MoroccoBusiness and economic outlook

Quarterly update - December 2012Final analysis by Nenad Pacek

Contents

• Executive summary• Political risk analysis • Important facts• Economic fundamentals• Strategic importance of the market• Corporate sales and profit trends• Growth trends and drivers• Household consumption trends• Gross fixed investment trends• Government spending trends• Currency outlook, interest rates and inflation rate• Forecast table

Executive summary

• Morocco is stuck in an unusually low growth period thanks to major problems in the Eurozone (which affect exports, remittances, tourism), higher spending on subsidies (and low capital investment), the rising cost of importing fuel and food, drought earlier this year and its long-term problem of low global competitiveness

• However, business this year is slightly better than last year for many firms (mostly because many companies are focusing on strong local execution in a relatively steady Morocco, to try to compensate for weak business growth in quite a few other MENA markets)

• Due to sizeable twin deficits (budget and current account) Moroccan foreign exchange reserves have been melting quickly, but because of the summer agreement with the IMF for a $6.2bn precautionary credit line we do not expect a financial meltdown in the foreseeable future

• Morocco is a strategic ally of western powers in MENA and is unlikely to be left alone when it comes to any emergency funding and other loans (similar to Jordan)

• To help the financials the King has toured the Gulf to sell upcoming bond issues and get Gulf investors to come to Morocco in greater numbers

Executive summary II

• Strong phosphate exports and good exports of electric/electronic sectors, plus government spending on current expenditures have kept growth positive this year

• However, growth will remain below potential again in 2013 – the Eurozone will stay under pressure and prime minister Benkirane is calling for austerity

• We expect growth to reach just 3.6% in 2013, with downside risks related to rain and the Eurozone

• Based on our survey, companies expect a slightly better year for business than in 2012, but business growth will be predominantly in single digits (see results of our new corporate survey in later slides)

• At the moment, consumer goods, food/beverages, pharma/health and to some extent IT are performing reasonably well (with solid, if perhaps too optimistic expectations, about 2013)

• It is industrial B2B companies that continue to suffer and this is unlikely to change• Household, (especially) corporate and government spending are likely to stay

under pressure in 2013, keeping headline real GDP growth below potential

Executive summary III

• Following early elections last year, the government is now run by the moderate Islamist Abdelilah Benkirane, head of the Justice and Development Party, in coalition with three other parties from the previous government

• Although this is a big change in Morocco, we do not expect the position of the King to be threatened – the new constitution still gives the King authority over big strategic decisions and key ministerial appointments, such as the Interior Minister

• But, as in the past, any current and future economic problems will be blamed on the government rather than the King

• The budget deficit is getting out of control following a surge in subsidy and public wage spending (which has supported household spending and B2C sales this year)

• Because such spending is not sustainable, companies should keep in mind that such subsidised consumption could be interrupted or reduced in the coming years

• Interest rates are unchanged at 3%• The currency is likely to stay stable, but inflation will be 2% following higher fuel

prices – without food subsidies overall inflation would be much higher

Political risk analysis

• Morocco’s dynasty is the oldest in the Arab world and has recently gone through partial and somewhat superficial political changes that are aimed at calming a socially and politically restless population

• The King holds most power and although the recently approved changes reduce some of his authority, he retains overwhelming power when it comes to strategic issues (particularly military, judiciary and internal affairs)

• The moderate Islamist Justice and Development Party (PJD) won early elections and now leads a coalition together with the Istiqlal Party, the Popular Movement, and the Progress and Socialism Party (all centre-left parties that were in the previous government)

• The PJD has traditionally supported the King and his right to be in charge• Prime Minister Abdelilah Benkirane is trying to implement more socially-

oriented economic policies in an attempt to stem the recent spate of public protests and industrial action against poverty, corruption and low wages

Political risk analysis II

• Morocco has, thanks to early elections and some constitutional changes, avoided the revolutions seen in Egypt and Tunisia, or the wars in Libya and Syria

• Although we expect frequent and relatively low-level protests to continue (as we have seen erupting again in recent weeks and months), they are unlikely to threaten the current political set-up and will be dealt with in a harsh fashion (with many demonstrators ending up in prison)

• We also expect that the government will, through subsidies (although changing the allocation system of subsidies away from the wealthy) and higher fiscal transfers for social purposes, keep protests under control, and reduce them over the medium term

• The new government’s central pillars of economic policy include reducing unemployment, boosting annual growth to 5.5% in the next five years, and improving tax collection/boosting tax earnings for use both for development and social purposes as well as to reduce the too-high budget deficit

