47 Economic Outlook Recover

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 25
Economic Outlook
21 March 2014
Economics Research

Recovery amid China risk
The global growth recovery remains broadly intact. However, the performance of
advanced markets has been uneven, and the risk to the recovery from a more severe
slowdown in China, with adverse effects on emerging markets, has risen.
Within an overall unchanged 3.4% global growth forecast for 2014, we have raised
our forecasts for US and Europe, but lowered them for Japan and EM. Notably, Chinas
weak Q1 suggests a need for more policy support to meet the annual growth target.
Core market policies remain broadly supportive, with our Fed policy scenario
unchanged, BoJ easing expected in July, and the ECB still in easing mode. EM economies
are adjusting but remain exposed to Chinese growth, Fed policy and political events.
Global overview: Recovery broadly intact with China risk
The global growth recovery remains broadly intact. However, performance in advanced
economies has been uneven, and the risks to the recovery from a more severe slowdown in
emerging markets, mainly China, seem to have risen. Since our last Global Outlook in early
December, US growth data for Q4 2013 have been stronger than we expected, suggesting better
momentum for growth going into 2014. Weather effects led to weakness in higher frequency
data in recent months, but the economy seems to be on track for annualized 2.5% q/q growth in
Q1. We have revised up our US growth forecast for 2014 to 2.7%, bringing it closer to the still
more optimistic consensus. In contrast, Japans Q4 growth disappointed significantly, reaching
only 0.7% (saar), less than a quarter of what had been expected. Moreover, net exports seem to
be a drag on Q1 GDP, despite the weak yen. We have thus lowered our 2014 growth forecast for
Japan to just 1.0% (from 1.5% in the last GO).
In the euro area, activity data have been in line with our scenario of a subdued recovery,
helped by improved financial conditions and less fiscal drag. Driven by stronger investment,
domestic demand is expected to make larger contributions to growth in coming quarters.
Thus, we have made small upward revisions to our growth forecasts for 2014 and 2015 (to
1.3% and 1.5%, respectively). Signals out of the UK have been even more robust, continuing
to point to a strong recovery this year. In aggregate, this has meant a slight upward revision
of our growth expectation for advanced economies, offsetting some downgrades in EM
growth and leaving our global growth forecast for 2014 unchanged at 3.4%.
Christian Keller
+44 (0)20 7773 2031
christian.keller@barclays.com

Dean Maki
+1 212 526 1731
dean.maki@barclays.com

Philippe Gudin
+33 1 4458 3264
philippe.gudin@barclays.com

David Fernandez
+65 6308 3518
david.fernandez@barclays.com
Uneven performance in US,
Japan and the euro area

US growth recovery intact
despite weather effects

Downside surprises in Japan
FIGURE 1
The modest recovery of global growth is broadly on track

FIGURE 2
but EM continues to lag, largely because of China

Source: Barclays Research Source: Markit, Haver Analytics, Barclays Research
Euro area recovery on track

UK recovery also robust
-8
-6
-4
-2
0
2
4
6
-8
-6
-4
-2
0
2
4
6
03 05 07 09 11 13 15
Global GDP indicator*
Global GDP*
% q/q saar
* Barclays aggregate for US, Europe, Japan and BRICs
Barclays' global GDP
forecasts* (Q3 13- Q4
2015)
Barclays'
global GDP
indicator
(Q4 13
estimated)
46
48
50
52
54
56
58
Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Global EM China
Manufacturing PMI (SA, >50 = Expansion)
Barclays | Recovery amid China risk

21 March 2014 2
Core market central banks remain broadly supportive of the growth recovery. Our reading of
Fed communication, combined with our forecasts of a moderate US growth recovery and
rising core inflation (mainly in H2), suggests a steady pace of tapering (with a final $15bn
taper in October 2014) and a first rate hike in June 2015. In Japan, we expect the BoJ to
further ease policy at its mid-July meeting, following adjustments to its macro forecasts in the
semi-annual Outlook Report at end-April and based on a likely outlook at the time for
prolonged sluggish inflation in H2 2014.
The ECB continues to face a big challenge: although cyclical data, financial conditions and
even labour markets show gradual improvement, inflation remains significantly below its 2%
target we forecast CPI inflation at 0.9% and 1.1% in 2014 and 2015, respectively. Such low
inflation not only implies the risk of slipping into outright deflation, but also creates a burden
for those euro area economies in need of continued debt deleveraging. Although we have
removed our earlier forecast for policy rate cuts from our baseline scenario, we think the need
for additional ECB policy action remains a tangible risk and expect further unconventional
measures to be deployed in 2014 (additional liquidity injection and credit easing).
EM economic performance remains mixed. After a number of downward revisions in our growth
forecasts since early December, we now see the EM aggregate growth rate at only 4.7% in 2014,
roughly unchanged from 2013. The ability of EM to adjust to an environment of tighter global
liquidity (ie, reduced capital inflows) and lower commodity demand depends heavily on the
speed at which US yields and Chinas growth change. Whereas the US yield environment has
remained relatively benign since the start of tapering in December, concerns about China have
risen on the back of weak activity data and increased signs of stress in the domestic financial
system (eg, first corporate bond default).
Although we leave our China annual growth forecast of 7.2% unchanged, we have reduced
our y/y forecast for Q1 to just 7.3% (from 7.7%). This implies sequential growth in Q1 slowing
to only 5.0% (saar) and thus requiring a pickup in growth momentum in subsequent quarters
to get close to the recently announced official annual 2014 growth target of 7.5%. In our view,
the Chinese authorities still have the means and the will to sufficiently support growth in
coming quarters just as they actively sought to slow growth in 2013 to allow a rebalancing
of the economy and reduce financial risks. The looser monetary stance of recent weeks can be
seen as a reflection of this. Introducing higher currency volatility and widening the currency
band also suggest an end to the appreciation trend, at least temporarily. The government is
also likely to carefully control any fallout from ongoing financial defaults and to use fiscal
Core market central banks
remain supportive

Fed tapering should continue
steadily

BoJ set to ease further in July
ECB has resisted cuts, but low
inflation remains challenge
FIGURE 3
Global rebalancing: C/A adjustments in Europe and US
opposite to those in China and Japan

FIGURE 4
Japan escapes deflation, while low inflation is a risk for the
euro area; US core inflation expected to pick up in H2

Source: Haver Analytics, Barclays Research
Note: * ex food & energy (US: market-based PCE, CPI for Japan/Tokyo); ** HICP
ex food, alc. drink, tobacco & energy (for UK: also excludes education, health &
social protection; EA: euro area). Source: Haver Analytics, Barclays Research
We have revised EM
growth even lower amid
external adjustments
EM C/A deficits have started
to adjust
-8
-6
-4
-2
0
2
4
6
8
10
12
04 05 06 07 08 09 10 11 12 13 14
C/A % of
GDP
(quarterly
/3m ma)
US
Japan
EA
China
-2
-1
0
1
2
3
4
04 05 06 07 08 09 10 11 12 13 14
US* EA** UK ** Japan *
Core inflation % y/y

21 March 2014 3
measures, including public investment, to buttress economic activity. That said, calibrating the
policy response to strike the balance between achieving >7% growth while preventing the re-
emergence of imbalances (eg, in the property market) will be challenging. Markets may
therefore remain nervous for some time, as shown by the sharp drops in commodity prices
and pressure on EM assets whenever China data have disappointed in recent months.
Elsewhere in EM, the main current-account-deficit economies (India, Indonesia, Brazil, South
Africa, Turkey) seen by markets as the weakest links since last May are showing
increasing signs of adjusting: depreciated currencies and higher domestic interest rates
facilitate a turnaround in external imbalances as growth shifts from domestic demand to net
exports. The speed of these adjustments varies, and growth may be subdued as higher net
exports cannot make up for the slump in domestic demand. But given how much
expectations had been lowered, downside surprises seem to have made way for some upside
surprises recently. This trend remains fragile, but could continue, particularly if economic
activity in China picks up in the wake of the notably weak (and holiday-affected) first quarter.
On the other hand, political and event risk out of EM remains elevated. Important elections
are approaching in key countries (India, Indonesia, Turkey, South Africa and Brazil), and
domestic tensions have spurred public protests in a number of countries (Thailand,
Venezuela and Turkey). More significantly, the Russia-Ukraine crisis in Crimea has the
potential to evolve into a geopolitical conflict with wider implications. Russias economy,
already weak before the crisis, looks set for a further significant slowdown, independent of
the geopolitical developments. However, scenarios that would involve severe sanctions on
trade and capital flows could also cast shadows over the European recovery, given the
dependence on Russian energy and other trade and financial links.
The main downside risk to our current baseline scenario is continued weaker-than-expected
growth in China, possibly combined with a secular, faster-than-expected increase in US
inflation that could move Fed rate hike expectations forward. This would weigh on global
trade, particularly key EM commodity exports, while also turning capital flows away from EM.
Such a combination could more seriously derail the still-fragile EM adjustment process,
including by forcing EM central banks into additional interest rate hikes (in response to
currency pressures). In turn, the resulting slump in EM demand could then create negative
feedback into the recovery in advanced economies. In particular, for Europe, EM economies
are significant export markets, as well as an important source of corporate earnings. The more
closed US economy would be less affected in the first round, but would ultimately also feel the
impact from weaker European and, ultimately, global demand.
EM economies with C/A
deficits are adjusting
Weakness in China growth

Policy support necessary to
meet annual target
EM political risk elevated by
elections and other events

including the Russia-
Ukraine conflict

FIGURE 5
China: Weaker growth reduces tolerance for FX appreciation

FIGURE 6
Euro area would be most exposed to potential EM crisis

Source: Haver Analytics, Barclays Research Source: IMF, Haver Analytics, Barclays Research
A combination of a China
hard landing and higher
US inflation is the main
risk scenario

The euro area is most exposed
to a potential EM crisis
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
110
115
120
125
130
135
Feb-11 Feb-12 Feb-13 Feb-14
China: Real Effective Exchange Rate (2000=100), LHS
China: Real Gross Value Added (SA, 3MMA, m/m, % )
0
2
4
6
8
10
0
10
20
30
40
50
Euro area US Japan
Exports to EM as % of GDP (RHS)
Exports to EM as % of otal exports

21 March 2014 4
FIGURE 7
Key fundamental factors across developed and emerging economies
2013 % GDP
(unless otherwise stated)
N America Asia (DM) EU
USA CAN AUS JPN GBR EUR BEL FRA DEU GRC IRL ITA NLD PRT ESP
GOVERNMENT BALANCES
1 Government gross debt (2013) 106 87 29 244 92 96 101 93 80 176 123 132 74 124 94
2 Government gross debt (2018 est.) 106 82 22 241 97 90 92 89 68 143 110 123 83 116 105
3 Government net debt (2013) 87 36 14 140 85 75 83 87 56 173 106 110 35 118 81
4 General government balance* -6.2 -2.4 -1.2 -10.0 -5.7 -3.1 -2.7 -4.0 0.0 -12.9 -7.3 -3.0 -3.1 -4.5 -7.0
5 Required fiscal adjustment
1
4.8 2.4 2.0 14.5 5.9 1.5 1.9 3.4 -0.5 3.2 5.3 1.4 0.6 4.7 4.6
6 Req'd fiscal adj't. (inc. age costs)
2
9.0 5.8 4.5 16.1 7.6 3.7 8.0 4.8 2.0 4.7 7.4 1.9 5.7 6.3 6.4
PRIVATE SECTOR BALANCES
7 Households gross debt 78 94 112 65 91 64 56 57 58 65 101 45 126 88 78
8 Non-fin. corporates gross debt 80 97 72 102 91 100 191 103 57 65 209 82 94 165 131
EXTERNAL BALANCES
9 Current account* -2.3 -3.3 -2.9 0.7 -3.7 1.7 -2.7 -2.1 7.4 1.3 5.8 0.1 10.2 0.3 -0.2
10 Net external assets (end 2012) -24 -16 -48 63 -7 -13 47 -21 41 -117 -112 -27 47 -117 -92
POTENTIAL GROWTH
11 Real GDP growth, 2001-12 % ar 1.8 2.0 3.1 0.8 1.4 0.9 1.3 1.0 1.1 0.2 2.0 0.0 1.0 0.0 1.4
13 Population growth 2013-18 % ar 0.9 0.9 1.2 -0.3 0.8 0.1 0.5 0.5 -0.2 -0.1 0.8 0.2 0.2 0.1 -0.2
Note: Shading is applied according to a Barclays Research assessment of riskiness, where the darker the shading colour, the greater the degree of risk.
* Barclays Research estimates
1
Average of IMF and OECD estimates of fiscal adjustment needed to achieve a 60% debt/GDP ratio (80% for Japan) by 2030, from
2013 onwards as % GDP (if respective debt/GDP ratio is less than 60%, estimate shows estimate of fiscal adjustment necessary to stabilize debt/GDP ratio at end-
2013 level
2
Average of IMF and OECD estimate, including their estimate of the future impact of age-related expenditure costs on the budget.
2013 % GDP
(unless otherwise stated)
LatAm Asia EEMEA
BRA COL MEX CHN IDN IND KOR MYS PHL THA TWN POL RUS TUR ZAF
GOVERNMENT BALANCES
1 Government gross debt (2013) 68 32 44 23 26 67 36 57 41 47 41 58 14 36 43
2 Government gross debt (2018 est.) 67 26 46 13 24 67 30 56 32 54 35 50 15 31 47
3 Government net debt (2013) 34 26 38 . . . 32 . . . . 29 . 28 38
4 General government balance* -3.3 -1.4 -2.3 -1.9 -2.3 -7.2 -2.0 -3.9 -1.4 -2.5 -2.0 -4.4 -0.5 -1.2 -4.3
5 Required fiscal adjustment
1
-1.8 -1.5 2.2 0.2 1.1 6.4 -3.4 4.0 -0.7 3.0 . 2.0 -0.3 -1.1 2.6
6 Req'd fiscal adj't. (inc. age costs)
2
1.4 . 4.5 4.5 1.9 6.8 4.8 6.1 0.6 4.9 . 2.8 3.7 5.6 4.4
PRIVATE SECTOR BALANCES
7 Households gross debt
73 .
14 33 17 9 83
129 .
69
.
35
64
21 39
8 Non-fin. corporates gross debt 11 134 18 46 107 49 42 37 30
EXTERNAL BALANCES
9 Current account* -3.7 -3.2 -1.8 2.0 -3.3 -2.6 5.9 3.8 3.9 -0.7 10.4 -1.3 1.5 -7.8 -5.8
10 Net external assets -37 -13 -42 20 -38 -15 -7 11 0 -12 6 -69 7 -52 -2
POTENTIAL GROWTH
13 Population growth 2013-18 % ar 0.7 1.2 1.0 0.5 1.4 1.3 0.5 2.0 0.7 0.4 0.4 0.0 -0.4 1.0 1.2
Note: Shading is applied according to a Barclays Research assessment of riskiness, where the darker the shading colour, the greater the degree of risk.. * Barclays
Research estimates
1
IMF estimate of fiscal adjustment needed to achieve a 40% debt/GDP ratio by 2030, from 2013 onwards as % GDP or if respective debt/GDP
ratio is less than 40%, estimate of fiscal adjustment needed to stabilize debt at the end-2013 level 2 IMF estimate, including age-related expenditure costs on budget
balance (see above footnote). Source: BIS; EU Consolidated Banking Data; FDIC; IMF, BIS-IMF-OECD-World Bank Joint External Debt Hub (JEDH); IMF staff estimates;
Haver analytics; Standard & Poor's Financial Services; Fitch Ratings; Moody's Investors Service;


