0

3

6

1990 1995 2000 2005 2010

Italy G7 World

-20

-10

0

10

1990 1995 2000 2005 2010

Italy

G7

-4

-2

0

2

4

1990 1995 2000 2005 2010

Italy

G7

-2

0

2

4


2010

2011

-1

0

1

2


2010

2011

-1

0

1

2

3



-1

0

1

2

3



2 | Real GDP | Q1 07-Q4 11 | % variation





Individual Forecasts 2010 2011BBVA 1.1 0.8BMO Capital Markets 1.1 1.6BNP Paribas 1.1 0.5Citigroup 1.1 1.0Commerzbank 1.1 1.3Confindustria 1.2 1.3Credit Agricole 1.0 0.9Credit Suisse 1.2 2.0DekaBank 1.2 1.3Deutsche Bank 1.1 0.9DZ Bank 1.0 0.8Experian 1.0 1.0Goldman Sachs 1.2 1.5Gruppo MPS 0.9 1.0ING 1.0 0.8Intesa Sanpaolo 1.0 1.2ISAE 1.0 1.4JPMorgan 1.2 1.3Lloyds TSB 0.8 0.9Nomura 1.1 1.0Raiffeisen Research 1.0 0.9ref. 1.1 0.7UBS 1.1 1.6Unicredit 1.0 1.1Summary Minimum 0.8 0.5Maximum 1.2 2.0Median 1.1 1.0Consensus 1.1 1.1History 30 days ago 1.0 1.160 days ago 0.9 1.190 days ago 0.9 1.1Additional Forecasts European Commission (Sep. 2010) 1.1 -IMF (Oct. 2010) 1.0 1.0Central Bank (July 2010) 1.0 1.0

Real GDP growth in %

General:Long-term chart period from 1990 to 2014 unless otherwise stated. All realsector data are from the National Statistical Institute (ISTAT, IstitutoNazionale di Statistica) and the Bank of Italy (BdI, Banca d’Italia). Seebelow for details. Forecasts based on FocusEconomics Consensus Fore-cast.

1 GDP, annual variation in %. Source: ISTAT.2 Quarterly GDP (seasonally adjusted), quarter-on-quarter variation in %.Source: ISTAT.3 GDP, evolution of 2010 forecasts during the last 18 months.4 GDP, evolution of 2011 forecasts since July 2009.5 Private consumption, annual variation in %. Source: ISTAT.6 Gross fixed investment, annual variation in %. Source: ISTAT.7 Private consumption, change in 2010 and 2011 forecasts since July2009.8 Gross fixed investment, change in 2010 and 2011 forecasts since July2009.9 Industrial production, annual variation in %. Source: ISTAT.10 Unemployment, % of active population. Source: ISTAT.11 Balance of non-financial public sector, % of GDP. Source: BdI.12 Industrial production, evolution of 2010 and 2011 forecasts since July2009.13 Unemployment, evolution of 2010 and 2011 forecasts since July 200914 Balance of non-financial public sector, evolution of 2010 and 2011forecasts since July 2009.

Notes and sources

| 42



8.0

8.5

9.0

9.5

10.0


20102011

4

6

8

10

12

1990 1995 2000 2005 2010

ItalyG7

-20

-10

0

10

1990 1995 2000 2005 2010

Italy

G7

-6.0

-5.5

-5.0

-4.5

-4.0


20102011

0

2

4

6


20102011

-12

-9

-6

-3

0

1990 1995 2000 2005 2010

ItalyG7








Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011BBVA 0.6 0.7 1.4 1.6 - - - - - - - -BMO Capital Markets - - - - - - 8.3 8.0 - - - -BNP Paribas 0.4 0.2 2.3 -1.0 5.4 1.3 8.7 9.5 -5.0 -4.3 - -Citigroup 0.4 0.5 1.0 0.7 - - 8.7 8.9 -4.8 -4.8 118 120Commerzbank - - - - - - - - - - - -Confindustria 0.4 0.7 2.7 3.4 - - 8.6 9.1 -5.1 -4.1 119 119Credit Agricole - - - - - - 8.5 8.5 -4.6 -3.9 119 121Credit Suisse - - - - - - - - -4.6 -3.6 - -DekaBank - - - - - - - - -5.1 -4.0 - -Deutsche Bank - - - - - - 8.6 8.7 -4.9 -3.3 - -DZ Bank 0.5 1.0 1.4 1.1 - - 8.5 8.3 -5.0 -4.7 119 119Experian 0.5 0.7 0.3 1.4 - - 8.5 8.7 -5.2 -4.5 - -Goldman Sachs - - - - - - - - -4.9 -3.8 - -Gruppo MPS 0.5 0.6 1.4 -0.4 - - 8.2 8.0 -5.4 -5.1 - -ING 0.4 0.5 2.1 1.1 - - 8.5 8.4 -5.1 -4.5 - -Intesa Sanpaolo 0.4 1.1 1.8 1.0 6.7 3.1 8.5 8.4 -5.0 -4.2 - -ISAE 0.8 1.1 0.9 2.8 - - 8.8 8.8 - - - -JPMorgan - - - - - - - - - - - -Lloyds TSB 0.3 0.6 0.3 0.3 5.5 3.2 - - -5.2 -5.3 - -Nomura 0.5 0.7 2.4 2.0 - - 8.6 8.5 -5.3 -4.7 118 119Raiffeisen Research - - - - - - 8.4 8.3 -5.1 -3.9 118 119ref. 0.1 0.3 1.5 1.3 - - - - -5.3 -4.8 119 121UBS 0.8 1.1 1.4 4.0 5.2 1.9 8.5 8.5 -4.7 -3.2 118 120Unicredit 0.4 0.7 1.1 0.8 - - 8.4 8.5 -5.0 -4.3 119 119Summary Minimum 0.1 0.2 0.3 -1.0 5.2 1.3 8.2 8.0 -5.4 -5.3 118 119Maximum 0.8 1.1 2.7 4.0 6.7 3.2 8.8 9.5 -4.6 -3.2 119 121Median 0.4 0.7 1.4 1.1 5.5 2.5 8.5 8.5 -5.0 -4.3 119 119Consensus 0.5 0.7 1.5 1.3 5.7 2.4 8.5 8.6 -5.0 -4.3 119 120History 30 days ago 0.5 0.8 1.1 1.7 5.0 1.8 8.6 8.7 -5.0 -4.2 119 12060 days ago 0.5 0.9 0.5 1.6 3.7 1.8 8.7 8.8 -5.1 -4.3 119 12090 days ago 0.4 0.9 0.5 1.5 3.7 1.8 8.7 8.8 -5.1 -4.3 - -


Public Debt% of GDP


Industry% variation



| 43




0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


2

3

4

5

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

Italy

Germany0

3

6

9

12

15

1990 1995 2000 2005 2010

Italy

Germany

0

1

2

3

4



0

1

2

3



-2

0

2

4

6

8

1990 1995 2000 2005 2010

ItalyG7

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

Italy

G7

Notes and sources

Inflation and Interest Rate 16 | Inflation | Q1 07-Q4 11 | in % 15 | Inflation | 1990 - 2014 | in %

19 | 10-year Bond Yield | 1990-2014 20 | 10-year Bond Yield | Q1 07-Q4 11

21 | Policy Rate | Q1 07-Q4 11 | in % 22 | Benchmark Rate | Q1 07-Q4 11


General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allmonetary sector data are from the National Statistical Institute (ISTAT,Istituto Nazionale di Statistica), Bank of Italy (BdI, Banca d’Italia), FederalReserve Board (Fed), Bank of Japan (BoJ) and the European CentralBank (ECB). See below for details. Forecasts based on FocusEconomicsConsensus Forecast.

15 Inflation, annual average variation in harmonized index ofconsumer prices (HICP) in % (aop). Source: ISTAT.16 Quarterly inflation, year-on-year variation in harmonized index ofconsumer prices (HICP) in % (aop). Source: ISTAT.17 Inflation, evolution of 2010 forecasts during the last 18 months.18 Inflation, evolution of 2011 forecasts since July 2009.19 10-year benchmark bond yield (eop). Source: ECB, BdI.20 Quarterly 10-year benchmark bond yield (eop). Source: ECB, BdI.21 Quarterly policy rate in % (eop). Source: ECB, Fed, BoJ.22 Quarterly 3-month benchmark rate in % (eop). Source: ECB, Fed,BoJ.

Individual Forecasts 2010 2011 2010 2011BBVA 1.6 1.8 - -BMO Capital Markets 1.5 1.7 - -BNP Paribas 1.6 1.8 3.85 4.10Citigroup 1.7 1.6 4.10 4.10Commerzbank 1.4 1.5 - -Confindustria 1.5 1.9 - -Credit Agricole 1.6 1.4 - -Credit Suisse 1.9 1.9 - -DekaBank 1.5 1.4 - -Deutsche Bank 1.6 1.9 - -DZ Bank 1.5 1.2 - -Experian 1.5 1.7 - -Goldman Sachs 1.6 1.8 - -Gruppo MPS 1.6 1.9 4.25 4.65ING 1.6 1.9 - -Intesa Sanpaolo 1.5 1.6 3.47 3.47ISAE 1.6 2.0 - -JPMorgan 1.7 1.5 - -Lloyds TSB 1.6 1.8 - -Nomura 1.6 2.1 - -Raiffeisen Research 1.5 1.7 - -ref. 1.5 1.6 - -UBS 1.5 1.9 3.00 3.84Unicredit 1.5 1.9 3.80 3.80Summary Minimum 1.4 1.2 3.00 3.47Maximum 1.9 2.1 4.25 4.65Median 1.6 1.8 3.83 3.97Consensus 1.6 1.7 3.75 3.99History 30 days ago 1.6 1.7 3.88 4.0960 days ago 1.6 1.7 4.12 4.4390 days ago 1.5 1.7 4.19 4.49Additional Forecasts Eur. Comm. (Sep. 2010) 1.6 - - -IMF (Oct. 2010) 1.6 1.7 - -Central Bank (July 2010) 1.5 1.9 - -

Consumer Prices 10-year Bond% var. Rate in %

| 44




-20

-15

-10

-5

0

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

-6

-3

0

3

6

1990 1995 2000 2005 2010

Italy

G7

-30

0

30

60

1990 1995 2000 2005 2010

Italy G7

-75

-50

-25

0



-75

-60

-45

-30

-15



-200

0

200

400

600

1990 1995 2000 2005 2010


-60

-40

-20

0

20

40

1990 1995 2000 2005 2010

-30

-15

0

15

30

1990 1995 2000 2005 2010

Italy G7

General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allexternal sector data are from the Bank of Italy (BdI, Banca d’Italia).Forecasts based on FocusEconomics Consensus Forecast.

23 Current account balance as % of GDP.24 Current account balance in EUR bn.25 Current account in EUR bn, evolution of 2010 forecast during thelast 18 months.26 Current account in EUR bn, evolution of 2011 forecast since July2009.27 Quarterly current account balance, in EUR bn.28 Trade balance, imports and exports, in EUR bn.29 Exports, annual variation in %.30 Imports, annual variation in %.



Notes and sources





Individual Forecasts 2010 2011BBVA - -BMO Capital Markets - -BNP Paribas -45.6 -38.4Citigroup -45.5 -32.8Commerzbank - -Confindustria -56.0 -55.5Credit Agricole -49.9 -44.7Credit Suisse -50.2 -47.2DekaBank -50.0 -46.5Deutsche Bank -56.2 -51.4DZ Bank - -Experian -43.7 -38.5Goldman Sachs -43.8 -29.1Gruppo MPS -49.1 -47.6ING - -Intesa Sanpaolo -51.4 -31.9ISAE - -JPMorgan - -Lloyds TSB -48.3 -46.4Nomura - -Raiffeisen Research -53.0 -48.0ref. -53.1 -46.3UBS - -Unicredit -48.3 -48.2Summary Minimum -56.2 -55.5Maximum -43.7 -29.1Median -49.9 -46.4Consensus -49.6 -43.5History 30 days ago -47.3 -42.160 days ago -44.7 -39.090 days ago -43.9 -38.8

| 45

Spain November 2010FOCUSECONOMICS


2000-04 2005-09 2010-14Population (million): 41.9 45.4 47.9GDP (EUR bn): 733 1,017 1,120GDP per capita (EUR): 17,469 22,396 23,349GDP growth (%): 3.6 1.7 1.0Fiscal Balance (% of GDP): -0.5 -2.1 -6.0Public Debt (% of GDP): 52.4 42.3 74.5Inflation (%): 3.2 2.7 1.5Current Account (% of GDP): -4.0 -8.3 -3.8

SpainOutlook stable


Spain


• The economic recovery remains fragile, even though thegovernment’s commitment to cut the fiscal deficit to 6.0% of GDP in2011 should restore some confidence in the country’s public finances.Meanwhile, labour market figures improved for the first time sincethe third quarter of 2007, as the unemployment rate fell from 20.1% inthe second quarter to 19.8% in the third.

• Consensus Forecast panellists expect GDP to contract 0.4% this year,which is unchanged from last month’s forecast. For 2011, the panelexpects the economy to grow 0.4%.

• Preliminary figures show that inflation rose from 2.0% in Septemberto 2.2% in October. Panellists expect inflation to average 1.6% thisyear, which is unchanged from last month’s forecast. In 2011, thepanel sees inflation inching down to 1.4%.

REAL SECTOR | Industrial production rebounds in AugustIn August, industrial production expanded 3.2% over the same month lastyear, which contrasted the 1.6% drop registered in July. On a working-dayadjusted basis, industrial output expanded 1.4% year-on-year, bouncing backfrom the 0.1% fall recorded in July (previously reported: +0.5% year-on-year)and beating market expectations, which had anticipated industrial outputadding 0.2%.

The August expansion was driven by a rebound in the manufacturing sector,which expanded 3.4% in annual terms (July: -2.7% yoy). Mining expanded astrong 14.1% (July: +3.0% yoy) and, finally, production of electricity, gas, steamand air conditioning increased 1.0% (July: +2.1% yoy).

On a use-based classification, intermediate and none-durable consumergoods were the main drivers behind the August expansion. Capital goodsproduction, in contrast, contracted over the same month last year.

Due to the robust monthly reading, the trend continues to improve, with theannual average variation in industrial production stepping up from minus2.9% in July to minus 2.0% in August. Consensus Forecast participantsexpect industrial output to expand 0.5% this year. For 2011, the panel seesindustrial production expanding 0.9%.

The Spanish Central Bank anticipates that the economy will contract 0.4%this year and will return to growth in 2011 with a 0.8% expansion. ConsensusForecast panellists share this assessment and anticipate GDP contracting0.4% this year, which is unchanged from last month’s forecast. In 2011, thepanel expects the economy to grow 0.4%.


Note: Year-on-year and annual average variation of industrial production index.Source: National Statistical Institute (INE) and FocusEconomics calculations.

-12.8

-4.0

-1.5 -1.9

6.85.1

3.23.23.0

-1.6

-10.6-12.7

-5.0

-20.0

-10.0

0.0

10.0


%

Year-on-year Annual average

| 46



OUTLOOK | Business confidence drops in the third quarterIn October, the quarterly business confidence index (ICE, Indicador deConfianza Empresarial) published by the Association of Chambers ofCommerce (Consejo Superior de Cámaras de Comercio) reached minus17.3 points, which was down from the minus 14.8 points recorded in July. Atthe current level, the index remains well below the 0-point threshold thatseparates optimistic from pessimistic territory. Nonetheless, businesssentiment is still higher than the trough reached in April 2009, when the indexfell to minus 27.6 points.

The deterioration in business confidence was the result of a decline in thecurrent situation sub-index, which dropped from minus 17.1 points in July tominus 21.5 points in October, amid worse perceptions regarding investmentand unemployment. In addition, the expectations sub-index for the next threemonths also fell, from minus 11.8 points in July to minus 12.6 points inOctober, amid deteriorating perceptions regarding the future price levels.

MONETARY SECTOR | Inflation accelerates in SeptemberIn September, consumer prices increased 0.1% over the previous month,which came in below the 0.3% price rise recorded in August. In spite of thesmall price increase, annual inflation rose from 1.8% in August to 2.1%,which was a notch above the 2.0% preliminary estimate released by theStatistical Institute on 29 September.

The monthly price rise was mainly driven by higher prices for clothing andfootwear (+3.7% month-on-month). However, the rise was partially offset by adecline of prices for leisure and recreation (-2.8% mom) as well as a drop inprices in hotels and restaurants (-1.0% mom).

Meanwhile, the core inflation index, which does not include prices forunprocessed food and energy, remained flat over the previous month, liftingannual core inflation from 1.0% in August to 1.1% in September.

More recent data point to a rise in inflationary pressures. According to apreliminary estimate released by INE on 29 October, annual inflationincreased to 2.2% in October, which is the highest level in nearly two years.

Consensus Forecast panellists expect harmonised inflation to average 1.6%this year, which is unchanged from last month’s forecast. For 2011, panellistsexpect inflation to average 1.4%.

Business Confidence

Note: Quarterly business confidence index. Values above 0 indicate a positiveassesment regarding economic activity while values below 0 indicate anegative assesment.Source: Association of Chambers of Commerce.

-30

-20

-10

0

10

20

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Poin

ts


Note: Year-on-year and month-on-month var. of consumer price index in %.Source: National Statistical Institute (INE).

0.5

0.0

-1.0

0.7

1.1

0.2 0.2

-0.4

0.30.1

-0.2

0.7

-0.2

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5


%

-2.0

0.0

2.0

4.0

%



| 47




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 44.1 44.7 45.2 46.2 46.7 47.1 47.5 47.9 48.3 48.8GDP per capita (EUR) 20,604 22,015 23,290 23,582 22,487 22,576 22,799 23,206 23,761 24,406GDP (EUR bn) 909 984 1,053 1,089 1,051 1,064 1,084 1,113 1,149 1,190Economic Growth (GDP, annual var. in %) 3.6 4.0 3.6 0.9 -3.7 -0.4 0.4 1.3 1.7 1.9 Private Consumption (annual var. in %) 4.2 3.8 3.6 -0.6 -4.3 0.8 0.1 1.1 1.4 1.7 Government Consumption (ann. var. in %) 5.5 4.6 5.5 5.8 3.2 - - - - - Fixed Investment (annual variation in %) 7.0 7.2 4.5 -4.8 -16.0 -7.2 -1.5 2.0 2.8 3.1Industrial Production (annual variation in %) 0.2 3.7 2.4 -7.1 -16.2 0.5 0.9 2.7 2.6 2.8Car Sales (mn) 1.5 1.6 1.6 1.2 1.0 - - - - -Housing Starts (mn) 0.72 0.76 0.62 0.35 0.16 - - - - -Unemployment (aop, % of active population) 9.2 8.5 8.3 11.3 18.0 20.1 20.3 18.9 17.8 16.8Fiscal Balance (% of GDP) 1.0 2.0 1.9 -4.1 -11.2 -9.4 -7.0 -5.7 -4.6 -3.6Public Debt (% of GDP) 43.0 39.6 36.1 39.7 53.2 64.9 72.0 76.4 79.1 80.3Monetary and Financial Sector Inflation (Core, annual variation in %) 2.9 2.5 3.3 2.4 0.3 - - - - -Inflation (HICP, annual variation in %) 3.7 2.7 4.3 1.5 0.9 - - - - -Inflation (HICP, annual avg. variation in %) 3.4 3.6 2.8 4.1 -0.2 1.6 1.4 1.3 1.5 1.7Inflation (IPRI, annual variation in %) 5.2 3.8 5.7 0.4 0.4 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor Rate (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.37 3.82 4.35 3.86 3.80 4.15 4.46 4.73 4.89 4.87Stock Market (variation of IBEX 35 in %) 18.2 31.8 7.3 -39.4 29.8 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) -7.4 -9.0 -10.0 -9.7 -5.5 -4.5 -3.5 -3.7 -3.6 -3.6Current Account Balance (EUR bn) -66.9 -88.3 -105 -106 -58.3 -47.5 -37.9 -41.6 -41.9 -43.2Trade Balance (EUR bn) -77.8 -89.7 -99.0 -94.1 -50.2 -48.5 -42.2 -42.8 -36.8 -36.7Exports (EUR bn) 154 170 181 188 158 176 188 204 222 238Imports (EUR bn) 231 260 280 282 208 225 231 247 260 276Exports (annual variation in %) 4.8 10.6 6.8 3.7 -15.9 11.0 6.4 8.6 8.8 7.5Imports (annual variation in %) 11.7 12.2 8.0 0.6 -26.2 8.2 3.0 6.6 5.3 6.3 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -3.9 -3.0 -1.3 -0.1 -0.1 0.1 0.1 0.1 0.6 1.0Economic Growth (GDP, qoq variation in %) -0.3 -0.2 0.1 0.2 -0.3 0.0 0.1 0.2 0.2 0.4Unemployment (aop, % of active population) 17.9 18.8 20.1 20.1 19.8 20.3 20.8 20.5 20.1 20.0Inflation (HICP, annual avg. variation in %) -1.0 0.2 1.2 1.6 1.9 2.0 1.9 1.6 1.2 1.3ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor Rate (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.3710-year Bond Yield (%, eop) 3.80 3.80 3.83 4.56 3.64 4.15 3.97 4.09 4.24 4.46Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) -5.0 -1.9 6.8 3.0 5.1 3.2 -1.6 3.2 - -Cons. Confid. Index (100-point threshold) 78.7 71.1 72.7 78.2 65.1 65.9 73.6 74.9 72.8 -Inflation (CPI, mom variation in %) -1.0 -0.2 0.7 1.1 0.2 0.2 -0.4 0.3 0.1 -Inflation (CPI, annual eop variation in %) 1.0 0.8 1.4 1.5 1.8 1.5 1.9 1.8 2.1 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 48



-6

-3

0

3

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

SpainEuro areaWorld

-5

0

5

10

1995 2000 2005 2010

SpainEuro areaWorld

-10

-5

0

5

10

1995 2000 2005 2010

Spain Euro area

-20

-10

0

10

20

1995 2000 2005 2010

Spain Euro area

-1.0

-0.5

0.0

0.5

Jan Mar May Jul Sep Nov


-2

-1

0

1

2






5 | Consumption | variation in % 6 | Investment | variation in %


1 | Real GDP | 1995 - 2014 | % variation Real GDP growth in %

General:Long-term chart period from 1995 to 2014 unless otherwise stated. All realsector data are from the National Statistical Institute (INE, Instituto Nacionalde Estadística) and Eurostat. See below for details. Forecasts based onFocusEconomics Consensus Forecast.

1 GDP, annual variation in %. Source: INE.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %. Source:INE.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %. Source: INE.6 Gross fixed investment, annual variation in %. Source: INE.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed investment, change in 2010 and 2011 forecasts since January2010.9 Industrial production, annual variation in %. Source: INE.10 Unemployment, % of active population. Source: INE.11 Balance of non-financial public sector, % of GDP. Source: Eurostat.12 Industrial production, evolution of 2010 and 2011 forecasts since January2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January2010.14 Balance of non-financial public sector, evolution of 2010 and 2011forecasts since January 2010.