• This will be challenging, if not impossible in 2013, considering weak EU growth and potential drought again – this means that the risk of protests will not evaporate soon and authorities will deal with them with increasing impatience

Political risk analysis III

• Moroccans still give King Mohammed VI legitimacy but there is more restlessness among the young (30%+ unemployment)

• Although Morocco is a constitutional monarchy, it has had an elected multi-party government since the 1960s, but the key government decisions have always been made by the King and his so-called “shadow government”

• The point of dispute for protesters during 2011 were the King’s wide-ranging constitutional powers (for example, he can dissolve parliament and runs something of a parallel government that calls most shots in the country)

• The King has been able to differentiate himself from the governments (which are traditionally weak coalitions) and is seen in a more positive light than ministers

• In a country where over 80% of the population (if polls are to be trusted) still approve of the King, it is unlikely we will see a regime change in the coming years

• Still, a lot remains to be done considering exceptionally high youth unemployment, which is now over 30% (and 50% of the young neither work nor go to school)

Political risk analysis IV

• Despite some recent constitutional changes, any significant change in economic policy cannot happen without the King’s approval and the agreement of the “Makhzen” (his de facto shadow government)

• If anything, the protests have put the King and his Makhzen entourage on alert in terms of accelerating competitiveness, alleviating poverty, and tackling youth unemployment

• The latest round of public sector wage increases, higher subsidies on food, and pension hikes, were measures to pacify the population (and this supported growth), but they also boosted an already high budget deficit and the need for the King to personally engage in bringing portfolio and direct investors to the country

• The position of the King is likely to stay largely intact although companies should be aware of the underlying political risk – many of the recent revolutions in the Middle East happened quickly and unexpectedly

• None of the above should stop corporate sales initiatives and companies should continue to build brands and business on the ground despite a somewhat challenging outlook

Political risk analysis V

• The Prime Minister is likely to come under more pressure in the next months following the government‘s decisions about subsidies plus any new and upcoming austerity measures

• Trade unions (although representing less than 15% of the total labour force) have been staging yet more protests

• The worsening economic environment, lack of liquidity (as a result of the high budget and current account deficits), and dwindling foreign exchange earnings (forex reserves now cover only four months of imports) are all factors that could contribute to lowering the popularity of the current government

• In other words, the King and his close allies could easily put all the blame for Morocco‘s weak economic performance on the newly elected government

• PM Benkirane has already criticised the royal palace (which is quite unusual in Morocco)

• Benkirane has to manage a careful and complex balancing act between placating the King, coalition partners, trade unions and the electorate that voted for him

Political risk analysis VI

• Companies looking at Morocco should be aware that there are Islamist groupings (Al-Adl wal Ihsan and Salafists) that currently do not play an active role in politics and there is also the secular movement that would want further changes in the political set up

• These are the hidden threats to the regime in case the economy deteriorates

• But like the Egyptian military, the King and his allies do not want chaos and economic decline considering vast business interests in many economic segments

Important facts

• 31m people, growing by approx. 350,000 per year• 8th largest market in the MENA region (in terms of total GDP), but one of the poorest in

per-capita GDP terms with a quarter of the population living below the poverty line• Over 50% of adults are illiterate• Largest exporter of phosphates in the world, holding over 70% of the world’s proven

reserves• Agriculture accounts for 17% of GDP and 40% of all employment• But the economy is becoming increasingly diversified, and has manufacturing, services

(including tourism), and mining industries• A new mining law, currently in the making, should attract major foreign investment into

the extraction of zinc, silver, cobalt, magnesium, gold, and copper• Tourism is the country’s largest foreign exchange earner• Morocco relies heavily on the EU for tourism income (80% of foreign tourists come from

Europe and they are trying to attract Gulf tourists), exports (70% of the total), and remittances inflows (some $7bn, more than either phosphates or tourism income

• Largest recipient of EU aid outside of the European continent

Economic fundamentals

• Morocco’s fundamentals are acceptable, although it faces a long-term issue with its competitiveness, widespread poverty and over 30% unemployment among the young

• Acceptable fundamentals and politics helped Morocco secure the IMF’s $6.2bn Precautionary and Liquidity Line (which provides financing to countries with good fundamentals, but which for one reason or another face temporary balance of payments pressures) – but S&P has just put it’s credit rating on negative watch

• External debt is rising and will be over 40% of GDP in 2012 – though still acceptable and below any danger zone