21 March 2014 5
US: Moderate growth despite adverse weather
US GDP growth has modestly outperformed our forecast since the December Global Outlook.
Real GDP for Q3 13 was revised up to an annualized 4.1% (from 3.6%) and the advance
estimate of growth in Q4 13 was 2.4%, above our 1.5% December forecast. Prospects for Q1
14 are uncertain because of an unusually cold and snowy winter. We believe that a portion of
the slowdown in payroll growth in recent months has stemmed from negative weather
conditions, and a substantial part of the sharp drop in the work week appears to stem from
weather; in fact, the February work week of 33.3 hours was the lowest ever not caused by a
recession (Figure 8). Nearly 7mn workers reported working only part time in February because
of bad weather, the highest figure for any month in 18 years, while the number unable to
report to work at all because of bad weather was more than 600k, about twice the normal
figure for February. We expect job growth and the work week to rebound as weather
(presumably) normalizes in the spring. Other economic indicators, such as industrial
production, housing starts, and retail sales, have also been affected by negative weather
conditions but should show some improvement in the spring.
One question raised by the stronger-than-expected H2 13 growth is the extent to which this
surprise will prove persistent. We see both transitory and persistent forces at work. On the
transitory side is inventory investment, which contributed 1.67pp to GDP growth in Q3 and
0.14pp in Q4. We think the pace of inventory growth in Q4 was too strong to be sustainable
and expect it to slow in 2014, acting as a drag on GDP growth. We also think the 10.5% saar
rise in equipment investment in Q4 13 may have been boosted by firms rushing to invest
ahead of the year-end expiration of bonus depreciation allowances and look for slightly slower
growth in this category this year. However, we view other parts of the H2 13 improvement as
more sustainable. Real consumer spending picked up to a 2.6% annualized pace in Q4 13
(Figure 9), from 1.9% in the prior four quarters, and we expect 2.4% growth in this category
this year. We think that the tax hikes implemented in early 2013 are now having a less
negative effect on quarterly consumption growth and that wealth effects, particularly from the
stock market, are pushing real consumer spending to grow faster. Another force likely to
prove persistent is the pickup in export growth to the euro area (following its exit from
recession) and to the Pacific Rim late last year (Figure 11). Net exports added modestly to real
GDP growth in 2013, and we expect another small positive effect this year.
Adverse weather conditions
led to weakening in some US
economic data

but this effect should
unwind in the spring
FIGURE 8
US payroll growth and the workweek have declined

FIGURE 9
US equipment investment picked up in Q4 13

Source: BLS, Haver Analytics Source: BEA, Haver Analytics
Improvement in H2 13 growth
driven partly by transitory,
partly by persistent factors
32.8
33.2
33.6
34.0
34.4
34.8
-800
-600
-400
-200
0
200
400
90 95 00 05 10
hrs
Nonfarm payrolls (lhs) Average weekly hours (rhs)
m/m chg, 3mma
-40
-30
-20
-10
0
10
20
30
40
05 06 07 08 09 10 11 12 13
q/q % chg, saar
Real equipment investment

21 March 2014 6
FIGURE 10
US real consumer spending growth has strengthened

FIGURE 11
US exports to the Pacific Rim and the euro area have firmed

Source: BEA, Haver Analytics Source: Census Bureau, Haver Analytics
One of our main forecasts in recent years has been that the unemployment rate will fall faster
than the consensus expects, even though we have often been below consensus on our real
GDP forecast. The reason for this is that we believe the bulk of the decline in the labor force
participation rate is structural and will not reverse, with the main force being the retirement of
the baby boomers. We forecast the unemployment rate to be at 6.1% in Q4 14. Furthermore,
because we do not see the baby boomers returning to the workforce once they have retired,
we believe the unemployment rate is a valid measure of labor market slack, and thus we look
for wage gains to pick up as the unemployment rate falls. The data suggest that this is already
happening. For example, the fraction of firms in the NFIB small business survey that report
raising wages has been rising as the unemployment rate has declined (Figure 12), and average
hourly earnings growth for production and nonsupervisory workers has picked up to 2.5% y/y
from a trough of 1.3% (Figure 13). We expect wage growth to continue to rise as the labor
market keeps tightening, and that is one reason we expect core inflation to increase this year
we look for the core CPI to reach 2.1% by the end of 2014 and the core PCE price index to
reach 1.7%.

-6
-4
-2
0
2
4
6
8
00 02 04 06 08 10 12 14
3m/3m % chg, saar
Real personal consumption
-40
-30
-20
-10
0
10
20
30
40
00 02 04 06 08 10 12 14
Pacific Rim Euro area
y/y % chg, 3mma
Exports
We look for the unemployment
rate to fall rapidly

...which should help push up
wage growth and core inflation
FIGURE 12
US firms have been raising wages as unemployment falls

FIGURE 13
US average hourly earnings growth is increasing

Source: BLS, NFIB, Haver Analytics Source: BLS, Haver Analytics
2
4
6
8
10
12 -7.5
0.0
7.5
15.0
22.5
30.0
37.5
85 90 95 00 05 10
Firms raising compensation past 3-6 months (LHS)
Unemployment rate (inverted, RHS)
% Net %, 3mma
2
4
6
8
10
12 0.75
1.50
2.25
3.00
3.75
4.50
5.25
85 90 95 00 05 10 15
Average hourly earnings (LHS)
Unemployment rate (inverted, RHS, 6m lag)
% y/y % chg

21 March 2014 7
Another factor we expect to push core inflation higher is rising inflation in rents and owners
equivalent rent, driven by falling vacancy rates. We also expect medical inflation to rise after
the Medicare sequester cuts helped push medical services inflation to a 50-year low in
2013; because there are no further sequester cuts this year, we expect medical inflation to
return to its underlying trend. The rise in core inflation we expect this year is likely to be
seen as positive by the Fed, as it pushes inflation toward the Feds 2% target on the PCE
price index and should ease fears about inflation falling too low. Given the combination of
moderate growth and rising core inflation, we look for the FOMC to maintain a steady
$10bn per meeting tapering in the pace of asset purchases, with a final $15bn taper in
October 2014. We continue to look for the first rate hike to occur in June 2015.
Euro area: Deflation risk is rising despite ongoing recovery
The euro area economy expanded for the third consecutive quarter at the end of 2013,
growing slightly more than we and the consensus expected, at a SAAR of 0.8% in Q4. Final
domestic demand continued to expand modestly (+0.2% q/q): private consumption continued
to creep up slowly as a household income was bouncing back and unemployment was
stabilising, while gross fixed capital formation accelerated (+1.1% q/q) on further
improvement in business confidence and profit margins. Divergence across countries is
receding, with most member states now growing again as the fall in domestic demand in
stressed countries is moderating. The most recent cyclical indicators point to a continuation of
economic growth at the same pace into 2014. We expect the gradual and subdued recovery
to continue, with a quarterly growth rate of 0.3-0.4% through 2014. We forecast overall euro
area GDP growth of 1.3% in 2014, vs 1.2% expected previously: the fading headwinds from
fiscal consolidation, stabilization of labour markets, rising business confidence and low
inflation should support further improvement in domestic demand. We also expect the
broadening of growth across countries observed in Q4 data to accelerate in 2014.
Although the acceleration of economic activity was welcome, the pace of the recovery
remained subdued after such a deep and long recession (the level of GDP at the end of 2013
was still 2.7% below its Q1 2008 pre-crisis peak). Powerful downward forces that sent the
economy back in recession in 2011-12 have faded away thanks to progress on repairing the
functioning of the financial sector and support from monetary policies, but we still believe that
the euro area is lacking a clear growth driver at the aggregate level. As we mentioned last
quarter, it will likely take several years for the debt overhang and the macroeconomic
imbalances that were at the root of the crisis to be unwound. Indeed, public- and private-
sector deleveraging will likely remain a drag on growth: fiscal consolidation continues, private
Fed outlook unchanged

...for final taper in October
2014 and first rate hike
in mid-2015
Although modest, the recovery
remains on track
FIGURE 14
Euro area Composite PMI and GDP growth

FIGURE 15
Euro area employment and employment expectations

Source: Markit, Eurostat, Barclays Research Source: Markit, Eurostat, Barclays Research
But the euro area still lacks a
growth driver
30
35
40
45
50
55
60
-3,0%
-2,5%
-2,0%
-1,5%
-1,0%
-0,5%
0,0%
0,5%
1,0%
1,5%
05 06 07 08 09 10 11 12 13 14
EA GDP (lhs) EA composite PMI output (rhs)
% q/q
Barclays fc. for
Q1 14, Q2 14
PMI level
-3
-2
-1
0
1
2
3
-3%
-2%
-1%
0%
1%
2%
3%
05 06 07 08 09 10 11 12 13 14 15
Total Employment (lhs)
EC hiring intentions (rhs)
Barclays PMI employment index (rhs)
F
o
r
e
c
a
s
t
% y/y Deviation
from mean (in
stdev), 3mma

21 March 2014 8
sector debt is still historically high, and financial fragmentation persists, although it is receding.
This will likely prevent the euro area economy from growing well above trend over the next
two years, with growth of only 1.5% projected for 2015. In the meantime, the euro area
remains very vulnerable to shocks from the global environment and financial markets.
In Q4 13, euro area employment rose, by 0.1% q/q, for the first time since Q2 2011 (Figure 15).
Although industrial employment continued to fall, for the tentth consecutive quarter, services
(both public and private) led the recovery. Although we welcome this positive news, we
maintain our view that any further employment gain is likely to remain modest, as companies
are likely to seek productivity gains and repair their profit margins, which are still near
historical lows. Therefore, job creation should remain subdued (we expect +0.4% in 2013 and
+0.8% in 2015) and unemployment should only stabilise at 12% this year before declining
modestly toward 11.6% by the end of next year.
Inflation in the euro area as a whole has been on a downward trend since 2012 and below 1%
since October 2013. Core inflation reached a historical low of 0.7% at end-2013, with some
countries posting outright deflation. We believe three factors explain the current weakness in
prices and are likely to stay in place for a long time. First, imported inflation is fairly weak as a
result of the low level of global inflation and the consistent appreciation of the euro over the past
18 months. Second, price pressures are muted at the aggregate level since spare capacity is
ample. GDP is still almost 3pp below its pre-2008-crisis level, unemployment is at a record high
of 12% and capacity utilisation is still well below the historical average. Therefore, wage pressure
remains muted, and actual compensation per employee is still declining in real terms (Figure 17).
Finally, absent exchange rate devaluation, the need to correct macroeconomic imbalances that
built up in several member states over the first 10 years of EMU may require depreciating the real
effective exchange rate via internal devaluations to regain competitiveness.
Crisis-hit countries implemented structural reforms that eventually led to lower labour costs
and declining inflation. This adjustment has occurred in various forms and at different
speeds and is still going on. Therefore, inflation has turned negative in Greece, Cyprus and,
more recently, Portugal and could also become negative in the near future in Spain and
Slovenia. The adjustment is likely to continue for some time, and it is possible that Italy and
France will eventually join the club of countries undertaking internal devaluations. Indeed,
these two countries have been lagging in implementing structural reforms, and we believe
both are in serious need of regaining competitiveness, as pointed out by the recent in-depth
review of macroeconomic imbalances by the European Commission.
Labour market is stabilizing

but unemployment likely to
decline very slowly
Inflation should remain well
below ECB target for a
long time
FIGURE 16
Euro area headline and core inflation

FIGURE 17
Euro area negotiated wages

Source: Eurostat, Barclays Research Source: Haver Analytics, Barclays Research
Price adjustment in countries
rebalancing their economies
likely to continue for the next
two years
-1
0
1
2
3
4
5
05 06 07 08 09 10 11 12 13 14 15
Euro area headline HICP Euro area "eurostat" core HICP
% y/y
F
o
r
e
c
a
s
t
-1
0
1
2
3
4
05 06 07 08 09 10 11 12 13 14
Negotiated wages (nominal) Real wages
% y/y

21 March 2014 9
We expect inflation to remain below or close to 1% over the coming year and to average
0.9% in 2014, before edging up slightly to 1.1% in 2015 (as German inflation rebounds to
close to 2%). However, we think that risks are clearly tilted to the downside, particularly
given the possibility of price adjustments in Italy and France, should these two countries
succeed in curbing labour costs and improving competitiveness.
As ECB President Mario Draghi acknowledged on March 13 that the longer inflation remains
low, the higher the probability [of deflation]. It is not our central scenario, but we think the risk
of the euro area falling into deflation is higher than current market pricing or policy rhetoric
would suggest (Figure 18). Comparing the situation of the euro area with that of Japan at a
similar stage suggests that this risk is not meaningfully lower than it was at the beginning of the
1990s in Japan (see Japan-Style deflation in Europe getting harder to dismiss, 13 February 2014).
In particular, we think Europe is quite vulnerable to external or internal shocks, which could
mean lower prices and/or weaker economic activity, especially given its exposure to EM.
Credit to the private sector has been on a declining trend since the euro area crisis began in
2010-11, primarily because of weak credit demand as households and non-financial
corporations of several member states were faced with a fall in revenues and had to
eliminate a significant debt overhang. Moreover, the impairment of the transmission
channels of monetary policy in countries under stress and the necessary deleveraging of the
banking sector in 2013 added pressure on credit dynamics. Therefore, despite the ongoing
recovery, credit has remained fairly weak lately, and loans to non-financial corporations
were still on a declining trend at the beginning of 2014. As the ECB has repeatedly stated,
repairing the banking sector and improving the capital position of banks is a precondition
for the elimination of financial fragmentation and a continuation of the recovery. It is also a
necessary process to avoid creating zombie banks that do not lend and increase the risk
of deflation. Therefore, the ongoing Comprehensive Assessment (CA) of euro area banks by
the ECB, ahead of the start of Single Supervision, is a major milestone. We expect this
exercise eventually to identify further capital needs in some medium-sized banks, but this
should be manageable through either market-based recapitalisation or an injection of public
money. Although this is likely to have a positive effect on credit conditions and credit supply
once the first pillar of the Banking Union comes into force at the end of 2014, it could still
temporarily weigh on credit dynamics in the coming months, given the reluctance of some
banks to take additional risk on the balance sheet before the results of the Asset Quality
Review and the stress tests are published in October.
Risk of deflation is significant
FIGURE 18
Euro area deflation vulnerability index