Notes and sources

Individual Forecasts 2010 2011Banesto -0.5 0.5BBVA -0.6 0.7BNP Paribas -0.3 -0.3Caja Madrid -0.4 0.4CEPREDE -0.6 0.5Citigroup -0.3 -0.1Credit Agricole -0.5 0.1Credit Suisse -0.3 1.1DekaBank -0.5 0.1Deutsche Bank -0.5 0.0DZ Bank -0.5 0.0Experian -0.5 0.7FUNCAS -0.4 0.4Goldman Sachs -0.4 1.1ING -0.2 0.7Instituto Flores de Lemus -0.3 0.3La Caixa -0.3 0.7Nomura -0.3 0.2Raiffeisen Research -0.5 0.4UBS 0.1 1.0Unicredit -0.3 0.4Summary Minimum -0.6 -0.3Maximum 0.1 1.1Median -0.4 0.4Consensus -0.4 0.4History 30 days ago -0.4 0.460 days ago -0.4 0.690 days ago -0.4 0.6Additional Forecasts IMF (Oct. 2010) -0.3 0.7European Commission (Sep. 2010) -0.3 0.8OECD (May 2010) -0.2 0.9

-0.5

0.0

0.5

1.0


20102011

-8

-6

-4

-2

0


20102011

| 49



-12

-10

-8

-6


20102011

18

19

20

21


20102011

0.0

0.5

1.0

1.5

2.0


20102011





9 | Industry | variation in %



-20

-10

0

10

1995 2000 2005 2010

Spain Euro area

5

10

15

20

25

1995 2000 2005 2010

Spain Euro area

-15

-10

-5

0

5

1995 2000 2005 2010

SpainEuro areaWorld

Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Banesto 0.4 -0.1 -6.6 -2.0 2.0 2.5 20.4 20.9 -9.3 -6.0 65.9 71.9BBVA -0.3 0.3 -9.5 -3.2 - - 19.4 19.2 -9.6 -6.6 63.7 69.8BNP Paribas 0.8 -1.6 -9.0 -6.5 -0.2 -3.3 20.2 22.0 -9.6 -7.8 - -Caja Madrid 0.7 0.0 -7.6 -2.2 1.2 1.7 20.2 20.5 -9.9 -6.9 66.2 73.1CEPREDE 0.3 0.3 -7.5 -1.1 -0.9 2.0 19.9 20.1 -10.6 -8.9 65.8 73.4Citigroup 1.3 -0.7 -7.8 -2.3 - - 20.4 20.8 -9.3 -7.2 64.7 72.4Credit Agricole - - - - - - - - -9.3 -6.2 65.2 72.3Credit Suisse - - - - - - - - -9.3 -6.8 64.9 72.5DekaBank - - - - - - - - -9.1 -6.4 - -Deutsche Bank 0.2 -0.2 -7.4 -1.6 -0.5 1.4 20.5 21.3 -9.0 -7.1 - -DZ Bank 1.1 0.4 -6.1 0.9 - - 20.0 19.9 -9.2 -7.5 66.0 71.0Experian -0.3 0.5 -6.7 0.9 - - 20.5 19.1 -9.3 -7.4 - -FUNCAS 1.2 0.5 -7.3 -3.1 0.7 0.9 20.0 20.3 -9.7 -6.8 65.0 73.6Goldman Sachs - - - - - - - - -9.6 -7.3 - -ING 1.2 0.5 -6.4 1.0 - - 20.2 20.3 -9.7 -7.0 - -Instituto Flores de Lemus 1.3 0.3 -7.1 -3.2 0.7 0.1 19.9 20.4 - - - -La Caixa 0.4 0.7 -6.6 -0.7 0.5 1.6 19.8 20.0 -9.5 -6.4 65.2 72.1Nomura 1.4 0.3 -6.4 -0.3 - - 19.9 20.1 -9.3 -8.0 64.3 71.5Raiffeisen Research - - - - - - 20.0 19.9 -8.5 -6.0 63.6 69.9UBS 1.6 0.0 -6.0 0.9 1.0 1.3 20.0 19.0 -8.0 -6.0 64.7 71.9Unicredit 1.3 0.3 -6.8 -2.0 - - 20.1 20.5 -9.3 -7.3 63.5 73.0Summary Minimum -0.3 -1.6 -9.5 -6.5 -0.9 -3.3 19.4 19.0 -10.6 -8.9 63.5 69.8Maximum 1.6 0.7 -6.0 1.0 2.0 2.5 20.5 22.0 -8.0 -6.0 66.2 73.6Median 1.0 0.3 -6.9 -1.8 0.7 1.4 20.0 20.3 -9.3 -7.0 65.0 72.2Consensus 0.8 0.1 -7.2 -1.5 0.5 0.9 20.1 20.3 -9.4 -7.0 64.9 72.0History 30 days ago 0.7 0.4 -7.2 -1.7 0.5 0.9 20.0 20.2 -9.4 -7.0 65.2 72.560 days ago 0.2 0.4 -7.0 -1.2 0.6 1.2 20.0 20.2 -9.5 -7.1 65.8 72.990 days ago 0.1 0.4 -6.9 -1.2 0.6 1.2 20.0 20.1 -9.5 -7.1 65.7 73.1



Industry% variation


Public Debt% of GDP


| 50



6,000

8,000

10,000

12,000

14,000

Jan Jul Jan Jul Jan Jul

0

2

4

6

8

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

United StatesEuro areaJapan

0

1

2

3

4

5

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

United StatesEuro areaJapan

-2

0

2

4

6

1995 2000 2005 2010

Spain Euro area

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

SpainEuro area

2

4

6

8

10

12

1995 2000 2005 2010

SpainGermany

0.5

1.0

1.5

2.0



-1

0

1

2

3



Monetary Sector | Inflation, Interest Rate and Stock Market

Notes and sources

Inflation | annual average variation in % 16 | Inflation | Q1 07-Q4 11 | in % 15 | Inflation | 1995 - 2014 | in %

19 | 10-year Bond Yield | 1995-2014 20 | Stock Market | IBEX 35

21 | Policy Rate | Q1 07-Q4 11 | in % 22 | 3-Month Rate | Q1 07-Q4 11 | in %


General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allmonetary sector data are from the National Statistical Institute (INE,Instituto Nacional de Estadística), Bank of Spain (BdE, Banco deEspaña), Federal Reserve Board (Fed), Bank of Japan (BoJ), GermanCentral Bank (BBK, Deutsche Bundesbank) and the European CentralBank (ECB). See below for details. Forecasts based on FocusEconomicsConsensus Forecast.

15 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in % (aop). Source: INE.16 Quarterly inflation, year-on-year variation in harmonised index ofconsumer prices (HICP) in % (aop). Source: INE.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: BdE, BBK.20 Monthly index levels, IBEX 35. Jan. 2008 until end of previousmonth. Source: Bolsa de Madrid.21 Quarterly policy rate in % (eop). Source: ECB, Fed, BoJ.22 Quarterly 3-month benchmark rate in % (eop). Source: ECB, Fed,BoJ.

Individual Forecasts 2010 2011Banesto 1.5 0.9BBVA 1.6 1.4BNP Paribas 1.7 1.2Caja Madrid 1.7 1.4CEPREDE - -Citigroup 1.7 1.1Credit Agricole 1.6 1.7Credit Suisse 1.7 1.5DekaBank 1.6 1.3Deutsche Bank 1.6 1.4DZ Bank 1.6 1.1Experian 1.5 1.3FUNCAS 1.7 1.5Goldman Sachs 1.6 1.1ING 1.6 1.3Instituto Flores de Lemus 1.7 1.3La Caixa 1.7 1.4Nomura 1.7 2.0Raiffeisen Research 1.6 1.5UBS 1.5 1.6Unicredit 1.8 2.2Summary Minimum 1.5 0.9Maximum 1.8 2.2Median 1.6 1.4Consensus 1.6 1.4History 30 days ago 1.6 1.460 days ago 1.6 1.490 days ago 1.5 1.4Additional Forecasts IMF (Oct. 2010) 1.5 1.1European Commission (Sep. 2010) 1.6 1.6OECD (May 2010) 1.4 0.6

| 51



-40

-30

-20

-10

0

Q1 07 Q1 08 Q1 09 Q1 10

-150

-100

-50

0

50

1990 1995 2000 2005 2010

-40

-20

0

20

40

1990 1995 2000 2005 2010-20

0

20

40

60

1990 1995 2000 2005 2010

-12

-9

-6

-3

0

3

1995 2000 2005 2010

Spain Euro area

-200

0

200

400

600

1990 1995 2000 2005 2010

Trade Balance ExportsImports

-75

-50

-25

0



-75

-50

-25

0




General:Long-term chart period from 1990 to 2014 unless otherwise stated. Allexternal sector data are from the Bank of Spain (BdE, Banco de España).Forecasts based on FocusEconomics Consensus Forecast.

23 Current account balance as % of GDP. 1995-2014.24 Current account balance in EUR bn.25 Current account in EUR bn, evolution of 2010 forecast sinceJanuary 2010.26 Current account in EUR bn, evolution of 2011 forecast sinceJanuary 2010.27 Quarterly current account balance, in EUR bn. Q1 07-Q2 10.28 Trade balance, imports and exports, in EUR bn.29 Exports, annual variation in %.30 Imports, annual variation in %.



Notes and sources





Individual Forecasts 2010 2011Banesto -48.0 -43.0BBVA -31.9 -11.9BNP Paribas -50.6 -28.1Caja Madrid -41.9 -16.2CEPREDE -61.6 -55.1Citigroup -47.7 -36.3Credit Agricole -50.0 -47.7Credit Suisse -49.0 -48.8DekaBank -49.0 -48.8Deutsche Bank -53.2 -48.8DZ Bank - -Experian -40.4 -36.0FUNCAS -52.8 -44.6Goldman Sachs -38.3 -21.7ING - -Instituto Flores de Lemus -43.1 -39.2La Caixa -53.3 -45.5Nomura - -Raiffeisen Research -47.9 -38.0UBS -46.1 -30.7Unicredit -51.1 -41.2Summary Minimum -61.6 -55.1Maximum -31.9 -11.9Median -48.5 -40.2Consensus -47.5 -37.9History 30 days ago -47.1 -37.460 days ago -46.3 -34.790 days ago -46.6 -34.9

| 52

Austria November 2010FOCUSECONOMICS


AustriaOutlook improves


Austria


REAL SECTOR | Industrial production expands at resilient pace in Au-gustIn August, industrial production expanded a working day adjusted 8.2% overthe same month last year, which came in above the revised 5.9% increaseregistered in the previous month (previously reported: 6.8% year-on-year). Themonthly improvement marked the fastest growth in industrial output since March2007.

The main drivers behind the August acceleration were a sharp rebound in min-ing and quarrying output, which increased 4.0% in annual terms, contrastingthe 7.3% contraction observed in July. In addition, the manufacturing sectoraccelerated to 12.3%, up from the previous 9.3% increase tallied in July. Fi-nally, water supply grew 11.4% (July: +7.5% yoy).

A month-on-month analysis confirms the acceleration suggested by annualfigures, as industrial output rose 1.3% in August in seasonally adjusted terms(July: +0.3% month-on-month). As a result of the robust August reading, thetrend continues to show a strong recovery, with annual average growth in in-dustrial production turning from minus 1.3% in July to plus 0.3% in August,which constituted the first positive reading since January 2009. ConsensusForecast panellists anticipate industrial production to rise 4.8% this year and3.8% in 2011.

In its bi-annual economic outlook report, the Central Bank expects economicactivity to rise 1.6% this year. For 2011, monetary authorities see the economyexpanding 1.8%. Consensus Forecast panellists expect GDP to grow 1.7%this year, which is up 0.2 percentage points from last month’s forecast. For2011, the panel expects the economy expanding 1.7% as well.

• Industrial production rebounded in August, expanding 8.2% over thesame month last year. Additional economic indicators point to a re-silient recovery, suggesting that the economy is back on track,favoured by a strong external sector, which benefits from healthygrowth in the country’s main trade partner, Germany.

• Consensus Forecast panellists expect the economy to expand 1.7%this year, which is up 0.2 percentage points from last month’s pro-jection. For 2011, the panel sees the economy expanding 1.7% aswell.

• Inflation rose from 1.7% in August to 1.9% in September. Panellistsexpect inflation to average 1.5% this year, which is unchanged fromlast month’s projection. Next year, the panel sees inflation averaging1.6%.

2000-04 2005-09 2010-14Population (million): 8.1 8.3 8.5GDP (EUR bn): 219 266 304GDP per capita (EUR): 27,081 32,044 35,861GDP growth (%): 1.8 1.6 1.9Fiscal Balance (% of GDP): -1.6 -1.5 -3.2Public Debt (% of GDP): 66.1 62.9 73.8Inflation (%): 1.8 1.9 1.7Current Account (% of GDP): 1.0 2.8 2.6

-6.5

-2.7-3.5

1.10.0

7.9 8.26.4

4.45.9

-11.6-9.8

-2.8

-15.0

-10.0

-5.0

0.0

5.0

10.0


%

-10.0

-5.0

0.0

5.0

%

Year-on-year (left scale)Annual average (right scale)

Note: Year-on-year variation and annual average variation of industrialproduction index in %.Source: Statistics Austria and FocusEconomics calculations.


| 53



MONETARY SECTOR | Inflation rises in SeptemberIn September, consumer prices rose 0.4% over the previous month, whichdoubled the 0.2% increase recorded in August. The monthly price rise wasmainly the result of higher prices for clothing and footwear (August: +4.3%month-on-month; September: +11.3% mom), owing to the seasonal change inclothing stocks for autumn and winter.

On an annual basis, inflation rose from 1.7% in August to 1.9% in September,which reflected increasing prices for mineral oil products (August: +10.0% year-on-year; September: +12.7% yoy). Furthermore, annual harmonised inflation(HICP) rose from 1.6% in August to 1.8% in September.

In its biannual economic outlook report, the Central Bank raised its inflationforecasts and now expects harmonised inflation to average to 1.7% for boththis year and next, up from its previous forecast of 1.5% for this year and 1.6%for 2011. Consensus Forecast panellists see harmonised inflation rising from0.3% in 2009 to 1.5 % in 2010, which is unchanged from the previous month’sforecast. For 2011, the panel expects inflation to reach 1.6%.


Note: Monthly and annual consumer price index variation in %.Source: Statistics Austria and FocusEconomics calculations.

0.2 0.2

-0.3

1.1

0.3

0.10.0

-0.4

0.2

0.4

0.1 0.0

0.2

-0.5

0.0

0.5

1.0

1.5


%

0.0

0.5

1.0

1.5

2.0

%

Monthly (left scale)

Annual (right scale)

| 54




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 8.2 8.3 8.3 8.3 8.4 8.4 8.4 8.5 8.5 8.5GDP per capita (EUR) 29,614 31,078 32,769 33,957 32,802 33,669 34,639 35,760 36,983 38,255GDP (EUR bn) 244 257 272 283 274 283 292 303 314 327Economic Growth (GDP, real ann. var. in %) 2.5 3.6 3.7 2.2 -3.9 1.7 1.7 2.0 2.0 2.0 Total Consumption (annual variation in %) 2.0 2.0 1.0 1.4 0.6 - - - - - Private Consumption (ann. var. in %) 5.4 1.8 0.7 0.7 0.4 0.9 1.0 1.5 1.7 1.7 Government Consumption (ann. var. in %) 1.7 2.7 1.7 3.2 1.2 - - - - - Fixed Investment (annual variation in %) 1.2 2.4 3.8 1.0 -8.1 -1.8 1.9 3.2 3.7 3.5Industrial Production (annual variation in %) 4.4 7.2 5.3 1.3 -9.3 4.8 3.8 3.7 3.4 3.5Unemployment (aop, % of active population) 5.2 4.7 4.4 3.8 4.8 4.5 4.3 4.4 4.5 4.4Fiscal Balance (% of GDP) -1.6 -1.6 -0.6 -0.4 -3.4 -4.5 -4.0 -3.2 -2.3 -2.1Public Debt (% of GDP) 63.9 62.2 59.5 62.6 66.5 70.5 72.8 74.5 75.5 75.7Monetary and Financial Sector Inflation (HICP annual variation in %) 1.6 1.6 3.5 1.5 1.1 - - - - -Inflation (HICP annual average variation in %) 2.1 1.7 2.2 3.2 0.4 1.5 1.6 1.7 1.8 1.8ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.35 3.81 4.29 4.25 3.92 3.03 3.37 4.28 4.40 4.35Stock Market (variation of ATX in %) 50.8 21.7 1.1 -61.2 42.5 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) 2.2 2.8 3.5 3.3 2.3 2.7 3.0 2.4 2.4 2.2Current Account Balance (USD bn) 5.3 7.3 9.6 9.2 6.3 7.7 8.9 7.2 7.6 7.2Trade Balance (USD bn) -1.0 0.3 1.3 -0.6 -2.1 -1.5 -0.4 1.2 2.4 4.0Exports (USD bn) 96 107 119 122 97 107 116 128 139 149Imports (USD bn) 97 106 117 122 99 108 116 126 137 146Exports (annual variation in %) 8.6 10.6 11.5 2.3 -19.9 9.7 8.2 10.6 9.0 6.6Imports (annual variation in %) 9.1 9.1 10.6 4.0 -18.5 8.9 7.2 9.0 8.6 6.0 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, real ann. var. in %) -3.6 -0.9 0.0 2.4 2.3 2.3 2.6 1.7 1.3 1.3Economic Growth (GDP, qoq variation in %) 0.6 0.4 0.0 1.2 0.6 0.4 0.3 0.3 0.3 0.4Inflation (HICP annual average variation in %) -0.1 0.6 1.3 1.8 1.7 1.8 1.8 1.6 1.8 1.7ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.3710-year Bond Yield (%, eop) 4.02 3.92 3.76 3.54 3.30 3.03 3.12 3.20 3.29 3.37 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) -2.8 1.1 0.0 4.4 7.9 6.4 5.9 8.2 - -Unemployment (eop, % of active population) 4.6 4.5 4.5 4.6 4.6 4.5 4.3 4.3 4.5 -Inflation (CPI, mom variation in %) -0.3 0.2 1.1 0.3 0.1 0.0 -0.4 0.2 0.4 -Inflation (CPI, annual eop variation in %) 1.2 1.0 2.0 2.0 1.9 2.0 1.9 1.7 1.9 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 55



-6

-3

0

3

6

1995 2000 2005 2010

AustriaEuro areaWorld

0

1

2

3

4



0

1

2

3

4



0.0

0.5

1.0

1.5


20102011

-2

0

2

4


2010 2011

-6

-3

0

3

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-2

0

2

4

6

1995 2000 2005 2010

AustriaEuro area

-15

-10

-5

0

5

10

1995 2000 2005 2010

Austria Euro area







General:Long-term chart period from 1995 to 2014 unless otherwise stated. All realsector data are from Statistics Austria (STAT) and the Austrian National Bank(OeNB, Oesterreichische Nationalbank). See below for details. Forecastsbased on FocusEconomics Consensus Forecast.

1 GDP, annual variation in %. Source: STAT.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %. STAT.6 Gross fixed capital formation, annual variation in %. STAT.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed capital formation, change in 2010 and 2011 forecasts sinceJanuary 2010.9 Public debt, % of GDP. Source: OeNB.10 Unemployment, % of active population. Source: OeNB.11 General government balance, % of GDP. Source: STAT.12 Public debt, evolution of 2010 and 2011 forecasts since January 2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January 2010.14 General government balance, evolution of 2010 and 2011 forecasts sinceJanuary 2010.

Notes and sources

Individual Forecasts 2010 2011Credit Suisse 2.0 3.0DekaBank 1.7 1.4Deutsche Bank 1.6 1.3DZ Bank 1.5 1.3Experian 1.4 1.6IHS 1.8 2.0Nomura 1.8 1.7Raiffeisen Research 1.9 1.5UBS 0.6 1.1Unicredit 1.9 1.7WIFO 2.0 1.9Summary Minimum 0.6 1.1Maximum 2.0 3.0Median 1.8 1.6Consensus 1.7 1.7History 30 days ago 1.5 1.760 days ago 1.3 1.790 days ago 1.3 1.7Additional Forecasts Central Bank (June 2010) 1.6 1.8IMF (Oct. 2010) 1.6 1.6European Commission (May 2010) 1.3 1.6

| 56



65

70

75

80


2010 2011

4

5

6

7

8


2010 2011

-5.5

-5.0

-4.5

-4.0

-3.5


2010 2011

50

60

70

80

90

2000 2005 2010

Austria Euro area

0

4

8

12

1995 2000 2005 2010

Austria

Euro area

-8

-6

-4

-2

0

2

1995 2000 2005 2010





12 | Public Debt | evolution of fcst

9 | Public Debt | % of GDP



Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Credit Suisse - - - - - - -4.5 -3.5 70.2 72.9DekaBank - - - - - - -4.7 -3.8 - -Deutsche Bank - - - - - - -4.4 -3.7 - -DZ Bank 0.9 0.8 -2.7 1.9 - - -4.4 -4.0 70.0 -Experian 0.9 1.0 -2.0 2.1 4.5 3.9 -4.7 -4.5 - -IHS 1.0 1.2 -1.9 1.7 4.4 4.2 -4.3 -3.4 - -Nomura 1.0 1.2 -0.5 0.8 4.6 4.5 -4.8 -4.3 70.4 72.7Raiffeisen Research 0.9 1.0 -2.7 2.0 - - -3.3 -4.0 70.2 72.9UBS 0.7 1.3 1.0 2.0 - - -5.5 -5.3 73.9 77.0Unicredit 1.0 0.8 -3.2 2.1 4.5 4.4 -4.3 -3.8 68.6 69.9WIFO 1.1 0.8 -2.5 2.4 4.4 4.3 -4.1 -3.5 70.2 71.6Summary Minimum 0.7 0.8 -3.2 0.8 4.4 3.9 -5.5 -5.3 68.6 69.9Maximum 1.1 1.3 1.0 2.4 4.6 4.5 -3.3 -3.4 73.9 77.0Median 1.0 1.0 -2.3 2.0 4.5 4.3 -4.4 -3.8 70.2 72.8Consensus 0.9 1.0 -1.8 1.9 4.5 4.3 -4.5 -4.0 70.5 72.8History 30 days ago 0.9 1.0 -1.8 2.1 4.5 4.3 -4.6 -4.2 70.5 72.960 days ago 0.9 0.9 -1.7 2.2 5.4 5.2 -4.9 -4.2 71.0 73.590 days ago 0.9 1.0 -1.3 2.1 5.6 5.3 -4.8 -4.2 71.2 73.9




Public Debt% of GDP


| 57



1,000

2,000

3,000

4,000

5,000


2

4

6

8

10


2010 2011

0

1

2

3

4

1995 2000 2005 2010

AustriaEuro area

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

AustriaEuro area

2

4

6

8

1995 2000 2005 2010

AustriaGermany

-5

-3

0

3

5

1995 2000 2005 2010

0.5

1.0

1.5

2.0

2.5



0.5

1.0

1.5

2.0

2.5



Monetary and External Sector | Inflation, Interest Rate and Current Account Balance

Notes and sources


Consumer Prices and Current Account Balance 16 | Inflation | Q1 07-Q4 11 | in % 15 | Inflation | 1995 - 2014 | in %


22 | Current Account | evolution of fcst

19 | 10-year Rate | 1995 - 2014 | in %

21 | Stock Market | ATX General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allmonetary sector data are from Statistics Austria (STAT) and the AustrianNational Bank (OeNB, Oesterreichische Nationalbank). See below fordetails. Forecasts based on FocusEconomics Consensus Forecast.

15 Inflation, annual average variation in the harmonised index ofconsumer prices (HICP) in %. Source: OeNB.16 Quarterly inflation, year-on-year variation in the harmonised indexof consumer prices (HICP) in %. Source: OeNB.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: OeNB.20 Current account balance in EUR bn. Source: OeNB.21 Daily index levels, ATX Index. January 2008 until the end ofprevious month. Source: Vienna Stock Exchange.22 Current account balance in EUR bn, evolution of 2010 and 2011forecasts since January 2010.

Individual Forecasts 2010 2011 2010 2011Credit Suisse 1.4 1.4 8.8 12.1DekaBank 1.5 1.3 8.8 11.9Deutsche Bank 1.6 1.7 9.9 8.7DZ Bank 1.6 1.4 - -Experian 1.5 1.7 7.1 7.1IHS 1.7 1.8 - -Nomura 1.6 1.5 - -Raiffeisen Research 1.5 1.0 8.6 7.6UBS 1.0 1.5 3.4 5.6Unicredit 1.8 2.0 7.4 8.6WIFO 1.8 2.1 7.6 9.6Summary Minimum 1.0 1.0 3.4 5.6Maximum 1.8 2.1 9.9 12.1Median 1.6 1.5 8.1 8.7Consensus 1.5 1.6 7.7 8.9History 30 days ago 1.5 1.6 7.6 8.860 days ago 1.4 1.6 7.7 9.690 days ago 1.3 1.5 7.1 9.4Additional Forecasts Central Bank (June 2010) 1.7 1.7 - -IMF (Oct. 2010) 1.5 1.7 - -Euro. Comm. (May 2010) 1.3 1.5 - -

Consumer Pricesvar. in %

Current AccountEUR bn

| 58

Belgium November 2010FOCUSECONOMICS


BelgiumOutlook improves


Belgium


REAL SECTOR | Economy grows faster than estimated in the third quarterIn the third quarter, gross domestic product (GDP) increased 0.5% over theprevious quarter in seasonally adjusted terms, according to preliminary datareleased by the National Bank of Belgium on 28 October. The quarterly ex-pansion halved the 1.0% increase tallied in the second quarter (previouslyreported: +0.9% quarter-on-quarter) and overshot last month’s ConsensusForecast, which had the economy rising 0.2%. Final results will be publishedon 8 December.

