Recent macroeconomic trends in the Baltic States (Estonia included) 11 May 2012

2 Domestic demand has strengthened... Retail sales have held up fairly well so far this year Estonian consumer confidence mimicking confidence in the euro area Consumer confidence edging down on global developments in both Lithuania and Latvia, but not yet at worrying levels.

...and expectations have largely stabilised

4 Weak external demand to weigh on growth......but the most important trade partners not among the most vulnerable economies (the Nordics, Germany, Russia...)

5 Growth to slow down in 2012 from faster-than- expected speed in 2011

6 Labour markets still weak, but improving

The state of public finances has improved considerably 7 Given the current environment in Europe, the successful fiscal consolidation and the thus improving government finances support confidence in the economies The State Treasury of Latvia had accumulated deposits of more than EUR 1.5 billion (8% of GDP) as of March 2011

The government: from straw hut in

...to stone hut in

CDS rates signalling rising investor confidence; credit rating agencies also inreasingly recognising it Both Latvia and Lithuania have been able to tap the international markets successfully this year 10

The financial markets believe the pegs to the euro in both Latvia and Lithuania will hold going forward 11

12 Inflation declining only slowly, due to global price developments

EMU membership still on the agenda Budget deficits to fulfil the Maastricht criterion in > enable accession in 2014 Inflation outlook more cloudy – The inflation criterion is a moving target, making it more difficult to aim at – the Baltics need a relatively steeper slowdown in consumer prices Accession in 2014 still possible, but risks are high for a later adoption, mainly due to inflation risks 13

14 Thank you! Andris Strazds Senior Economist Economic Research Nordea Markets Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S. The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient. The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results. Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets.