1. Aron Gampel Vice-President & Deputy Chief Economist Navigating Through Volatile Times Toronto, Ontario February 14, 2012

2. annual % change Source: Scotia Economics, Bloomberg, BEA, Statistics Canada, Eurostat. Real GDP 2004-07 Global Output Moves To A Slower Growth Trajectory

3. America’s Growth Engine & Competitive Realignment Exports to High Growth Regions Source: Bloomberg, NAR. Uneven Sales Performance Total Home Sales index: January 2009 = 100 Source: Bloomberg. Rest of World South & Central America Pacific Rim index: January 2009 = 100 Auto Sales

4. Fiscal Deficits *2011f: 10.3%; 2010: 32% reflects extensive bank support. Source: IMF September 2011, Scotia Economics. General Government, 2010, % of GDP Debt General Government, 2010, % of GDP n/a European Debt Fuels Economic And Market Volatility…

5. Fiscal Deficits Source: IMF September 2011, Scotia Economics. General Government, 2010, % of GDP Debt Emerging Economies General Government, 2010, % of GDP Emerging Economies … That Will Impede Medium-Term Growth Internationally

6. Budget Balances (FY11*, % of GDP) Federal SK*** MB NS BC QC NB ON NL PE Target for Balanced Books** FY14 balanced FY15 balanced FY14 FY15 FY14 FY17 FY18 AB*** budget balances % of GDP U.S. Federal ex. Social Security Looking Forward Source: Budget documents, Statistics Canada, BEA, Scotia Economics. forecast Aggregate Provincial Canada Federal *Final results except for NL. SK on a General Revenue Fund basis. **Without using reserve funds. ***After transfers. Source: Budget documents, Statistics Canada. Canada Leads Most Major Nations In Fiscal Repair …

7. 2012, % National Average assumes 10% Prov. CIT rate and cross- Canada HST Marginal Effective Tax Rates on Capital Source: Finance Canada, Finance Ontario. Corporate Income Tax Rates* Japan France U.S. Germany Canada Italy U.K. * Central plus sub-central rates. Source: OECD. 2011, % Canada Small Developed Countries OECD U.S. … And Has A Competitive Tax Advantage

8. Source: Bank of Canada, U.S. Federal Reserve, European Central Bank, Scotia Economics. Central Bank Rates U.S. forecast % Canada Euro zone 10-year Bond Yields U.S. yield Source: Scotia Economics, Bloomberg. Canada forecast Germany Monetary Policies Geared To Reviving Growth

9. Source: Statistics Canada, Scotia Economics. *January 2012. Euro zone U.S. Employment Cresting... index: 2004 Q1 = 100... As Manufacturing Headwinds Rise index: 2004 Q1=100 Construction Manufacturing Canada Services Natural Resources * * * * * * Canada’s Solid But Uneven Employment Recovery

10. Canadian Household Debt Is A Source Of Concern * Includes households and unincorporated business. Source: U.S. Federal Reserve, Statistics Canada, Scotia Economics. Canada U.S. household* credit liabilities o/s as % of PDY Canadians’ Debt-To-Income Now Higher … Canada U.S. household* debt o/s as % of assets … But Less Debt Used To Buy Assets Existing Home Sales units, 000s MLS Average Price MLS Sales $000 Mortgage Delinquencies Source: MBA, CBA. U.S. Canada % of total loans past due three or more months

11. Source: Scotia Economics, Statistics Canada, Bloomberg. CADUSD Canadian Dollar (RHS) forecast The Loonie Continues to Fly High … WTI Oil (LHS) WTI Oil US$/bbl Commodities … Despite Weaker Trade Balances C$ billions, s.a. Merchandise Trade ex. Commodities Merchandise Trade Loonie Strength, U.S. Weakness Hit Canadian Exports

12. Focus On Global Markets For Long-Term Growth Exports (Goods & Services) % of GDP, 2010 Source: World Bank, Scotia Economics. World exports for 2011 is an estimate. % of world GDP World Exports

13. Focus On Global Markets For Long-Term Growth Source: World Bank, Strategis, Scotia Economics, ytd = Jan - Nov. World exports for 2011 is an estimate. Canadian Exports % share of total exports, 2011 ytd % of world GDP World Exports