On an annual basis, the economy grew 2.1% in the third quarter, slower thanthe 2.6% expansion observed in the second quarter. The economy markedthe third consecutive annual expansion after having contracted for five con-secutive quarters since the fourth quarter of 2008.

The Central Bank expects economic activity to grow 1.3% this year. For 2011,monetary authorities see the economy expanding 1.7%. Consensus Fore-cast panellists are more optimistic than the Central Bank and anticipate GDPexpanding 1.8% this year, which is up 0.1 percentage points from last month’sprojection. For 2011, the panel expects the economy to expand 1.6%.

REAL SECTOR | Industrial output accelerates in AugustIn August, industrial production expanded 7.1% over the same month lastyear, which came in above the 4.4% annual increase registered in July. Thereading marked the sixth consecutive month of positive growth in the indus-trial sector.

The acceleration observed in August was mainly the result of faster growth inthe manufacturing sector (July: +6.2% year-on-year; August: +10.3% yoy), aswell as in electricity, gas and water supply (July: +1.9% yoy; August: +3.8%

• Preliminary estimates confirm that the recovery is gaining steam, asgross domestic product rose 0.5% in the third quarter. In particular,the industrial sector is picking up, with output rising 7.1% annually inAugust, which marked the sixth consecutive month of growth.

• Consensus Forecast participants expect the economy to expand 1.8%this year, which is up 0.1 percentage points from last month’s esti-mate. In 2011, economic growth is expected to slow to 1.6%.

• Inflation rose from 2.9% in September to 3.0% in October, whichmarked the highest level since November 2008. Consensus Fore-cast panellists expect inflation to average 1.9% this year, which is up0.1 percentage points from last month’s projection. Next year, infla-tion should average 1.8 %.

2000-04 2005-09 2010-14Population (million): 10.3 10.6 11.0GDP (EUR bn): 269 328 378GDP per capita (EUR): 26,106 30,981 34,499GDP growth (%): 2.0 1.1 1.9Fiscal Balance (% of GDP): 0.0 -2.0 -3.9Public Debt (% of GDP): 102 90 102Inflation (%): 2.0 2.2 1.9Current Account (% of GDP): 3.7 0.6 1.5

Note: Quarter-on-quarter changes of seasonally adjusted GDP in %.Source: National Bank of Belgium and FocusEconomics Consensus Forecast.

Gross Domestic Product | variation in %

1.0

0.4

0.1

1.0

0.5

0.0

0.5

1.0

1.5

3Q 09 4Q 09 1Q 10 2Q 10 3Q 10

%

| 59



yoy). A month-on-month analysis confirms the strong expansion suggestedby the annual figures, as industrial output rose a seasonally adjusted 0.1%in August (July: -0.8% mom).

The trend continues to improve, with annual average variation in industrialproduction rising from minus 1.5% in July to a flat reading in August, which isfinally scratching positive territory after 21 consecutive months mired in re-cession.

Consensus Forecast panellists expect industrial production to expand 3.0%this year. For next year, the panel anticipates industrial output to grow a moremoderate 2.0%.

MONETARY SECTOR | Inflation rises to the highest level in over two yearsIn October, consumer prices added 0.1% over the previous month, whichcame in below the 0.3% increase observed in September. The main driversbehind the October reading were higher prices for meat, as well as for elec-tricity, which were only partially offset by lower prices for vegetables.

In spite of the small price increase, annual inflation rose from 2.9% in Sep-tember to 3.0%, which marked the highest level since November 2008. Inaddition, annual average harmonised inflation (HICP) jumped from 1.2% inAugust to 1.5% in September (the last month for which data are available).September’s figure marked the highest level since August 2009.

The Central Bank expects harmonised inflation to average to 2.0% this yearand 1.9% in 2011. Consensus Forecast panellists broadly share monetaryauthorities’ view and see inflation averaging 1.9% in 2010, which is up 0.1%from previous month’s forecast. For 2011, the panel expects inflation to reach1.8%.


Note: Monthly and annual consumer price index variation in %.Source: Statistics Belgium and FocusEconomics calculations.

0.2

0.50.4

0.30.4

0.0

0.0 0.1

0.3

0.1

0.4

0.3

0.0

-0.2

0.0

0.2

0.4

0.6


%

-2.0

0.0

2.0

4.0

%

monthly (left scale) annual (right scale)

Note: Month-on-month changes of seasonally adjusted industrial production andannual average growth rate in %.Source: National Bank of Belgium and FocusEconomics calculations.


0.6 0.8

-2.8

-0.2

5.0

-1.1

0.1

3.5

-1.4-2.2

-0.8

0.4

1.9

-4.0

-2.0

0.0

2.0

4.0

6.0


%

-15.0

-10.0

-5.0

0.0

%

Month-on-month (right scale)

Annual average (left scale)

| 60




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 10.4 10.5 10.6 10.7 10.7 10.8 10.9 11.0 11.0 11.1GDP per capita (EUR) 28,992 30,267 31,658 32,378 31,609 32,543 33,407 34,404 35,513 36,630GDP (EUR bn) 303 318 335 345 339 352 364 377 392 407Economic Growth (GDP, annual var. in %) 1.7 2.7 2.9 1.0 -2.8 1.8 1.6 1.9 2.1 2.0Domestic Demand (annual variation in %) 2.6 2.1 3.1 2.0 -1.9 1.3 1.3 1.9 2.3 2.3 Private Consumption (annual var. in %) 1.0 1.8 1.8 1.5 -0.3 1.3 1.1 1.7 2.0 1.9 Government Consumption (ann. var. in %) 1.2 0.6 2.1 2.3 0.6 - - - - - Fixed Investment (annual variation in %) 7.0 2.0 6.5 2.9 -5.3 -1.2 2.4 3.1 3.3 2.9Industrial Production (annual variation in %) -1.1 4.6 2.8 -0.8 -12.1 3.0 2.0 3.2 3.9 3.5Unemployment (aop, % of active population) 8.4 8.3 7.5 7.0 7.9 8.7 8.7 8.2 8.0 7.7Fiscal Balance (% of GDP) -2.7 0.3 -0.2 -1.2 -6.0 -5.0 -4.5 -3.8 -3.3 -3.1Public Debt (% of GDP) 92 88 84 90 97 100 101 103 103 102Monetary and Financial Sector Inflation (HICP, annual variation in %) 2.8 2.1 3.1 2.7 0.3 - - - - -Inflation (HICP annual average variation in %) 2.5 2.3 1.8 4.5 0.0 1.9 1.8 1.9 1.8 1.9ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.40 3.82 4.33 4.40 3.89 3.02 3.41 3.54 3.90 4.38Stock Market (BEL20, annual var. in %) 21.3 23.3 -5.8 -53.8 32.3 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) 2.0 1.9 1.6 -2.9 0.3 1.3 1.3 0.8 1.9 2.3Current Account Balance (EUR bn) 6.0 5.9 5.3 -10.1 1.0 4.7 4.8 2.9 7.6 9.2Trade Balance (EUR bn) 12.7 12.0 14.2 3.8 12.6 14.5 16.6 20.5 25.2 30.6Exports (EUR bn) 270 292 314 321 265 289 306 320 330 340Imports (EUR bn) 257 280 300 317 253 274 289 303 316 330Exports (annual variation in %) 9.0 8.3 7.7 2.0 -17.3 8.9 6.0 4.4 3.1 3.0Imports (annual variation in %) 11.6 9.0 7.2 5.6 -20.3 8.3 5.7 4.6 4.6 4.4 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -2.7 -0.1 1.7 2.6 2.1 1.4 1.7 1.3 1.4 1.4Economic Growth (GDP, s.a. qoq var. in %) 1.0 0.4 0.1 1.0 0.5 0.4 0.3 0.2 0.4 0.4Inflation (HICP annual average variation in %) -1.2 -0.2 1.2 2.4 2.6 2.4 2.1 1.8 2.0 2.1ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.37Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) -5.2 -1.5 8.1 6.0 6.2 8.8 4.4 7.1 - -Unemployment (eop, % of active population) 8.6 8.7 8.5 8.3 8.0 8.1 8.9 8.9 8.7 -Inflation (CPI, mom variation in %) 0.5 0.4 0.4 0.3 0.4 0.0 0.0 0.1 0.3 0.1Inflation (CPI, annual variation in %) 0.6 0.7 1.7 1.8 2.3 2.5 2.6 2.3 2.9 3.0Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 61



-6

-3

0

3

6

1995 2000 2005 2010

BelgiumEuro areaWorld

-6

-3

0

3

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-2

0

2

4

1995 2000 2005 2010

BelgiumEuro area

-15

-10

-5

0

5

10

1995 2000 2005 2010

Belgium Euro area

0

1

2

3

4



0

1

2

3



0.0

0.5

1.0

1.5

2.0


20102011

-3

0

3

6


2010 2011






1 | Real GDP |1995 - 2014 | % variation

General:Long-term chart period from 1995 to 2014 unless otherwise stated. All realsector data are from the National Bank of Belgium (NBB, Nationale Bankvan België). See below for details. Forecasts based on FocusEconomicsConsensus Forecast.

1 GDP, annual variation in %.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %.6 Gross fixed capital formation, annual variation in %.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed capital formation, change in 2010 and 2011 forecasts sinceJanuary 2010.9 Public debt, % of GDP.10 Unemployment, % of active population.11 General government balance, % of GDP.12 Public debt, evolution of 2010 and 2011 forecasts since January 2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January2010.14 General government balance, evolution of 2010 and 2011 forecasts sinceJanuary 2010.

Notes and sources

Individual Forecasts 2010 2011BNP Paribas Fortis 1.8 1.3Commerzbank 1.6 1.6Credit Agricole 1.0 1.8Credit Suisse 2.0 2.3DekaBank 1.8 1.2Deutsche Bank 1.8 1.2Dexia 2.0 1.8DZ Bank 2.1 1.3Experian 1.7 1.9ING 1.7 1.6KBC 1.8 1.5Raiffesien Research 1.8 1.5UBS 2.1 2.0Summary Minimum 1.0 1.2Maximum 2.1 2.3Median 1.8 1.6Consensus 1.8 1.6History 30 days ago 1.7 1.760 days ago 1.5 1.790 days ago 1.4 1.8Additional Forecasts Central Bank (Oct. 2010) 1.3 1.7IMF (Oct. 2010) 1.6 1.7European Commission (May 2010) 1.3 1.6

| 62



97

99

101

103

105


2010 2011

8.0

8.5

9.0

9.5


2010 2011

-6.0

-5.5

-5.0

-4.5

-4.0


2010 2011

60

80

100

120

2000 2005 2010

BelgiumEuro area

6

7

8

9

10

11

1995 2000 2005 2010

Belgium

Euro area

-9

-6

-3

0

3

1995 2000 2005 2010









Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011BNP Paribas Fortis 1.4 0.7 -1.1 1.7 8.8 9.1 -4.9 -4.4 98 100Commerzbank - - - - - - - - - -Credit Agricole - - - - - - -5.0 -4.2 99 100Credit Suisse - - - - - - -4.8 -4.4 99 101DekaBank - - - - - - -4.4 -3.7 - -Deutsche Bank - - - - - - -4.7 -3.9 - -Dexia 1.2 1.2 - - 8.6 9.0 -4.7 -4.3 98 100DZ Bank - - - - - - -5.6 -5.6 101 -Experian 1.3 1.3 -0.9 3.4 8.6 8.7 -5.1 -4.6 - -ING 1.4 1.4 -1.6 2.3 8.5 8.3 -4.8 -4.1 100 101KBC 1.3 1.1 -1.1 2.0 - - -4.6 -4.4 100 101Raiffesien Research - - - - 8.7 8.5 -5.0 -5.0 99 101UBS 1.3 1.2 - - 8.7 8.7 -5.8 -5.8 101 104Summary Minimum 1.2 1.1 -1.6 2.0 8.5 8.3 -5.8 -5.8 98 100Maximum 1.4 1.4 -0.9 3.4 8.7 9.0 -4.4 -3.7 101 104Median 1.3 1.2 -1.1 2.3 8.6 8.7 -4.8 -4.4 100 101Consensus 1.3 1.1 -1.2 2.4 8.7 8.7 -5.0 -4.5 100 101History 30 days ago 1.3 1.1 -1.2 2.4 8.7 8.7 -5.1 -4.7 100 10160 days ago 0.8 1.3 -1.0 2.8 8.6 8.7 -5.2 -4.7 100 10190 days ago 0.9 1.4 -1.0 2.8 8.6 8.6 -5.3 -4.6 100 102

Public Debt% of GDP





| 63



1,000

2,000

3,000

4,000

5,000


-20

-10

0

10

20

2000 2005 2010

-2

0

2

4

6

2000 2005 2010

BelgiumEuro area

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

BelgiumEuro area

2

4

6

8

1995 2000 2005 2010

BelgiumGermany

0

1

2

3



0.5

1.0

1.5

2.0



-3

0

3

6

9

12


2010 2011


Notes and sources





19 | 10-year Rate | 1995 - 2014 | in %

21 | Stock Market | BEL 20General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allmonetary sector data are from the National Bank of Belgium (NBB,Nationale Bank van België), Statistics Belgium (SB) and the EuropeanCentral Bank (ECB). See below for details. Forecasts based onFocusEconomics Consensus Forecast.

15 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in %. 2000-2014. Source: SB.16 Quarterly inflation, year-on-year variation in harmonised index ofconsumer price (HICP) in %. Source: SB.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: Belgostat, ECB.20 Current account balance in EUR bn. 2000-2014. Source: NBB.21 Daily index levels, BEL 20 Index. January 2008 until the end ofprevious month. Source: Brussels Stock Exchange.22 Current account balance in EUR bn, evolution of 2010 and 2011forecasts since January 2010

Individual Forecasts 2010 2011 2010 2011BNP Paribas Fortis 2.2 2.1 - -Commerzbank 1.7 1.8 - -Credit Agricole 1.3 1.7 - -Credit Suisse 1.7 1.5 10.2 11.3DekaBank 2.2 1.7 10.6 12.0Deutsche Bank 2.1 1.7 8.8 7.3Dexia 1.8 1.8 - -DZ Bank 2.2 1.8 - -Experian 1.8 1.7 -0.7 0.7ING 1.9 1.9 - -KBC 1.9 1.8 - -Raiffesien Research 2.0 1.7 -5.3 -7.3UBS 2.1 1.9 - -Summary Minimum 1.3 1.5 -5.3 -7.3Maximum 2.2 1.9 10.6 12.0Median 1.9 1.7 8.8 7.3Consensus 1.9 1.8 4.7 4.8History 30 days ago 1.8 1.7 4.8 4.860 days ago 1.6 1.5 7.8 8.990 days ago 1.6 1.5 6.1 6.8Additional Forecasts Central Bank (Oct. 2010) 2.0 1.9 - -IMF (Oct. 2010) 2.0 1.9 - -Euro. Comm. (May 2010) 1.6 1.6 - -



| 64

Finland November 2010FOCUSECONOMICS


FinlandOutlook improves

Gerardo MoránSenior Economist

Finland


REAL SECTOR | Growth moderates in JulyIn July, the economy grew 4.6% over the same month last year in working-dayadjusted terms. The reading represented a moderation compared to the strong5.5% expansion recorded in June (previously reported: +5.1% year-on-year).A month-on-month comparison corroborates the deterioration suggested bythe annual figures, as the economy contracted 0.2% over June in seasonallyadjusted terms.

The monthly slowdown was the result of a deceleration in manufacturing andconstruction, which grew 7.3% (June: +11.3% yoy). In contrast, agriculture,hunting, forestry and fishery accelerated to a 10.1% expansion (June: +2.3%yoy). Finally, growth in the services sector remained unchanged at June’s 3.2%.

In its latest Economic Outlook Bulletin, the Central Bank raised its growthforecast for this year from 1.6% to 2.6%. Consensus Forecast panellists broadlyshare the Bank’s assessment and see the economy growing 2.4% this year,which is up 0.3 percentage points over the previous month’s projection. Nextyear, the panel expects the economy to grow 2.5%.

MONETARY SECTOR | Inflation continues to climbIn September, consumer prices rose 0.4% over the previous month, whichmirrored the reading recorded in August. The monthly price increase was mostlydriven by higher food prices (+1.3% month-on-month), in particular forvegetables. Moreover, a rise in prices for clothing and footwear (+5.1% mom)owing to the end of the summer sales, also contributed to the monthly priceincrease.

As a result of the relatively high monthly figure, annual inflation continued totrend upwards, rising from 1.2% in August to 1.4% in September. In the same

• Indicators across the board point towards sustained growth in thecoming quarters, as the recovery in the external sector is filtering tothe domestic economy. That said, growth is expected to deceleratecompared to the strong 1.9% quarter-on-quarter expansion tallied inthe second quarter.

• Considering the better-than-expected performance of the Finisheconomy, Consensus Forecast panellists revised their growthforecasts up by 0.3 percentage points over last month to 2.4%. Nextyear, the panel sees the economy growing 2.5%.

• In September, harmonised consumer price inflation increased a notchto 1.4%. The panel anticipates inflation will remain broadly stablethroughout the rest of the year and average 1.3%, which is unchangedover the previous month’s forecast. In 2011, the panel anticipatesinflation will accelerate to 2.0%.

2000-04 2005-09 2010-14Population (million): 5.2 5.3 5.4GDP (EUR bn): 142 172 194GDP per capita (EUR): 27,391 32,452 35,719GDP growth (%): 3.1 1.1 2.5Fiscal Balance (% of GDP): 4.1 2.8 -2.0Public Debt (% of GDP): 43.3 39.0 51.9Inflation (%): 1.8 1.8 1.7Current Account (% of GDP): 7.1 3.5 1.8

Monthly GDP | variation in %

Note: Month-on-month seasonally adjusted and annual variation of the trendindicator of output.Source: Statistics Finland and FocusEconomics calculations.

0.5

-0.2

0.5

-0.3 -0.2

1.41.2

1.5

0.10.3

1.1

-1.0

-0.2

-2.0

-1.0

0.0

1.0

2.0

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

%

-15.0

-10.0

-5.0

0.0

5.0

10.0

%

MoM s.a. (left scale) YoY (right scale)

| 65



0.2

-0.5

0.1

0.5

0.3

-0.1

-0.5

0.4 0.4

0.1

0.4

0.10.2

-0.8

-0.4

0.0

0.4

0.8


%

-2.0

-1.0

0.0

1.0

2.0

%

Monthly (left scale) Annual (right scale)


Note: Monthly and annual consumer price index variations in %.Source: Statistics Finland and FocusEconomics calculations.

vein, annual inflation as measured by the harmonised index of consumer prices(HICP), stepped up from 1.3% in August to 1.4% in September, which drove upthe annual average harmonised inflation rate a notch to 1.4%.

In its most recent Economic Outlook Bulletin published in September, the CentralBank projects inflation to average 1.6% this year and to accelerate further toan average of 1.9% next year. Consensus Forecast panellists anticipate inflationto average 1.3% this year, which is unchanged over last month’s forecast. For2011, the panel expects inflation to reach 2.0%.

| 66




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 5.3 5.3 5.3 5.4 5.3 5.4 5.4 5.4 5.5 5.5GDP per capita (EUR) 29,991 31,453 33,978 34,752 32,088 33,034 34,338 35,727 37,074 38,424GDP (EUR bn) 157 166 180 185 171 178 186 194 202 211Economic Growth (GDP, annual var. in %) 2.9 4.4 5.3 0.9 -8.0 2.4 2.5 2.6 2.5 2.4 Private Consumption (annual var. in %) 3.1 4.3 3.5 1.7 -1.9 2.1 1.9 2.2 2.4 2.5 Government Consumption (ann. var. in %) 2.2 0.4 1.1 2.4 1.2 - - - - - Fixed Investment (annual var. in %) 3.6 1.9 10.7 -0.4 -14.7 0.6 4.6 4.8 4.3 4.2Industrial Production (annual variation in %) 0.3 9.9 4.4 0.8 -18.0 6.8 5.4 4.8 4.5 4.8Unemployment (aop, % of active population) 8.4 7.7 6.9 6.4 8.2 8.5 8.0 7.6 7.3 7.1Fiscal Balance (% of GDP) 2.7 4.0 5.2 4.2 -2.2 -3.4 -2.4 -1.4 -1.4 -1.6Public Debt (% of GDP) 41.7 39.7 35.2 34.2 44.0 49.3 51.8 51.9 53.1 53.5Monetary and Financial Sector Inflation (CPI, annual average in %) 0.9 1.6 2.5 4.1 0.0 - - - - -HICP (annual average variation in %) 0.8 1.3 1.6 3.9 1.6 1.3 2.0 2.0 1.7 1.7Producer prices (PPI, annual variation in %) 3.8 3.0 2.9 -0.8 -2.6 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.23 3.97 4.40 3.69 3.57 2.99 3.48 3.57 3.91 4.27Stock Market (OMXH25, annual var. in %) 25.7 26.5 3.4 -49.6 34.1 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) 3.4 4.2 4.3 2.9 2.7 1.6 1.8 1.8 1.9 1.9Current Account Balance (EUR bn) 5.3 7.0 7.6 5.4 4.7 2.9 3.3 3.5 3.8 4.1Trade Balance (EUR bn) 7.4 8.6 9.1 6.9 3.4 3.9 4.2 4.6 5.4 6.2Exports (EUR bn) 52.6 61.4 65.7 65.6 45.1 49.5 53.6 58.6 64.2 69.4Imports (EUR bn) 45.2 52.8 56.6 58.8 41.7 45.3 48.9 53.6 59.7 64.7Exports (annual variation in %) 7.2 16.8 7.0 -0.2 -31.3 9.8 8.2 9.3 9.6 8.1Imports (annual variation in %) 15.1 16.7 7.2 3.8 -29.0 8.7 7.8 9.6 11.4 8.4 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -8.1 -5.2 0.0 3.7 3.8 4.2 4.0 3.0 2.6 2.3Economic Growth (GDP, qoq variation in %) 1.1 0.3 0.1 1.9 1.1 0.6 0.0 0.7 0.7 0.4HICP (annual average variation in %) 1.2 1.2 1.5 1.4 1.3 1.8 2.1 2.0 2.1 2.1ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.37Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Trend Indicator of Output (annual var. in %) -0.3 -1.0 -0.3 1.5 4.4 5.5 4.6 - - -Trend Indicator of Output (s.a. mom var. in %) -0.3 -0.2 1.4 0.1 1.2 1.5 -0.2 - - -Unemployment (eop, % of active population) 9.5 9.2 9.1 9.3 10.5 8.8 7.5 7.3 7.0 -Cons. Confidence Index (long-term avg. 13.2) 14.5 15.9 15.4 17.9 15.8 18.7 19.1 21.9 22.9 20.5Inflation (CPI, mom variation in %) 0.1 0.4 0.5 0.3 -0.1 0.2 -0.5 0.4 0.4 -Inflation (CPI, annual variation in %) -0.2 0.1 0.6 0.9 1.0 0.9 1.1 1.2 1.4 -HICP (annual variation in %) 1.6 1.3 1.5 1.6 1.4 1.3 1.3 1.3 1.4 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 67




Real GDP growth in %

Individual Forecasts 2010 2011Aktia Bank 3.0 3.0Credit Suisse 2.5 2.9DekaBank 0.6 2.2Deutsche Bank 2.4 2.0DZ Bank 0.9 1.4ETLA Research Institute 3.5 4.0Experian 1.9 2.0Handelsbanken 3.4 2.7Nordea 3.5 3.0Raiffeisen Research 2.4 1.8Sampo Bank 3.1 2.5Swedbank 2.2 2.4UBS 1.6 2.1Summary Minimum 0.6 1.4Maximum 3.5 4.0Median 2.4 2.4Consensus 2.4 2.5History 30 days ago 2.1 2.560 days ago 1.5 2.490 days ago 1.3 2.3Additional Forecasts Central Bank (Sep. 2010) 2.6 3.0IMF (Oct. 2010) 2.4 2.0European Commission (May 2010) 1.4 2.1

General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from Statistics Finland (SF) and Eurostat. See belowfor details. Forecasts based on FocusEconomics Consensus Forecast.