FIGURE 19
HICPx inflation implied by the swaps market for 2014-18

Note: in brackets, the weight of the grouping in the euro area HICP basket.
Source: IMF, Bloomberg, Barclays Research
Source: Bloomberg, Barclays Research
Ongoing Comprehensive
Assessment of euro area banks
is entering a decisive phase

which should help revive
credit growth in 2015
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
2007 2008 2009 2010 2011 2012 2013 2014
Euro Area
Greece, Portugal, Spain, Cyprus, Slovenia (18%)
Italy, France (39%)
HIGH
MODERATE
LOW
0.5%
1.0%
1.5%
2.0%
2.5%
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14
2014 2015 2016 2017 2018
Late October inflation surprise
y/y

21 March 2014 10
Given the rising risk of deflation, we had expected the ECB to cut official rates in February or
March. At the March meeting, Mr Draghi said that economic and financial data since the start
of 2014 suggested that the monetary policy stance was appropriate, even though the forward
guidance with a downward bias was reiterated, and even strengthened. We have removed rate
cuts from our central forecast scenario, but we still expect unconventional measures to be
deployed in 2014. We think an injection of liquidity via another VLTRO or funding for lending
could be decided in the next couple of months, while some credit easing measures might be
decided later in the year with a view to boosting sources of financing to the real economy, in
particular through a purchase programme of ABS backed by SME loans. However, the size of
such a programme would be limited given that the market is still small. Should the economic
situation deteriorate because of an external shock or renewed tensions on sovereign debt, we
think the ECB would have no option but cut rates to zero and launch a QE programme.
Although this is not our central scenario, we think the ECB is increasingly preparing for this.
As mentioned, the euro area recovery remains vulnerable to potential shocks, and we think
that risks to our scenario are still skewed to the downside for 2014. First, risks at the global
level stem mostly from the situation in EM, particularly China. A more severe slowdown in
China, with potential spill-over effects in other EM countries, would have a bigger impact on
Europe via the direct trade channel than on other advanced countries (Figure 6). Moreover,
given the effect on commodity prices, this would amplify the risk of deflation in the euro
area. The Russia-Ukraine crisis could also have adverse consequences; in particular, severe
sanctions on trade and capital flows (which we think are unlikely) would endanger the
European recovery, given the dependence on Russian energy and other trade and financial
links. On the domestic front, we identify three sets of risks for 2014: 1) the comprehensive
assessment of banks is a temporary downside risk to bank lending, as explained above; 2) a
possible renewed focus on debt sustainability in peripheral countries, especially as a result of
the mounting risk of deflation, which would complicate debt adjustment; and 3) political risk
stemming from reform and austerity fatigue, which could culminate at the European
elections at the end of May. Risks should rebalance in 2015: the launch of the Banking Union
will have clarified the situation of the banking sector and should help reduce fragmentation
further; structural reforms should eventually pay off; therefore, better profit margins and
lower labour costs could eventually lead to a stronger rebound in investment.
UK: A stronger economy gradually rebalancing
The UK economy continued to grow through the end of 2014. Although the expenditure
breakdown for Q4 revealed that household consumption slowed significantly, this was offset
by stronger investment spending and an improved net trade contribution. Should this trend
continue into 2014, it would be an encouraging signal about the rebalancing of growth: not
only would the economy have moved toward a more sustainable composition of domestic
demand, but it would also be making some headway toward export-driven growth. Of course,
it is still early days, and the latest trade data cast some doubt on the outlook for a better and
sustained net trade contribution to growth. As far as domestic demand is concerned, we
expect consumption growth to stabilise on an improvement in household income as a further
decline in the savings rate is unlikely. In addition, we expect the baton to pass to business
investment, as firms confidence about future profitability has returned to more normal levels
and non-financial companies are sitting on a large amount of cash. Business surveys have
been levelling off since the beginning of the year but continue to indicate a strong pace of
expansion. We expect GDP to grow by 2.7% in 2014 and 2.5% in 2015.
Despite the acceleration in economic activity in 2013, productivity has failed to post a strong
cyclical rebound, suggesting a permanent hit to productivity and growth in the business
services and finance sector (Figure 21). Consequently, unemployment has been falling much
faster than initially expected and is now close to the threshold set up by the Bank of England in
ECB should remain in easing
mode

and could deploy additional
unconventional measures in
the months ahead
Risks remain skewed to the
downside in 2014 and should
gradually rebalance thereafter
Growth remained strong
through the end of 2013, and
we expect this to continue
Subdued inflation but weak
productivity pose a challenge
for the BoE

21 March 2014 11
its forward guidance introduced last summer, which may therefore become redundant soon
(Figure 20). Meanwhile, inflation has been falling below the BoEs target in January for the first
time since November 2009. Following the evolution of the jobless rate, the MPC is now
focusing on the amount of slack in the economy in a way that is more consistent with the
inflation-targeting regimes of more normal times. The broad message from the MPC is that
there is still some degree of slack in the economy and in the labour market and that it will not
raise rates until this gap is near exhausted. However, we think uncertainty about the recovery
and the policy path should not be downplayed. Our baseline scenario is that the first rate hike
will come in Q2 2015, although there is significant uncertainty about the exact timing.
Japan Choppy path to higher growth
Contrary to our expectations, Japanese real GDP growth slowed in Q4 13, mainly because of a
net export drag, which appears to be lingering into 2014 (Figure 22). However, domestic
demand has been firm, and we still expect the economy to reaccelerate in Q1 14, driven by front-
loading in such areas as private consumption and housing investment prior to the April VAT hike
(to 8% from the current 5%). After the VAT hike, we look for one quarter of contraction, but
FIGURE 20
UK unemployment rate

FIGURE 21
Contribution to the UK productivity gap

Source: Haver Analytics, Barclays Research Source: Haver Analytics, Barclays Research
FIGURE 22
Net exports dragging on Japan domestic-demand-led growth

FIGURE 23
BoJ forecasts versus Barclays and consensus

Note: Q1 14 onward are Barclays forecasts.
Source: Cabinet Office (national accounts), Barclays Research
Note: BoJ forecasts are medians of the majority of Policy Board members.
Source: BoJ, Japan Center for Economic Research, Barclays Research
Growth slowed in Q4 2013 due
to drag from net exports

4,0
4,5
5,0
5,5
6,0
6,5
7,0
7,5
8,0
8,5
9,0
05 06 07 08 09 10 11 12 13 14 15 16 17
%
Unemployment rate November IR
BoE's Threshold February IR
-12
-10
-8
-6
-4
-2
0
2
4
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
% trend
Total ex. Business services and finance
Business services and finance
Total
-2
-1
0
1
2
3
1
-
3
4
-
6
7
-
9
1
0
-
1
2
1
-
3
4
-
6
7
-
9
1
0
-
1
2
1
-
3
4
-
6
12 13 14
Real GDP growth rate and contributions
Net
exports
Public
demand
Private
demand
Real GDP
(% q/q)
pp q/q
Abenomics
FY13 2.1% 2.3%
FY14 0.5% 0.7%
FY15 1.3% 1.4%
Real GDP
Barclays Consensus
2.7%
BoJ (as of 22 Jan)
1.4%
1.5%
FY13 0.8% 0.8%
FY14 3.3% 3.0%
ex-VAT hike 1.3% 1.0%
FY15 2.0% 1.7%
ex-VAT hike 1.3% 1.0%
CPI ex-perishables (core)
Barclays Consensus
0.7%
3.3%
1.3%
2.6%
1.9%
BoJ (as of 22 Jan)

21 March 2014 12
expect growth to resume from Q3, underpinned by private capex and public investment. Also
over this period, the net export drag should ease and private consumption should stay marginally
in positive territory as employment and wage conditions improve gradually.
The next major focus will be the 30 April monetary policy meeting, during which the Bank of
Japan will update its GDP and CPI forecasts as part of its semi-annual Outlook Report. The BoJ is
sharply above consensus in its GDP forecasts for FY13 (April 13-March 14) and FY14 (Figure 23),
and we expect downward revisions. With the CPI tracking in line with its forecasts, we believe the
BoJ is unlikely to alter its inflation outlook. Indeed, it could even interpret the CPIs firm tone in the
face of weaker-than-expected GDP growth as evidence that the Phillips curve is shifting upward
one of the premises behind its CPI outlook (see Japan Economic Focus, 11 March).
However, we believe inflation will be sluggish into H2 14, contrary to the BoJs expectation for
acceleration, as the boost from JPY depreciation runs its course and last years fall in CME grain
futures begins to feed through to CPI-based grain product prices. Our view has been reinforced
by Q4 GDP growth, which only matched our and the Cabinet Office estimates of potential (0.7%
q/q saar). This suggests that the output gap, which leads CPI inflation by about two quarters,
failed to narrow. Although the results of this springs annual wage negotiations suggest that
large companies will offer their biggest pay hikes since 2001, our provisional estimates suggest
that the CPI effect will be less than the 0.6-0.8%/year impact of the JPY depreciation since
November 2012 running its course. Moreover, the historical lag suggests that the effect is
unlikely to provide an offset from H2 (see Japan Instant Insights, 13 March).
When the BoJ meets in July for an interim assessment of the April Outlook Report, the
prospect of prolonged sluggish CPI inflation should become more apparent and more of a
concern as the economy copes with post-VAT-hike payback. We expect the BoJ to lower its
CPI forecasts and to ease further in July increasing its JGB purchases by JPY1-2trn/month;
boosting its Nikkei-linked ETF purchases by JPY30bn/month; and extending the time
horizon of its projections for the monetary base to end-2015 from end-2014.
In June, Prime Minister Shinzo Abe will unveil a new growth strategy the third arrow of
his policy program (Abenomics), which also includes bold monetary easing (first arrow)
and flexible fiscal policy (second arrow). In our opinion, the key is to reduce corporate tax
rates to competitive levels and to make labor markets more flexible (eg, ease onerous
restrictions on job termination). At this stage, we do not expect such far-reaching reforms.
Instead, given the economic and political events that lie ahead, we expect Abenomics to stay
focused on the first two arrows. Along with monetary easing, we expect a supplementary
budget in FY14, as in the two preceding years. Economically, such moves would not only
offset the effects of this Aprils VAT hike, but also ensure that growth looks firm toward the
end of 2014, when a final decision based primarily on Q3 GDP is likely to be made on
whether to follow through with plans for a second VAT hike in October 2015 (to 10%).
Politically, the ruling LDP will have an incentive to boost public spending in local areas ahead
of the nationwide regional elections scheduled for April 2015. We believe Mr Abe, who
might otherwise wish to stress fiscal consolidation, could yield to such pressures from
within his party to facilitate his re-election as LDP president in September 2015
1
. Indeed, he
may even embrace proposals for a FY14 supplementary budget given the difficulty he could
face in drafting such a budget for FY15, when the Abe government has pledged to slash its
national and regional primary deficit versus GDP to half of FY10 levels
2
.

1
Even with new spending, we would expect Japan to experience fiscal contraction in FY14 due to the VAT hike.
2
The Abe government has pledged to eliminate this deficit around FY20.
BoJ forecast changes at April
meetings
Likely rebound in Q1 14, but
renewed weakness in Q2 due
to VAT hike
BoJ likely to ease monetary
policy further at July meeting
PM Abe to unveil new growth
strategy in June
Regional elections in April
2015 to affect spending
decision

21 March 2014 13
Australia/NZ: Low interest rates gain traction
Australias economic outlook is a little brighter, with more signs that low interest rates are
working. Growth should still be subpar in 2014 as the largest boom on record in mining
investment continues to unwind, but pick up in 2015 as commodity exports accelerate and non-
mining activity gathers pace. Housing is strong and consumer spending has improved, but non-
mining investment is likely to be slow to recover. The RBA should keep the cash rate steady at
2.5% in 2014 and start raising rates in Q1 2015 as growth rebounds. We see a risk of an earlier
rate rise given leading indicators that suggest unemployment may peak sooner than expected,
while inflation could exceed the RBAs 2-3% target band. The new government should forecast a
slow return to surplus over the next 4-5 years in the May budget.
In New Zealand, the RBNZ has started raising rates, lifting the cash rate from a record low of
2.50% to 2.75%. Prudential measures are helping cool the housing market, but the broader
strength of the economy points to further rate rises. We see the cash rate reaching 4.5% by the
end of 2015, but the RBNZ could act more quickly if faster growth spills over into inflation.
China: Growth recovery in a volatile market
The news flow for Chinas economy so far in 2014 has been poor. The three-month slide in
both manufacturing PMIs to an eight-month low had been sending worrying signs about the
economys growth. This was followed by the January-February activity data (IP, fixed asset
investment, retail sales, production of steel, cement, and crude oil), which missed expectations
by a wide margin, confirming a significant growth slowdown. We lower our Q1 14 GDP
forecast to 7.3% y/y while maintaining our 7.2% forecast for the full year. This implies a
marked slowdown in sequential momentum to around 5% q/q saar in Q1 (Figure 24).
In our view, weaker growth poses difficulties for the government in maintaining the
momentum of reforms in 2014. We have argued that reforms tend to slow growth in the
near term before long-term benefits are felt. Since December, the government has shown
more commitment to cutting overcapacity and controlling pollution, regulating shadow
banking and controlling local government debt. It has also broadened its anti-graft
campaign and announced more austerity measures to curb public spending and grey
incomes. These measures have led to a sharper-than-expected slowdown in growth.
Meanwhile, Chinas financial market, after narrowly avoiding a trust default in January, saw its
first onshore corporate bond default in March (see China: Implications of a first onshore
corporate bond default, 5 March 2014). A sharp depreciation in CNY triggered sell-offs in the
commodity market and worries about a property correction. We continue to expect more but
Better growth outlook
supported by low rates
New Zealand has started to
hike
Weaker-than-expected
January-February data led us
to lower our Q1 growth
forecast to 7.3% y/y
The government needs to
balance reform and growth
FIGURE 24
China: We expect a recovery after the sharp deceleration in Q1

FIGURE 25
China: External demand was not helpful at the start of the year

Source: Haver, CEIC, Barclays Research Source: Haver, Barclays Research
More defaults to come, but
financial crisis can be avoided
-5
0
5
10
15
20
25
30
0
2
4
6
8
10
12
14
16
18
20
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
GDP, %q/q saar
GDP, %y/y
IP, %3m/3m saar (RHS)
F'cast
-5
0
5
10
15
20
Exports Imports
%3m/3m, sa

21 March 2014 14
selective individual defaults, more financial risks to be exposed, and greater financial market
volatility in Q2. Debt repayment pressures in a slowing economy, along with an increasing
maturity mismatch within the financial system, suggest great liquidity risks. Overall, we judge
that the likelihood of a large credit/financial crisis remains small. The Chinese government has
committed to avoid systemic and regional financial risks and, in contrast with fully market-
based financial systems, retains the capacity to take action, in our view. For the same reason, we
believe bank runs and capital flight also remain unlikely.
Premier Li said in March that reasonable investment growth was needed, and we expect
government projects to start soon to prevent a further slide in growth. The government is to
focus on social housing, rural infrastructure, major irrigation projects, and railways in the
central and western regions, as well as on public utilities and environmental protection.
Service sectors such as healthcare, elderly care and finance will be opened up to private
capital. We believe weak growth will spur a push for deregulation and SOE reforms (see Asian
Themes: The National Peoples Congress in 2014, 25 February 2014). Meanwhile, the PBoC
will likely maintain easier liquidity conditions throughout H1, and following the recent
widening of the trading band, we expect CNY to stay weak before eventually returning to a
mild appreciation trend. All of these policy moves should support our forecast of a recovery
in q/q momentum for the rest of the year.
Other EM Asia: Shaken, stirred, but not disturbed
Indias countdown to its sixteenth general elections (7 April-12 May) will be critical for its
economy and financial markets. The latest opinion polls indicate that Narendra Modis BJP is
the leading contender to form Indias next government. The economic agendas of the
various parties have yet to be fully spelled out. In terms of economic agenda, the BJP has
indicated a preference to prioritise infrastructure, power generation and the manufacturing
sector, along with the implementation of a goods and service tax and measures to increase
FDI, as easy wins to boost growth momentum. However, political uncertainty is unlikely to
come down until the results are confirmed.
Indonesia will also have key political events in the coming quarter, with parliamentary
elections slated for April and the presidential election in July. The elections will likely be heavily
contested, as a sizeable part of the electorate is undecided, according to recent opinion polls.
Joko Widodo Jokowi is leading the polls, and with the Indonesian Democratic Party of
Struggle (PDI-P) announcing his candidature, the uncertainty has abated somewhat. In both
We expect more investment to
stablise growth
FIGURE 26
PBoC has ensured ample liquidity in the interbank market

FIGURE 27
Policy-driven CNY weakness ahead of the band widening

Source: CEIC, Barclays Research Source: Bloomberg, Barclays Research
Indias elections likely to bring
new government

and possibly fresh reform
momentum
Indonesia holds parliamentary
and presidential elections
1
3
5
7
9
11
13
Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
%
7-day repo rate
Overnight repo
7-day repo rate (monthly average)
6.00
6.05
6.10
6.15
6.20
6.25
6.30
6.35
6.40
6.45
6.50
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14
USD/CNY spot USD/CNY fixing
Lower trading bound Upper trading bound
Band widening to
1% in April 2012
Band widening
to 2%

21 March 2014 15
India and Indonesia, the decline in external financing requirements has led to a sharp
rebound in asset prices. India remains a frontrunner in the deficit adjustment process.
Indonesia, too, has undergone a large improvement in the deficit, but that has been largely
on the back of weaker domestic growth.
Elsewhere in EM Asia, weather disruptions have temporarily reversed North Asias export-
led outperformance. The North-South divide that we had identified in Q3 2013 has reversed
in Q1 2014. North Asian economies have seen a slow start to the year in terms of export
momentum as a result of US weather disruptions. Indeed, US airport closures had a
disproportionate effect on North Asian electronic shipments, which are carried by air.
Another clue that recovery has been delayed lies in semiconductor equipment book-to-bill
ratio being above 1x, provided by the semiconductor industry association (SIA). Given that
this leads production, it indicates to us that the global electronics cycle will keep North
Asian export momentum supported in the coming months. Clear catalysts on the horizon
are the launches of the Samsung Galaxy S5 (from April), which could trigger Apple to bring
forward the launch of its competing product in 2014. But if, as we expect, North Asia re-
accelerates in Q2, attention will refocus on closing output gaps in the region, renewing
expectations for rate normalisation especially for the economies that are more
synchronised with the US. We expect Malaysia, Korea, Philippines and Taiwan to lead with
rate hikes this year, widening the differential with US rates.
EEMENA: Divergence in growth amid (geo)political risks
Growth trends in our region are diverging. Russia and Turkey, the two largest economies,
find their growth retreating from relatively high levels. Based on an expected slowdown in
domestic demand, we have cut our growth forecasts for both countries. However, neither is
likely to fall into recession, assuming that economic sanctions on Russia remain benign. In
Central Europe, the economies are in the early stages of recovery, and we expect further
pickup in growth in 2014 and 2015. In the Middle East, growth is picking up in oil-exporting
countries and is roughly stable at a moderate level in Israel.
In Russia, even before the conflict with Ukraine started, growth had undergone a change in
momentum. In 2013, it decelerated to just 1.3% on declines in domestic demand. Private
investment declined on a drop in corporate profits, and public investment fell as a result of the
completion of large projects in 2012. A deceleration in consumption is under way, as the
FIGURE 28
South Asian PMIs are outperforming North Asia

FIGURE 29
Output gaps across the region are closing

Note: North Asia = China, Korea, Taiwan.
South Asia = India, Philippines, Indonesia, Thailand, Malaysia.

North-South divide in EM Asia
has turned in favor of South

but global electronics cycle
to support North Asian exports
Current account adjustment
underway in both countries
Some rate hikes in the region
expected for later in the year
Regional growth headed in
different directions
Russian growth is likely to
decelerate further this year
35
40
45
50
55
60
65
South Asia North Asia
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
EM Asia GDP index Deviation from trend (%)
Asia ex China GDP index Deviation from trend (%)
Asia ex China, India GDP index Deviation from trend (%)

21 March 2014 16
squeeze in corporate profits is slowing wage increases and bank lending to households is
decelerating from unsustainably high levels. Recent tightening of monetary conditions will add
to this. We expect a further growth deceleration to 0.7% in 2014.

FIGURE 30
Growth likely to improve in Central Europe, but decline in Russia and Turkey

Note: Arrows denote changes of 0.2pp or more since December EMQ. Source: Haver Analytics, Barclays Research
Furthermore, investor sentiment will be adversely affected by the Russia-Ukraine conflict.
Russias annexation of Crimea led the EU and US to enact mild sanctions. In our main scenario,
we expect the sanctions to be gradually intensified unless a political solution emerges.
However, in the event that serious economic sanctions are introduced, they would likely push
Russias economy into recession.
In Turkey, a rotation from consumption-led to export-led growth will lead to slower growth
and a gradual narrowing of its high C/A deficit. Muted capital flows into EM are forcing this
adjustment, after growth had been driven by foreign-funded credit growth for some time. A
marked increase in domestic tensions ahead of the local elections in end-March and the
presidential elections this summer has weighed on business confidence, and a resolution to
the political conflict is not in sight. Large external financing needs and FX mismatches on
corporate balance sheets leave Turkey vulnerable and could trigger the need for further rate
hikes. Against this backdrop, we expect growth to moderate to 2.2% in 2014.
In contrast, growth in Central Europe (CE) continues to recover. This is supported by the
euro area recovery, which has led to improved exports performance in CE already in 2013. In
a second stage, domestic demand is picking up, with consumption rising on base effects,
better labour market conditions, stronger confidence and, last but not least, less fiscal drag.
Some early signs of investment recovery are starting to emerge as well, although existing
excess capacity is likely to delay a full investment surge. Given very low inflation across the
region, monetary policy should stay expansionary, with policy rates at or near all-time lows.
In the Middle East, aggregate growth is relatively stable, albeit with significant intra-regional
differences between oil exporters and oil importers. Growth in Saudi Arabia and the UAE
should accelerate, supported by government spending and higher credit growth. In Egypt,
growth disappointed in H2 13 on the back of heightened political volatility, and we
downgrade our forecasts for 2014-15. Israel has managed to maintain its growth at around
2.5-3.0%. This is somewhat below its medium-term potential, and growth appears to be
receding slightly, but it is still decent by global standards.
-2
-1
0
1
2
3
4
5
6
C
z
e
c
h

R
.
P
o
l
a
n
d
H
u
n
g
a
r
y
R
o
m
a
n
i
a
C
r
o
a
t
i
a
S
e
r
b
i
a
T
u
r
k
e
y
I
s
r
a
e
l
R
u
s
s
i
a
U
k
r
a
i
n
e
S
.

A
r
a
b
i
a
U
A
E
E
g
y
p
t
M
o
r
o
c
c
o
Real GDP (% y/y)
2013 Barclays 2014F Barclays 2015F Barclays
Central Europe South Eastern
Europe
Other
Europe
CIS
MENA
-5%
A scenario of more serious
sanctions could push Russia
into recession
Turkeys growth to slow, as
C/A needs to adjust
In Central Europe, growth is
likely to accelerate further
Growth should remain
relatively stable in the Middle
East

21 March 2014 17
Latin America: The productivity challenge
Growth forecasts are beginning to stabilize in parts of Latin America. Except for Mexico
(where we revised growth down to 3%) and Venezuela (where we now expect recession),
our growth forecasts for 2014 and 2015 are stabilizing at or below potential, and the worst
for growth appears to be over. Even in Brazil, following a period of downward surprises,
recent data came in somewhat stronger, making us leave our 1.9% growth forecast for
2014 unchanged. However, challenges to the breadth and the speed of the next recovery
phase are standing tall, especially as consumption may not remain the engine of growth.
Productivity-led growth, with stronger investment flows and a supportive reform agenda, is
critical for a new leg of sustained growth acceleration in the region.
In the decade to 2011, the strong terms of trade expansion (Figure 31) has helped boost
income and growth across most of Latin America. Countries including Chile, Peru and
Argentina posted terms of trade growth rates of 5% or more per year (Chiles ToT expanded
by 10% on average per year). These are small rises relative to the 21% observed in Venezuela,
but meaningfully above the 1% observed in Mexico. Colombia and Brazil, while benefitting
from the commodity boom, saw more modest expansions in their ToT (4% and 2%,
respectively). But this has changed since 2011, with ToT across the region stabilizing or falling.
We think this has been a major driver of the slowdown in current and potential growth in the
region. Normalization of US monetary policy, boosting the cost of foreign funding and
provoking a strong rise in local yields across EM, has also exacerbated the cyclical slowdown.
Regional policymakers face a major challenge to offset the absence of terms of trade tailwinds.
Figure 32 plots the average rate at which the gap between productivity growth in LatAm
economies and the US widened or contracted versus each countrys average per-capita
growth rate in 2000-13. The strong positive correlation between productivity growth and per-
capita growth is clear. Moreover, with the exception of Peru, the region seems to be suffering
from low productivity, which has likely prevented growth from accelerating more consistently.
In our view, an agenda of productivity-enhancing reforms need to be adopted across the region.
This has been the story in Mexico since last year, and we think the legislative component of
reforms (approving secondary regulation of the constitutional changes of 2013) will set the stage
for a rise in investment and productivity over the longer haul. And while Peru is in a good
position, the sense of urgency is much higher in Brazil, Argentina and Venezuela.
Brazil growth data stabilized
recently

but challenges for the region
stand tall
FIGURE 31
Terms of trade moderating after 2011

FIGURE 32
Growth will rely on productivity, which remains a challenge
across most of the region

Source: Haver, Barclays Research Source: Conference Board, Barclays Research
Commodity-related terms-of-
trade improvements now over
Lower potential growth
Need for productivity-boosting
reforms
Mexicos reforms should pay
off over medium to long term
80
100
120
140
160
180
200
220
2000 2002 2004 2006 2008 2010 2012
Argentina
Brazil
Chile
Colombia
Mexico
Peru
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
-2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%
Peru
Colombia
Chile
Brazil Venezuela
Argentina
Mexico
TFP Gap with US (- below US/ + above US; avg per year)
GDP Per Capita
Growth (Avg p/y)

21 March 2014 18
SSA: Positive growth outlook, despite challenges
The broad story of economic growth remains a positive one for the 13
3
countries under
coverage in Sub Saharan Africa (SSA). We forecast weighted GDP growth of 5.0% y/y in
2014, above the average of 4.6% in 2013 and 0.2pp lower than our forecast in the last
Emerging Markets Quarterly. That the figures look so resilient is less about the rotation of
global growth back to developed markets and more to do with a combination of the SSA
region's multi-year focus on infrastructure build-out, fresh investment in the resource sector
in several countries, and (less helpfully for the medium-term) fiscal slippage in several
important markets. Commodity prices do look more challenging now than in 2013,
particularly for countries with a high exposure to precious and base metals, but so far, the
lagged realisation of past investment commitments has generally boosted economic
growth in the region; however, this raises risks related to future investment commitments
for 2015 and beyond.
Of the major economies, we have lowered our GDP growth estimates for South Africa by a few
tenths, as the strike in the platinum sector looks likely to be very long. A brief period of rolling
blackouts in early March served to remind us just how critically tight the electricity supply
situation remains until the turn of the year, while an expectation of gradual monetary tightening
also weighs on our previous estimates. We now look for the economy to grow by 2.2% this year,
up only slightly from 2013. In Nigeria, the main driver of the economy has been the non-oil sector
in recent years, and we expect a similar story for 2014 (with, perhaps, some additional pre-
election spending boost in the later stages of the year). Following a very strong end to 2013 (real
GDP rose by 7.7% y/y in Q4), we forecast average growth of 6.8% this year.
In East Africa, we expect growth in Kenya and Tanzania to accelerate this year, to 5.5% y/y
and 6.9% y/y, respectively, thanks to investment in infrastructure (transport in Kenya's case
and a combination of transport and gas and electricity in Tanzania). Uganda's outlook will
be boosted by an expected improvement in domestic demand, and we see growth rising to
6%. Further South, fresh copper mine capacity should help offset the negative effect of
lower copper prices on Zambia this year and still allow the economy to grow by more than
6%, while Mozambique's infrastructure spend (and, perhaps, some pre-election spending,
too) should lead to another above-7% growth rate there.

3
The thirteen countries that make up our SSA aggregate are Angola, Botswana, Ghana, Kenya, Mauritius,
Mozambique, Namibia, Nigeria, Seychelles, South Africa, Tanzania, Uganda and Zambia
Sub-Saharan Africa remains a
fast growing region

even as commodity prices
have cooled
South Africa may grow just
above 2% this year

but Nigerias growth likely to
remain close to 7%
Growth prospects upbeat for
east Africa, Zambia and
Mozambique in 2014


21 March 2014 19
FIGURE 33
Global Forecasts (1): GDP and CPI inflation: Barclays Research projections

Note: Weights used for real GDP are based on IMF PPP based GDP, and weights used for consumer prices are based on IMF nominal GDP (5yr centered moving
average). (*) IMF PPP-based GDP weights for 2013. Source: Barclays Research
Weight* 4Q13 1Q14 2Q14 3Q14 4Q14 2013 2014 2015 1Q14 2Q14 3Q14 4Q14 2013 2014 2015
Global 100.0 3.5 2.8 2.9 4.0 4.1 2.9 3.4 3.8 2.6 3.1 3.1 3.2 2.6 3.0 3.1
Advanced 51.4 1.9 2.2 1.6 2.2 2.2 1.2 2.1 2.1 1.2 1.7 1.6 1.8 1.3 1.6 1.8
Emerging 48.6 5.2 3.5 4.4 5.8 6.1 4.8 4.7 5.4 5.1 5.5 5.5 5.6 4.9 5.4 5.3
BRIC 30.9 6.0 3.9 4.7 7.0 7.0 5.8 5.6 6.1 3.7 3.9 4.1 4.4 4.2 4.0 4.4
Americas 33.0 2.2 2.2 2.5 2.7 2.8 2.0 2.5 2.8 3.5 3.8 3.9 4.1 3.1 3.8 3.9
United States 22.2 2.4 2.5 2.5 2.5 2.5 1.9 2.7 2.6 1.4 1.6 1.7 2.0 1.5 1.7 2.1
Canada 2.0 2.0 2.0 2.0 2.5 2.5 1.7 2.2 2.5 1.2 1.6 1.6 1.7 0.9 1.5 1.9
Latin America 8.8 1.8 1.2 2.4 3.5 3.6 2.3 2.1 3.5 11.2 11.7 12.0 11.7 9.2 11.6 10.3
Argentina 1.0 -0.8 -4.4 -4.1 1.1 4.0 3.1 -1.5 4.4 33.2 37.7 39.0 39.0 26.9 37.4 38.2
Brazil 3.2 2.8 1.2 2.4 2.4 2.4 2.3 1.9 2.4 5.7 5.6 6.1 6.2 6.2 5.9 5.9
Chile 0.4 -0.3 8.2 2.0 8.2 1.2 4.1 4.2 4.7 3.3 4.0 3.7 3.2 1.8 3.6 3.0
Colombia 0.7 6.2 4.0 4.4 4.0 4.3 4.2 4.8 4.4 3.0 3.0 2.8 3.0 2.1 3.0 3.0
Mexico 2.5 0.7 2.5 5.5 4.7 4.5 1.1 3.0 3.8 4.2 3.5 3.8 3.8 3.8 3.8 3.7
Peru 0.5 6.4 3.9 4.4 6.1 8.1 5.0 5.1 5.7 3.4 3.1 2.3 2.5 2.8 2.5 2.5
Venezuela 0.5 -2.6 -5.3 -3.6 1.7 2.7 1.1 -1.8 3.0 59.3 63.0 62.7 58.0 40.6 60.7 43.0
Asia/Pacific 40.1 5.5 4.3 4.1 6.3 6.6 5.3 5.2 5.7 2.5 3.2 3.2 3.3 2.4 3.1 3.3
Japan 6.2 0.7 3.1 -3.0 1.6 1.9 1.5 1.0 1.2 1.3 3.3 3.3 3.3 0.4 2.8 2.3
Australia 1.3 3.2 2.5 2.1 2.5 3.1 2.4 2.6 3.5 3.2 3.5 2.7 2.5 2.4 3.0 2.8
Emerging Asia 32.6 6.4 4.6 5.5 7.3 7.6 6.1 6.1 6.6 2.9 3.2 3.2 3.4 3.1 3.2 3.7
China 17.6 7.0 4.9 7.4 8.5 8.7 7.7 7.2 7.4 2.3 2.5 2.8 3.3 2.6 2.7 3.5
Hong Kong 0.5 4.4 3.3 2.9 4.0 4.2 2.9 3.4 3.8 4.4 4.2 3.7 3.7 4.3 4.0 4.1
India 6.6 6.0 5.3 1.2 8.2 7.8 4.6 5.3 6.4 5.2 6.0 5.4 5.0 6.3 5.4 5.6
Indonesia 1.7 6.8 4.1 4.7 5.4 7.9 5.8 5.3 5.6 7.7 6.9 5.0 5.3 6.4 6.2 5.3
South Korea 2.2 3.7 3.6 4.9 4.1 3.2 2.8 4.1 4.2 1.1 1.7 2.4 2.9 1.3 2.0 2.3
Malaysia 0.7 8.6 4.0 4.0 4.0 5.5 4.7 5.4 5.3 3.2 3.3 3.3 3.0 2.1 3.2 3.5
Philippines 0.6 5.0 8.6 8.9 4.0 6.1 7.2 6.5 6.5 4.1 4.6 4.5 3.8 2.9 4.3 3.5
Singapore 0.4 6.1 -0.4 4.9 1.6 7.0 4.0 3.5 3.4 0.9 2.8 2.4 2.0 2.4 2.0 2.4
Taiwan 1.2 7.3 2.8 5.3 3.6 3.2 2.1 4.0 4.5 0.7 1.0 0.9 1.0 0.8 0.9 1.8
Thailand 0.9 3.9 0.0 3.5 5.0 6.0 2.9 3.0 4.0 2.0 2.6 2.7 2.5 2.2 2.4 2.5
Europe and Africa 26.9 2.1 1.5 1.7 1.9 1.9 0.6 1.6 1.9 1.8 2.1 2.0 2.1 2.3 2.0 2.1
Euro area 14.9 1.1 1.4 1.7 1.8 1.7 -0.4 1.3 1.5 0.7 1.0 0.9 1.0 1.4 0.9 1.1
Belgium 0.6 2.0 1.2 1.3 1.6 1.7 0.2 1.4 1.6 1.0 1.0 1.1 1.2 1.2 1.1 1.6
France 3.0 1.2 0.7 1.6 1.5 1.2 0.3 1.1 1.5 0.9 1.3 1.2 1.3 1.0 1.2 1.3
Germany 4.3 1.5 2.1 2.3 2.3 2.0 0.5 2.0 1.6 1.0 1.2 1.2 1.4 1.6 1.2 1.9
Greece 0.4 -7.9 3.8 4.1 3.3 2.2 -3.7 0.7 2.1 -1.1 -1.1 -0.9 -0.9 -0.9 -1.0 -1.0
Ireland 0.3 -9.0 4.3 4.3 3.5 3.3 -0.6 1.7 2.6 0.2 0.2 0.5 0.8 0.5 0.4 1.5
Italy 2.4 0.5 1.0 1.2 1.6 1.6 -1.9 0.8 1.0 0.5 0.6 0.5 0.6 1.3 0.5 0.7
Netherlands 0.9 2.8 0.5 0.4 0.8 1.0 -0.8 1.1 1.2 0.5 0.6 0.4 0.5 2.6 0.5 0.2
Portugal 0.3 2.5 0.5 0.2 0.6 0.6 -1.4 1.1 1.3 -0.1 0.1 -0.1 -0.2 0.4 -0.1 -0.4
Spain 1.9 0.7 1.8 1.4 1.6 1.8 -1.2 1.2 1.7 0.1 0.4 0.0 0.1 1.5 0.2 0.0
United Kingdom 3.2 2.9 2.5 2.4 2.5 2.3 1.8 2.7 2.5 1.7 1.8 1.6 1.6 2.6 1.7 1.9
Switzerland 0.5 0.6 1.8 1.8 1.8 1.8 2.0 1.7 1.7 -0.1 0.0 0.2 0.4 -0.2 0.1 0.5
Sweden 0.5 6.9 1.0 2.6 2.3 2.4 1.5 2.8 2.5 -0.1 0.4 0.5 1.1 -0.1 0.5 1.9
Norway (mainland) 0.4 2.4 2.6 2.4 2.4 2.4 2.1 2.3 2.6 2.2 2.3 2.4 2.5 2.1 2.4 2.5
Denmark 0.3 -2.0 2.0 2.0 2.0 2.0 0.4 1.3 2.2 0.9 1.1 1.3 1.4 0.7 1.2 1.6
EM Europe & Africa 7.2 3.6 1.0 1.5 1.9 2.2 2.1 1.6 2.4 5.5 6.0 6.0 6.0 5.7 5.9 5.3
Poland 1.1 2.4 3.4 3.3 3.4 3.4 1.6 3.1 3.5 0.9 1.1 0.8 1.1 1.0 1.1 2.0
Russia 3.4 3.4 -1.3 -0.1 0.8 1.0 1.3 0.7 1.4 6.2 6.7 7.0 6.8 6.8 6.7 5.7
Turkey 1.5 4.7 3.8 3.3 2.9 3.5 3.9 2.2 3.5 7.9 8.6 7.8 8.1 7.5 8.1 6.9
Israel 0.4 2.7 3.0 3.0 3.0 3.1 3.2 2.9 3.3 1.3 1.4 1.3 1.6 1.6 1.4 2.1
South Africa 0.8 3.8 1.7 1.5 2.0 3.0 1.9 2.2 2.8 5.9 6.5 6.7 7.0 5.8 6.5 6.0
Real GDP
% over previous period, saar
Real GDP
% annual change % over a year ago
Consumer prices
% annual change
Consumer prices

