2. The global and European environment for CEE economies CEE Economic forum Velden, 16 September 2009 Dr. Jürgen Pfister, Chief Economist

4. CEE economies: Highly exposed to foreign trade Exports plus imports as percentage of GDP, at current prices Seite Country 1999 2008 Poland 54.2 83.2 Czech. Rep. 112.1 149.3 Romania 60.9 75.7 Hungary 131.4 161.7 Slovakia 126.8 167.6 Bulgaria 94.9 143.7

5. CEE economies: Dominant role of Western European customers Share of merchandise exports to EU-15 countries in total exports in percent Seite Country 2008 Poland 58.4 Czech. Rep. 63.7 Romania 55.2 Hungary 57.7 Slovakia 55.4 Bulgaria 46.6

6. CEE economies: FDI inflows have fallen dramatically FDI inflows in billions of dollars/in percent of GDP Seite 1) Without Special Purpose Entities (SPE) Country 2006 2007 2008 Average 2006 - 2008 As % of GDP Expected inflows 2009 as % of GDP Poland 19.9 23.0 16.5 19.8 4.6 2.5 Czech. Rep. 5.5 10.6 10.9 9.0 5.1 3.5 Romania 11.4 9.9 13.3 11.5 7.0 3.5 Hungary 1 7.5 6.1 6.4 6.7 4.9 2.0 Slovakia 4.2 3.4 3.4 3.7 5.0 2.0 Bulgaria 7.8 11.7 9.2 9.6 23.7 7.0

7. CEE economies: Massive turnaround in private capital flows In billions of dollars; eleven countries according to IMF definition Seite 160.0 120.0 80.0 40.0 0.0 -40.0 Private capital flows, net Direct investments Portfolio investments of which:

8. CEE economies: Catching up in living standards will take another generation Per-capita GDP, average of EU-15 countries =100, in purchasing power parities Seite Country 1999 2008 Poland 42.1 51.9 Czech. Rep. 60.2 72.6 Romania 22.5 41.3 Hungary 46.4 56.8 Slovakia 43.8 64.9 Bulgaria 23.5 36.2

12. World economy: Severe recession in 2009 (1) Inflation-adjusted GDP, change on previous year in percent, market exchange rates Seite Forecast

13. World economy: Severe recession in 2009 (2) Inflation-adjusted GDP, change on previous year, in percent Seite

14. US: Recovery, but not yet an upswing in sight Purchasing mangers index (ISM, manufacturing) and consumer confidence (Conference Board), seasonally-adjusted monthly figures Seite 2007 2008 2009 Mar May Aug Mar May

16. US: Typical recession – slow recovery Inflation and seasonally-adjusted GDP, change on previous quarter in percent, annualised Seite -6.5 2007 2009 2010 Forecast Recession 2008 -4.5 -2.5 -0.5 1.5 5.5 3.5

17. US: High losses of wealth Change in net assets of private households in trillions of dollars and net assets as a percentage of disposable income Seite Memorandum item: disposable income 2008: 10.81 trillion dollars

18. US: Risky course General government fiscal balance as percent of GDP Seite Forecast 3.0 0.0 -3.0 -6.0 -9.0 -12.0 3.0 0.0 -3.0 -6.0 -9.0 -12.0

20. Germany: Recovery, but not yet an upswing in sight ifo business climate, seasonally-adjusted monthly figures, 2000=100 Seite 2007 2008 2009 Mar May Mar May Mar May

21. Germany: Signs of stabilisation after dramatic fall Order intake (in volume terms) and production in manufacturing, seasonally-adjusted monthly figures, 2005=100 Seite 2006 2007 2008 2009 Mar May Mar May Mar May Mar May Jun

22. Germany: Slump in winter Inflation and seasonally-adjusted GDP, quarterly figures, 2000=100 Seite Annual average: +1.3% Carry over: -2.1% Forecast Annual average: -5.0%

23. Euro area: No inflation risks for the foreseeable future HICP and core rate (excl. unproc. food and energy), change on previous year in percent Seite 4.0 2.0 1.0 0.0 -1.0 3.0

24. Commodity prices: Turn up again HWWI commodity price index, dollar basis, 2000=100 Seite

25. Advanced economies: Sharp rise in government deficits General government fiscal balance as percent of GDP Seite Germany Euro area France United Kingdom Italy US

26. Advanced economies: High debt burden Gross government debt as percent of GDP Seite Germany Euro area United Kingdom US

27. US: Strong growth in the monetary base – stagnating credit volumes In billions of dollars and change on previous year in percent Seite Updated: August 24, 2009 1) Change on December 2008, annual rate 1) 1) 1) 1) 1) Monetary base M2 Credit Commercial and industrial loans Real estate Consumer Dec. 2006 811.1 +2.5 7033.6 +5.4 1187.5 +14.7 3378.8 +14.9 742.8 +5.0 Dec. 2007 822.4 +1.4 7438.4 +5.8 1430.8 +20.5 3607.9 +6.8 806.8 +8.6 Dec. 2008 1651.3 +100.8 8153.7 +9.6 1618.6 +13.1 3820.2 +5.9 861.8 +6.8 July 2009 1666.2 +1.6 8347.8 +4.1 1489.2 -13.3 3840.3 +0.9 850.1 -2.3

28. Euro area: Credit expansion has slowed sharply In billions of euros and change on previous year in percent Seite Updated: August 27, 2009 1) Change on December 2008, annual rate 1) 1) 1) 1) Monetary base M3 Credit To businesses Consumer credit housing loans Dec. 2006 771.8 +11.4 7743.7 +9.9 3836.9 +12.8 584.2 +5.8 3194.3 +10.0 Dec. 2007 841.9 +9.1 8664.6 +11.6 4383.4 +14.2 616.1 +5.5 3419.9 +7.1 Dec. 2008 1150.7 +36.7 9407.3 +7.5 4825.8 +10.1 630.8 +2.4 3480.9 +1.8 July 2009 1102.0 +23.8 9446.0 +0.7 4759.0 -2.4 631.0 +0.1 3488.0 +0.3

29. US/euro area: Rising short-term rates from spring 2010 onwards In percent p.a. Seite

30. Bond market: Low yields for some months 10-y government bond yields, monthly averages, in percent Seite 2007 2009 2010 2008 Forecast Bunds Dec Mar Dec Mar Dec Mar

33. Thank you for your attention! Seite Dr. Jürgen Pfister Chief Economist Phone: +49 (0)89.2171.21750 Email: juergen.pfister@bayernlb.de