1 GDP, annual variation in %. Source: SF.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %.Source: SF.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %. Source: SF.6 Gross fixed capital formation, annual variation in %. Source: SF.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed capital formation, change in 2010 and 2011 forecastssince January 2010.9 Industrial production, annual variation in %. Source: SF.10 Unemployment, % of active population. Source: SF.11 General government balance, % of GDP. Source: Eurostat.12 Industrial production, evolution of 2010 and 2011 forecasts sinceJanuary 2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January2010.14 General government balance, evolution of 2010 and 2011 forecastssince January 2010.

Notes and sources

-10

-5

0

5

10

1995 2000 2005 2010

FinlandEuro areaWorld

-12

-6

0

6

12

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-2

0

2

4

6

1995 2000 2005 2010

FinlandEuro area

-20

-10

0

10

20

1995 2000 2005 2010

Finland Euro area

0

1

2

3

4



1

2

3

4

5



0

1

2

3


2010 2011

-6

-3

0

3

6


2010 2011






| 68




Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Aktia Bank 2.5 2.0 1.0 6.0 - - 8.5 7.9 -3.0 -2.0 49.0 50.0Credit Suisse - - - - - - - - -3.6 -3.0 50.5 54.9DekaBank - - - - - - - - -3.4 -3.1 - -Deutsche Bank - - - - - - - - -3.2 -2.5 - -DZ Bank - - - - - - - - -4.0 -3.0 51.0 -ETLA Research Institute 2.5 2.0 2.5 8.0 6.8 8.2 8.4 7.7 -2.7 -1.8 - -Experian 1.6 1.6 -1.2 3.1 - - 8.3 8.0 -3.5 -2.8 - -Handelsbanken 2.6 2.4 0.9 5.3 11.0 5.0 8.2 8.0 -2.4 -0.5 48.4 49.6Nordea 2.4 2.6 0.7 4.1 10.0 5.0 8.5 8.1 -2.5 -0.5 47.5 48.3Raiffeisen Research - - - - - - 8.5 8.1 -3.8 -2.9 50.5 54.9Sampo Bank 2.3 1.5 -1.0 5.0 - - 8.5 7.8 -3.1 -1.5 49.0 51.0Swedbank 2.3 2.5 1.2 3.0 5.0 6.0 8.5 8.2 -4.2 -2.8 50.5 53.0UBS 0.5 1.0 1.0 2.0 1.3 3.0 8.8 8.2 -4.5 -4.3 47.4 52.7Summary Minimum 0.5 1.0 -1.2 2.0 1.3 3.0 8.2 7.7 -4.5 -4.3 47.4 48.3Maximum 2.6 2.6 2.5 8.0 11.0 8.2 8.8 8.2 -2.4 -0.5 51.0 54.9Median 2.4 2.0 1.0 4.6 6.8 5.0 8.5 8.0 -3.4 -2.8 49.0 51.9Consensus 2.1 1.9 0.6 4.6 6.8 5.4 8.5 8.0 -3.4 -2.4 49.3 51.8History 30 days ago 2.1 1.9 0.6 4.6 6.8 5.4 8.5 8.1 -3.4 -2.4 49.3 51.860 days ago 1.6 1.9 -0.8 4.2 6.1 5.1 9.0 8.6 -3.7 -2.9 49.2 52.590 days ago 1.4 1.7 -0.6 3.4 2.7 4.0 9.1 8.7 -3.7 -3.2 48.5 52.5



Industry% variation


Public Debt% of GDP


2

4

6

8


2010 2011

-8

-4

0

4

8

1995 2000 2005 2010


6

9

12

15

18

1995 2000 2005 2010

FinlandEuro area

-24

-16

-8

0

8

16

1995 2000 2005 2010

FinlandEuro area

-5

-4

-3

-2


2010 2011

7.5

8.0

8.5

9.0

9.5

10.0


2010 2011




9 | Industry | variation in %



| 69




Consumer Prices and Current Account Balance

Individual Forecasts 2010 2011 2010 2011Aktia Bank 1.1 2.1 - -Credit Suisse 1.8 1.8 2.0 2.4DekaBank 1.5 1.9 1.9 2.4Deutsche Bank 1.6 1.9 4.5 3.7DZ Bank 1.5 1.9 - -ETLA Research Institute 1.2 2.4 2.0 3.0Experian 1.4 1.7 2.8 2.6Handelsbanken 1.0 2.2 3.0 2.8Nordea 0.8 2.0 2.8 3.8Raiffeisen Research 1.5 1.8 3.7 2.8Sampo Bank 1.3 2.3 2.5 3.5Swedbank 1.5 2.5 3.0 3.4UBS 1.0 1.4 3.5 5.5Summary Minimum 0.8 1.4 1.9 2.4Maximum 1.8 2.5 4.5 5.5Median 1.4 1.9 2.8 3.0Consensus 1.3 2.0 2.9 3.3History 30 days ago 1.3 2.0 2.9 3.460 days ago 1.3 1.8 3.1 3.890 days ago 1.4 1.6 3.1 3.6Additional Forecasts Central Bank (Sep. 2010) 1.6 1.9 - -IMF (Oct. 2010) 1.4 1.8 - -Euro. Comm. (May 2010) 1.7 1.9 - -



Notes and sources

General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from Statistics Finland (SF), the European CentralBank (ECB), and the Bank of Finland (BoF). See below for details.Forecasts based on FocusEconomics Consensus Forecast.

15 Inflation, annual average variation in harmonised index of consumerprices (HICP) in % (aop). 2000-2014. Source: SF.16 Quarterly inflation, year-on-year variation in harmonised index ofconsumer prices (HICP) in % (aop). Source: SF.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: BoF, ECB.20 Current account balance in EUR bn. Source: BoF.21 Daily index levels. OMXH25 (Helsinki Stock Exchange). Jan. 2008until end of previous month. Source: NASDAQ OMX Group.22 Current account balance in EUR bn, evolution of 2010 and 2011forecasts since January 2010.

2

4

6

8

1995 2000 2005 2010

FinlandGermany

0

1

2

3

4

5

2000 2005 2010

FinlandEuro area

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

FinlandEuro area

0

1

2

3



0

1

2

3



2.5

3.0

3.5

4.0


2010 2011

0

3

6

9

12

15

1995 2000 2005 2010

1,000

1,500

2,000

2,500

3,000

3,500



16 | Inflation | Q1 07-Q4 11 | in % 15 | Inflation | 2000 - 2014 | in %



19 | 10-year Rate | 1995 - 2014 | in %

21 | Stock Market | OMXH25

| 70

Greece November 2010FOCUSECONOMICS


2000-04 2005-09 2010-14Population (million): 11.0 11.2 11.4GDP (EUR bn): 160 222 245GDP per capita (EUR): 14,510 19,817 21,499GDP growth (%): 4.5 2.3 -0.2Fiscal Balance (% of GDP): -5.2 -7.0 -5.5Public Debt (% of GDP): 101 102 144Inflation (%): 3.4 3.1 1.9Current Account (% of GDP): -6.8 -11.8 -6.0

GreeceOutlook stable


Greece


FISCAL SECTOR | Government presents 2011 budget draftOn 4 October, the government presented the draft 2011 budget, which projectsa fiscal deficit of 7.0% of GDP for next year. The projection is well below the7.6% target set in the Economic Policy Programme, which aims at bringing thebudget deficit to under 3.0% of GDP by 2014. In 2010, the deficit is estimated toreach 7.8% of GDP, lower than the 8.1% of GDP projected in the programme.

The budget reflects a 5.9% decline in overall expenditure and a 6.9% increasein revenues. The fiscal adjustments include reductions in public investment,as well as savings from wage cuts in the public sector. That said, additionalrevenues are expected to come from the VAT increase, which was implementedin July this year, as well as from taxes on property and a special levy on profitableenterprises.

Meanwhile, Eurostat, in cooperation with the Greek Statistical Office and theGreek Court of Auditors, is assessing the quality of public accounts data, thusdelaying the revision of Greek budget deficit figures for 2006-2009 until 15November. According to market analysts, the budget deficit figure could berevised to 15.5% of GDP, up from the 13.6% initially reported.

Consensus Forecast panellists are more pessimistic than the governmentand see the fiscal deficit narrowing to 7.6% of GDP in 2011.

REAL SECTOR | Industrial production moderates rate of contraction in AugustIn August, industrial production fell 2.1% over the same month last year, whichrepresented an improvement compared to the 9.1% drop registered in July.However, the industrial sector remains mired in recession despite the favorablebase effect.

• On 4 October, the government presented the budget draft for 2011,which aims at reducing the fiscal deficit to 7.0% of GDP next year,following on an estimated 7.8% of GDP deficit this year. Final numbersfor the 2009 deficit will be published by 15 November. The final deficitnumber is expected to be corrected from the current 13.6% of GDP to15.5% of GDP.

• Consensus Forecast panellists expect the economy to contract 3.8%this year, which is unchanged over last month’s estimate. In 2011, theeconomy is unlikely to escape recession, with the panel seeing GDPto contract 2.2%.

• Inflation rose from 5.5% in August to 5.6% in September. ConsensusForecast panellists expect consumer prices to increase an averageof 4.3% in 2010. In 2011, inflation is expected to moderate to an average1.8%, amid weak economic activity.

Fiscal Balance | % of GDP

Note: Annual fiscal balance as % of GDP; red line represents the 3.0% of GDPthreshold stipulated by the Maastricht Treaty.Source: Eurostat and FocusEconomics Consensus Forecast.

-15

-12

-9

-6

-3

0

1990 1995 2000 2005 2010

%

| 71



The improvement in August was driven by a rebound in mining and quarrying,which expanded 3.1% year-on-year contrasting the 15.8% contraction in July,as well as a better performance of water supply (July: -5.9% yoy; August: +2.3%yoy) and electricity supply (July: -6.0% yoy; August: +0.2% yoy). Nonetheless,the all-important manufacturing sector remains in negative territory, decreasing3.9% yoy, which represents a slower rate of contraction compared to the 9.7%drop in the previous month.

Despite the monthly reading, the trend continues to improve, as the annualaverage variation in industrial production stepped up from minus 7.0% in Julyto minus 6.4% in August. Consensus Forecast panellists see industrialproduction contracting 4.1% this year, which is unchanged from last month’sforecast.

Meanwhile, Consensus Forecast panellists see the overall economycontracting 3.8% this year, which is unchanged from last month’s forecast. For2011, the panel anticipates GDP to contract 2.2%.

MONETARY SECTOR | Inflation inches up in SeptemberIn September, consumer prices rose 1.9% over the previous month, whichcontrasted the 0.7% drop recorded in August. The monthly price increase mainlyreflected higher prices for clothing and footwear (+17.6% month-on-month),owing to the end of seasonal sales. The increase was also fanned by higherprices for food and non-alcoholic beverages (+0.7% mom) and householdequipment (+5.4% mom), which helped offsetting lower prices for alcoholicbeverages and tobacco (-1.4% mom).

Due to the monthly reading, annual inflation inched up from 5.5% in August to5.6% in September, which represents the highest level since 1997. Meanwhile,the harmonised index of consumer prices (HICP) also inched up in September,thus driving annual average harmonised inflation up to 3.9% (August: +3.5%).

The European Commission, the European Central Bank (ECB) and theInternational Monetary Fund (IMF) expect 2010 inflation to end the year at 4.8%.In 2011, inflation is likely to moderate sharply to 1.5% - 2.0% amid subduedeconomic activity and high unemployment.

Consensus Forecast panellists expect harmonised inflation to average 4.3%this year, which is up 0.2 percentage points from last month’s forecast. For2011, panellists expect inflation to average 1.8%.


Note: Monthly and annual consumer price index variation in %.Source: National Statistical Service of Greece (EL.STAT) and FocusEconomicscalculations.

1.9

0.5 0.50.2

-0.7-0.5

3.1

1.20.8

-0.3-0.5

-0.7

1.9

-1.0

0.0

1.0

2.0

3.0

4.0


%

0.0

2.0

4.0

6.0

%



Note: Month-on-month changes of seasonally adjusted industrial production andmoving annual average growth rate in %.Source: National Statistical Service of Greece (EL.STAT) and FocusEconomicscalculations.


-9.7-9.1 -9.5

-5.2

-6.7

-4.3

-10.0

-4.2

-6.7

-4.7 -4.3

-9.1

-2.1

-15.0

-10.0

-5.0

0.0


%

-12.0

-10.0

-8.0

-6.0

%

YoY (left scale)

Annual Average (right scale)

| 72




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 11.1 11.1 11.2 11.2 11.3 11.3 11.4 11.4 11.4 11.5GDP per capita (EUR) 17,594 18,878 20,231 21,311 21,073 21,088 20,927 21,278 21,785 22,416GDP (EUR bn) 195 210 226 239 237 239 238 243 249 257Economic Growth (GDP, annual var. in %) 2.2 4.5 4.5 2.0 -2.0 -3.8 -2.2 1.0 1.8 2.0 Total Consumption (annual variation in %) 3.9 4.3 4.2 2.0 0.4 - - - - - Private Consumption (annual var. in %) 4.7 5.2 3.3 2.3 -1.8 -3.5 -3.6 0.0 0.6 1.6 Government Consumption (ann. var. in %) 1.1 -0.1 8.4 0.6 9.6 - - - - - Fixed Investment (annual variation in %) -4.5 9.8 4.6 -7.4 -13.9 -10.8 -5.5 1.9 3.5 3.8Industrial Production (annual variation in %) -1.6 0.8 2.3 -4.0 -9.2 -4.1 -0.1 2.6 3.6 3.0Unemployment (aop, % of active population) 9.9 8.9 8.3 7.7 9.4 12.2 14.1 13.6 13.1 12.9Fiscal Balance (% of GDP) -5.2 -3.6 -5.1 -7.7 -13.6 -8.6 -7.6 -5.5 -3.4 -2.5Public Debt (% of GDP) 100 98 96 99 115 132 141 147 148 151Monetary and Financial Sector Inflation (HICP, annual variation in %) 5.5 3.2 3.9 2.2 2.6 - - - - -Inflation (HICP annual average variation in %) 3.5 3.3 3.0 4.2 1.3 4.3 1.8 1.1 0.9 1.2ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.57 4.04 4.54 5.07 5.49 4.60 4.68 5.40 5.45 5.55Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) -7.3 -11.3 -14.4 -14.6 -11.2 -9.9 -7.9 -5.2 -3.6 -3.4Current Account Balance (EUR bn) -14.3 -23.8 -32.6 -34.8 -26.6 -23.6 -18.7 -12.7 -9.0 -8.7Trade Balance (EUR bn) -27.5 -35.3 -41.5 -44.0 -30.8 -28.9 -25.4 -30.1 -36.5 -37.6Exports (EUR bn) 14.2 16.2 17.4 19.8 15.3 15.9 16.9 18.1 19.0 20.2Imports (EUR bn) 41.7 51.4 58.9 63.9 46.1 44.8 42.3 43.4 45.0 47.0Exports (annual variation in %) 12.2 13.8 8.0 13.6 -22.7 3.9 6.2 6.9 5.1 6.3Imports (annual variation in %) 9.6 23.2 14.6 8.3 -27.8 -2.8 -5.5 2.6 3.6 4.4 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -2.5 -2.5 -2.3 -3.7 -4.5 -4.5 -4.1 -2.6 -1.5 -0.4Economic Growth (GDP, qoq variation in %) -0.5 -0.8 -0.8 -1.8 -1.6 -0.6 -0.2 -0.1 0.0 0.3Unemployment (eop, % of active population) 9.7 10.2 11.1 12.2 12.2 12.4 12.7 13.2 13.7 14.1Inflation (HICP annual average variation in %) 0.8 2.0 3.0 5.1 5.6 4.8 4.2 2.2 0.7 0.6ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.37Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) -4.3 -10.0 -4.2 -6.7 -4.7 -4.3 -9.1 -2.1 - -Inflation (CPI, mom variation in %) -0.7 -0.5 3.1 1.2 0.8 -0.3 -0.5 -0.7 1.9 -Inflation (CPI, annual variation in %) 2.4 2.8 3.9 4.8 5.4 5.2 5.5 5.5 5.6 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 73



-5

0

5

10

1995 2000 2005 2010

GreeceEuro areaWorld

-10

-5

0

5

10

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-6

-3

0

3

6

1995 2000 2005 2010

GreeceEuro area

-20

-10

0

10

20

1995 2000 2005 2010

Greece

Euro area

-6

-3

0

3



-4

-2

0

2



-4

-2

0

2


20102011

-18

-12

-6

0

6


2010 2011






1 | Real GDP | 1995-2014 | % variation

General:Long-term chart period from 1995 to 2014 unless otherwise stated. All realsector data are from the National Statistical Service of Greece (EL.STAT.),the Eurostat and the Bank of Greece (BoG). See below for details. Fore-casts based on FocusEconomics Consensus Forecast.

1 GDP, annual variation in %. Source: Eurostat.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %. Source:Eurostat.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %. Source: Eurostat.6 Gross fixed capital formation, annual variation in %. Source: Eurostat.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed capital formation, change in 2010 and 2011 forecasts sinceJanuary 2010.9 Public debt,% of GDP. Source: EL.STAT.10 Unemployment, % of active population. Source: EL.STAT.11 General government balance, % of GDP. Source: BoG.12 Public debt, evolution of 2010 and 2011 forecasts since January 2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January2010.14 General government balance, evolution of 2010 and 2011 forecasts sinceJanuary 2010.

Notes and sources

Individual Forecasts 2010 2011Alpha Bank -3.5 -1.5BNP Paribas -4.0 -3.2Citi Group -3.5 -2.3Credit Agricole -4.0 -2.2Credit Suisse -4.0 -2.5DekaBank -3.9 -2.5Deutsche Bank -4.3 -2.7DZ Bank -4.2 -2.9Experian -3.4 -1.7ING -4.0 -2.0National Bank of Greece -3.8 -2.2Nomura -4.0 -2.9Piraeus Bank -3.3 -1.5Raiffeisen Research -3.8 -0.8Summary Minimum -4.3 -3.2Maximum -3.3 -0.8Median -4.0 -2.3Consensus -3.8 -2.2History 30 days ago -3.8 -2.160 days ago -3.7 -2.090 days ago -3.4 -1.7Additional Forecasts IMF (Oct. 2010) -4.0 -2.6European Commission (May 2010) -3.0 -0.5OECD (May 2010) -3.7 -2.5

| 74



50

70

90

110

130

150

170

2000 2005 2010

GreeceEuro area

4

8

12

16

1995 2000 2005 2010

Greece

Euro area

-15

-10

-5

0

5

1995 2000 2005 2010


110

120

130

140

150


2010 2011

10

11

12

13

14

15


2010 2011

-10

-9

-8

-7


2010 2011








Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Alpha Bank - - -6.8 2.6 11.8 14.6 -7.8 -6.0 - -BNP Paribas -0.7 -4.0 -16.4 -13.2 12.7 14.5 -8.2 -7.9 134 147Citi Group -4.0 -4.2 -6.5 -6.8 12.7 14.3 -8.2 -7.3 130 142Credit Agricole -3.3 -1.7 -18.2 -2.8 12.1 13.6 -7.9 -7.3 130 140Credit Suisse - - - - - - -8.0 -7.5 125 134DekaBank - - - - - - -10.6 -8.7 - -Deutsche Bank - - - - - - -8.0 -7.0 - -DZ Bank -4.6 -4.4 -17.7 -6.0 - - -9.5 -8.5 133 140Experian -3.1 -3.1 -5.3 -0.7 12.1 14.3 -9.3 -9.9 - -ING - - - - - - - - - -National Bank of Greece -3.8 -3.6 -9.3 -6.5 11.5 13.5 -8.5 -7.1 130 138Nomura -4.8 -4.0 -6.6 -10.4 12.0 14.7 -8.6 -7.1 145 155Piraeus Bank - - - - 12.5 14.0 -8.0 -6.9 131 133Raiffeisen Research - - - - 12.2 13.8 -8.8 -7.6 133 145Summary Minimum -4.8 -4.4 -18.2 -13.2 11.5 13.5 -10.6 -9.9 125 133Maximum -0.7 -1.7 -5.3 2.6 12.7 14.7 -7.8 -6.0 145 155Median -3.8 -4.0 -8.1 -6.2 12.1 14.3 -8.2 -7.3 131 140Consensus -3.5 -3.6 -10.8 -5.5 12.2 14.1 -8.6 -7.6 132 141History 30 days ago -3.3 -3.3 -11.5 -4.4 12.1 14.1 -8.5 -7.7 131 14060 days ago -2.1 -2.5 -9.1 -2.1 12.1 14.0 -8.5 -7.5 129 13890 days ago -2.2 -2.0 -7.7 -1.4 12.1 13.7 -8.7 -7.9 130 139




Public Debt% of GDP


| 75



-18

-12

-6

0

6

1995 2000 2005 2010

GreeceEuro area

-40

-30

-20

-10

0

1995 2000 2005 2010

0

2

4

6

2000 2005 2010

Greece

Euro area

-2

0

2

4

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

GreeceEuro area

0

4

8

12

16

1995 2000 2005 2010

GreeceGermany

0

2

4

6



-2

0

2

4

6



-25

-20

-15

-10


2010 2011


Notes and sources





19 | 10-year Rate | 1995 - 2014 | in %

21 | Current Account | % of GDPGeneral:Long-term chart period from 1995 to 2014 unless otherwise stated. Allmonetary sector data are from the National Statistical Service of Greece(EL.STAT.) and the Bank of Greece (BoG). See below for details. Forecastsbased on FocusEconomics Consensus Forecast.

15 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in %. Source: EL.STAT.16 Quarterly inflation, year-on-year variation in harmonised indexconsumer prices (HICP) in %. Source: EL.STAT.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: BoG.20 Current account balance in EUR bn. Source: BoG.21 Current account balance as % of GDP. Source: BoG22 Current account balance in EUR bn, evolution of 2010 and 2011forecasts since January 2010

Individual Forecasts 2010 2011 2010 2011Alpha Bank 3.8 1.2 - -BNP Paribas 3.0 1.6 -23.7 -20.0Citi Group 5.0 3.2 -21.9 -15.9Credit Agricole 4.5 -0.2 -23.9 -21.0Credit Suisse 3.2 2.0 -24.3 -20.2DekaBank 4.8 1.7 - -Deutsche Bank 4.7 1.7 -19.1 -17.9DZ Bank 4.6 1.3 - -Experian - - -24.3 -20.0ING 4.7 2.4 - -National Bank of Greece 4.7 2.5 -22.0 -16.8Nomura - - - -Piraeus Bank 4.5 4.0 -29.0 -Raiffeisen Research 4.3 0.5 -23.9 -17.8Summary Minimum 3.0 -0.2 -29.0 -21.0Maximum 5.0 4.0 -19.1 -15.9Median 4.5 1.7 -23.9 -19.0Consensus 4.3 1.8 -23.6 -18.7History 30 days ago 4.1 1.6 -23.6 -18.660 days ago 4.2 1.8 -23.4 -18.090 days ago 3.6 1.4 -23.4 -18.0Additional Forecasts IMF (Oct. 2010) 4.6 2.2 -33.1 -22.6Euro. Comm. (May 2010) 3.1 2.1 -24.1 -19.9OECD (May 2010) 3.0 0.3 -20.8 -15.5



| 76

Ireland November 2010FOCUSECONOMICS


IrelandOutlook improves


Ireland


REAL SECTOR | Industrial production growth slows in August but trendcontinues to improveIn August, industrial production dropped a seasonally adjusted 13.6% over theprevious month, which contrasted the 3.8% expansion registered in July (pre-viously reported: +3.2% month-on-month). The slowdown over the previousmonth was mainly the result of weaker manufacturing output, which plunged16.4%, contrasting the 4.3% increase recorded in July. Within manufacturing,production of pharmaceuticals and electrical equipment slowed markedly overthe previous month.