21 March 2014 20
FIGURE 34
Global Forecasts (2): External and government balances, and Barclays Research projections

Note: Weights used are based on IMF nominal GDP (5yr centered moving average). (*) South Africa Government balance (% GDP) is a consolidated budget figure
representing financial years (i.e., FY 09/10 = 2010). Source: Barclays Research
2010 2011 2012 2013F 2014F 2015F 2010 2011 2012 2013F 2014F 2015F
Global 0.2 -0.1 -0.1 0.1 0.3 0.3 -6.7 -5.4 -5.0 -4.1 -3.4 -3.0
Advanced -0.6 -0.7 -0.6 -0.1 0.0 -0.1 -8.4 -7.1 -6.4 -5.0 -3.9 -3.3
Emerging 1.9 1.0 0.7 0.5 0.8 0.9 -3.0 -2.2 -2.4 -2.5 -2.6 -2.5
BRIC 2.0 0.9 0.8 0.5 0.8 1.1 -3.0 -2.1 -2.3 -2.5 -2.7 -2.7
Americas -2.5 -2.4 -2.5 -2.4 -2.1 -2.0 -9.6 -8.4 -7.4 -5.3 -4.2 -3.7
United States -3.0 -2.9 -2.7 -2.2 -2.0 -2.0 -12.2 -10.7 -9.3 -6.2 -4.6 -4.0
Canada -3.5 -2.8 -3.4 -3.3 -2.9 -2.7 -3.4 -2.7 -2.5 -2.4 -2.2 -2.0
Latin America -0.6 -0.7 -1.5 -2.4 -2.0 -1.7 -2.9 -2.8 -3.0 -3.4 -3.6 -3.2
Argentina 3.8 2.1 1.7 -0.6 1.7 -0.1 -1.8 -2.8 -3.3 -4.8 -4.6 -3.2
Brazil -2.2 -2.1 -2.4 -3.7 -3.3 -2.5 -2.5 -2.6 -2.5 -3.3 -3.9 -3.5
Chile 1.6 -1.2 -3.4 -3.4 -3.0 -2.1 -0.4 1.5 0.6 0.4 -0.9 -0.5
Colombia -3.1 -2.9 -3.2 -3.2 -3.6 -3.5 -3.3 -1.8 0.4 -1.4 -0.6 -0.6
Mexico -0.3 -1.1 -1.2 -1.8 -2.7 -2.2 -2.8 -2.4 -2.6 -2.3 -3.5 -3.1
Peru -2.4 -1.9 -3.3 -4.8 -4.5 -4.1 -0.5 2.0 2.1 0.8 0.3 0.5
Venezuela 5.4 9.2 3.4 3.9 6.8 7.0 -10.3 -11.6 -16.6 -13.5 -8.0 -9.8
Asia/Pacific 3.1 1.7 1.2 1.4 1.3 1.2 -4.4 -4.2 -4.5 -4.3 -3.8 -3.4
Japan 3.7 2.0 1.0 0.7 0.1 0.3 -8.3 -8.9 -9.9 -10.0 -8.0 -6.9
Australia -3.5 -2.8 -4.1 -2.9 -3.2 -3.6 -4.2 -3.4 -2.9 -1.2 -2.7 -1.8
Emerging Asia 3.5 2.1 1.8 2.1 2.1 1.9 -2.5 -2.2 -2.4 -2.5 -2.5 -2.4
China 4.0 1.9 2.3 2.0 1.9 2.0 -1.7 -1.1 -1.7 -1.9 -2.2 -2.1
Hong Kong 7.0 5.6 1.7 4.5 5.3 6.0 4.1 3.8 3.2 0.6 1.0 1.0
India -3.2 -3.4 -5.0 -2.6 -2.3 -2.8 -8.1 -8.1 -7.4 -7.2 -7.0 -7.0
Indonesia 0.7 0.2 -2.8 -3.3 -2.5 -1.9 -0.7 -1.1 -1.8 -2.3 -2.1 -2.0
South Korea 2.9 2.3 4.3 5.9 4.9 4.4 -1.6 -1.6 -2.1 -2.0 -1.0 -0.5
Malaysia 10.9 11.6 6.1 3.8 3.7 3.0 -5.6 -4.8 -4.5 -3.9 -3.5 -3.0
Philippines 4.3 3.1 2.8 3.9 3.2 2.7 -3.5 -2.0 -2.3 -1.4 -2.1 -2.0
Singapore 25.3 23.2 17.4 18.4 16.5 14.5 0.3 1.2 1.1 1.1 -0.3 0.4
Taiwan 9.3 9.0 10.7 10.4 10.0 9.0 -3.3 -2.2 -2.5 -2.0 -1.0 -1.0
Thailand 3.1 1.2 -0.4 -0.7 0.6 0.5 -0.8 -2.7 -2.8 -2.5 -2.2 -1.5
Europe and Africa 0.7 0.6 1.2 1.6 1.9 1.9 -5.6 -3.4 -2.9 -2.6 -2.2 -1.9
Euro area 0.0 0.1 1.4 2.3 2.5 2.4 -6.2 -4.2 -3.7 -3.1 -2.6 -2.1
Belgium 1.9 -1.1 -2.0 -1.8 -0.5 -0.9 -3.7 -3.7 -4.0 -2.7 -2.4 -1.5
France -1.4 -1.7 -2.2 -2.2 -2.2 -2.2 -7.1 -5.3 -4.8 -4.0 -3.7 -3.2
Germany 6.1 6.2 7.1 7.4 7.4 6.9 -4.2 -0.8 0.1 0.0 -0.2 -0.2
Greece -9.8 -9.5 -2.3 0.7 0.9 1.2 -10.7 -9.5 -9.0 -13.9 -2.0 -0.9
Ireland 1.1 1.2 4.4 5.8 3.2 3.1 -30.6 -13.1 -8.2 -7.4 -4.9 -3.0
Italy -3.6 -3.1 -0.5 0.8 1.5 1.8 -4.5 -3.8 -3.0 -3.0 -2.8 -2.5
Netherlands 7.4 9.1 9.5 10.7 9.6 8.3 -5.1 -4.3 -4.1 -3.1 -2.8 -2.5
Portugal -10.6 -7.0 -2.0 0.3 0.9 1.6 -9.8 -4.3 -6.4 -4.5 -4.2 -4.1
Spain -4.5 -3.8 -1.1 0.7 1.5 2.0 -9.6 -9.6 -10.6 -7.0 -5.8 -4.9
United Kingdom -2.7 -1.5 -3.7 -3.7 -3.5 -3.5 -10.2 -7.8 -6.1 -5.7 -5.2 -4.2
Switzerland 14.7 9.0 11.2 10.5 10.1 9.8 0.8 0.8 0.7 0.7 1.0 1.2
Sweden 6.9 7.3 6.5 6.2 6.0 5.8 0.0 0.2 -0.5 -1.1 -1.6 -1.0
Norway 12.4 12.8 14.3 12.8 12.5 12.5 12.2 13.3 14.7 12.0 12.0 12.0
Denmark 5.9 5.6 6.0 7.0 6.8 6.6 -2.5 -1.8 -3.9 -0.5 -1.4 -2.9
EM Europe & Africa 0.1 -0.3 -0.4 -1.3 -0.2 0.4 -4.6 -1.2 -1.6 -1.6 -1.7 -1.9
Poland -5.2 -5.1 -3.5 -1.3 -1.2 -1.1 -7.9 -5.0 -3.9 -4.4 -3.7 -3.0
Russia 4.4 5.1 3.6 1.5 2.7 3.9 -3.9 0.7 -0.1 -0.5 -0.4 -1.1
Turkey -6.2 -9.7 -6.2 -7.8 -5.7 -6.0 -3.6 -1.4 -2.0 -1.2 -2.2 -2.1
Israel 3.1 1.3 0.3 2.5 2.9 3.0 -3.5 -3.1 -3.9 -3.1 -3.0 -2.7
South Africa
*
-2.0 -2.3 -5.2 -5.8 -5.8 -5.3 -6.5 -4.3 -3.7 -4.3 -4.0 -4.0
Current account (% GDP) Government balance (% GDP)

21 March 2014 21
FIGURE 35
Global Forecasts (3): Official interest rates and Barclays Research projections

Note: Rates are COB of 19 March 2014. Source: Barclays Research
Last Next move
Current Date Level move expected Q1 14 Q2 14 Q3 14 Q4 14
Advanced
Fed funds rate 0-0.25 Easing: 17 Sep 07 5.25 Dec 08 (-75-100) Jun 15 0-0.25 0-0.25 0-0.25 0-0.25
BoJ overnight rate 0.10 Easing: 30 Oct 08 0.50 Oct 10 (0-10) H2 18 (+20) 0-0.10 0-0.10 0-0.10 0-0.10
ECB main refinancing rate 0.25 Easing: 3 Nov 11 1.50 Nov 13 (-25) - 0.25 0.25 0.25 0.25
ECB deposit facility rate 0.00 Easing: 3 Nov 11 0.75 Jul 13 (-25) - 0.00 0.00 0.00 0.00
BOE bank rate 0.50 Easing: 6 Dec 07 5.75 Mar 09 (-50) Q2 15 (+25) 0.50 0.50 0.50 0.50
RBA cash rate 2.50 Easing: 1 Nov 11 4.75 Aug 13 (-25) Q1 15 (+25) 2.50 2.50 2.50 2.50
RBNZ cash rate 2.75 Tightening: 13 Mar 14 2.50 Mar 14 (+25) Q2 2014 (+25) 2.75 3.00 3.25 3.50
Swiss National Bank 0-0.25 Easing: 8 Oct 08 2.75 Aug 11 (-25) Beyond Q4 14 0.25 0.25 0.25 0.25
Norges Bank 1.50 Easing: 14 Dec 11 2.25 Mar 12 (-25) Beyond Q4 14 1.50 1.50 1.50 1.50
Riksbank 1.00 Easing: 20 Dec 11 2.00 Dec 13 (-25) Q4 14 (+25) 0.75 0.75 0.75 1.00
Bank of Canada 1.00 Tightening: 1 Jun 10 0.25 Sep 10 (+25) Q1 15 (+25) 1.00 1.00 1.00 1.00
Emerging Asia
China: 1y bench. lending rate 6.00 Easing: 7 Jun 12 6.56 Jul 12 (-31) Beyond Q4 14 6.00 6.00 6.00 6.00
Hong Kong: Base rate 0.50 Easing: 19 Sep 07 6.75 Dec 08 (-100) Beyond Q4 14 0.50 0.50 0.50 0.50
India: Repo rate 8.00 Tightening: 20 Sep 13 7.25 Jan 14 (+25) Q3 14 (-25) 8.00 8.00 7.75 7.50
Indonesia: O/N policy rate 7.50 Tightening: 13 Jun 13 5.75 Nov 13 (+25) Q1 15 (-25) 7.50 7.50 7.50 7.50
Korea: Base rate 2.50 Easing: 12 Jul 12 3.25 May 13 (-25) Q3 14 (+25) 2.50 2.50 2.75 2.75
Malaysia: O/N policy rate 3.00 Tightening: 4 Mar 10 2.00 May 11 (+25) May 14 (+25) 3.00 3.25 3.50 3.50
Philippines: O/N lending 3.50 Easing: 19 Jan 12 4.50 Oct 12 (-25) Q2 14 (+25) 3.50 3.75 4.00 4.00
Taiwan: Rediscount rate 1.875 Tightening: 24 Jun 10 1.380 Jun 11 (+12.5) Q3 14 (+12.5) 1.875 1.875 2.000 2.125
Thailand: O/N repo rate 2.00 Easing: 30 Nov 11 3.50 Mar 14 (-25) Q1 15 (+25) 2.00 2.00 2.00 2.00
Emerging Europe, Middle East &
Czech Republic: 2w repo rate 0.05 Easing: 8 Aug 08 3.70 Nov 12 (-20) Beyond Q4 14 0.05 0.05 0.05 0.05
Hungary: 2w deposit rate 2.70 Easing: 28 Aug 12 7.00 Feb 14 (-15) Mar 14 (-10) 2.60 2.50 2.50 2.50
Poland: 2w repo rate 2.50 Easing: 7 Nov 12 4.75 Jul 13 (-25) Q1 15 (+25) 2.50 2.50 2.50 2.50
Romania: Key policy rate 3.50 Easing: 4 Feb 08 10.25 Feb 14 (-25) Beyond Q4 14 3.50 3.50 3.50 3.50
Russia: One-week repo rate 7.00 Tightening: 13 Sep 12 5.25 Mar 14 (+150) Q2 14 (+100) 7.00 8.00 8.00 8.00
South Africa: Repo rate 5.50 Tightening: 29 Jan 14 5.00 Jan 14 (+50) Mar 14 (+50) 6.00 6.00 6.50 6.50
Turkey: One-week repo rate* 10.00 Tightening: 28 Jan 14 4.50 Jan 14 (+550) Beyond Q4 14 10.00 10.00 10.00 10.00
Turkey: O/N lending rate 12.00 Tightening: 24 Jul 13 6.50 Jan 14 (+425) Beyond Q4 14 12.00 12.00 12.00 12.00
Egypt: Deposit rate 8.25 Easing: 1 Aug 13 9.75 Dec 13 (-50) Beyond Q4 14 8.25 8.25 8.25 8.25
Israel: Discount rate 0.75 Easing: 26 Sep 11 3.25 Feb 14 (-25) Beyond Q4 14 0.75 0.75 0.75 0.75
Latin America
Brazil: SELIC rate 10.75 Tightening: 17 Apr 13 7.25 Feb 14 (+25) Apr 14 (+25) 10.75 11.00 11.00 11.00
Chile: Monetary policy rate 4.00 Easing: 12 January 12 5.25 Mar 14 (-25) Beyond Q4 14 4.00 4.00 4.00 4.00
Colombia: Repo rate 3.25 Easing: 27 Jul 12 5.25 Mar 13 (-50) Jul 14 (+25) 3.25 3.25 4.00 4.75
Mexico: Overnight rate 3.50 Easing: 16 Jan 09 8.25 Oct 13 (-25) Q1 15 (+25) 3.50 3.50 3.50 3.50
Peru: Reference rate 4.00 Easing: 7 Nov 13 4..25 Nov 13 (-25) Beyond Q4 14 4.00 4.00 4.00 4.00
Forecasts Start of cycle

21 March 2014 22
FIGURE 36
Global Forecasts (4): General government gross debt/GDP ratios and Barclays Research projections