• Government debt has been steadily cut in recent years and is now 53% of GDP (anything below 60% is seen as broadly acceptable)

• But government debt will rise in the short term as spending on wages and subsidies goes up and the high budget deficit (currently 7% of GDP) becomes almost chronic

• Foreign exchange reserves have dropped to under four months of imports and this is one of the reasons the authorities requested the IMF precautionary credit line and are looking at placing more bonds, particularly in the Gulf

Economic fundamentals II

• The current account deficit is too high at some 8% of GDP, and the currency would now be under pressure without the long-standing actively managed float system

• We expect the government to increasingly tap into sovereign wealth funds in the Gulf for loans, project financing and FDI

• In addition to securing a precautionary credit line from the IMF and for planning new bond issue(s) the authorities have secured more loans this year which should enable broad economic stability to continue (despite major headwinds in the external environment and more domestic pressures)

• New loans include: $800m loan from the African Development Bank for developing projects in the renewable energy sector, $300m from the World Bank to help reduce youth unemployment, and soon to arrive, over $120m loan from Arab Monetary Fund to help the balance of payments

Strategic business importance

• Morocco is seen as one of the more reliable MENA markets, usually delivering single digit growth (sometimes despite any big real GDP movements)

• However, most companies are only growing in single digits so it is hardly a truly exciting emerging market (and B2B firms are mostly doing badly)

• Companies are aware that Morocco is unlikely to become a high double-digit growth market for established companies in 2013-2014

• With a number of MENA markets under pressure, Morocco is seen as a steady market that is unlikely to boom or collapse in the near future, but will continue to provide single-digit growth for most firms (although top line growth could actually be slower in the coming quarters and there will be more margin pressures building up)

• Companies remain committed to Morocco due to its good size and relative stability/predictability and in fact many of our CEEMEA Business Group members have stepped up local execution to compensate for lack of growth in quite a few MENA markets

Corporate sales and profit trends – all sectors 2011

• Sales growth in 2011 was weaker than 2010 for most companies• 40% of companies did not grow and only 24% grew in double digits (and

anecdotally, such growth was linked either to specific large projects, or came from a low base)

• Half of consumer goods companies did not grow their business in Morocco last year – this was worse than in 2010

• Food and beverage firms did better in 2011 than in 2010• Industrial firms mostly struggled – sales for some 70% were flat in 2011• Pharma/healthcare results disappointed more in 2011 than in 2010; some

40% of companies did not manage to grow, while the rest grew in single or double digits

Corporate sales and profit trends 2010-2011, including expectations for 2012 as seen by companies in Dec

2011

Corporate sales and profit trends in 2012 and expectations about 2013, all sectors, based on Dec 2012

survey

• There has been a slight improvement in terms of corporate revenue growth in 2012, with 70% of companies recording revenue growth this year

• However, revenue growth this year is predominantly in single digits, with less than 15% of companies managing double digit growth

• Profit growth is just slightly worse than in 2011 with almost 70% of companies recording growth (mostly single digit), but still just over 30% have no profit increase this year

• Also, companies will have to pay a new tax on profits generated in 2012 (see later for more details)

• Expectations for 2013 are mildly better, but we caution that some of these expectations might have to be scaled down as many drivers of GDP growth and domestic demand stay under pressure

Corporate sales and profit trends for 2012 and expectations for 2013 (including comparison between

expectations expressed in June and Dec 2012)

Consumer goods companies –sales/profit results and expectations

• Consumer goods companies did not have a great 2011 – only half of surveyed multinationals grew and about one quarter had flat revenues

• Profit trends last year were similar• This year sales have improved, contrary to real GDP growth deceleration• All companies will have some revenue growth this year, but mostly in

single digits (with a large proportion in just low single digits)• Profit growth this year is similar and anecdotal evidence from our

members suggests that many have actually taken substantial costs out of their businesses

• 2013 corporate expectations are a replica of 2012 results

Food/beverage –sales/profit results and expectations

• 2011 was a growth year for virtually all food and beverages firms, but revenue growth was mostly in single digits (60% of companies grew just 1-5%)

• Profit growth was very similar• Despite a slowdown in GDP growth rate and a hit on rural incomes (agro

employs 40% of population), the vast majority of companies will have revenue growth this year but in single digits

• Profit growth is marginally better than revenue growth this year, but single digit growth dominates

• Corporate expectations for 2013 are better at the margins

Industrial B2B –sales/profit results and expectations

• Most industrial B2B companies saw no change in revenues last year, compared with 2010, and only about 30% of companies managed to find any top line growth