On an annual basis, industrial production expanded 9.6% in August, whichwas down from the 12.8% expansion registered in July (previously reported:+12.1% year-on-year). As a result of the August reading, the trend continues topoint upwards, as annual average variation in industrial production turned fromminus 1.4% in July to plus 0.6% in August, marking the first positive reading inannual average industrial production since November 2008.

The Central Bank sees the economy growing 0.2% this year. Next year, mon-etary authorities see growth picking up to 2.4%. Consensus Forecast panellistsdisagree with the Central Bank and anticipate the economy to contract 0.3% in2010, which is nonetheless up 0.1 percentage points from last month’s fore-cast. In 2011, panellists anticipate economic growth to inch up to 1.4%, whichis down 0.2 percentage points from last month’s forecast.

MONETARY SECTOR | Inflation remains in positive territory for a secondconsecutive monthIn September, consumer prices dropped 0.1% over the previous month, whichcontrasted the 0.7% increase recorded in August. The main drivers behind the

• On 6 October, international credit rating agency Fitch downgradedIreland’s rating from A+ to AA-, as the cost of the Irish banking sec-tor bailout is expected to weigh heavily on the country’s financesgoing forward.

• Despite the downgrade, the outlook for the country improved slightly,as Consensus Forecast participants revised up their forecast by 0.1percentage points and now see the economy to contracting 0.3% in2010. In 2011, the economy is expected to rebound with a 1.4% ex-pansion.

• Inflation stepped up from 0.2% in August to 0.5% in September.Panellists expect consumer prices to decline an average 0.9% thisyear, which is up 0.3 percentage points from last month’s forecast.Next year, the country should exit deflation with an average inflationrate of 0.7%.

2000-04 2005-09 2010-14Population (million): 3.9 4.7 5.3GDP (EUR bn): 128 175 173GDP per capita (EUR): 32,657 36,906 32,645GDP growth (%): 6.2 1.2 1.8Fiscal Balance (% of GDP): 1.4 -3.4 -10.8Public Debt (% of GDP): 33.3 37.0 96.4Inflation (%): 4.1 1.8 1.0Current Account (% of GDP): -0.5 -4.1 -0.2

7.8

-2.2

-6.7

-0.7

19.1

-1.3

3.3

-9.2

9.2

3.7 3.8

-13.6-11.3

-20.0

-10.0

0.0

10.0

20.0

30.0


%

-6.0

-4.0

-2.0

0.0

2.0

%




Note: Month-on-month changes of seasonally adjusted industrial productionand annual average growth rate in %.Source: Central Statistics Office Ireland (CSO) and FocusEconomics calcu-lations.

| 77



monthly price decrease were lower prices for transport, which, according to theCentral Statistical Office (CSO), were due to a reduction in airfares.

Despite the monthly price fall, annual inflation stepped up from 0.2% in Augustto 0.5% in September, marking the second consecutive month with inflation inpositive territory since December 2008. Meanwhile, annual harmonised infla-tion (based on the harmonised index of consumer prices - HICP) stepped upfrom minus 1.2% in August to 1.0%.

In the October Quarterly Bulletin, the Central Bank stated that it expects infla-tion to average minus 1.4% this year and to rebound to 1.1% next year. Con-sensus Forecast panellists see the country reverting to deflation this year andanticipate consumer prices to decrease an average 0.9%, which is up 0.3 per-centage points over last month’s forecast. For 2011, the panel expects thecountry to leave deflation, with prices increasing an average 0.7%, unchangedfrom last month forecast.

-0.4

-0.2

0.0

-0.5-0.6

0.4

0.10.2

0.6

-0.1

0.0

0.7

-0.1

-1.0

-0.5

0.0

0.5

1.0


%

-9.0

-6.0

-3.0

0.0

3.0

%




Note: Monthly and annual consumer price index variation in %.Source: Central Statistics OfficeIreland (CSO) and FocusEconomicscalculations.

| 78




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 4.3 4.7 4.8 4.9 5.0 5.1 5.2 5.3 5.4 5.5GDP per capita (EUR) 37,402 37,621 39,576 37,169 32,764 31,721 31,741 32,352 33,200 34,209GDP (EUR bn) 162 177 190 182 164 162 165 171 179 188Economic Growth (GDP, annual var. in %) 6.0 5.3 5.6 -3.5 -7.6 -0.3 1.4 2.4 2.8 3.0 Private Consumption (annual var. in %) 6.9 6.7 6.4 -1.5 -7.0 -0.9 1.1 2.1 2.4 2.8 Fixed Investment (annual variation in %) 14.9 4.6 2.8 -14.3 -31.0 -17.0 0.5 2.8 4.0 3.4Industrial Production (annual variation in %) 4.0 3.1 5.2 -2.2 -4.5 -2.1 0.8 4.2 4.6 4.9Unemployment (aop% of active population) 4.4 4.4 4.6 6.3 11.8 13.7 13.6 12.1 11.3 10.7Fiscal Balance (% of GDP) 1.6 3.0 0.1 -7.3 -14.3 -19.3 -13.6 -7.9 -7.1 -6.1Public Debt (% of GDP) 27.4 24.9 25.0 43.9 64.0 83.4 98.6 98.6 99.2 102.2Monetary and Financial Sector Inflation (HICP, annual variation in %) 1.9 3.0 3.2 1.3 -2.6 - - - - -Inflation (HICP, ann. avg. var in %) 2.2 2.7 2.9 3.1 -1.7 -0.9 0.7 1.4 1.7 1.9ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.27 3.95 4.50 4.57 4.94 4.10 4.57 5.62 6.25 6.47Stock Market (var. of ISEQ in %) 18.8 27.8 -26.3 -66.2 27.0 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) -3.5 -3.6 -5.3 -5.2 -2.9 -0.5 0.1 0.6 -0.5 -0.5Current Account Balance (EUR bn) -5.7 -6.3 -10.1 -9.4 -4.8 -0.9 0.2 0.9 -1.0 -0.9Trade Balance (EUR bn) 28.2 25.0 19.8 23.8 32.6 34.7 36.2 37.5 39.4 42.1Exports (EUR bn) 82.7 83.2 84.1 81.5 78.0 80.3 82.9 85.9 88.6 90.4Imports (EUR bn) 54.5 58.2 64.3 57.7 45.3 45.6 46.7 48.7 50.1 52.1Exports (annual variation in %) 2.7 0.7 1.0 -3.1 -4.3 3.0 3.3 3.6 3.1 2.1Imports (annual variation in %) 10.9 6.9 10.4 -10.3 -21.4 0.7 2.4 4.1 3.0 3.9 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -7.4 -5.8 -0.8 -1.8 0.9 0.5 1.1 1.5 2.0 1.0Economic Growth (GDP, qoq variation in %) -0.3 -2.5 2.2 -1.2 0.5 -0.2 0.2 0.3 0.3 0.3Inflation (HICP, ann. avg. var in %) -2.6 -2.8 -2.4 -2.1 -1.2 -0.8 -0.1 0.4 0.6 0.9ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.3710-year Bond Yield (%, eop) 4.67 4.94 4.53 5.50 5.25 4.10 4.21 4.33 4.45 4.57Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) 1.2 2.7 4.0 -4.1 6.6 8.4 12.8 9.6 - -Unemployment (% of active population) 13.4 13.4 13.4 13.4 13.7 13.4 13.7 13.8 13.7 -Inflation (CPI, mom variation in %) -0.6 0.4 0.1 0.2 0.6 -0.1 0.0 0.7 -0.1 -Inflation (CPI, annual variation in %) -3.9 -3.2 -3.1 -2.1 -1.1 -0.9 -0.1 0.2 0.5 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 79



-10

-5

0

5

10

15

1995 2000 2005 2010

IrelandEuro areaWorld

-10

-5

0

5

10

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-10

-5

0

5

10

15

1995 2000 2005 2010

IrelandEuro area

-40

-20

0

20

1995 2000 2005 2010

Ireland Euro area

-6

-4

-2

0

2



-2

0

2

4



-4

-2

0

2


20102011

-20

-10

0

10


2010 2011







General:Long-term chart period from 1995 to 2014 unless otherwise stated. All realsector data are from the Central Statistics Office Ireland (CSO) and Eurostat.See below for details. Forecasts based on FocusEconomics ConsensusForecast.

1 GDP, annual variation in %. Source: CSO.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %. Source:CSO.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %. Source: CSO.6 Gross fixed capital formation, annual variation in %. Source: CSO.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed capital formation, change in 2010 and 2011 forecasts sinceJanuary 2010.9 Public debt, % of GDP. 2000-2014 Source: CSO.10 Unemployment, % of active population. Source: CSO.11 General government balance, % of GDP. Source: Eurostat.12 Public debt, evolution of 2010 and 2011 forecasts since January 2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January 2010.14 General government balance, evolution of 2010 and 2011 forecasts sinceJanuary 2010.

Notes and sources

Individual Forecasts 2010 2011Credit Suisse 0.5 1.5DekaBank -0.5 1.2Deutsche Bank -0.5 1.2DZ Bank -1.6 -0.9Experian 0.6 2.7ING -1.0 1.2Nomura -0.4 2.1Raiffeisen Research -0.3 0.5UBS 0.4 3.0Summary Minimum -1.6 -0.9Maximum 0.6 3.0Median -0.4 1.2Consensus -0.3 1.4History 30 days ago -0.4 1.660 days ago -0.4 1.890 days ago -0.3 1.9Additional Forecasts IMF (Oct. 2010) -0.3 2.3European Commission (May 2010) -0.9 3.0Central Bank (Oct. 2010) 0.2 2.4

| 80



20

40

60

80

100

120

2000 2005 2010

Ireland

Euro area

0

4

8

12

16

1995 2000 2005 2010

Ireland

Euro area

-20

-15

-10

-5

0

5

1995 2000 2005 2010


70

80

90

100


2010 2011

8

10

12

14

16


2010 2011

-20

-15

-10

-5


2010 2011





9 | Public Debt | % variation



Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Credit Suisse - - - - - - -11.8 -10.0 77.3 87.3DekaBank - - - - - - -14.3 -13.5 - -Deutsche Bank - - - - - - -29.2 -9.8 - -DZ Bank - - - - - - -32.0 -14.0 65.5 98.5Experian -1.1 0.7 -19.1 -3.4 13.5 13.2 -11.5 -9.7 - -ING - - - - - - - - - -Nomura 0.0 1.6 -19.9 2.0 13.7 13.0 -11.9 -10.4 98.0 108.0Raiffeisen Research - - - - 13.6 14.7 -32.0 -31.3 98.0 111.0UBS -1.5 1.0 -12.0 3.0 14.0 - -12.0 -10.0 78.0 88.0Summary Minimum -1.5 0.7 -19.9 -3.4 13.5 13.0 -32.0 -31.3 65.5 87.3Maximum 0.0 1.6 -12.0 3.0 14.0 14.7 -11.5 -9.7 98.0 111.0Median -1.1 1.0 -19.1 2.0 13.6 13.2 -13.2 -10.2 78.0 98.5Consensus -0.9 1.1 -17.0 0.5 13.7 13.6 -19.3 -13.6 83.4 98.6History 30 days ago -1.2 0.9 -18.3 0.7 13.7 13.5 -13.0 -10.8 79.3 88.860 days ago -1.8 1.8 -14.1 1.0 13.7 13.8 -12.7 -10.0 78.7 86.790 days ago -1.8 1.8 -14.1 1.0 13.7 13.8 -12.0 -9.4 77.6 85.1




Public Debt% of GDP


| 81



2,000

4,000

6,000

8,000


-15

-10

-5

0

5

1995 2000 2005 2010

-4

-2

0

2

4

6

2000 2005 2010

IrelandEuro area

-4

-2

0

2

4

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

IrelandEuro area

2

4

6

8

1995 2000 2005 2010

IrelandGermany

-4

-2

0

2



-1

0

1

2



-3

-2

-1

0

1

Jan Apr Jul Oct

2010 2011


Notes and sources


Consumer Prices and Current Account Balance 16 | Inflation | Q1 07-Q4 11 | in % 15 | Inflation | 2000- 2014 | in %



19 | 10-year Rate | 2000 - 2014 | in %

21 | Stock Market | ISEQGeneral:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from the Central Statistics Office Ireland (CSO) andEuropean Central Bank (ECB). See below for details. Forecasts basedon FocusEconomics Consensus Forecast.

15 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in % 2000-2014. Source: CSO.16 Quarterly inflation, year-on-year variation in harmonised index ofconsumer prices (HICP) in %. Source: CSO.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: CSO, ECB.20 Current account balance in EUR bn. Source: CSO.21 Monthly index levels, ISEQ Index. Jan. 2008 until end of previousmonth. Source: Irish Stock Exchange.22 Current account balance in EUR bn, evolution of 2010 and 2011forecasts since January 2010.

Individual Forecasts 2010 2011 2010 2011Credit Suisse 1.4 0.7 -1.5 -1.0DekaBank -1.6 0.4 -1.4 -1.0Deutsche Bank -1.5 0.5 -1.6 0.0DZ Bank -1.6 0.7 - -Experian -1.3 0.7 0.2 3.2ING -1.0 0.8 - -Nomura - - - -Raiffeisen Research -1.5 1.5 -1.6 0.0UBS 0.0 0.4 0.8 0.2Summary Minimum -1.6 0.4 -1.6 -1.0Maximum 1.4 1.5 0.8 3.2Median -1.4 0.7 -1.5 0.0Consensus -0.9 0.7 -0.9 0.2History 30 days ago -1.2 0.7 -1.0 0.160 days ago -1.2 0.6 -0.9 -0.390 days ago -1.2 0.5 -0.9 -0.3Additional Forecasts IMF (Oct. 2010) -1.6 -0.5 - -Euro. Comm. (May 2010) -1.3 0.8 - -Central Bank (July 2010) -1.2 1.2 - -



| 82

Netherlands November 2010FOCUSECONOMICS


NetherlandsOutlook improves


Netherlands


REAL SECTOR | Industrial output rebounds in AugustIn August, industrial production expanded 0.3% over the previous month inseasonally adjusted terms, contrasting the revised 0.2% drop observed in July(previously reported: -0.4% month-on-month).

August’s expansion was mainly driven by a stronger dynamism in all the maincategories of industrial production. Manufacturing, which accounts for the bulkof industrial production, grew 0.7% over the previous month (July: +0.1% month-on-month). In addition, mining and quarrying accelerated over July and in-creased 3.4% (July: +0.5% mom). Finally, utilities bounced back and expanded3.0%, contrasting the 6.6% contraction recorded in July.

On an annual basis, industrial production expanded 7.3%, which was up fromthe 2.8% increase registered in July. As a result of the August reading, thetrend resumed its upward course, with the annual average growth in industrialproduction jumping from 2.4% in July to 4.0%. Consensus Forecast panellistssee industrial production rising 6.8% this year.

Meanwhile, the Central Bank expects the economy to grow 1.2% this year.Next year, monetary authorities see growth picking up to 1.9%. ConsensusForecast panellists expect the economy to grow 1.9% in 2010, which is up 0.1percentage points from last month’s forecast. In 2011, panellists anticipateeconomic growth to slow to 1.7%.

MONETARY SECTOR | Inflation rises in SeptemberIn September, consumer prices added 0.6% over the previous month. Thereading came in above the 0.2% increase registered in August, but was virtu-ally in line with market expectations. The monthly increase mainly reflected

• In August, the country continued to benefit from strong growth inthe industrial sector, with output expanding 7.3% annually. Moreover,additional data confirm the healthy state of the economy, with unem-ployment at the lowest level in over a year.

• Consensus Forecast participants lifted their 2010 growth forecastby 0.1 percentage points over last month and expect the economy toexpand 1.9% this year. In 2011, economic growth is likely to remainmoderate, with projections at 1.7%.

• Inflation rose a notch from 1.5% in August to 1.6% in September.Panellists expect inflation to average 1.0% this year, which is un-changed over last month’s projection. Next year, inflation should riseto 1.3%.

2000-04 2005-09 2010-14Population (million): 16.2 16.4 16.6GDP (EUR bn): 460 559 629GDP per capita (EUR): 28,427 34,036 37,813GDP growth (%): 1.7 1.5 1.9Fiscal Balance (% of GDP): -1.1 -0.8 -4.2Public Debt (% of GDP): 51.9 52.8 68.6Inflation (%): 3.0 1.6 1.4Current Account (% of GDP): 4.0 6.8 5.8

0.5

-0.1

0.8 0.6

1.9

2.7

-2.5

2.1

0.4

1.9

-2.7

-0.2

0.3

-4.0

-2.0

0.0

2.0

4.0


%

-10.0

-5.0

0.0

5.0

%

MoM s.a.

Annual average YoY


Note: Month-on-month changes of seasonally adjusted industrial productionand annual average growth rate in %.Source: Statistics Netherlands and FocusEconomics calculations.

| 83



higher prices for clothing and footwear (+11.9% month-on-month), as well asfor communications (+1.4% mom).

As a result of the monthly increase, annual inflation stepped up from 1.5% inAugust to 1.6% in September, driving annual average inflation up from 1.0% inAugust to 1.1%. Moreover, annual average harmonised inflation (based on theharmonised index of consumer prices – HICP) rose from 0.6% in August to0.7% in September.

According to the June Economic Outlook report, the Central Bank expectsharmonised inflation to average 1.0% this year and to accelerate to 1.6% nextyear. Consensus Forecast panellists anticipate inflation to average 1.0% thisyear, which is unchanged over last month’s forecast. For 2011, the panel ex-pects inflation to reach 1.3%.


Note: Monthly and annual consumer price index variation in %.Source: Statistics Netherlands and FocusEconomics calculations.

0.5

0.1

-0.1

-0.6

0.0

0.7

1.2

0.3

0.0

-0.5

-0.3

0.2

0.6

-1.0

-0.5

0.0

0.5

1.0

1.5


%

0.0

0.5

1.0

1.5

2.0

%



| 84




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 16.3 16.4 16.4 16.5 16.5 16.5 16.6 16.6 16.7 16.7GDP per capita (EUR) 31,432 33,025 34,854 36,166 34,705 35,591 36,558 37,729 38,951 40,237GDP (EUR bn) 513 540 572 596 572 589 606 628 650 673Economic Growth (GDP, annual var. in %) 2.0 3.4 3.9 1.9 -3.9 1.9 1.7 1.8 2.0 2.0Domestic Demand (annual variation in %) 1.4 3.9 3.1 2.4 -3.1 1.7 1.6 1.3 1.6 1.9 Private Consumption (annual var. in %) 1.0 -0.3 1.8 1.1 -2.5 0.5 1.0 1.3 1.6 1.7 Government Consumption (ann. var. in %) 0.5 9.5 3.5 2.5 - - - - - - Fixed Investment (annual variation in %) 3.7 7.5 5.5 5.1 -12.7 -3.2 3.7 2.8 3.1 3.3Industrial Production (annual variation in %) 0.4 1.5 2.2 1.5 -7.4 6.8 2.6 2.4 2.8 2.9Unemployment (aop% of active population) 6.5 5.5 4.5 3.9 4.9 5.5 5.3 4.9 4.7 4.6Fiscal Balance (% of GDP) -0.3 0.5 0.2 0.7 -5.3 -6.1 -4.6 -3.9 -3.3 -3.0Public Debt (% of GDP) 51.8 47.4 45.5 58.2 60.9 65.2 68.3 69.3 69.6 70.6Monetary and Financial Sector Inflation (Core, annual average variation in %) 6.6 2.9 8.6 -6.4 0.9 - - - - -HICP (annual variation in %) 2.0 1.7 1.6 1.7 0.7 - - - - -HICP (annual average variation in %) 1.5 1.7 1.6 2.2 1.0 1.0 1.3 1.7 1.5 1.6Inflation (PPI, annual variation in %) 6.6 2.9 8.6 -6.4 0.9 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.35 3.81 4.34 3.65 3.44 2.58 3.34 3.44 3.77 3.93Stock Market (var. of AEX in %) 29.6 18.3 8.0 -51.5 32.8 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) 7.2 9.0 8.3 4.6 5.0 6.0 5.7 5.5 5.8 5.7Current Account Balance (EUR bn) 37.0 48.5 47.2 27.2 28.4 35.6 34.6 34.7 37.9 38.6Trade Balance (EUR bn) 39.2 39.9 43.8 40.1 35.5 34.4 35.2 41.5 47.1 53.2Exports (EUR bn) 280 314 341 364 302 340 361 389 415 436Imports (EUR bn) 240 274 297 324 267 305 324 348 366 383Exports (annual variation in %) 10.1 12.2 8.8 6.8 -17.0 12.4 6.2 7.8 6.7 5.0Imports (annual variation in %) 9.0 13.9 8.6 9.1 -17.7 14.1 6.3 7.4 5.3 4.5 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -3.7 -2.2 0.6 2.2 2.3 2.1 1.7 1.3 1.4 1.4Economic Growth (GDP, qoq variation in %) 0.6 0.6 0.5 1.0 0.4 0.4 0.2 0.4 0.4 0.4HICP (annual average variation in %) 1.3 1.0 0.6 0.4 0.7 1.3 1.4 1.0 1.5 1.4ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.3710-year Bond Yield (%, eop) 3.58 3.44 3.37 2.90 2.52 2.58 2.60 2.83 3.08 3.34 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) 3.7 6.2 11.5 11.7 10.3 8.8 2.8 7.3 - -Unemployment (eop % of active population) 5.7 5.8 5.7 5.6 5.6 5.5 5.5 5.3 5.3 -Consumer Confidence Index -10.0 -13.0 -12.0 -15.0 -16.0 -18.0 -14.0 -11.0 -14.0 -10.0Inflation (CPI, mom variation in %) 0.0 0.7 1.2 0.3 0.0 -0.5 -0.3 0.2 0.6 -Inflation (CPI, annual variation in %) 0.8 0.8 1.0 1.1 1.0 0.8 1.6 1.5 1.6 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 85



-10

-5

0

5

10

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

NetherlandsEuro areaWorld

0

1

2

3



0

1

2

3

4



-1

0

1

2

3


20102011

-10

-5

0

5


2010 2011

-5

0

5

10

1995 2000 2005 2010

NetherlandsEuro area

-20

-10

0

10

1995 2000 2005 2010








General:Long-term chart period from 1995 to 2014 unless otherwise stated. All realsector data are from Statistics Netherlands (CBS, Centraal Bureau voor deStatistiek), the Central Bank (DNB, De Nederlandsche Bank) and Eurostat.See below for details. Forecasts based on FocusEconomics ConsensusForecast.

1 GDP, annual variation in %. Source: CBS.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %. Source:CBS.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %. Source: CBS.6 Gross fixed capital formation, annual variation in %. Source: CBS.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed capital formation, change in 2010 and 2011 forecasts sinceJanuary 2010.9 Public debt, % of GDP. 2000-2014 Source: Eurostat.10 Unemployment, % of active population. Source: DNB.11 General government balance, % of GDP. Source: Eurostat.12 Public debt, evolution of 2010 and 2011 forecasts since January 2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January 2010.14 General government balance, evolution of 2010 and 2011 forecasts sinceJanuary 2010.