Note: (
#
) Corresponds to FY for India (i.e., FY 10/11 = 2010); (*) Corresponds to FY for South Africa (i.e., FY 10/11 = 2011); (**) Central government debt ratio is
reported for China. Source: Barclays Research
FIGURE 37
US economic projections
% Change q/q saar
2013 2014 2015 Calendar year average
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015
Real GDP 1.1 2.5 4.1 2.4 2.5 2.5 2.5 2.5 2.5 2.5 3.0 3.0 2.8 1.9 2.7 2.6
Private consumption 2.3 1.8 2.0 2.6 2.5 2.5 2.5 2.5 2.5 2.5 3.0 3.0 2.2 2.0 2.4 2.6
Public consumption and invest. -4.2 -0.4 0.4 -5.6 -1.0 -1.0 -0.5 -0.5 -0.5 -0.5 0.0 0.0 -1.0 -2.3 -1.6 -0.5
Residential investment 12.5 14.2 10.3 -8.7 10.0 10.0 8.0 8.0 8.0 8.0 8.0 8.0 12.9 12.1 6.1 8.1
Equipment investment 1.6 3.3 0.2 10.6 8.0 8.0 6.0 6.0 6.0 6.0 8.0 8.0 7.6 3.1 6.8 6.5
Intellectual property investment 3.7 -1.5 5.8 8.0 6.0 6.0 5.0 5.0 4.0 4.0 6.0 6.0 3.4 3.4 5.7 4.8
Structures investment -25.7 17.6 13.4 0.2 6.0 6.0 6.0 6.0 4.0 4.0 4.0 4.0 12.7 1.4 6.4 4.7
Exports -1.3 8.0 3.9 9.4 6.0 6.0 6.0 6.0 6.5 6.5 6.5 6.5 3.5 2.7 6.5 6.3
Imports 0.6 6.9 2.4 1.5 5.0 5.0 5.0 5.0 5.5 5.5 6.0 6.0 2.2 1.4 4.1 5.4
Net exports (contr to GDP, pp) -0.3 -0.1 0.1 1.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 -0.1 0.1 0.1 0.2 0.0
Final sales 0.2 2.1 2.5 2.3 2.6 2.7 2.5 2.6 2.5 2.5 3.0 3.0 2.6 1.7 2.5 2.6
Ch. inventories ($bn, real) 42.2 56.6 115.7 117.4 114.0 109.0 107.0 105.0 104.0 103.0 102.0 101.0 57.6 83.0 108.8 102.5
Ch. inventories (contr to GDP, pp) 0.9 0.4 1.7 0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 0.2 0.2 0.2 0.2
GDP price index 1.3 0.6 2.0 1.6 2.3 2.3 2.3 2.3 2.4 2.5 2.6 2.6 1.7 1.4 2.0 2.4
Nominal GDP 2.8 3.1 6.2 4.0 4.5 4.9 4.8 4.9 4.9 5.0 5.7 5.7 4.6 3.4 4.7 5.1
Industrial output 4.1 1.2 2.5 5.5 2.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 3.6 2.6 3.8 5.0
Employment (avg mthly chg, K) 206 201 172 198 175 200 200 200 200 200 225 225 186 194 194 213
Unemployment rate (%) 7.7 7.5 7.3 7.0 6.6 6.4 6.2 6.1 5.9 5.8 5.7 5.5 8.1 7.4 6.3 5.7
CPI inflation (%y/y) 1.7 1.4 1.6 1.2 1.4 1.6 1.7 2.0 1.9 2.1 2.2 2.2 2.1 1.5 1.7 2.1
Core CPI (%y/y) 1.9 1.7 1.7 1.7 1.6 1.7 1.9 2.1 2.4 2.6 2.6 2.6 2.1 1.8 1.8 2.5
PCE price index (%y/y) 1.4 1.1 1.1 1.0 1.0 1.4 1.5 1.8 1.9 1.9 2.0 1.9 1.8 1.1 1.4 1.9
Core PCE price index (%y/y) 1.5 1.2 1.2 1.2 1.1 1.3 1.5 1.7 2.0 2.2 2.2 2.3 1.8 1.2 1.4 2.2
Current account (%GDP) -2.5 -2.3 -2.2 -1.9 -2.0 -2.0 -2.0 -2.0 -2.0 -2.0 -2.0 -2.1 -2.7 -2.2 -2.0 -2.0
Federal budget bal. (%GDP) -6.8 -4.1 -3.2 -2.7
Federal funds rate (%) 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0.50 0.75 1.00
Note: All numbers expressed in q/q saar % unless otherwise specified. The budget balance is fiscal year. Source: BEA, BLS, Federal Reserve, US Treasury, Barclays Research
2010 2011 2012 2013F 2014F 2015F 2010 2011 2012 2013F 2014F 2015F
Americas Europe and Africa
United States 115.3 120.6 122.4 124.0 125.0 124.0 Euro area 85.7 88.0 92.7 95.8 96.6 96.3
Canada 85.1 85.4 87.5 89.0 87.5 87.0 Austria 72.3 72.8 74.0 74.4 74.8 74.2
Latin America Belgium 95.7 98.0 99.8 101.1 101.2 100.0
Argentina 45.2 41.4 45.7 53.6 55.1 56.1 Finland 48.7 49.2 53.6 58.0 59.8 60.5
Brazil 53.4 54.2 58.8 57.2 58.1 58.6 France 82.4 85.8 90.2 93.8 96.1 97.4
Chile 8.6 11.1 12.0 11.5 12.4 12.9 Germany 82.5 80.0 81.0 79.8 77.5 74.7
Colombia 35.8 36.7 36.5 36.7 35.9 35.9 Greece 148.3 170.3 156.9 173.6 170.1 169.9
Mexico 33.5 34.9 35.3 37.6 38.8 39.1 Ireland 91.2 104.1 117.4 123.4 122.4 121.0
Peru 23.7 24.0 23.2 21.4 20.9 20.4 Italy 119.3 120.7 127.0 132.7 133.5 133.3
Venezuela 43.1 48.2 49.3 60.0 69.7 62.9 Netherlands 63.4 65.7 71.3 74.6 76.2 76.3
Asia/Pacific Portugal 94.0 108.2 124.0 129.5 131.5 132.8
Japan 193.3 210.6 221.0 230.0 237.0 238.0 Spain 61.7 70.5 86.0 94.4 100.3 104.3
Australia 24.3 30.2 33.4 36.0 38.0 39.0 United Kingdom 78.4 84.3 90.4 92.3 94.5 95.1
Emerging Asia Switzerland 48.9 49.1 49.2 48.2 46.6 45.6
China
**
16.8 15.2 14.9 15.3 15.7 16.0 Sweden 39.3 38.3 38.2 41.5 42.2 41.5
Hong Kong 0.6 0.6 0.5 0.5 0.5 0.5 Norway 43.0 28.7 28.7 34.2 34.2 34.2
India
#
66.0 65.6 64.5 63.5 61.0 61.0 Denmark 42.7 46.4 45.4 42.4 41.6 43.1
Indonesia 25.9 24.1 23.7 27.0 24.4 23.6 EM Europe & Africa
South Korea 32.8 31.2 35.4 36.6 35.5 35.1 Poland 54.9 56.2 55.6 57.6 50.6 51.2
Malaysia 51.1 51.6 53.3 54.8 54.0 52.5 Russia 8.9 8.7 10.7 10.1 10.5 10.7
Philippines 58.5 56.9 56.2 52.9 49.8 47.2 Turkey 42.3 39.1 36.2 35.3 34.9 34.2
Singapore 101.0 103.4 108.4 105.5 104.0 102.2 Israel 71.5 70.0 68.9 67.7 66.3 65.4
Taiwan 33.5 34.8 35.6 35.8 35.5 34.4 South Africa
*
28.8 36.0 39.8 42.7 45.8 46.9
Thailand 42.4 40.3 44.0 45.7 46.3 47.0
Gross government debt ratio (% GDP)

21 March 2014 23
FIGURE 38
Euro area economic projections
% change q/q
Q1 Q2 Q3 Q4E Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2012 2013E 2014E 2015E
Real GDP -0.2 0.3 0.1 0.3 0.3 0.4 0.4 0.4 0.4 0.3 0.3 0.3 ... ... ... ...
Real GDP (saar) -0.9 1.3 0.6 1.1 1.4 1.7 1.8 1.7 1.5 1.3 1.3 1.3 ... ... ... ...
Real GDP (y/y) -1.2 -0.6 -0.3 0.5 1.1 1.2 1.5 1.6 1.6 1.6 1.4 1.4 -0.6 -0.4 1.3 1.5
Private consumption -0.1 0.2 0.1 0.1 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 -1.4 -0.5 0.8 1.1
Public consumption 0.3 0.0 0.4 -0.2 0.2 0.1 0.1 0.2 0.2 0.2 0.2 0.2 -0.6 0.3 0.4 0.8
Investment -1.7 0.2 0.6 1.1 0.4 0.8 0.8 0.7 0.6 0.6 0.5 0.5 -3.9 -2.8 2.8 2.6
- Residential construction -1.7 0.3 0.8 0.0 0.4 0.5 0.4 0.4 0.3 0.3 0.4 0.4 -3.4 -3.0 1.5 1.4
- Non-residential construction -2.9 -0.8 0.6 0.9 0.4 0.6 0.7 0.6 0.4 0.4 0.4 0.4 -4.8 -4.6 2.1 1.9
- Non-construction investment -0.9 0.7 0.4 1.8 0.5 1.1 1.0 1.0 0.9 0.8 0.7 0.7 -3.7 -1.6 3.9 3.7
Inventories contribution (pp) 0.0 -0.2 0.3 -0.3 0.2 0.1 0.1 0.0 0.0 0.0 0.0 0.0 -0.5 -0.2 -0.1 0.0
Final dom. demand cont. (pp) -0.3 0.1 0.3 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 -1.7 -0.7 1.1 1.3
Net exports contribution (pp) 0.0 0.4 -0.4 0.4 0.0 0.0 0.1 0.0 0.1 0.1 0.0 0.0 1.5 0.5 0.2 0.2
Industrial output (ex construct.) 0.4 0.7 0.0 0.4 0.4 0.4 0.4 0.5 0.6 0.6 0.7 0.8 -2.5 -0.7 1.5 2.2
Employment (q/q) -0.5 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 -0.7 -0.9 0.4 0.8
Unemployment rate % 12.0 12.1 12.1 12.0 12.0 12.0 12.0 11.9 11.8 11.8 11.7 11.6 11.4 12.1 12.0 11.7
CPI inflation (y/y) 1.9 1.4 1.3 0.8 0.7 1.0 0.9 1.0 1.0 1.1 1.1 1.2 2.5 1.4 0.9 1.1
Core CPI (ex food/energy) y/y 1.4 1.1 1.1 0.8 0.8 1.0 1.0 1.0 1.0 1.0 1.1 1.1 1.5 1.1 1.0 1.1
Current account % GDP 2.1 2.6 1.8 2.8 2.6 2.5 2.5 2.5 2.5 2.4 2.4 2.3 1.4 2.3 2.5 2.4
Government balance % GDP -3.7 -3.1 -2.6 -2.1
Refi rate (period end %) 0.75 0.50 0.50 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.75 0.25 0.25 0.25
Note: All numbers expressed in % q/q unless otherwise specified. Source: Barclays Research
FIGURE 39
UK economic projections
% Change q/q Q1 Q2 Q3 Q4E Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2013 2014E 2015E
Real GDP 0.4 0.7 0.8 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 ... ... ...
Real GDP (saar) 1.6 3.0 3.4 2.9 2.5 2.4 2.5 2.3 2.6 2.6 2.7 2.6 ... ... ...
Real GDP (y/y) 0.6 1.8 1.9 2.7 2.9 2.8 2.6 2.4 2.4 2.5 2.5 2.6 1.8 2.7 2.5
Private consumption 1.2 -0.2 1.1 0.1 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.5 2.3 2.0 2.1
Public consumption -0.8 1.8 0.6 0.3 0.0 -0.1 -0.3 -0.2 -0.1 0.1 0.0 -0.2 0.9 0.7 -0.4
Investment 0.5 3.9 1.7 2.4 1.5 1.8 1.9 2.2 2.0 2.1 2.1 2.1 -0.5 8.2 8.4
Inventories (q/q cont.) -1.0 0.1 0.9 -0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 0.0
Net exports (q/q cont.) 0.8 0.0 -1.1 0.4 0.0 0.0 0.1 -0.1 0.0 0.0 0.0 0.0 0.1 -0.2 0.0
Nominal GDP 0.3 0.4 1.7 1.7 1.1 1.1 1.1 1.2 1.2 1.2 1.2 1.2 3.4 5.2 4.8

Industrial output 0.5 0.6 0.5 0.5 0.5 0.4 0.5 0.5 0.5 0.5 0.5 0.5 -0.3 2.0 1.9
Employment -0.1 0.2 0.6 0.6 0.5 0.4 0.1 0.2 0.3 0.3 0.3 0.3 1.3 1.8 1.1
Unemployment rate % 7.8 7.8 7.6 7.2 6.9 6.7 6.7 6.6 6.5 6.4 6.3 6.2 7.6 6.7 6.3
CPI inflation y/y 2.8 2.7 2.7 2.1 1.7 1.8 1.6 1.6 1.7 1.8 1.8 1.9 2.6 1.7 1.9
Core CPI y/y 2.2 1.7 2.0 1.8 ... ... ... ... ... ... ... ... ... ... ...
Current account % GDP -4.7 -1.5 -5.1 -3.3 -3.5 -3.5 -3.4 -3.5 -3.5 -3.5 -3.5 -3.4 -3.7 -3.5 -3.5
Govt. balance % GDP* ... ... ... ... ... ... ... ... ... ... ... ... -5.8 -4.5 -3.5
Bank Rate 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.75 1.00 1.25 0.50 0.50 1.25
Note: *Fiscal year forecasts, 2012 = FY 12-13; excludes the impact of financial sector interventions. Source: ONS, Barclays Research

21 March 2014 24
FIGURE 40
Japan economic projections
% change q/q Q1 Q2 Q3 Q4 Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2012 2013E 2014E 2015E
Real GDP 1.1 1.0 0.2 0.2 0.8 -0.8 0.4 0.5 0.3 0.3 0.6 -0.1
Real GDP (q/q, saar) 4.5 4.1 0.9 0.7 3.1 -3.0 1.6 1.9 1.3 1.2 2.6 -0.6 1.4 1.5 1.0 1.2
Real GDP (y/y) 0.0 1.2 2.3 2.6 2.2 0.4 0.6 0.8 0.4 1.5 1.7 1.1 2.0 1.9 0.8 0.1
Private consumption 1.0 0.6 0.2 0.4 1.7 -2.0 0.1 0.1 0.1 0.2 0.8 -0.8 1.7 2.2 1.7 1.3
Public consumption 0.6 0.9 0.2 0.5 0.4 0.4 0.4 0.3 0.4 0.3 0.2 0.3 2.9 8.9 4.1 0.5
Residential investment 1.7 0.9 3.3 4.1 2.3 -2.1 -2.8 0.3 0.4 1.7 1.2 -0.3 2.8 11.4 7.1 -0.8
Public investment 3.2 6.8 7.2 2.1 -1.5 0.5 1.9 1.3 -0.2 -2.2 -1.7 -0.6 3.7 -1.6 3.4 4.1
Capital Investment -0.9 1.0 0.1 0.8 1.4 0.9 0.3 0.9 1.1 1.3 1.5 0.8 -0.9 -0.3 -1.2 0.0
Net exports (q/q cont.) 0.4 0.1 -0.5 -0.5 -0.7 0.2 0.1 0.0 -0.0 -0.1 -0.1 0.2 -0.1 1.6 1.9 6.7
Exports 4.2 2.9 -0.7 0.4 -1.1 1.4 1.7 1.8 1.7 1.5 1.5 1.6 5.3 3.4 8.4 5.6
Imports 1.1 1.8 2.4 3.5 2.9 0.2 1.0 1.5 1.6 1.6 1.8 0.5 0.1 -0.3 0.3 0.1
Ch. Inventories (q/q cont.) -0.1 -0.2 0.1 0.0 0.1 0.1 0.1 0.1 -0.0 -0.0 -0.0 -0.0 0.5 1.0 1.8 1.7
Nominal GDP 0.7 1.0 0.1 0.3 0.7 0.1 0.5 0.5 0.4 0.2 0.6 0.4
Industrial output 0.6 1.5 1.7 1.8 4.4 0.3 1.5 2.0 1.5 1.4 1.1 1.7 0.6 -0.9 8.6 6.0
Employment 0.2 0.3 0.3 0.5 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.5 0.8 1.2 0.3
CPI inflation (y/y) -0.3 0.0 0.7 1.1 1.3 3.3 3.3 3.3 3.5 1.6 1.6 2.4 -0.1 0.4 2.8 2.3
Core CPI ex food/energy (y/y) -0.8 -0.4 -0.0 0.5 0.7 2.7 2.7 2.6 2.6 0.6 0.6 1.5 -0.6 -0.2 2.2 1.3
Current account (% GDP) 0.7 1.9 0.5 -0.3 -0.5 0.3 0.3 0.3 0.3 0.3 0.3 0.3 1.0 0.7 0.1 0.3
Government balance (% GDP) -9.9 -10.0 -8.0 -6.9
Overnight call rate 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Note: Central bank rates are for end of period %. Source: BoJ, Cabinet Office, METI, MIC, MoF, Barclays Research
FIGURE 41
China economic projections
% change y/y Q1 Q2 Q3 Q4 Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2012 2013 2014E 2015E
Real GDP 7.7 7.5 7.8 7.7 7.3 7.2 7.1 7.2 7.6 7.6 7.4 7.2 7.7 7.7 7.2 7.4
Real GDP (q/q, saar) 5.9 8.3 9.3 7.0 4.9 7.4 8.5 8.7 5.9 7.6 7.6 7.6
Real GDP (% y/y, YTD) 7.7 7.6 7.7 7.7 7.3 7.3 7.2 7.2 7.6 7.6 7.6 7.4
Consumption* (pp) 4.3 3.4 3.5 3.9 5.2 3.5 3.5 3.5 3.6 3.6 3.6 3.6 4.2 3.9 3.5 3.6
Investment* (pp) 2.3 4.1 4.3 4.2 2.5 4.1 3.8 3.7 4.0 4.0 3.9 3.6 3.6 4.2 3.7 3.6
Net exports contribution* (pp) 1.1 0.1 -0.1 -0.3 -0.4 -0.3 -0.1 0.0 0.0 0.0 0.1 0.2 -0.2 -0.3 0.0 0.2
Industrial output 9.5 9.1 10.1 10.0 8.9 8.6 8.3 8.7 9.5 9.6 9.1 8.5 10.0 9.7 8.6 9.2
CPI inflation 2.4 2.4 2.8 2.9 2.3 2.5 2.8 3.3 3.5 3.5 3.5 3.5 2.6 2.6 2.7 3.5
Current account (% GDP) 2.2 2.3 1.7 2.1 -0.3 1.8 2.3 3.8 1.7 2.1 1.8 2.3 2.3 2.0 1.9 2.0
Government balance (% GDP) -1.7 -1.9 -2.2 -2.1
Key CB rate (period end, %) 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
Note: All numbers are expressed in y/y % change unless otherwise specified. *Contributions by GDP expenditure components are all reported as year to date
numbers officially. Source: Barclays Research