• Profit performance was better, though, as companies managed costs tightly• 2012 has been as disappointing as 2011 since companies remained reluctant

to invest considering significant weakness in export markets and slower than usual domestic growth

• But profit growth deteriorated relative to 2011 and at the moment virtually all industrial B2B companies expect no profit growth this year

• Expectations for 2013 remain equally miserable• Companies should be aware, however, that the worsening EU outlook could

also put even more pressure on industrial sales in the next few quarters

Pharma/health care –sales/profit results and expectations

• Almost 60% of companies grew last year, but about 20% had falling revenues, and 20% reported flat sales compared with 2010

• Profit performance was just a little bit better• Almost 70% of companies will grow this year, with slightly better profit

growth• And just like with consumer goods, business is mostly growing in single

digits• As government finances continue to come under pressure (and these

pressure are growing) there could be more receivables issues in 2013• Still, corporate expectations about 2013 are very good – all companies

expect to grow their top and bottom lines, with a growing proportion of those planning double digit growth

IT companies –sales/profit results and expectations

• IT companies on the ground reported a tough 2011, with few finding any growth

• 2012 is a better year with over 80% of companies recording revenue growth, mostly in single digits

• Most companies will manage profit growth this year, but only in low single digits ranging from 1-5%

• In 2013 companies expect a gradual improvment of both top and bottom lines

Corporate sales and profit trends by sector in 2012, based on Dec 2012 survey

Corporate expectations for 2013, based on Dec 2012 survey

Growth trends and drivers

• After GDP growth of 3.7% in 2010, growth reached 4.9% last year, supported by various government spending initiatives that helped boost household spending, supporting B2C firms in particular

• In response to unions’ demands, authorities agreed to raise industrial wages; they also increased the minimum pension by 70% and provided $6bn in subsidies for various food items

• Credit growth of 10%, as well as various construction and manufacturing projects, also supported growth last year

• This year, growth was affected by drought (which we warned about back in March), the deteriorating Eurozone outlook (which affects Moroccan tourism, remittances and exports), a food import bill (owing to the drought Morocco needs to import more wheat than usual) and higher global energy prices

• But export growth of 5-7% this year will help (particularly a strong increase in phosphate exports), as will a 6-7% increase in credit growth

• Moroccan GDP traditionally moves up and down with abundance or lack of rain

Growth trends and drivers II

• Growth will reach just 2.6% this year due to the weak Eurozone, drought and marginally slowing credit growth

• Tourism and remittances income is down over 3% so far this year• Considering that 40% of Moroccans work in agriculture, any agro shortfall always has a

severe impact on growth and domestic demand (the last big drought in 2007 resulted in just 2.5% growth, and significantly slower consumer spending)

• However, increased and politically motivated government spending this time has kept consumer spending afloat

• All main drivers of growth (agriculture, exports, tourism, FDI inflows, remittances) look shaky for next year too, as many are linked to the EU

• We expect below potential growth of 3.6% in 2013, largely because Europe will be a poor economic performer, and because there will be at least moderate austerity next year (as recently requested by the prime minister)

• We have serious doubts about the government’s ability to reach its desired 5.5% growth in 2013-14 (even during the decade before the global economic crisis, Moroccan growth was averaging 4.5% pa)

Growth trends and drivers III

• Many EU markets are in a mild recession in 2012 and weakness will continue in 2013, as EU markets struggle under the burden of the sovereign debt crisis, high public debt and widespread austerity programs

• Public spending and phosphate exports (and other exports) will keep Moroccan growth afloat and at a modest rate (and if the rains are good, agro will help)

• Despite an upcoming sovereign bond issue of about $1bn plus access to a $6.2bn IMF credit line, we expect that there will be continued delays with many capital spending projects as current spending continues to dominate the budget (for social and political reasons)

• The government wanted to reduce the budget deficit to 5% this year but this is unlikely – we think the budget deficit will reach 7% of GDP

• The government should have enough money for short-term subsidy spending and on projects alleviating poverty (at least for now and with IMF support) – $6bn was spent on subsidies last year

• There will be changes in the allocation of subsidies considering that the richest fifth of the population gets over 40% of all subsidies

Growth trends and drivers IV

• Additional corporate and excise taxes should boost the Compensation Fund (which doles out subsidies and spends in impoverished parts of the country)