14. Emerging Market Strength Is Helping To Rebalance Growth … Population billions, 2010* * 2010 IMF forecast. Euro area Japan Brazil Mexico Russia U.S. Rest of Asia (ex. Japan) Indonesia Vietnam Korea Thailand Canada % of global GDP, 2010* Global GDP (PPP) Other Asia/Oceania

15. Emerging Market Strength Is Helping To Rebalance Growth … Population billions, 2010* * 2010 IMF forecast. Euro area Japan Brazil Mexico Russia U.S. Rest of Asia (ex. Japan) Indonesia Vietnam Korea Thailand Canada *Market exchange rate, USD. Source: Bank of Canada, IMF WEO estimates, World Bank Development Indicators, CIA Factbook. Per Capita GDP* Motor vehicles per 1000 people Number of Airports India1,00017350 China4,00058500 Brazil10,0001584,050 Canada46,0006191,400 United States 47,00076615,100

16. … But Is Reshaping The Global Manufacturing Landscape Motor Vehicle Sales millions of units North America* EU & Japan *Includes light trucks in North America. Source: Scotia Economics, Ward’s Automotive. Brazil, Russia, India & China forecast millions of units Motor Vehicle Production North America* Europe China forecast

17. Source: Scotia Economics, IMF, Bloomberg. Housing Starts millions of starts, 2011e Motor Vehicle Sales millions of units North America* EU & Japan Brazil, Russia, India & China forecast … But Is Reshaping The Global Manufacturing Landscape

18. *Includes light trucks in North America. Source: Scotia Economics, Ward’s Automotive. Motor Vehicle Sales millions of units North America* EU & Japan Brazil, Russia, India & China forecast 1999 = 100 Emerging Asia China United States Global Oil Consumption … But Is Reshaping The Global Manufacturing Landscape

19. Ontario’s Trade Needs More East-West, Less North-South International Trade Balance $ billions Source: Statistics Canada, Ontario Economic Accounts. *ytd, 2011Q3 Interprovincial Trade Balance $ billions Ontario Exports Beyond the U.S. % of international merchandise trade receipts EU27 Latin America Japan China India Other Asia Mexico Source: Strategis trade data. Trade With Asia* % of total, 2011ytd * Excludes Middle East; domestic basis. Source: Strategis trade data. 2011ytd = Jan-Nov.

20. 2000-2010 % change, compound annual growth Source: Scotia Economics. Canada’s Competitive Challenge

21. 2000-2010 % change, compound annual growth Source: Scotia Economics. Canada’s Competitive Challenge

22. 2000-2010 % change, compound annual growth Source: Scotia Economics. Canada’s Competitive Challenge

23. 2000-2010 % change, compound annual growth Source: Scotia Economics. Canada’s Competitive Challenge

24. 2000-2010 % change, compound annual growth Source: Scotia Economics. Canada’s Competitive Challenge

25. Auto Industry Investment Shifts Away From Canada Investment Slumps in Canada, But Has Stabilized in the U.S. & Mexico* Mexico – The Big NAFTA Winner % of North American output U.S. Canada 000s of USD *Investment per vehicle produced in each country. Source: Scotia Economics, Global Auto Report. Mexico Canada Mexico

26. Source: Statistics Canada, Scotia Economics. Nominal GDP Per Capita index: 2004=100 Nominal GDP Per Capita index: 2004=100 Ontario B.C. Alberta Quebec Saskatchewan P.E.I. New Brunswick Nova Scotia Newfoundland and Labrador forecast Manitoba Growth And Income Prospects Best In Resource Regions

27. Demographic Trends Favour Western Canada Interprovincial Migration % of population, 2011 ytd International Migration Source: Statistics Canada, ytd = 2011 Q1-Q3. % of population, 2011 ytd

28. * Annual averages. Source: Scotia Economics, Bloomberg. Forecasts as of February 2, 2012.

29. Disclaimer This report has been prepared by Scotia Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank Group nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.

30. Aron Gampel Vice-President & Deputy Chief Economist Navigating Through Volatile Times Toronto, Ontario February 14, 2012