1. J.P.Morgan Chase IV ASTANA Economic Forum Astana, Kazakhstan May 3-4, 2011 S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L The Global Economy: Challenges & Prospects Dr. Jacob A. Frenkel Chairman, JPMorgan Chase International Chairman, Group of Thirty (G30) Former Governor, Bank of Israel

2. 4/14/2011 2 Six Global Challenges Financial Markets Financial Markets The Global Economy The Global Economy Global Trade and Imbalances Global Trade and Imbalances Monetary and Fiscal Policies Monetary and Fiscal Policies The Euro-zone Crisis The Euro-zone Crisis Long-term Demographic Challenges Long-term Demographic Challenges

3. 4/14/2011 3 Global Financial Markets Equity Markets Equity Markets Revival of International Flows Revival of International Flows

4. 4 J.P.Morgan Chase 4/14/2011 Global Equity Markets: Emerging Markets and Developed indices

5. 5 J.P.Morgan Chase 4/14/2011 Net Inward Equity Portfolio Flows to Emerging Markets

6. 4/14/2011 6 Global Growth Projections Global Growth Projections The Rise of Developing Countries The Rise of Developing Countries The Global Economic System

7. 7 J.P.Morgan Chase 4/14/2011 Global GDP Growth (%)

8. 8 J.P.Morgan Chase 4/14/2011 Real GDP Growth (%) World Economy

9. 9 J.P.Morgan Chase 4/14/2011 Real GDP Growth (%) Industrial Countries

10. 10 J.P.Morgan Chase 4/14/2011 Real GDP Growth (%) Developing Countries

11. 11 J.P.Morgan Chase 4/14/2011 Global GDP Shares

12. 4/14/2011 12 The Volume of World Trade The Volume of World Trade China and the Trading System China and the Trading System Current Account Imbalances Current Account Imbalances International Reserves International Reserves Savings Imbalances Savings Imbalances Global Trade, China and Imbalances

13. 13 J.P.Morgan Chase 4/14/2011 World Trade Volume

14. 14 J.P.Morgan Chase 4/14/2011 U.S.&EU People’s Republic of China Exports Imports Imports Exports Asia China’s Role in Global Trade (bill. Usd)

15. 15 J.P.Morgan Chase 4/14/2011 European Union Exports by Destination

16. 16 J.P.Morgan Chase 4/14/2011 U.S. Exports by Destination

17. 17 J.P.Morgan Chase 4/14/2011 US$ billions, 2011 Current Account of Balance of Payments

18. 18 J.P.Morgan Chase 4/14/2011 Current Account of Balance of Payments

19. 19 J.P.Morgan Chase 4/14/2011 StockStock Flow (2005 – 2010) Flow Accumulation of Foreign Exchange Reserves (Bill. Usd)

20. 20 J.P.Morgan Chase 4/14/2011 Gross National Savings as a % of GDP, 2009

21. 4/14/2011 21 Global Interest Rates Global Interest Rates Central Bank’s Balance Sheets Central Bank’s Balance Sheets Fiscal Deficits and Public Debt Fiscal Deficits and Public Debt Challenges to Macro Policies

22. 22 J.P.Morgan Chase 4/14/2011 Coordinated Global Rate Cuts

23. 23 J.P.Morgan Chase 4/14/2011 Total Assets of Key Central Banks (indexed levels)

24. 24 J.P.Morgan Chase 4/14/2011 Fiscal Positions: General Government Balance

25. 25 J.P.Morgan Chase 4/14/2011 Fiscal Positions: Net Debt

26. 4/14/2011 26 Unemployment & Productivity Unemployment & Productivity Budget Deficits and Public Debt Budget Deficits and Public Debt Savings & Payment Imbalances Savings & Payment Imbalances Yield Spreads Yield Spreads “Bad Zones” and the Crisis “Bad Zones” and the Crisis The Euro-Zone Crisis

27. 27 J.P.Morgan Chase 4/14/2011 Unemployment Rate (%): Selected Euro Area Countries

28. 28 J.P.Morgan Chase 4/14/2011 Relative Unit Labor Costs, Manufacturing Sector

29. 29 J.P.Morgan Chase 4/14/2011 Fiscal Position: General Government Balance – Select Euro Area Economies

30. 30 J.P.Morgan Chase 4/14/2011 Fiscal Positions: Net Debt – Select Euro Area Economies

31. 31 J.P.Morgan Chase 4/14/2011 Change in Gross National Saving Rate: Select European Counties (2000 – 2010)

32. 32 J.P.Morgan Chase 4/14/2011 Euro Area Current Account Balance (% of GDP)

33. 33 J.P.Morgan Chase 4/14/2011 10yr Government Bond Yield Spread

34. 34 J.P.Morgan Chase 4/14/2011 Gross Government Debt and Budget Deficit (% of GDP 2011)

35. 35 J.P.Morgan Chase 4/14/2011 Current Account Balance and Budget Deficit (% of GDP 2011)

36. 36 J.P.Morgan Chase 4/14/2011 Gross National Saving Rate and Budget Deficit (% of GDP 2011)

37. 4/14/2011 37 The World The World Developing Countries Developing Countries Developed Countries Developed Countries US, Europe, Japan US, Europe, Japan China, India, Africa China, India, Africa Long-term Demographic Challenges

38. 38 J.P.Morgan Chase 4/14/2011 Source: United Nations Populations Division, Last update 2009 World Demographic Challenge

39. 39 J.P.Morgan Chase 4/14/2011 Developing Countries Demographic Challenge Source: United Nations Populations Division, Last update 2009

40. 40 J.P.Morgan Chase 4/14/2011 Developed Countries Demographic Challenge Source: United Nations Populations Division, Last update 2009

41. 41 J.P.Morgan Chase 4/14/2011 U.S. Demographic Challenge Source: United Nations Populations Division, Last update 2009

42. 42 J.P.Morgan Chase 4/14/2011 Europe Demographic Challenge Source: United Nations Populations Division, Last update 2009

43. 43 J.P.Morgan Chase 4/14/2011 Japan Demographic Challenge Source: United Nations Populations Division, Last update 2009

44. 44 J.P.Morgan Chase 4/14/2011 China Demographic Challenge Source: United Nations Populations Division, Last update 2009

45. 45 J.P.Morgan Chase 4/14/2011 India Demographic Challenge Source: United Nations Populations Division, Last update 2009

46. 46 J.P.Morgan Chase 4/14/2011 Africa Demographic Challenge Source: United Nations Populations Division, Last update 2009