• However, we do not think that the government will totally neglect major infrastructure projects in the next three years since they are critical for at least some job creation (new loans described in Economic fundamentals II will help)

• For example, it is likely to press ahead with major solar power projects as part of the Moroccan Solar Mast Plans, which sees the creation of production capacity for 2 Gigawatts of solar power in the next eight years

• Tendering for some of the projects from the plan will most likely accelerate in the next few years and will cost the country up to $10bn

• Once more solar and wind power is functioning, Morocco‘s heavy reliance on importing hydrocarbons will drop and so will the burden on its current account deficit and the drain on foreign exchange earnings

• We expect the government to increasingly tap into sovereign wealth funds in the Gulf for loans and project financing

• But this will only impact economic fundamentals in the medium to long-term

Growth trends and drivers V

• The government has introduced additional corporate taxes of 1.5% and 2.5% for companies with net profits over MAD 100m

• Taxes on beer and alcohol have also gone up, and should help drive government revenues

• In addition, the latest round of fuel price hikes should also bring in more revenues earmarked for investment spending on roads, schools, etc.

• We expect a new bond worth up to $1bn to be sold in the coming months to plug significant financing gaps, while additional income could come from tenders for 4G telecom licenses

• Morocco might have to pay a bigger premium than on its 2010 Eurobond, especially if the Euro crisis deepens (which is still a possibility)

Growth trends and drivers VI

• The new government has already pre-announced a few possible economic measures which companies should monitor in the next months and quarters (though we think many of these will not be implemented quickly):– To accelerate annual GDP growth to 5.5%– Reduce unemployment, especially among the young– Keep paying subsidies, rather than cutting them, although with allocation shifts– Introduction of a tax on unused land – Introduction of a tax on luxury goods– Imposition of extra taxes on banks and telecom firms, and on the cement sector– Major infrastructure projects (highways, widening of the electricity network,

ports, etc) with the help of the private sector – Improving regulations and bureacracy to attract more investors– Judiciary reform and combatting corruption

Growth trends and drivers VII

• Morocco is planning a new mining law to attract investors, and a new banking law which will allow Islamic banking – both should help boost growth in the medium term

• Over the medium to long term, reaching higher growth rates will be dependent on how well Morocco moves up the value chain in terms of its exports – its economic structure has plenty of room for improvement

• Many of its manufacturing exports are increasingly exposed to competition from cheaper, mainly Asian locations

• Morocco would have to grow at least 6-8% to start reducing youth unemployment and start lifting more people out of poverty

• This kind of growth will be very difficult to achieve and therefore underlying economic, social and political pressures remain a major challenge in the next few years

• The EU parliament has approved a trade agreement with Morocco which will see a broad eliminiation of trade barriers for agricultural products, as well as fish and various food items

Household consumption trends

• Consumer spending has been relatively resilient with most companies recording at least single digit growth this year despite drought, tourism and remittances-induced weakness in disposable incomes

• But many companies report a slightly softer second half than the first half of the year• Household spending will increase by 2.8% this year and by 3.2% in 2013• An increase in public wages of 5%+ this year has offset some of the loss of income

linked to drought – without that, household spending would be even weaker• We continue to advise B2C companies to manage expectations for 2013 downwards

considering that the underlying pressures on consumer income will not go away quickly

• Unemployment will end this year above 9.0%, compared to 8.9% in 2011 (youth unemployment is still over 30%) and this is already hurting consumer confidence at the margins – unemployment has gone up again to 9.4%

• Future household spending will depend on rains and agro output; the ability of the government to continue spending on subsidies; remittances; tourism; and manufacturing/exports (the latter items linked strongly to the Eurozone economy)

Household consumption trends II – corporate opinions

“We are trying to boost growth in Morocco but that can only be done by bringing in new products and by substantially diversifying our product portfolio to include also cheaper products for various segments of the population. Without this, there is no way we can exceed the usual, stubborn single digit pattern. In order not to dilute and cannibalize our premium brands, we are now setting up an additional facility within several of our European manufacturing plants that will manufacture smaller packs for MEA markets. This will be great for our business in Morocco when we introduce these smaller packs in late 2013. ” Country director, consumer goods multinational

Gross fixed investment trends

• Corporate spending rose just 2% in 2011, not particularly exciting for corporate growth plans

• In 2012, we will see a continued modest increase in corporate spending of just 1% and only 2% in 2013, with downside risks linked to Europe

• Between 2006 and 2008, corporate spending increased every year by 12%• Those days are long gone and after a difficult 2009 and slow 2010, companies

reported that 2011 was even slower in terms of sales growth than 2010 -- and 2012 is equally as difficult as 2011