Notes and sources

-6

-3

0

3

6

1995 2000 2005 2010


Individual Forecasts 2010 2011ABN AMRO Bank 1.9 1.3Barclays 1.9 2.1Citigroup 2.4 1.9Credit Suisse 2.4 3.1DekaBank 1.9 1.3Deutsche Bank 1.8 1.2DZ Bank 2.1 1.5Experian 1.9 2.0Goldman Sachs 2.0 2.0ING 1.7 1.4NIBC Bank 1.7 1.1Nomura 1.9 1.8Rabobank 1.8 1.5Raiffeisen Research 1.8 1.4UBS 1.9 1.7Summary Minimum 1.7 1.1Maximum 2.1 2.0Median 1.8 1.5Consensus 1.9 1.7History 30 days ago 1.8 1.760 days ago 1.7 1.790 days ago 1.6 1.9Additional Forecasts IMF (Oct. 2010) 1.8 1.7European Commission (Sep. 2010) 1.3 1.9Central Bank (June 2010) 1.2 1.9

| 86



-7

-6

-5

-4


2010 2011

60

63

66

69

72


2010 2011

5.2

5.4

5.6

5.8


2010 2011

40

60

80

100

2000 2005 2010

Netherlands

Euro area

0

4

8

12

1995 2000 2005 2010

Netherlands

Euro area-10

-5

0

5

1995 2000 2005 2010






9 | Public Debt | variation in %



Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011ABN AMRO Bank 0.3 0.8 -3.2 3.8 5.5 5.1 -5.8 -3.8 64.7 66.8Barclays - - - - - - - - - -Citigroup - - - - - - -5.3 -3.2 - -Credit Suisse - - - - - - -6.3 -4.0 66.3 69.6DekaBank - - - - - - -6.8 -5.7 - -Deutsche Bank - - - - - - -5.8 -4.8 - -DZ Bank 0.4 1.5 -3.2 2.6 - - -5.9 -5.1 60.8 63.5Experian 0.8 1.3 -3.6 2.3 - - -6.0 -5.0 - -Goldman Sachs - - - - - - -5.6 -4.1 - -ING 0.3 0.9 -3.5 2.6 5.5 5.3 -6.7 -5.2 - -NIBC Bank 0.3 1.0 -2.6 4.5 5.5 5.0 - - - -Nomura 0.2 0.8 -2.2 3.8 5.5 5.3 -5.9 -4.2 66.2 69.7Rabobank 0.5 0.5 -5.0 2.8 5.5 5.5 -6.0 -4.5 66.0 69.0Raiffeisen Research - - - - - - -6.3 -5.1 66.3 69.6UBS 0.9 1.5 -2.0 7.3 5.7 5.3 -6.3 -5.1 66.3 69.6Summary Minimum 0.2 0.5 -5.0 2.3 5.5 5.0 -6.7 -5.2 60.8 63.5Maximum 0.9 1.5 -2.0 7.3 5.7 5.5 -5.6 -4.1 66.3 69.7Median 0.4 1.0 -3.2 2.8 5.5 5.3 -6.0 -5.0 66.2 69.6Consensus 0.5 1.0 -3.2 3.7 5.5 5.3 -6.1 -4.6 65.2 68.3History 30 days ago 0.6 1.1 -3.3 3.9 5.6 5.5 -6.1 -4.7 65.7 68.860 days ago 0.9 1.3 -4.5 3.6 5.6 5.5 -6.2 -4.8 65.9 68.890 days ago 0.9 1.1 -5.7 3.3 5.6 5.5 -6.0 -4.6 65.2 68.0




Public Debt% of GDP


| 87



200

300

400

500


0

10

20

30

40

50

1995 2000 2005 2010

0.0

0.5

1.0

1.5

2.0



0

1

2

3



25

30

35

40


20102011

0

2

4

6

2000 2005 2010

Netherlands

Euro area

-1

0

1

2

3

4

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


2

4

6

8

1995 2000 2005 2010

NetherlandsGermany


Notes and sources





19 | 10-year Rate | 1995 - 2014 | in %

21 | Stock Market | AEXGeneral:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from Statistics Netherlands (CBS, Centraal Bureauvoor de Statistiek), the Central Bank (DNB, De Nederlandsche Bank)and the German Central Bank (BBK, Deutsche Bundesbank). See be-low for details. Forecasts based on FocusEconomics Consensus Fore-cast.

15 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in % 2000-2014. Source: CBS.16 Quarterly inflation, year-on-year variation in harmonised index ofconsumer prices (HICP) in %. Source: CBS.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: DNB, BBK.20 Current account balance in EUR bn. Source: CBS.21 Monthly index levels, AEX Index. Jan. 2008 until end of previousmonth. Source: Amsterdam Stock Exchange.22 Current account balance in EUR bn, evolution of 2010 and 2011forecasts since January 2010.

Individual Forecasts 2010 2011 2010 2011ABN AMRO Bank - - 29.5 32.5Barclays - - - -Citigroup - - 41.8 41.2Credit Suisse 1.4 1.4 34.7 38.8DekaBank 0.8 1.6 34.6 38.6Deutsche Bank 0.9 1.5 26.4 27.1DZ Bank 0.9 1.3 - -Experian 1.0 1.3 39.4 36.4Goldman Sachs 0.9 1.2 32.4 34.0ING - - - -NIBC Bank 0.9 1.0 39.0 34.0Nomura 0.9 1.8 - -Rabobank 1.3 1.0 - -Raiffeisen Research 0.8 1.6 38.1 30.2UBS 0.9 1.0 39.5 33.2Summary Minimum 0.8 1.0 26.4 27.1Maximum 1.3 1.8 39.5 36.4Median 0.9 1.3 38.6 33.6Consensus 1.0 1.3 35.6 34.6History 30 days ago 1.0 1.4 34.9 34.460 days ago 1.1 1.5 37.8 38.190 days ago 1.1 1.4 37.4 38.2Additional Forecasts IMF(Oct. 2010) 1.3 1.1 - -Euro. Comm. (Sep. 2010) 1.3 1.1 - -Central Bank (June 2010) 1.0 1.6 - -



| 88

Portugal November 2010FOCUSECONOMICS


2.0

3.0

4.0

5.0

6.0

7.0

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

GermanyPortugal

%

2000-04 2005-09 2010-14Population (million): 10.4 10.6 10.8GDP (EUR bn): 139 164 179GDP per capita (EUR): 13,360 15,520 16,652GDP growth (%): 1.4 0.4 1.1Fiscal Balance (% of GDP): -3.3 -5.0 -5.1Public Debt (% of GDP): 54.8 66.3 90.5Inflation (%): 3.3 1.9 1.4Current Account (% of GDP): -8.0 -9.9 -8.1

PortugalOutlook improves


Portugal


FISCAL SECTOR | Government and opposition reach agreement on 2011budgetOn 29 October, only days after the main opposition Social Democratic Party(PSD) had walked away from budget talks, government and opposition reachedan agreement in order to allow the 2011 budget to pass through parliament. Thegovernment needs the support of the PSD to pass the budget, as it lacks amajority in Congress.

Finance Minister Fernando Teixeira dos Santos proposed a budget with a mix ofspending cuts and tax increases, including an unpopular two percentage pointhike in the VAT to 23% next year, whereas the opposition PSD insists on moredrastic spending cuts in order to avoid tax increases. The current budget draftaims at cutting the fiscal deficit to 4.6% of GDP in 2011, down from an estimated7.3% of GDP this year. In 2009, the fiscal deficit reached 9.3% of GDP. Thegovernment plans to further cut the public sector deficit to 2.8% of GDP in 2013.

The full details of the compromise have not yet been published. Previously,Teixeira dos Santos had said that he would not agree on a compromise with thePSD that fails to meet the government’s deficit goal, as any overshooting of thetarget “would only make an already delicate situation in financial markets signifi-cantly worse”. The agreement now reached excluded some items from a hike inthe VAT, reducing the tax take. Teixeira dos Santos said those lower revenueswould still have to be compensated by income from other sources before thebudget is signed into law. Markets had reacted nervously to the stalemate be-tween the government and PSD and pushed the yield spread between Portu-guese and German 10-year benchmark bonds to the highest level since 15 Oc-tober. Following the agreement the yield spread narrowed 6 basis points to 337basis points.

• Government and opposition reached an agreement on the draft bud-get for 2011 after bond markets reacted nervously to the politicalstalemate, pushing borrowing costs to a temporary high on 29 Octo-ber. Meanwhile, industrial production continued to recover in August,exiting negative territory for the first time in two years.

• Consensus Forecast panellists expect the economy to expand 1.3%this year, which is up 0.3 percentage points from last month’s esti-mate. In 2011, GDP is likely to contract 0.1%.

• In September, inflation remained unchanged at August’s 2.0%, whichrepresents the highest level since October 2008. Consensus Fore-cast panellists expect inflation to average 1.2% this year, which isunchanged from last month’s forecast. For 2011, panellists expectinflation to average 1.4%.

Note: Harmonised long-term interest rates for convergence assessmentpurposes. Percentages per annum, period averages, secondary market yieldsof government bonds with maturities of close to ten years.Source: Eurostat.

10-year bond yields | in %

| 89



Consensus Forecast panellists are more pessimistic than the government andsee the fiscal deficit narrowing only to 6.0% of GDP in 2011.

REAL SECTOR | Industrial production grows moderately despite monthlysurgeIn August, industrial production surged a seasonally and calendar-day adjusted3.91% over the previous month, which contrasted the 1.01% drop recorded inJuly. The monthly expansion was driven by a jump in durable consumer goodsproduction (August: +23.42% month-on-month), which was partially offset by adrop in energy production (August: -1.16% mom).

On an annual basis, however, industrial output decelerated for the third con-secutive month in August moderating to 0.2% growth, down from a 1.5% ex-pansion seen in July. Nevertheless, the trend continues to point upwards, withannual average variation improving from minus 0.4% in July to 0.0% in August.Consensus Forecast panellists see industrial production expanding 1.4% thisyear, which is unchanged from last month’s forecast. For 2011, the panel an-ticipates industrial output to expand 1.1%.

Moreover, Consensus Forecast panellists see the overall economy adding 1.3%this year, which is up 0.3 percentage points from last month’s forecast. For2011, the panel anticipates GDP to decline 0.1%.

MONETARY SECTOR | Inflation remains unchanged in SeptemberIn September, consumer prices rose 0.2% over the previous month, which con-trasted the 0.2% drop recorded in August. The monthly price increase mainlyreflected higher prices for clothing and footwear (+11.5% month-on-month),owing to the end of seasonal sales. That said, the jump in clothing prices waspartially offset by moderate price decreases across five of the 12 remainingcategories.

Despite the price rise recorded in September, annual inflation remained un-changed at August’s 2.0% rate, the highest level since October 2008. Mean-while, annual core inflation, which does not include prices for unprocessedfood and energy, fell to 0.6% in September, down from 0.8% in August. Finally,annual average harmonised inflation (HICP) increased for the seventh con-secutive month, rising from 0.3% in August to 0.6% in September.

Consensus Forecast panellists expect harmonised inflation to average 1.2%this year, which is unchanged from last month’s forecast. For 2011, panellistsexpect inflation to average 1.4%.


Note: Monthly and annual consumer price index variation in %.Source: Statistics Portugal (INE) and FocusEconomics calculations.

0.20.1

0.20.1

-0.5

0.1

1.1

0.4

0.2 0.20.1

-0.2

0.2

-1.0

-0.5

0.0

0.5

1.0

1.5


%

-2.0

-1.0

0.0

1.0

2.0

3.0

%



Note: Month-on-month (seasonally adjusted) and annual average var. in %.Source: Statistics Portugal (INE) and FocusEconomics calculations.


5.20

-2.47-1.82 -2.03

1.400.89

-0.08

4.99

-3.92

1.47

-0.74 -1.01

3.91

-8.0

-4.0

0.0

4.0

8.0


%

-9.0

-6.0

-3.0

0.0

%


Annual Average (right scale)

| 90




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 10.6 10.6 10.6 10.6 10.6 10.7 10.7 10.8 10.8 10.9GDP per capita (EUR) 14,600 15,100 15,900 16,200 15,800 16,094 16,250 16,537 16,954 17,428GDP (EUR bn) 154 160 169 172 168 172 174 178 183 189Economic Growth (GDP, annual var. in %) 0.8 1.4 2.4 0.0 -2.6 1.3 -0.1 1.0 1.5 1.6Domestic Demand (annual var. in %) 1.4 0.8 2.0 1.2 -3.0 0.7 -1.4 0.7 1.8 2.0 Total Consumption (annual var. in %) 2.1 1.2 2.1 1.6 -0.1 - - - - - Private Consumption (annual var. in %) 1.6 1.8 2.4 1.8 -1.0 1.5 -0.4 0.5 1.3 1.5 Government Consumption (ann. var. in %) 3.3 -0.7 0.5 0.8 2.9 - - - - - Fixed Investment (annual var. in %) -0.5 -1.3 2.6 -1.8 -11.9 -3.9 -2.6 2.1 2.9 3.0Industrial Production (annual variation in %) -3.0 3.1 0.0 -4.1 -8.1 1.4 1.1 1.7 1.8 1.7Unemployment (aop, % of active population) 7.6 7.7 8.0 7.6 9.5 10.9 11.2 10.8 10.5 10.1Fiscal Balance (% of GDP) -5.9 -4.1 -2.8 -3.0 -9.3 -7.7 -6.0 -4.4 -3.6 -3.7Public Debt (% of GDP) 63.6 63.9 62.7 65.3 76.1 83.2 88.7 91.7 93.6 95.4Monetary and Financial Sector Inflation (CPI, annual variation in %) 2.6 2.5 2.7 0.8 -0.1 - - - - -Inflation (CPI, annual average in %) 2.3 3.1 2.5 2.6 -0.9 1.2 1.4 1.1 1.5 1.6HICP (annual average variation in %) 2.1 3.0 2.4 2.7 -0.9 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.17 2.10 2.80 3.083-Month Euribor (%, eop) 2.49 3.73 4.68 2.89 0.70 0.97 1.37 2.18 2.90 2.9210-year Bond Yield (%, eop) 3.46 3.96 4.47 4.00 3.91 5.32 4.95 5.10 5.15 4.90Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.33 1.30 1.26 1.26 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.38 1.31 1.28 1.26 1.25External Sector Current Account Balance (% of GDP) -9.1 -9.6 -9.0 -11.6 -10.0 -9.6 -8.5 -7.9 -7.6 -7.0Current Account Balance (EUR bn) -14.0 -15.4 -15.2 -20.0 -16.8 -16.5 -14.9 -14.0 -14.0 -13.2Trade Balance (EUR bn) -19.8 -20.7 -21.6 -25.2 -19.6 -16.3 -14.2 -3.5 7.9 9.7Exports (EUR bn) 31.6 35.6 38.3 39.0 31.6 32.6 34.2 36.1 38.8 41.7Imports (EUR bn) 51.4 56.3 59.9 64.2 51.2 52.2 54.3 56.5 58.5 61.4Exports (annual variation in %) 6.1 12.8 7.5 1.7 -18.7 3.0 5.0 5.5 7.4 7.6Imports (annual variation in %) 15.3 9.6 6.5 7.1 -20.2 2.0 4.0 4.1 3.4 5.1 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -2.3 -1.0 1.8 1.5 1.1 1.3 0.2 0.0 0.0 -0.7Inflation (CPI, annual average in %) -1.6 -0.7 0.3 1.0 0.6 2.9 1.4 1.4 1.3 1.4ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.03 1.07 1.173-Month Euribor (%, eop) 0.75 0.70 0.63 0.77 0.89 0.97 1.10 1.25 1.39 1.37Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.33 1.35 1.35 1.34 1.30 Monthly Data Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10Industrial Production (annual variation in %) 3.8 3.2 4.5 0.6 3.7 3.4 1.5 0.2 - -Inflation (CPI, mom variation in %) -0.5 0.1 1.1 0.4 0.2 0.2 0.1 -0.2 0.2 -Inflation (CPI, annual variation in %) 0.1 0.2 0.5 0.7 1.1 1.2 1.9 2.0 2.0 -Exchange Rate (USD per EUR, eop) 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37 1.39

| 91



-6

-3

0

3

6

1995 2000 2005 2010

PortugalEuro areaWorld

-6

-3

0

3

6

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-2

0

2

4

6

1995 2000 2005 2010

PortugalEuro area

-20

-10

0

10

20

1995 2000 2005 2010

PortugalEuro area

-1

0

1

2

3



-2

-1

0

1

2



-0.5

0.0

0.5

1.0

1.5

2.0


20102011

-6

-3

0

3


20102011







General:Long-term chart period from 1995 to 2014 unless otherwise stated. All realsector data are from Statistics Portugal (INE, Instituto Nacional de Estatística)and the Central Bank of Portugal (BP, Banco de Portugal). See below fordetails. Forecasts based on FocusEconomics Consensus Forecast.

1 GDP, annual variation in %. Source: INE.2 Quarterly GDP (seasonally adjusted), year-on-year variation in %. Source:INE.3 GDP, evolution of 2010 forecasts since January 2010.4 GDP, evolution of 2011 forecasts since January 2010.5 Private consumption, annual variation in %. Source: INE.6 Gross fixed capital formation, annual variation in %. Source: INE.7 Private consumption, change in 2010 and 2011 forecasts since January2010.8 Gross fixed capital formation, change in 2010 and 2011 forecasts sinceJanuary 2010.9 Public debt,% of GDP. Source: BP.10 Unemployment, % of active population. Source: INE.11 General government balance, % of GDP. Source: BP.12 Public debt, evolution of 2010 and 2011 forecasts since January 2010.13 Unemployment, evolution of 2010 and 2011 forecasts since January 2010.14 General government balance, evolution of 2010 and 2011 forecasts sinceJanuary 2010.

Notes and sources

Individual Forecasts 2010 2011Banco BPI 1.3 -1.1BBVA 1.1 0.5BNP Paribas 1.4 -0.5Credit Suisse 1.5 0.5Deka Bank 1.3 -0.9Deutsche Bank 1.6 0.0DZ Bank 0.8 -0.6Experian 1.0 1.1Nomura 1.2 -1.1Raiffeisen Research 1.5 0.4UBS 1.3 1.5Univ. Católica Portuguesa 1.5 -0.7Summary Minimum 0.8 -1.1Maximum 1.6 1.5Median 1.3 -0.3Consensus 1.3 -0.1History 30 days ago 1.0 0.460 days ago 1.0 0.390 days ago 0.9 0.4Additional Forecasts European Commission (May 2010) 0.5 0.7IMF (Oct. 2010) 1.1 -0.1OECD (May 2010) 1.0 0.8

| 92



50

70

90

110

2000 2005 2010

PortugalEuro area

3

6

9

12

1995 2000 2005 2010

PortugalEuro area

-10

-5

0

5

1995 2000 2005 2010


80

85

90

95


2010 2011

9.5

10.0

10.5

11.0

11.5


20102011

-10

-8

-6

-4


20102011




12 | Public Debt | evolution of forecasts




Individual Forecasts 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011Banco BPI 1.8 -1.0 -4.7 -7.5 10.8 11.2 -7.3 -4.9 83.5 85.9BBVA 1.4 -0.1 -3.5 -1.5 - - - - - -BNP Paribas 1.4 -1.5 -6.7 -7.9 11.3 12.7 -7.7 -5.9 82.8 88.1Credit Suisse - - - - - - -7.5 -5.0 85.8 91.1Deka Bank - - - - - - -7.4 -5.1 - -Deutsche Bank - - - - - - -7.5 -6.0 - -DZ Bank 1.4 -0.7 -4.3 -0.8 - - -7.5 -7.0 76.1 86.0Experian 1.5 0.3 -5.1 1.0 10.6 10.4 -8.6 -7.8 - -Nomura 1.9 -1.4 -3.1 -2.7 10.8 10.3 -7.6 -5.3 85.0 90.0Raiffeisen Research - - - - 10.8 11.4 -8.3 -4.6 85.6 89.4UBS 1.2 1.7 0.0 1.3 11.0 11.0 -8.0 -8.7 84.6 91.1Univ. Católica Portuguesa - - - - 10.7 11.4 -7.3 -5.9 82.1 87.8Summary Minimum 1.2 -1.5 -6.7 -7.9 10.6 10.3 -8.6 -8.7 76.1 85.9Maximum 1.9 1.7 0.0 1.3 11.3 12.7 -7.3 -4.6 85.8 91.1Median 1.4 -0.7 -4.3 -1.5 10.8 11.2 -7.5 -5.9 84.1 88.8Consensus 1.5 -0.4 -3.9 -2.6 10.9 11.2 -7.7 -6.0 83.2 88.7History 30 days ago 1.4 0.1 -3.5 -0.9 10.9 11.1 -7.8 -6.3 85.2 90.260 days ago 1.3 0.0 -3.6 -1.5 10.8 11.1 -5.8 -5.0 85.0 90.190 days ago 1.2 0.1 -3.4 -1.7 10.8 11.1 -7.7 -5.9 84.8 89.9




Public Debt% of GDP


| 93



3,000

6,000

9,000

12,000

15,000

Jan Jul Jan Jul Jan Jul-18

-16

-14

-12


20102011

-30

-20

-10

0

10

1995 2000 2005 2010

-2

0

2

4

6

2000 2005 2010

PortugalEuro area

-2

0

2

4

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

PortugalEuro area

0

4

8

12

1995 2000 2005 2010

PortugalGermany

0.0

0.5

1.0

1.5

2.0



0.0

1.0

2.0

3.0




Notes and sources





19 | 10-year Rate | 1995 - 2014 | in %

21 | Stock Market | PSI-20General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allmonetary sector data are from Statistics Portugal (INE, Instituto Nacionalde Estatística) and the Central Bank of Portugal (BP, Banco de Portugal).See below for details. Forecasts based on FocusEconomics ConsensusForecast.

15 Inflation, annual average variation in consumer price index (CPI) in%. 2000-2014. Source: INE.16 Quarterly inflation, year-on-year variation in consumer price index(CPI) in %. Source: INE.17 Inflation, evolution of 2010 forecasts since January 2010.18 Inflation, evolution of 2011 forecasts since January 2010.19 10-year benchmark bond yield (eop). Source: BP.20 Current account balance in EUR bn. Source: BP.21 Daily index levels, Portugal Stock Index. Source: Portugal Stockand Exchange. Jan. 2008 until end of previous month.22 Current account balance in EUR bn, evolution of 2010 and 2011forecasts since January 2010.

Individual Forecasts 2010 2011 2010 2011Banco BPI 1.3 2.0 - -BBVA - - - -BNP Paribas 1.0 1.1 -16.0 -13.9Credit Suisse 1.1 1.3 - -Deka Bank 1.2 1.2 -17.4 -17.4Deutsche Bank 1.4 1.5 -18.1 -14.0DZ Bank 1.3 1.8 - -Experian 1.0 1.2 -17.5 -17.9Nomura - - - -Raiffeisen Research 1.3 1.3 -13.8 -9.7UBS 1.4 1.1 -15.5 -16.4Univ. Católica Portuguesa 1.4 2.1 -17.3 -Summary Minimum 1.0 1.1 -18.1 -17.9Maximum 1.4 2.1 -13.8 -9.7Median 1.3 1.3 -17.3 -15.2Consensus 1.2 1.4 -16.5 -14.9History 30 days ago 1.2 1.3 -15.0 -13.760 days ago 1.1 1.3 -14.0 -12.890 days ago 1.0 1.2 -14.0 -12.8Additional Forecasts Euro. Comm. (May 2010) 1.0 1.4 - -IMF (Oct. 2010) 0.9 1.2 - -OECD (May 2010) 0.9 1.1 - -



| 94

Slovakia November 2010FOCUSECONOMICS

FocusEconomics Consensus Forecast Eastern Europe

2000-04 2005-09 2010-14Population (million): 5.4 5.4 5.6GDP (USD bn): 28 72 100GDP per capita (USD): 5,256 13,285 17,617GDP growth (%): 3.6 5.4 3.8Fiscal Balance (% of GDP): -6.4 -3.5 -4.3Inflation (%): 7.7 3.2 2.4Current Account (% of GDP): -6.7 -6.1 -3.5External Debt (% of GDP): 54.2 60.4 77.8

REAL SECTOR | Industrial production slows slightly in AugustIn August, industrial output added 16.3% over the same month last year,which was slightly down from the 16.8% expansion recorded in July, butrepresented, in fact, the slowest expansion so far this year.

The monthly slowdown was driven by manufacturing, which accounts for thebulk of industrial production, as the sector added 14.7% year-on-year, whichwas down from the 21.5% expansion registered in July. Growth in themanufacturing sector was dragged lower as the result of negative growth infood, beverages and tobacco production. In addition, weaker automobileproduction also affected the monthly reading adversely. Meanwhile, electricity,gas, steam and air conditioning added 27.4% in August, which was wellabove the 0.3% expansion tallied in July, and finally, mining and quarrying fell0.1%, which came in above the 7.1% contraction recorded in July.

