1. Master Template1 Global forecasting service Economic forecast summary - May 2012 www.gfs.eiu.com

2. We have raised our forecast for real GDP growth in 2012 to 2.2% from 1.9%. US economic figures this year have been reasonably strong, especially on the consumer spending front. Serious headwinds remain, and our outlook is still cautious. Job creation slowed in March, and income growth of late has been negative in real terms. Housing market data has improved recently but a large overhang of unsold houses remains a drag on the property market. A drastic tightening of fiscal policy is in prospect in 2013 for the incoming administration.

3. The euro zone debt crisis has returned as the effects of the ECB’s recent liquidity injections fade. Spain’s fiscal misjudgements sent bond yields soaring in late March and April. Yields also rose in Italy, but at a slower pace. As in 2011, the authorities will struggle to keep sovereign funding costs at sustainable levels We expect the euro zone to survive, but anticipate much turmoil in 2012. The EU’s bail-out funds, at present, are not large enough to accommodate Spain. We expect euro zone GDP to contract by 0.7% in 2012. Germany will fare best; Greece, Portugal and Spain worst.

4. The economy contracted by 0.7% in 2011, undermined by the negative impact of the March earthquake and tsunami as well as a strong yen that constrained export potential. A recovery in Japan's automotive sector—after the disruption caused by the natural disasters and flooding later in the year in Thailand—will support both industrial output and exports. The economy is expected to grow by 1.5% in 2012, supported by a stronger export performance and reconstruction activity. From 2013 we expect the economy to grow at a rate of between 1- 1.5%, a downgrade from prior forecasts.

5. Growth in 2012 will be constrained by sluggish OECD demand. EMs will still comfortably outperform their peers in the developed world in 2012-16. EM currencies will be sensitive to the “risk-on”, “risk-off” trade, rallying when investors are more tolerant of risk and falling back when investors flock to the US dollar. We have raised our China 2012 GDP forecast to 8.3% from 8.2%, higher than the government’s new medium- term target of 7.5%. Rebalancing the economy away from investment towards private spending will make for less commodity-intensive growth.

6. Oil consumption growth will be constrained in 2012 by the weak OECD economic outlook. It will average nearly 2% year on year in 2013-16, led by rising demand in the developing world. Geopolitical risks are weighing on the supply picture particularly the tensions between the West and Iran. Our forecast assumes a military outcome is avoided. Prices will average around US$115/b in 2012 as supply concerns offset the negative impact of weaker demand.

7. Consumption growth is expected to slow in 2012, constrained by weak EU and growth and somewhat slower growth in the developing world. However, rising emerging market incomes and urbanisation will underpin medium-term demand growth. Years of underinvestment, particularly in agriculture, will support prices. Nominal prices will remain historically high in 2012-16, but prices will ease back in real terms.

8. Sluggish demand will be deflationary but high oil prices will push up headline inflation in coming months. The Fed has said it will keep interest rates very low until late 2014. A further round of quantitative easing appears unlikely if the US economy grows at a reasonable pace. The ECB cut its policy rate twice in 2011 as the regional economic crisis worsened. We expect the ECB to hold its policy rate steady at 1% in 2012. Most emerging market central banks will keep interest rates broadly stable in 2012.

9. The return of Europe’s debt crisis will keep the euro under pressure. We expect an average 2012 rate of US$1.31:€1 vs US$1.39:€1 in 2011. The yen has weakened since the start of the year as risk appetite has recovered somewhat and the Bank of Japan has become more aggressive in easing monetary policy. EM currencies will be supported over the medium term by positive growth and interest rate differentials with OECD economies. China’s decision to allow the renminbi to move in a wider trading ban will increase volatility.

10. + Unprecedented policy response after Greek exit prevents contagion - An attack on Iran results in an oil price shock - The global economy falls into recession - The euro zone breaks up + Stronger than anticipated US growth boosts the global economy 15 16 15 12

11. - Tensions over currency manipulation lead to protectionism - The Chinese economy crashes - US dollar crashes - Economic upheaval leads to widespread social and political unrest - Resumption of monetary stimulus leads to new asset bubbles 10 12 10 9 8

13. Access analysis on over 200 countries worldwide with the Economist Intelligence Unit T he analysis and content in our reports is derived from our extensive economic, financial, political and business risk analysis of over 203 countries worldwide. You may gain access to this information by signing up, free of charge, at www.eiu.comwww.eiu.com Click on the country name to go straight to the latest analysis of that country: Further reports are available from Economist Intelligence Unit and can be downloaded at www.eiu.comwww.eiu.com G8 Countries * Canada Canada * FranceFrance * GermanyGermany * ItalyItaly * JapanJapan * RussiaRussia * United KingdomUnited Kingdom * United States of AmericaUnited States of America BRIC Countries * BrazilBrazil * RussiaRussia * IndiaIndia * ChinaChina CIVETS Countries * ColombiaColombia * IndonesiaIndonesia * VietnamVietnam * EgyptEgypt * TurkeyTurkey * South AfricaSouth Africa Or view the list of all the countries.view the list of all the countries Should you wish to speak to a sales representative please telephone us: Americas: +1 212 698 9717 Asia: +852 2585 3888 Europe, Middle East & Africa: +44 (0)20 7576 8181 www.gfs.eiu.com

14. Access analysis and forecasting of major industries with the Economist Intelligence Unit I n addition to the extensive country coverage the Economist Intelligence Unit provides each month industry and commodities information is also available. The key industry sectors we cover are listed below with links to more information on each of them. www.gfs.eiu.com Automotive Analysis and five-year forecast for the automotive industry throughout the world providing detail on a country by country basis Commodities This service offers analysis for 25 leading commodities. It delivers price forecasts for the next two years with forecasts of factors influencing prices such as production, consumption and stock levels. Analysis and forecasts are split by the two main commodity types: “Industrial raw materials” and “Food, feedstuffs and beverages”. Consumer goods Analysis and five-year forecast for the consumer goods and retail industry throughout the world providing detail on a country by country basis Energy Analysis and five-year forecast for the energy industries throughout the world providing detail on a country by country basis Financial services Analysis and five-year forecast for the financial services industry throughout the world providing detail on a country by country basis Healthcare Analysis and five-year forecast for the healthcare industry throughout the world providing detail on a country by country basis Technology Analysis and five-year forecast for the technology industry throughout the world providing detail on a country by country basis

15. Media Enquiries for the Economist Intelligence Unit www.gfs.eiu.com Europe, Middle East & Africa Grayling PR Jennifer Cole Tel: + 44 (0)20 7592 7933 Sophie Kriefman Tel: +44 (0)20 7592 7924 Ravi Sunnak Tel : +44 (0)207 592 7927 Mobile: + 44 (0)7515 974 786 Email: allgraylingukeiu@grayling.comallgraylingukeiu@grayling.com Asia The Consultancy Tom Engel +852 3114 6337 / +852 9577 7106 tengel@consultancy-pr.com.hk Ian Fok +852 3114 6335 / +852 9348 4484 ifok@consultancy-pr.com.hk Rhonda Taylor +852 3114 6335 rtaylor@consultancy-pr.com.hk Americas Grayling New York Ivette Almeida Tel: +(1) 917-302-9946 Ivette.almeida@grayling.com Katarina Wenk-Bodenmiller Tel: +(1) 646-284-9417 Katarina.Wenk-Bodenmiller@grayling.com Australia and New Zealand Cape Public Relations Telephone: (02) 8218 2190 Sara Crowe M: 0437 161916 sara@capepublicrelations.com Luke Roberts M: 0422 855 930 luke@capepublicrelations.com