• There has been a bit of improvement of demand in the early months of 2012, but this quickly came under pressure in the second half as manufacturing exports to Europe continue to struggle (especially those going to Spain, Portugal and France)

• Lending to companies for equipment purchases is sharply down, to less than 3% growth yoy (it was growing 17% in 2010)

Gross fixed investment trends II

• The shift of government spending to current spending rather than capital projects hurt corporate spending in 2011 and 2012 —this will be a recurring theme in 2013

• Exporters will struggle more than usual in 2012 as key EU export markets go through deleveraging and austerity

• “Flat for three years. Good volume and overall good business but no growth. We managed to increase earnings by a few percentage points every year by optimizing opex. I do not expect anything new in 2013.” Regional MENA director, IT firm

Government spending

• The economic stimulus program continued during 2011 and to some extent in 2012, but its make-up put more emphasis on subsidies and less on investment spending

• The government borrowed to plug the gap — it will have to launch another large $1bn bond soon, and may also have to draw on its new precautionary credit line from the IMF (if reserves keep falling)

• The budget deficit last year hit 6.9% of GDP and due to ongoing social and political pressures it will stay fairly high at 7% this year and 6.5% next year

• The government will try not to breach 60% of GDP of debt accumulation (government debt is now 53% of GDP) so spending increases will still have to be cautious in the next few years – but political realities might force more current spending for social reasons

• Although the prime minister is announcing moderate austerity, we are not sure how well this will be implemented – social spending will be a priority

Government spending II

• Still, we expect to see the new government trying to manage the budget deficit down but probably at the expense of capital spending (for which they will seek to bring in private investors)

• Companies relying on government spending, such as in IT or healthcare, could be affected in the next 2-3 years (with slower collection of receivables and/or lower demand)

• We also expect a significant reshuffling of the subsidy system in such a way that it benefits the poorer segments of the society more than companies

Currency outlook, inflation and interest rates

• We expect a stable dirham, despite the high current account deficit• The underlying current account deficit, at some 8% of GDP, is too high, but the

central bank is likely to protect the managed float • With the IMF precautionary credit line (which acts as insurance in case reserves

go too low), we believe that currency risk has now diminished • Authorities cut the benchmark interest rate several months ago, to 3.00% from

3.25% — the first cut since 2009• Reserve requirements were also cut to help liquidity and growth• Lending interest rates are much higher, though (over 7.0% for consumer loans,

6.5% for mortgages…some borrowers pay 12-14%)• Headline inflation rate was below 1.0% in 2011, but with fuel price increases and

the severe drought, we expect inflation to accelerate during 2012 to 1.6% and to 2.0% in 2013 (real inflation would be higher if one would eliminate subsidies)

• The industrial fuel price is now up 27%, with unleaded fuel up by 20%

Morocco - forecast table

2009 2010 2011 2012 2013 2014Real GDP growth, % 4.9 3.7 4.9 2.6 3.6 4.0 Household consumption, % growth 4.5 3.5 4.7 2.8 3.2 4.0 Gross fixed investment, % growth 4.5 3.5 2.0 1.0 2.0 4.0 Government spending, % growth 4.8 11.0 12.0 7.5 5.0 4.5 Current-account balance, % of GDP -5.0 -4.3 -8.0 -8.8 -8.0 -7.4 Budget balance, % of GDP -2.8 -4.2 -6.9 -7.0 -6.5 4.8 Exchange rate vs. $, average 7.9 8.4 8.4 8.65 8.8 8.9 Inflation rate, %, average 1.0 1.0 0.9 1.6 2.0 2.0

Disclaimer, copyright, sources

© 2012 CEEMEA Business Group* CEEMEA Business Group currently works with senior leaders of over 320 large multinational companies operating in the Central Eastern Europe, Middle East and Africa regions, helping them understand economic and business outlooks globally, regionally and at country levels. Regional and global executives also receive regular advice and updates on best practices for expansion and success in emerging markets. Executive members of the CEEMEA Business Group can also attend regular peer group meetings held throughout Europe and in Dubai. Source: GSA Global Success Advisors GmbH and CEEMEA Business Group researchBasic data sources come from central banks, own intelligence network, CEEMEA Business Group corporate survey, governments and other public sources. Interpretation, views, forecasts, business quotes and business outlooks by GSA Global Success Advisors GmbH and CEEMEA Business Group.

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

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

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