That said, a month-on-month analysis does not corroborate the deteriorationobserved in the annual figures, as industrial production added 2.2% over theprevious month in seasonally adjusted terms. In addition, the overall trendcontinues to improve, with annual average variation in industrial productionjumping from 11.7% in July to 13.7%.

Panellists currently expect industrial production to expand 13.7% this year,which is down 1.0 percentage points from last month’s estimate. Next year,industrial production is likely to slow to 7.4%

The Central Bank expects the economy to expand 4.3% this year, witheconomic growth slowing to 3.0% in 2011. Consensus Forecast panellistsexpects the economy to expand 3.4% in this year, which is up 0.2 percentagepoints over last month’s forecast. For next year, the panel sees growth at3.4%.

SlovakiaOutlook improves

Keith CatlinSenior Economist

Slovakia


• Recent data indicate that the economy continues to recover, albeit ata more moderate pace. August industrial production slowed to a 16.3%expansion, the slowest rate observed so far this year.

• Consensus Forecast panellists lifted their GDP growth forecast by0.2 percentage points over last month and see the economy expanding3.4% this year. Next year, the panel sees economic growth at 3.4%.

• In September, inflation inched up from the 1.0% rate observed inAugust to 1.1%. Panellists expect inflation to rise to 1.7% by the endof the year, which is unchanged over last month’s forecast. For 2011,the panel sees inflation rising further to 3.5%.

-8.7 -7.4 -6.2

1.4

11.8

20.2 20.3 18.8 20.6

28.723.5

16.8 16.3

-30.0

-15.0

0.0

15.0

30.0

45.0


%

YoY YoY, Annual Average


Note: Year-on-year and average annual changes in %.Source: Slovakia Statistical Office (SSOR) and FocusEconomics calculations.

| 95



MONETARY SECTOR | Inflation edges up despite flat monthly readingIn September, consumer prices remained unchanged over the previousmonth, which came in above the 0.1% price drop recorded in August. Lowerprices for health helped compensate for higher prices in clothing and footwear.

Despite the flat reading, annual headline inflation inched up from 1.0% inAugust to 1.1%. Annual average harmonised inflation (based on theharmonised index of consumer prices, HICP, which is the reference rate formeasuring price increases within the European Union), was rose a notchfrom 0.3% in August to 0.4% in September.

The Slovak Central Bank currently expects annual average harmonisedinflation to reach only 0.9% this year. For next year, the Central Bank expectsharmonised inflation to average 2.6%.

Consensus Forecast participants expect headline inflation to rise and closethe year at 1.7%, which is unchanged over last month’s estimate. Next year,panellists expect inflation to rise to 3.5%.


Note: Annual and monthly variation of consumer price index in %.Source: Slovakia Statistical Office (SSOR).

0.0

0.1

0.3

-0.1

0.2

0.0

0.1

0.4

0.1

0.0

0.1

-0.1

0.0

-0.2

0.0

0.2

0.4


%

0.0

0.5

1.0

1.5

%



| 96




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 5.4 5.4 5.4 5.5 5.5 5.5 5.6 5.6 5.7 5.8GDP per capita (USD) 8,874 10,326 13,799 17,380 16,046 16,801 16,530 17,283 18,173 19,297GDP (USD bn) 47.9 55.9 75.0 95.0 88.2 93.0 92.3 97 104 111GDP per capita (EUR) 7,131 8,221 10,067 11,824 11,520 12,436 13,066 13,830 14,612 15,423GDP (EUR bn) 38.5 44.5 54.7 64.6 63.3 68.9 73.0 78.0 83.2 88.9Economic Growth (GDP, annual var. in %) 6.5 8.5 10.4 6.4 -4.7 3.4 3.4 3.9 4.2 4.2 Private Consumption (annual var. in %) 6.5 5.9 7.1 6.1 -0.7 0.5 1.9 3.6 4.0 4.3 Government Consumption (ann. var. in %) 3.9 9.7 0.1 5.3 2.8 - - - - - Fixed Investment (annual variation in %) 17.5 9.3 9.1 1.8 -10.5 2.3 3.6 5.3 5.0 4.9Industrial Production (annual variation in %) -2.5 12.2 16.1 7.4 -13.1 17.0 7.5 6.6 7.0 6.4Unemployment (eop, % of active population) 15.3 12.0 10.3 8.7 13.9 14.3 13.5 11.8 10.6 10.3Fiscal Balance (% of GDP) -2.8 -3.5 -1.9 -2.3 -6.8 -7.4 -5.6 -3.9 -2.6 -2.2Public Debt (% of GDP) 34.2 30.5 29.3 27.7 35.7 - - - - -Monetary and Financial Sector Money (annual variation of M1 in %) 24.3 41.2 14.0 -7.5 28.2 - - - - -Inflation (CPI, annual variation in %) 3.7 4.2 3.4 4.4 0.5 1.7 3.5 2.5 2.7 2.5Inflation (Core, annual variation in %) 1.1 2.5 2.4 3.3 -0.2 - - - - -Inflation (HICP, annual avg. variation in %) 2.8 4.2 2.0 3.9 0.9 - - - - -Inflation (PPI, annual variation in %) 6.2 5.6 2.4 6.0 -3.6 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.38 2.26 3.10 3.303-Month EURIBOR in %, eop 2.49 3.73 4.68 2.89 0.70 0.95 1.50 2.39 3.29 3.18Stock Market (variation of SAX in %) 26.5 0.6 7.2 -19.4 -25.7 - - - - -Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.27 1.26 1.24 1.25 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.35 1.27 1.25 1.24 1.25External Sector Current Account (% of GDP) -8.4 -7.0 -5.3 -6.5 -3.2 -3.1 -3.2 -3.8 -3.7 -3.5Current Account (USD bn) -4.0 -3.9 -4.0 -6.2 -2.8 -2.9 -3.0 -3.7 -3.8 -3.9Trade Balance (USD bn) -2.5 -3.1 -0.9 -1.0 1.7 1.2 1.4 0.8 0.7 0.7Exports (USD bn) 32.1 41.6 57.5 69.9 55.3 59.6 62.4 68.0 72.6 78.4Imports (USD bn) 34.5 44.7 58.4 70.9 53.7 58.5 61.1 67.2 72.3 78.1Exports (annual variation in %) 16.1 29.7 38.2 21.5 -20.8 7.7 4.8 8.9 6.9 8.0Imports (annual variation in %) 18.4 29.4 30.6 21.5 -24.3 9.0 4.5 9.8 7.7 8.1International Reserves (USD bn) 15.5 13.4 18.6 18.8 1.8 1.5 1.6 1.7 1.8 2.0International Reserves (months of imports) 5.4 3.6 3.8 3.2 0.4 0.3 0.3 0.3 0.3 0.3External Debt (USD bn) 26.9 32.2 44.3 52.5 65.3 71.1 77.8 78.7 78.4 80.2External Debt (% of GDP) 56.2 57.6 59.1 55.3 74.0 76.4 84.2 80.8 75.7 72.1 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -4.9 -2.6 4.8 4.7 2.9 2.7 3.0 3.0 3.5 3.6Inflation (CPI, annual variation in %) 0.6 0.5 0.8 1.0 1.1 1.7 3.2 3.2 3.4 3.5ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.06 1.20 1.383-Month EURIBOR in %, eop 0.75 0.70 0.63 0.77 0.89 0.95 1.09 1.30 1.49 1.50Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.27 1.28 1.29 1.29 1.26 Monthly Data Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10Industrial Production (annual variation in %) 11.8 20.2 20.3 18.8 20.6 28.7 23.5 16.8 16.3 -Inflation (CPI, mom variation in %) -0.1 0.2 0.0 0.1 0.4 0.1 0.0 0.1 -0.1 0.0Inflation (CPI, annual variation in %) 0.5 0.4 0.4 0.8 1.3 1.2 1.0 1.1 1.0 1.1Exchange Rate (USD per EUR, eop) 1.43 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37

| 97



-8

-6

-4

-2

May Aug Nov Feb May Aug

20102011

9

11

13

15


20102011

0

2

4

6

8



-2

0

2

4

6



-15

-10

-5

0

5

1995 2000 2005 2010

SlovakiaEastern EuropeWorld

-12

-6

0

6

12

18

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11


-12

-6

0

6

12

1995 2000 2005 2010


Real and Monetary Sector | Gross Domestic Product and Fiscal Balance


Economic Growth and Fiscal Balance 2 | Real GDP | Q1 07-Q4 11 | % variation

7 | Unemployment | evolution of fcst 8 | Fiscal Balance | evolution of fcst

General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from the Statistical Office of the Slovak Republic(SVSR, Štatisticky úrad Slovenskej republiky). Forecasts based onFocusEconomics Consensus Forecast.

1 GDP, annual variation in %.2 Quarterly GDP (not seasonally adjusted), year-on-year variation in %.3 GDP, evolution of 2010 forecasts during the last 18 months.4 GDP, evolution of 2011 forecasts during the last 18 months.5 Unemployment, % of active population.6 Balance of non-financial public sector, % of GDP.7 Unemployment, evolution of 2010 and 2011 forecasts during the last18 months.8 Balance of non-financial public sector, evolution of 2010 and 2011forecasts during the last 18 months.

Notes and sources

1 | Real GDP | 1995- 2014 | % variation

5 | Unemployment | % of active pop. 6 | Fiscal Balance | % of GDP

6

10

14

18

22

1995 2000 2005 2010

SlovakiaEastern Europe

Individual Forecasts 2010 2011 2010 2011BofA Merrill Lynch 1.4 4.1 - -Capital Economics 4.0 1.5 -8.0 -6.0CSOB 3.0 3.2 -7.2 -5.5DZ Bank 2.7 3.6 -6.0 -5.5Erste Bank 3.1 4.0 -7.5 -6.0Experian 3.2 2.9 - -ING 2.8 3.5 -6.4 -5.5OTP Bank 4.2 2.8 -7.8 -4.9Raiffeisen Research 4.2 4.0 -7.8 -4.9UniCredit 4.3 3.1 -7.8 -5.0VÚB Banka 4.2 3.6 -8.0 -6.5WIIW 4.0 4.0 -7.0 -6.5SummaryMinimum 1.4 1.5 -8.0 -6.5Maximum 4.3 4.1 -6.0 -4.9Median 3.6 3.6 -7.6 -5.5Consensus 3.4 3.4 -7.4 -5.6History30 days ago 3.2 3.4 -7.1 -5.560 days ago 2.9 3.4 -6.8 -5.490 days ago 2.9 3.4 -6.8 -5.4Additional ForecastsIMF (Oct. 2010) 4.1 4.3 - -Euro. Comm. (May 2010) 2.7 3.6 - -

Real GDPvariation in %


| 98



-6

-5

-4

-3

-2


20102011

1.1

1.2

1.3

1.4

1.5


20102011

0

1

2

3

4


20102011

1

2

3

4


20102011

-12

-8

-4

0

4

8

1995 2000 2005 2010


0.8

1.0

1.2

1.4

1.6

1995 2000 2005 2010

0

10

20

30

40

2000 2005 2010


0

6

12

18

24

2000 2005 2010


Monetary and External Sector | Inflation, Interest Rate, Exchange Rate and Current Account Balance

13 | Exchange Rate | USD per EUR

9 | Inflation | in % Consumer Price Index and Current Account

General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from the Statistical Office of the Slovak Republic(SVSR, Štatisticky úrad Slovenskej republiky) and the Bank of Slovakia(NBS, Národná banka Slovenska). See below for details. European Com-mission forecasts refer to annual average harmonised inflation. Fore-casts based on FocusEconomics Consensus Forecast.

9 Inflation, annual variation in consumer price index (CPI) in % (eop).2000-2014. Source: Slovakia Statistical Office.10 Interest rate, ECB Refinancing rate in % (eop). 2000-2014. Source:NBS.11 Inflation, evolution of 2010 and 2011 forecasts during the last 18months.12 Interest rate, evolution of 2010 and 2011 forecasts during the last18 months.13 Exchange rate, USD per EUR (eop). Source: NBS.14 Current account balance as % of GDP. Source: NBS.15 Exchange rate, evolution of 2010 and 2011 forecasts during thelast 18 months.16 Current account in USD billion, evolution of 2010 and 2011forecasts during the last 18 months.

Notes and sources

11 | Inflation | evolution of forecast

15 | USD/EUR | evolution of fcst 16 | Current Account | evol. of fcst

14 | Current Account | % of GDP

12 | Interest Rate | evolution of forecast

10 | Interest Rate | in %

Individual Forecasts 2010 2011 2010 2011BofA Merrill Lynch - - - -Capital Economics - - -2.9 -2.7CSOB 1.6 3.1 - -DZ Bank - - - -Erste Bank 2.0 4.0 -2.0 -2.6Experian - - -3.9 -3.3ING - - -3.1 -3.8OTP Bank 1.5 2.2 -3.1 -2.1Raiffeisen Research 1.7 3.8 -1.0 -1.6UniCredit 1.9 4.2 -4.1 -VÚB Banka 1.7 3.4 -3.2 -3.2WIIW - - -2.8 -4.4SummaryMinimum 1.5 2.2 -4.1 -4.4Maximum 2.0 4.2 -1.0 -1.6Median 1.7 3.6 -3.1 -3.0Consensus 1.7 3.5 -2.9 -3.0History30 days ago 1.7 3.2 -2.9 -3.160 days ago 2.0 3.1 -3.0 -3.390 days ago 2.0 3.1 -3.0 -3.3Additional ForecastsIMF (Oct. 2010) 1.0 2.0 - -Euro. Comm. (May 2010) 1.3 2.8 - -

CPIvariation in %

Current AccountUSD billion

| 99

Slovenia November 2010FOCUSECONOMICS


REAL SECTOR | Industrial production jumps in AugustIn August, industrial output increased 14.0% annually, which more thandoubled the 6.9% expansion recorded in July (previously reported: +7.1%year-on-year).

The acceleration in industrial production was broad-based, as growth in allthree major categories picked up the pace over the previous month.Manufacturing output, which accounts for the bulk of industrial production,rose 15.0% over the same month last year, up from the 7.6% reading recordedthe previous month. Electricity, gas and water added 1.1%, which contrastedthe 3.6% decline in July, and finally, production in the mining sector soared36.9%, which nearly doubled the 18.5% expansion observed in July.

Seasonally adjusted data corroborate the pick up suggested by the annualdata, as industrial production added 5.2% over July. Furthermore, annualaverage growth in industrial production jumped from minus 2.0% to a positive0.4%.

Consensus Forecast panellists expect industrial production to continuerecovering throughout the year and expect it to expand 3.7% in the full year.For next year, the panel sees industrial output moderating to 3.5%.

Meanwhile, Consensus Forecast panellists the economy to grow 1.1% thisyear, which is up 0.3 percentage points over the previous month’s projection.In 2011, the panel expects the economy to expand 2.1%.

SloveniaOutlook improves

Keith CatlinSenior Economist

Slovenia


• Recent data point to a continued recovery in the Slovenian economy.Industrial production accelerated strongly in August to a 14.0% year-on-year expansion, buttressed by robust manufacturing growth.

• Consensus Forecast panellists anticipate GDP to expand 1.1% thisyear, which is up 0.3 percentage points over last month’s estimate.For 2011, the panel expects economic growth to accelerate to 2.1%.

• Inflation fell from 2.3% in August to 2.0% in September. Panellistsexpect inflation to inch up to 2.1% by the end of the year, which isdown 0.3 percentage points over last month’s forecast. For 2011, thepanel sees inflation rising to 2.3%.

2000-04 2005-09 2010-14Population (million): 2.0 2.0 2.0GDP (USD bn): 24.8 44.8 50.4GDP per capita (USD): 12,466 22,131 24,730GDP growth (%): 3.7 2.6 2.5Fiscal Balance (% of GDP): -3.0 -2.0 -3.6Inflation (%): 6.8 3.0 2.3Current Account (% of GDP): -1.0 -3.2 -1.2External Debt (% of GDP): 46 96 113


Note: Month-on-month seasonally adjusted changes and annual average growth ofindustrial production index in %.Source: Statistical Office of the Republic of Slovenia (SORS).

3.5 3.1

-3.9

3.8

-0.8

-5.2

6.1

2.9

-2.8

4.8

0.6

-2.1

5.2

-10.0

-5.0

0.0

5.0

10.0


%

-20.0

-10.0

0.0

10.0

%

MoM s.a. (left scale) YoY, Ann. Average (right scale)

| 100



MONETARY SECTOR | Inflation dips in SeptemberIn September, consumer prices fell 0.5% over the previous month, whichcontrasted the 0.3% increase registered in August. The price decrease wasmainly driven by lower prices for restaurants and hotels, as well as fortransport.

As a result of the September reading, annual headline inflation moderatedfrom 2.3% in August to 2.0%. Annual harmonised inflation (based on theharmonised consumer price index – HICP), which is the reference rate formeasuring price increases within the European Union, followed suit anddecreased from 2.4% in August to 2.1%.

At the current level, inflation in Slovenia is well above the 1.8% Septemberinflation rate estimated for the entire Euro area. The Euro area inflation isslowly approaching the 2.0% ceiling set by the European Central Bank (ECB).Nevertheless, on 7 October, the ECB left the benchmark interest rateunchanged at a historic low of 1.00% for the 17th consecutive month.

Consensus Forecast participants expect headline inflation to rise to 2.1%this year. Next year, panellists anticipate inflation to inch up further to 2.3%.


Note: Annual and monthly variation of consumer price index in %.Source: Statistical Office of the Republic of Slovenia (SORS).

-0.2

0.1

0.9

-0.5

-0.8

0.4

1.1 1.0

0.4 0.3

-0.7

0.3

-0.5

-1.2

-0.6

0.0

0.6

1.2


%

-1.0

0.0

1.0

2.0

3.0

%



| 101




Annual Data 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Real Sector Population (million) 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0GDP per capita (USD) 17,469 19,019 23,475 26,893 23,798 23,674 23,109 24,092 25,463 27,313GDP (USD bn) 35.0 38.2 47.4 54.6 48.6 48.5 47.3 49.3 51.9 55.3GDP per capita (EUR) 14,050 15,283 18,689 19,620 16,190 17,523 18,267 19,279 20,473 21,829GDP (EUR bn) 28.1 30.7 37.7 39.8 33.1 35.9 37.4 39.4 41.7 44.2Economic Growth (GDP, annual var. in %) 4.5 5.9 6.9 3.7 -8.1 1.1 2.1 3.1 3.2 3.3 Private Consumption (ann. var. in %) 2.8 2.9 6.7 3.0 -0.6 -0.2 1.9 2.2 2.9 3.0 Government Consumption (ann. var. in %) 3.4 4.0 0.7 6.2 3.0 - - - - - Fixed Investment (annual variation in %) 3.7 10.1 12.8 8.5 -21.6 -4.4 4.5 3.9 4.3 4.5Industrial Production (annual variation in %) 3.5 5.7 7.2 2.5 -17.4 3.7 3.5 4.0 3.9 3.9Unemployment (eop, % of active population) 6.5 6.0 4.7 4.3 6.4 7.4 6.8 6.3 5.6 5.3Fiscal Balance (% of GDP) -1.4 -1.3 0.0 -1.7 -5.5 -5.9 -4.4 -3.4 -2.3 -1.9Public Debt (% of GDP) 27.0 26.7 23.4 22.6 35.7 - - - - -Monetary and Financial Sector Money (annual variation of M1 in %) 13.0 8.2 2.2 -3.7 7.7 - - - - -Inflation (CPI, annual variation in %) 2.3 2.8 5.6 2.1 1.8 2.1 2.3 2.4 2.6 2.8Inflation (HICP annual average variation in %) -0.7 -1.1 -2.9 0.7 -0.6 - - - - -Inflation (PPI, annual variation in %) 1.5 3.3 3.4 2.2 -1.2 - - - - -ECB Refinancing Rate (%, eop) 2.25 3.50 4.00 2.50 1.00 1.00 1.38 2.26 3.10 3.303-Month EURIBOR in %, eop 2.49 3.73 4.68 2.89 0.70 0.95 1.50 2.39 3.29 3.18Exchange Rate (USD per EUR, eop) 1.18 1.32 1.46 1.39 1.43 1.27 1.26 1.24 1.25 1.25Exchange Rate (USD per EUR, average) 1.24 1.26 1.37 1.47 1.39 1.35 1.27 1.25 1.24 1.25External Sector Current Account (% of GDP) -1.8 -2.6 -4.7 -6.1 -1.0 -1.0 -1.7 -1.4 -1.0 -1.0Current Account (USD bn) -0.6 -1.0 -2.2 -3.3 -0.5 -0.5 -0.8 -0.7 -0.5 -0.5Trade Balance (USD bn) -1.3 -1.5 -2.3 -3.9 -0.9 -0.6 -0.8 -1.0 -0.8 -0.8Exports (USD bn) 18.1 21.3 27.1 29.6 22.6 23.7 25.8 27.0 27.9 28.9Imports (USD bn) 19.4 22.8 29.4 33.5 23.4 24.8 27.1 28.5 29.2 30.3Exports (annual variation in %) 13.0 17.5 27.0 9.3 -23.8 4.8 8.6 5.0 3.4 3.5Imports (annual variation in %) 12.0 17.6 29.0 13.8 -30.0 5.8 9.3 5.1 2.6 3.8International Reserves (USD bn) 6.9 7.1 1.0 1.0 1.1 0.8 0.8 0.8 0.8 0.8International Reserves (months of imports) 4.3 3.8 0.4 0.3 0.6 0.4 0.4 0.3 0.3 0.3External Debt (USD bn) 24.3 31.7 51.1 54.5 57.8 58.7 58.4 53.1 55.8 56.8External Debt (% of GDP) 69 83 108 100 119 121 123 108 108 103 Quarterly Data Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11Economic Growth (GDP, annual var. in %) -8.8 -5.7 -1.1 2.2 1.8 1.0 2.5 2.3 1.5 3.3Inflation (CPI, annual variation in %) -0.1 1.8 1.4 1.9 2.0 2.1 2.4 2.0 1.9 2.3ECB Refinancing Rate (%, eop) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.06 1.20 1.383-Month EURIBOR in %, eop 0.75 0.70 0.63 0.77 0.89 0.95 1.09 1.30 1.49 1.50Exchange Rate (USD per EUR, eop) 1.46 1.43 1.35 1.22 1.37 1.27 1.28 1.29 1.29 1.26 Monthly Data Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10Industrial Production (annual variation in %) 4.7 -8.7 -1.2 8.4 9.1 14.4 10.3 6.9 14.0 -Inflation (CPI, mom variation in %) -0.5 -0.8 0.4 1.1 1.0 0.4 0.3 -0.7 0.3 -0.5Inflation (CPI, annual variation in %) 1.8 1.5 1.3 1.4 2.3 2.1 1.9 2.1 2.3 2.0Exchange Rate (USD per EUR, eop) 1.43 1.39 1.36 1.35 1.32 1.23 1.22 1.30 1.28 1.37

| 102



-6

-4

-2

0


20102011

6.0

6.5

7.0

7.5

8.0


20102011

1

2

3

4

5



-2

0

2

4



-10

-5

0

5

10

15

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11

SloveniaEastern EuropeWorld

-10

-5

0

5

10

1995 2000 2005 2010


Real and Monetary Sector | Gross Domestic Product and Fiscal Balance


Economic Growth and Fiscal Balance 2 | Real GDP | Q1 07-Q4 11 | % variation

7 | Unemployment | evolution of fcst 8 | Fiscal Balance | evolution of fcst

General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from the Statistical Office of the Republic of Slovenia(SORS). Forecasts based on FocusEconomics Consensus Forecast.

1 GDP, annual variation in %.2 Quarterly GDP (not seasonally adjusted), year-on-year variation in %.3 GDP, evolution of 2010 forecasts during the last 18 months.4 GDP, evolution of 2011 forecasts during the last 18 months.5 Unemployment, % of active population.6 Balance of non-financial public sector, % of GDP. 2000-2014.7 Unemployment, evolution of 2010 and 2011 forecasts during the last18 months.8 Balance of non-financial public sector, evolution of 2010 and 2011forecasts during the last 18 months.

Notes and sources

1 | Real GDP | 1995 - 2014 | % var.

5 | Unemployment | % of active pop. 6 | Fiscal Balance | % of GDP

4

6

8

10

12

1995 2000 2005 2010

SloveniaEastern Europe

-10

-5

0

5

2000 2005 2010


Individual Forecasts 2010 2011 2010 2011Capital Economics 1.5 1.8 -5.0 -4.0DZ Bank 1.1 1.8 -6.5 -6.0Experian 1.3 1.8 - -IMAD 0.9 2.5 - -Institute EIPF 1.5 2.7 -5.8 -2.9Raiffeisen Research 0.5 2.0 -6.0 -4.5UniCredit 1.2 2.1 -6.0 -4.7WIIW 0.5 2.0 -6.0 -4.5SummaryMinimum 0.5 1.8 -6.5 -6.0Maximum 1.5 2.7 -5.0 -2.9Median 1.2 2.0 -6.0 -4.5Consensus 1.1 2.1 -5.9 -4.4History30 days ago 0.8 2.1 -5.7 -4.460 days ago 0.8 2.2 -5.7 -4.590 days ago 0.8 2.2 -5.7 -4.5Additional ForecastsIMF (Oct. 2010) 0.8 2.4 - -Euro. Comm. (May 2010) 1.1 1.8 - -

Real GDPvariation in %


| 103



-3

-2

-1

0


20102011

1.1

1.2

1.3

1.4

1.5


20102011

0

1

2

3

4


20102011

1.5

2.0

2.5

3.0


20102011

-8

-4

0

4

1995 2000 2005 2010


0.8

1.0

1.2

1.4

1.6

1995 2000 2005 2010

0

10

20

30

40

2000 2005 2010


0

6

12

18

24

2000 2005 2010


Monetary and External Sector | Inflation, Interest Rate, Exchange Rate and Current Account Balance

13 | Exchange Rate | USD per EUR

9 | Inflation | in % Consumer Price Index and Current Account

General:Long-term chart period from 1995 to 2014 unless otherwise stated. Allreal sector data are from the Statistical Office of the Republic of Slovenia(SORS) and the Central Bank of Slovenia (BS, Banka Slovenije). Seebelow for details. European Commission Forecasts refer to annual aver-age harmonised inflation. Forecasts based on FocusEconomics Con-sensus Forecast.

9 Inflation, annual variation in consumer price index (CPI) in % (eop).2000-2014. Source: SORS.10 Interest rate, ECB refinancing rate in % (eop). 2000-2014. Source:BS.11 Inflation, evolution of 2010 and 2011 forecasts during the last 18months.12 Interest rate, evolution of 2010 and 2011 forecasts during the last18 months.13 Exchange rate, USD per EUR (eop). Source: BS.14 Current account balance as % of GDP. Source: BS.15 Exchange rate, evolution of 2010 and 2011 forecasts during thelast 18 months.16 Current account in USD billion, evolution of 2010 and 2011forecasts during the last 18 months.

Notes and sources

11 | Inflation | evolution of forecast

15 | USD/EUR | evolution of fcst 16 | Current Account | evol. of fcst

14 | Current Account | % of GDP

12 | Interest Rate | evolution of forecast

10 | Interest Rate | in %

Individual Forecasts 2010 2011 2010 2011Capital Economics - - -0.6 -0.7DZ Bank - - - -Experian - - -0.7 -0.7IMAD 1.8 2.3 -0.4 -0.5Institute EIPF 2.2 1.5 -0.6 -1.3Raiffeisen Research 2.0 2.0 -0.4 -0.7UniCredit 2.5 3.2 -0.5 -1.0WIIW - - -0.4 -0.7SummaryMinimum 1.8 1.5 -0.7 -1.3Maximum 2.5 3.2 -0.4 -0.5Median 2.1 2.2 -0.5 -0.7Consensus 2.1 2.3 -0.5 -0.8History30 days ago 2.4 2.2 -0.5 -0.860 days ago 1.9 2.2 -0.6 -0.990 days ago 1.9 2.2 -0.6 -0.9Additional ForecastsIMF (Oct. 2010) 2.1 2.4 - -Euro. Comm. (May 2010) 1.8 2.0 - -

CPIvariation in %

Current AccountUSD billion

| 104

Cyprus November 2010FOCUSECONOMICS


-6

-3

0

3

6

2000 2003 2006 2009

CyprusEuro areaWorld

-10

-5

0

5

2000 2003 2006 2009

CyprusEuro areaWorld

0

2

4

6

2000 2003 2006 2009

Cyprus

Euro area

2000-04 2005-09 2010-14Population (million): 0.7 0.8 0.8GDP (EUR bn): 11.2 15.6 19.0GDP per capita (EUR): 15,777 20,063 22,368GDP growth (%): 3.5 3.0 1.7Fiscal Balance (% of GDP): -3.9 -1.1 -5.5Public Debt (% of GDP): 60.9 59.3 66.2Inflation (%): 3.1 2.2 2.5Current Account (% of GDP): -4.0 -10.0 -6.7

-1

0

1

2

3


20102011

-8

-7

-6

-5


20102011

1.5

2.0

2.5

3.0


20102011

CyprusCyprus


Outlook improves• Consensus Forecast panellists expect the economy to contract

0.1% this year, which is up 0.1 percentage points from last month’sforecast. For 2011, panellists expect the economy to rebound andgrow 1.4%.

• Inflation rose from 3.2% in August to 3.5% in September. Panellistsexpect inflation to average 2.6% this year, which is up 0.1percentage points from last month’s figure. In 2011, the panelanticipates inflation will moderate to 2.4%.


1 | GDP | % variation

4 | GDP | evolution of forecasts



3 | Inflation | in %

6 | Inflation | evolution of forecasts

| 105

Cyprus November 2010FOCUSECONOMICS


-4

-3

-2

-1

0

2000 2003 2006 20093

6

9

12

2000 2003 2006 2009

Cyprus

Euro area

5.5

6.0

6.5

7.0


20102011

-1.8

-1.6

-1.4

-1.2


20102011



9 | Unemployment | evol. of fcst


10 | Current Account | evol. of fcst

General:Long-term chart period from 2000 to 2011 unless otherwise stated.All data are from the Central Bank of Cyprus (CBC), the Statis-tical Service of the Republic of Cyprus (CYSTAT) and Eurostat.See below for details. Forecasts based on FocusEconomicsConsensus Forecast.

1 GDP, annual variation in %. Source: CYSTAT.2 Balance of non-financial public sector, % of GDP. Source:CYSTAT.3 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in % (aop). Source: CYSTAT.4 GDP, evolution of 2010 and 2011 forecasts since January2010.5 Balance of non-financial public sector, evolution of 2010 and2011 forecasts since January 2010.6 Inflation, evolution of 2010 and 2011 forecasts since January2010.7 Unemployment, % of active population. Source: Eurostat.8 Current account balance EUR bn. Source: Eurostat.9 Unemployment, evolution of 2010 and 2011 forecasts sinceJanuary 2010.10 Current account balance in EUR bn, evolution of 2010 and2011 forecasts since January 2010.

Notes and sources

Annual Data 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Real Sector Population (million) 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.8GDP per capita (EUR) 15,563 16,446 17,326 17,969 18,834 20,392 21,853 21,266 21,153 21,606GDP (EUR bn) 11.0 11.8 12.7 13.5 14.4 15.9 17.2 16.9 17.4 18.0Economic Growth (GDP, ann. var. in %) 2.1 1.9 4.2 3.9 4.1 5.1 3.6 -1.7 -0.1 1.4 Private Consumption (annual var. in %) 1.3 2.1 6.5 4.2 4.7 9.4 8.4 -3.0 -1.5 1.8 Fixed Investment (annual variation in %) 8.6 2.4 11.6 4.1 10.2 13.4 8.6 -12.0 -6.3 -0.3Unemployment (aop, % of active population) 3.6 4.1 4.7 5.3 4.6 4.0 3.6 5.3 6.3 6.4Fiscal Balance (% of GDP) -4.4 -6.5 -4.1 -2.4 -1.2 3.4 0.9 -6.1 -6.8 -7.0Public Debt (% of GDP) 64.6 68.9 70.2 69.1 64.6 58.3 48.4 56.2 62.1 66.4Monetary and Financial Sector Inflation (HICP, annual variation in %) 3.1 2.2 3.9 1.4 1.5 3.7 1.8 1.6 - -Inflation (HICP annual average variation in %) 2.8 4.0 1.9 2.0 2.2 2.2 4.4 0.2 2.6 2.4ECB Refinancing Rate (%, eop) 2.75 2.00 2.00 2.25 3.50 4.00 2.50 1.00 1.00 1.173-Month Euribor (%, eop) 2.87 2.14 2.16 2.49 3.73 4.68 2.89 0.70 0.97 1.37External Sector Current Account Balance (% of GDP) -3.7 -2.2 -5.0 -5.9 -7.0 -11.7 -17.7 -7.9 -7.7 -7.3Current Account Balance (EUR bn) -0.4 -0.3 -0.6 -0.8 -1.0 -1.9 -3.0 -1.3 -1.3 -1.3Trade Balance (EUR bn) -3.4 -3.1 -3.6 -3.8 -4.4 -5.3 -6.2 -4.7 -4.9 -5.2Exports (EUR bn) 0.9 0.8 0.9 1.2 1.1 1.1 1.2 1.0 1.0 1.1Imports (EUR bn) 4.2 3.9 4.6 5.1 5.5 6.4 7.4 5.7 5.8 6.1Exports (annual variation in %) -18.6 -6.7 14.9 31.2 -9.5 -2.6 9.9 -19.1 4.6 8.4Imports (annual variation in %) -1.7 -7.3 16.3 10.7 8.8 15.2 15.9 -23.2 2.6 5.5

| 106

Luxembourg November 2010FOCUSECONOMICS


LuxembourgLuxembourg


Outlook improves• Consensus Forecast panellists raised their projections for 2010

growth by 0.2 percentage points and anticipate the economy togrow 2.2%. Next year, the panel expects the economy to expand2.5%.

• Inflation stepped up from 2.2% in August to 2.4%. ConsensusForecast panellists expect inflation to remain stable in the remain-der of the year and average 2.4%, which is up 0.1 percentage pointsfrom last month’s projection. Next year, the panel sees inflationmoderating to 1.9%.


2000-04 2005-09 2010-14Population (million): 0.4 0.5 0.5GDP (EUR bn): 24.4 35.8 43.3GDP per capita (EUR): 54,694 74,995 83,282GDP growth (%): 4.2 2.8 2.7Fiscal Balance (% of GDP): 2.7 1.4 -1.8Public Debt (% of GDP): 6.2 9.5 19.9Inflation (%): 2.8 2.7 2.0Current Account (% of GDP): 10.5 8.7 7.2

-8

-4

0

4

8

2000 2002 2004 2006 2008 2010

LuxembourgEuro areaWorld

-2

0

2

4

6

2000 2002 2004 2006 2008 2010

LuxembourgEuro area

1.0

1.5

2.0

2.5

3.0


2010 2011

-5.0

-4.5

-4.0

-3.5

-3.0


2010 2011

1.0

1.5

2.0

2.5

3.0


2010 2011

-5

0

5

10

2000 2002 2004 2006 2008 2010

LuxembourgEuro areaWorld

1 | GDP | variation in %






| 107

Luxembourg November 2010FOCUSECONOMICS


1

2

3

4

2000 2002 2004 2006 2008 2010

0

3

6

9

12

2000 2002 2004 2006 2008 2010

LuxembourgEuro area

5

6

7

8


2010 2011

1

2

3

4


2010 2011


General:Long-term chart period from 2000 to 2011 unless otherwisestated. All data are from the Central Bank of Luxembourg (BCL),Eurostat, and the Statistics Office (STATEC, Service Centralde la Statistique et des Études Économiques). See below fordetails. Forecasts based on FocusEconomics ConsensusForecast.

1 GDP, annual variation in %. Source: STATEC.2 General government balance, % of GDP. Source: Eurostat.3 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in % (aop). Source: STATEC.4 GDP, evolution of 2010 and 2011 forecasts since January2010.5 General government balance, evolution of 2010 and 2011forecasts since January 2010.6 Inflation, evolution of 2010 and 2011 forecasts since January2010.7 Unemployment, % of active population. Source: STATEC.8 Current account balance in EUR bn. Source: BCL.9 Unemployment, evolution of 2010 and 2011 forecasts sinceJanuary 2010.10 Current account balance in EUR bn, evolution of 2010 and2011 forecasts since January 2010.

Notes and sources





Annual Data 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Real Sector Population (million) 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5GDP per capita (EUR) 54,025 57,627 60,343 65,660 72,800 78,677 81,332 76,505 78,681 80,739GDP (EUR bn) 24.0 25.8 27.5 30.3 34.2 37.5 39.3 37.8 39.5 41.2Economic Growth (GDP, annual var. in %) 4.1 1.5 4.4 5.4 5.6 6.5 0.0 -3.4 2.2 2.5 Private Consumption (annual var. in %) 5.7 -5.9 1.9 2.2 2.4 2.5 3.2 -0.7 1.0 2.2 Fixed Investment (annual var. in %) 5.5 6.3 2.7 2.5 4.7 12.6 -0.1 -14.9 1.6 3.8Unemployment (aop, % of active population) 2.6 3.5 3.9 4.2 4.4 4.4 4.4 5.7 5.9 5.7Fiscal Balance (% of GDP) 2.1 0.5 -1.1 0.0 1.4 3.6 2.9 -0.7 -3.3 -3.3Public Debt (% of GDP) 6.3 6.1 6.3 6.1 6.5 6.7 13.7 14.5 18.7 21.1Monetary and Financial Sector HICP (annual variation in %) 2.8 2.4 3.5 3.4 2.3 4.3 0.7 2.5 - -HICP (annual average variation in %) 2.1 2.5 3.2 3.8 3.0 2.7 4.1 0.0 2.4 1.9Inflation (PPI, annual variation in %) 0.8 0.1 17.3 2.1 7.1 4.1 6.0 -9.9 - -ECB Refinancing Rate (%, eop) 2.75 2.00 2.00 2.25 3.50 4.00 2.50 1.00 1.00 1.173-Month Euribor (%, eop) 2.87 2.14 2.16 2.49 3.73 4.68 2.89 0.70 0.97 1.37Exchange Rate (USD per EUR, eop) 1.05 1.26 1.36 1.18 1.32 1.46 1.39 1.43 1.33 1.30Exchange Rate (USD per EUR, average) 0.95 1.13 1.24 1.24 1.26 1.37 1.47 1.39 1.38 1.31External Sector Current Account Balance (% of GDP) 10.5 8.1 11.9 11.0 10.3 10.1 5.3 6.8 4.6 5.0Current Account Balance (EUR bn) 2.5 2.1 3.3 3.3 3.5 3.8 2.1 2.5 1.8 2.1Trade Balance (EUR bn) -2.2 -2.6 -2.9 -3.4 -3.4 -3.5 -4.3 -3.1 -2.8 -2.9Exports (EUR bn) 10.1 9.7 10.9 11.7 13.2 13.4 14.5 11.2 11.9 12.8Imports (EUR bn) 12.3 12.3 13.7 15.1 16.6 16.9 18.9 14.2 14.4 14.9Exports (annual variation in %) -0.3 -3.6 12.2 8.0 12.0 2.2 8.1 -23.1 6.6 7.1Imports (annual variation in %) -4.5 0.4 11.4 10.1 9.5 2.1 11.5 -24.6 1.5 3.1

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Malta November 2010FOCUSECONOMICS


-5

0

5

10

2000 2003 2006 2009

MaltaEuro areaWorld

-10

-5

0

5

2000 2003 2006 2009

MaltaEuro areaWorld

0

2

4

6

2000 2003 2006 2009

Malta Euro area

0

1

2

3


20102011

-5.0

-4.5

-4.0

-3.5


2010 2011

1.6

1.8

2.0

2.2

2.4


20102011

MaltaMalta


Outlook improves• Consensus Forecast panellists expect the economy to expand

1.5% this year, which is up 0.3 percentage points from last month’sforecast. For 2011, panellists expect economic growth toaccelerate to 1.9%.

• Panellists expect inflation to average 1.9% this year, which is down0.1 percentage points from last month’s estimate. In 2011, thepanel anticipates inflation will average 2.1%.


1 | GDP | % variation






2000-04 2005-09 2010-14Population (million): 0.4 0.4 0.4GDP (EUR bn): 4.4 5.4 6.5GDP per capita (EUR): 11,174 13,112 15,492GDP growth (%): 2.2 2.3 2.1Fiscal Balance (% of GDP): -6.5 -3.2 -3.3Public Debt (% of GDP): 63.9 65.7 71.0Inflation (%): 2.5 2.5 2.2Current Account (% of GDP): -4.6 -6.7 -10.0

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Malta November 2010FOCUSECONOMICS


-1.0

-0.5

0.0

0.5

2000 2003 2006 20094

6

8

10

12

2000 2003 2006 2009

Malta Euro area

6.6

6.8

7.0

7.2

7.4

7.6


2010

2011

-0.5

-0.4

-0.3

-0.2

-0.1


2010

2011


General:Long-term chart period from 2000 to 2011 unless otherwise stated.All data are from the Central Bank of Malta (BCM, Bank Centralita’ Malta) and Eurostat. See below for details. Forecasts basedon FocusEconomics Consensus Forecast.

1 GDP, annual variation in %. Source: Eurostat.2 Balance of non-financial public sector, % of GDP. Source:Eurostat.3 Inflation, annual average variation in harmonised index ofconsumer prices (HICP) in % (aop). Source: Eurostat.4 GDP, evolution of 2010 and 2011 forecasts since January2010.5 Balance of non-financial public sector, evolution of 2010 and2011 forecasts since January 2010.6 Inflation, evolution of 2010 and 2011 forecasts since january2010.7 Unemployment, % of active population. Source: Eurostat.8 Current account balance in EUR bn. Source: Eurostat.9 Unemployment, evolution of 2010 and 2011 forecasts sinceJanuary 2010.10 Current account balance in EUR bn, evolution of 2010 and2011 forecasts since January 2010.

Notes and sources





Annual Data 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Real Sector Population (million) 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4GDP per capita (EUR) 11,375 11,129 11,276 11,867 12,628 13,396 13,839 13,830 14,308 14,827GDP (EUR bn) 4.5 4.4 4.5 4.8 5.1 5.5 5.7 5.7 5.9 6.2Economic Growth (GDP,annual var. in %) 2.6 -0.3 0.7 3.9 3.6 3.8 1.7 -1.5 1.5 1.9 Private Consumption (annual var. in %) -1.5 3.9 2.4 2.3 0.6 2.2 5.1 1.3 1.1 1.9 Fixed Investment (annual variation in %) -19.5 23.1 -0.8 12.1 5.1 -0.6 -21.7 -18.8 5.6 5.7Unemployment (aop, % of active population) 7.5 7.6 7.4 7.2 7.1 6.4 5.9 6.9 7.1 7.0Fiscal Balance (% of GDP) -5.5 -9.8 -4.7 -2.9 -2.6 -2.2 -4.5 -3.8 -4.2 -3.8Public Debt (% of GDP) 60.1 69.3 72.3 70.1 63.7 61.9 63.7 69.1 70.7 71.8Monetary and Financial Sector HICP (annual variation in %) 2.1 2.4 1.9 3.4 0.8 3.1 5.0 -0.4 - -HICP (annual average variation in %) 2.3 2.1 2.6 2.6 2.5 0.9 4.6 1.7 1.9 2.13-Month Euribor (%, eop) 2.87 2.14 2.16 2.49 3.73 4.68 2.89 0.70 0.97 1.3710-year Bond Yield (%, eop) 5.74 4.98 4.68 4.57 4.32 4.73 4.81 4.54 4.20 5.10Exchange Rate (USD per EUR, eop) 1.05 1.26 1.36 1.18 1.32 1.46 1.39 1.43 1.33 1.30Exchange Rate (USD per EUR, average) 0.95 1.13 1.24 1.24 1.26 1.37 1.47 1.39 1.38 1.31External Sector Current Account Balance (% of GDP) 2.4 -3.1 -6.0 -8.8 -9.2 -6.1 -5.6 -3.9 -5.7 -6.2Current Account Balance (EUR bn) 0.1 -0.1 -0.3 -0.4 -0.5 -0.3 -0.3 -0.2 -0.3 -0.4Trade Balance (EUR bn) 0.1 -0.1 -0.2 -0.3 -0.3 -0.1 -0.2 0.1 -0.3 -0.4Exports (EUR bn) 3.8 3.6 3.6 3.7 4.5 4.9 4.7 4.2 4.1 4.4Imports (EUR bn) 3.7 3.6 3.7 4.0 4.7 5.0 4.9 4.1 4.4 4.7Exports (annual variation in %) 7.6 -5.7 -0.3 3.7 20.5 10.0 -4.0 -11.5 -0.3 6.7Imports (annual variation in %) -1.2 -0.8 2.5 5.7 19.1 6.3 -2.8 -16.5 7.6 7.1

| 110

November 2010FOCUSECONOMICS


Notes and Statements

PUBLICATION NOTE

Consensus forecasts are mean averages of projections of economic forecasters surveyed byFocusEconomics for our monthly publication. Quarterly averages may not correspond to the annualfigures due to different forecast panels.

The GDP-weighted averages for the world refer to economies surveyed by FocusEconomics on amonthly basis, and include the following countries and regions, comprising more than 90% of totalglobal output:

G7 (7 countries): Canada, Japan, United Kingdom and United States; France, Germany and Italyare also Euro area countries.Euro area (16 countries): Austria, Belgium, Cyprus, Finland, Greece, Ireland, Luxembourg, Malta,Netherlands, Portugal, Slovakia, Slovenia, and Spain.Eastern Europe (14 countries): Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia,Lithuania, Poland, Romania, Russia, Turkey and Ukraine.Asia-Pacific (11 countries): Australia, China, Hong Kong, India, Indonesia, Korea, Malaysia, NewZealand, Philippines, Singapore, Taiwan, Thailand and Vietnam.Latin America (20 countries): Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Do-minican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama,Paraguay, Peru, Uruguay and Venezuela.

Weights are based on market exchange rates and reflect the latest forecasts on GDP growth, infla-tion and exchange rates.

BRIC (4 countries): Brazil, Russia, India, and China. The term was coined by Goldman Sachs inNovember 2001 and has since been widely adopted in investment and finance.

Slovakia and Slovenia are from Eastern Europe publication. For publication and poll dates pleaserefer to FocusEconomics Consensus Forecast Eastern Europe.

COPYRIGHT NOTE

© Copyright 2009 FocusEconomics S.L. Duplication, reproduction, transmission, publication or re-distribution in any form or by any means electronic, mechanical, or otherwise without prior writtenconsent of FocusEconomics S.L. is strictly prohibited. Please cite source when quoting. All rightsreserved under International Copyright Conventions.

The FocusEconomics Consensus Forecast - Major Economies is a monthly publication ofFocusEconomics. Communications to the Editor or FocusEconomics in general should be addressedas follows:

FocusEconomics S.L.Gran Via 657E-08010 BarcelonaSpaintel: +34 932 651 040fax: +34 932 650 804e-mail: [email protected]: http://www.focus-economics.com

DISCLOSURE STATEMENT

The FocusEconomics Consensus Forecast – Euro Area (“Forecast”) is based on information obtained from sources believed to bereliable. FocusEconomics and the participating panellists (“Information Providers”) do not guarantee that the information supplied in theForecast is accurate, complete or timely. The Information Providers do not make any warranties with regard to the results obtained fromthe Forecast. The Information Providers are not responsible for any errors or omissions, or for any injuries or damages resulting from theuse of this information, including incidental and consequential damages. Recipients should not regard the Forecast as a substitute forthe exercise of their own judgement. The recommendations made in the Forecast may be unsuitable for investors depending on theirspecific investment objectives and financial position. The Forecast has been prepared solely for informational purposes and is not asolicitation of any transaction or an offer to enter into any transaction. Any opinions expressed in this report are subject to change withoutnotice and the Information Providers are under no obligation to update the information contained herein.

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