21 March 2014 25
FIGURE 42
Global Key Events Calendar

Sources: Central banks, IMF, European Commission, Reuters, Bloomberg, Market News, Barclays Research
(*) Potential second round
(#) Subject to change
() Event yet to be confirmed
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Forthcoming central bank announcement dates
North America
FOMC meeting 19 30 - 18 30 - 17 29 - 17 28
FOMC minutes - 9 21 - 9 20 - 8 19 - 7
Fed's Beige Book 5 16 - 4 16 - 3 15 - 3 14
Bank of Canada 5 16 - 4 16 - 3 22 - 3
Europe
ECB "policy" meeting 6 3 8 5 3 7 4 2 6 4 8 5 5
ECB monthly bulletin 13 10 15 12 10 14 11 9 13 11 15 12 12
ECB "non-policy" meeting 19 16 21 17 17 - 17 15 19 17 21 18 18-19
Bank of England 5-6 9-10 7-8 4-5 9-10 6-7 3-4 8-9 5-6 3-4 7-8 4-5 4-5
BoE Inflation Report - - 14 - - 13 - - 12 - - 11 -
BoE minutes 19 23 21 18 23 20 17 22 19 17 21 18 18
Riksbank - 9 - - 3 - 4 28 - 16 -
SNB 20 - - 19 - - 18 - - 11 -
Norges Bank 27 - - 19 - - 18 - - 11 - - 19
Asia/RoW
Bank of Japan 10-11 7-8,30 20-21 12-13 14-15 7-8 3-4 6-7,31 18-19 18-19
BoJ minutes 14 11 7,26 18 18 13 9 10 6,25 25
Reserve Bank of Australia 4 1 6 3 1 5 2 7 4 2 - 3
RBNZ 13 24 - 12 24 - 11 30 - 11 29 12
Key international meetings
IMF/IBRD - 11-13 - - - - - 10-12 - - - - -
EU Summit 20-21 - 20-21 26-27
ECOFIN 11 1 6 20
G20 - - - - - - 20-21 - - - - - -
G8 - - - 04-05 - - - - - - - - -
Elections
Belgium (Parliamentary) - - 25 - - - - - - - - - -
Brazil (Presidential) - - - - - - - 5, 26* - - - - -
Colombia (Presidential) - - 25 - - - - - - - - - -
EU (Parliamentary) - - 22-25 - - - - - - - - - -
Egypt (Presidential) Mar
#
- - - - - - - - - - - -
Egypt (Parliamentary) - - - - Jul
#
- - - - - - - -
France (Municipal) 23-30 - - - - - - - - - - - -
Greece (Presidential) - - - - - - - - - - - Feb -
Hungary (Parliamentary) - 6 - - - - - - - - - - -
India (Parliamentary) - - - - - - - - - - -
Indonesia (Parliamentary) - 9 - - - - - - - - - - -
Indonesia (Presidential) - - - - Jul - - - - - - - -
Iraq (General) Mar - - - - - - - - - - - -
Israel (Presidential) - - - Jun - - - - - - - - -
Japan (Tokyo gubernatorial) - - - - - - - - - - - - -
Netherlands (Municipal) 19 - - - - - - - - - - - -
Romania (President) - - - - - - - - 9 - - - -
Spain (Catalonia referendum) - - - - - - - - 9 - - - -
Slovakia (Presidential) 15, 22* - - - - - - - - - - - -
South Africa (General) - - 7 - - - - - - - - - -
Sweden (General) - - - - - - 14 - - - - - -
Thailand (General) - - - - - - - - - - - - -
Turkey (Municipal) Mar - - - - - - - - - - - -
Turkey (Presidential) - - - - - 2 - - - - - - -
United Kingdom (Local) - - 22 - - - - - - - - - -
United Kingdom (Scotland referendum) - - - - - - 18 - - - - - -
United states (congressional) - - - - - - - - 4 - - - -
2014 2015
7 Apr-12May

Analyst Certification
We, Christian Keller and Dean Maki, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of
the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the
specific recommendations or views expressed in this research report.

Important Disclosures:
Barclays Research is a part of the Corporate and Investment Banking division of Barclays Bank PLC and its affiliates (collectively and each individually,
"Barclays"). For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays
Research Compliance, 745 Seventh Avenue, 14th Floor, New York, NY 10019 or refer to http://publicresearch.barclays.com or call 212-526-1072.

Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that Barclays may have a conflict of interest that could affect the objectivity of this report. Barclays Capital Inc. and/or one of its affiliates regularly
trades, generally deals as principal and generally provides liquidity (as market maker or otherwise) in the debt securities that are the subject of this research
report (and related derivatives thereof). Barclays trading desks may have either a long and / or short position in such securities, other financial instruments
and / or derivatives, which may pose a conflict with the interests of investing customers. Where permitted and subject to appropriate information barrier
restrictions, Barclays fixed income research analysts regularly interact with its trading desk personnel regarding current market conditions and prices.
Barclays fixed income research analysts receive compensation based on various factors including, but not limited to, the quality of their work, the overall
performance of the firm (including the profitability of the investment banking department), the profitability and revenues of the Fixed Income, Currencies and
Commodities Division and the potential interest of the firms investing clients in research with respect to the asset class covered by the analyst. To the extent
that any historical pricing information was obtained from Barclays trading desks, the firm makes no representation that it is accurate or complete. All levels,
prices and spreads are historical and do not represent current market levels, prices or spreads, some or all of which may have changed since the publication
of this document. Barclays produces various types of research including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis,
and trade ideas. Recommendations contained in one type of research may differ from recommendations contained in other types of research, whether as a
result of differing time horizons, methodologies, or otherwise. Unless otherwise indicated, Barclays trade ideas are provided as of the date of this report and
are subject to change without notice due to changes in prices. In order to access Barclays Statement regarding Research Dissemination Policies and
Procedures, please refer to https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html. In order to access Barclays
Research Conflict Management Policy Statement, please refer to: http://group.barclays.com/corporates-and-institutions/research/research-policy.

Disclaimer
This publication has been prepared by the Corporate and Investment Banking division of Barclays Bank PLC and/or one or more of its affiliates (collectively
and each individually, "Barclays"). It has been issued by one or more Barclays legal entities within its Corporate and Investment Banking division as provided
below. It is provided to our clients for information purposes only, and Barclays makes no express or implied warranties, and expressly disclaims all warranties
of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. Barclays will not treat unauthorized recipients
of this report as its clients. Prices shown are indicative and Barclays is not offering to buy or sell or soliciting offers to buy or sell any financial instrument.
Without limiting any of the foregoing and to the extent permitted by law, in no event shall Barclays, nor any affiliate, nor any of their respective officers,
directors, partners, or employees have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of
anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or
its contents.
Other than disclosures relating to Barclays, the information contained in this publication has been obtained from sources that Barclays Research believes to
be reliable, but Barclays does not represent or warrant that it is accurate or complete. Barclays is not responsible for, and makes no warranties whatsoever as
to, the content of any third-party web site accessed via a hyperlink in this publication and such information is not incorporated by reference.
The views in this publication are those of the author(s) and are subject to change, and Barclays has no obligation to update its opinions or the information in
this publication. The analyst recommendations in this publication reflect solely and exclusively those of the author(s), and such opinions were prepared
independently of any other interests, including those of Barclays and/or its affiliates. This publication does not constitute personal investment advice or take
into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all
investors. Barclays recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent
advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic
markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those
reflected. Past performance is not necessarily indicative of future results.
This material has been issued and approved for distribution in the UK and European Economic Area (EEA) by Barclays Bank PLC. It is being made available
primarily to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005. It is directed at, and therefore should only be relied upon by, persons who have professional experience in matters relating to
investments. The investments to which it relates are available only to such persons and will be entered into only with such persons. Barclays Bank PLC is
authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member
of the London Stock Exchange.
The Corporate and Investment Banking division of Barclays undertakes U.S. securities business in the name of its wholly owned subsidiary Barclays Capital
Inc., a FINRA and SIPC member. Barclays Capital Inc., a U.S. registered broker/dealer, is distributing this material in the United States and, in connection
therewith accepts responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only by
contacting a representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019.
Non-U.S. persons should contact and execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulations
permit otherwise.
Barclays Bank PLC, Paris Branch (registered in France under Paris RCS number 381 066 281) is regulated by the Autorit des marchs financiers and the
Autorit de contrle prudentiel. Registered office 34/36 Avenue de Friedland 75008 Paris.
This material is distributed in Canada by Barclays Capital Canada Inc., a registered investment dealer and member of IIROC (www.iiroc.ca).
Subject to the conditions of this publication as set out above, the Corporate & Investment Banking Division of Absa Bank Limited, an authorised financial
services provider (Registration No.: 1986/004794/06. Registered Credit Provider Reg No NCRCP7), is distributing this material in South Africa. Absa Bank
Limited is regulated by the South African Reserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the (South
African) Financial Advisory and Intermediary Services Act, 37 of 2002, or any other financial, investment, trading, tax, legal, accounting, retirement, actuarial

or other professional advice or service whatsoever. Any South African person or entity wishing to effect a transaction in any security discussed herein should
do so only by contacting a representative of the Corporate & Investment Banking Division of Absa Bank Limited in South Africa, 15 Alice Lane, Sandton,
Johannesburg, Gauteng 2196. Absa Bank Limited is a member of the Barclays group.
In Japan, foreign exchange research reports are prepared and distributed by Barclays Bank PLC Tokyo Branch. Other research reports are distributed to
institutional investors in Japan by Barclays Securities Japan Limited. Barclays Securities Japan Limited is a joint-stock company incorporated in Japan with
registered office of 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131, Japan. It is a subsidiary of Barclays Bank PLC and a registered financial instruments firm
regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143.
Barclays Bank PLC, Hong Kong Branch is distributing this material in Hong Kong as an authorised institution regulated by the Hong Kong Monetary Authority.
Registered Office: 41/F, Cheung Kong Center, 2 Queen's Road Central, Hong Kong.
Information on securities/instruments that trade in Taiwan or written by a Taiwan-based research analyst is distributed by Barclays Capital Securities Taiwan
Limited to its clients. The material on securities/instruments not traded in Taiwan is not to be construed as 'recommendation' in Taiwan. Barclays Capital
Securities Taiwan Limited does not accept orders from clients to trade in such securities. This material may not be distributed to the public media or used by
the public media without prior written consent of Barclays.
This material is distributed in South Korea by Barclays Capital Securities Limited, Seoul Branch.
All equity research material is distributed in India by Barclays Securities (India) Private Limited (SEBI Registration No: INB/INF 231292732 (NSE), INB/INF
011292738 (BSE), Registered Office: 208 | Ceejay House | Dr. Annie Besant Road | Shivsagar Estate | Worli | Mumbai - 400 018 | India, Phone: + 91 22
67196363). Other research reports are distributed in India by Barclays Bank PLC, India Branch.
Barclays Bank PLC Frankfurt Branch distributes this material in Germany under the supervision of Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin).
This material is distributed in Malaysia by Barclays Capital Markets Malaysia Sdn Bhd.
This material is distributed in Brazil by Banco Barclays S.A.
This material is distributed in Mexico by Barclays Bank Mexico, S.A.
Barclays Bank PLC in the Dubai International Financial Centre (Registered No. 0060) is regulated by the Dubai Financial Services Authority (DFSA). Principal
place of business in the Dubai International Financial Centre: The Gate Village, Building 4, Level 4, PO Box 506504, Dubai, United Arab Emirates. Barclays Bank
PLC-DIFC Branch, may only undertake the financial services activities that fall within the scope of its existing DFSA licence. Related financial products or
services are only available to Professional Clients, as defined by the Dubai Financial Services Authority.
Barclays Bank PLC in the UAE is regulated by the Central Bank of the UAE and is licensed to conduct business activities as a branch of a commercial bank
incorporated outside the UAE in Dubai (Licence No.: 13/1844/2008, Registered Office: Building No. 6, Burj Dubai Business Hub, Sheikh Zayed Road, Dubai
City) and Abu Dhabi (Licence No.: 13/952/2008, Registered Office: Al Jazira Towers, Hamdan Street, PO Box 2734, Abu Dhabi).
Barclays Bank PLC in the Qatar Financial Centre (Registered No. 00018) is authorised by the Qatar Financial Centre Regulatory Authority (QFCRA). Barclays
Bank PLC-QFC Branch may only undertake the regulated activities that fall within the scope of its existing QFCRA licence. Principal place of business in Qatar:
Qatar Financial Centre, Office 1002, 10th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 15891, Doha, Qatar. Related financial products or services are
only available to Business Customers as defined by the Qatar Financial Centre Regulatory Authority.
This material is distributed in the UAE (including the Dubai International Financial Centre) and Qatar by Barclays Bank PLC.
This material is distributed in Saudi Arabia by Barclays Saudi Arabia ('BSA'). It is not the intention of the publication to be used or deemed as
recommendation, option or advice for any action (s) that may take place in future. Barclays Saudi Arabia is a Closed Joint Stock Company, (CMA License No.
09141-37). Registered office Al Faisaliah Tower, Level 18, Riyadh 11311, Kingdom of Saudi Arabia. Authorised and regulated by the Capital Market Authority,
Commercial Registration Number: 1010283024.
This material is distributed in Russia by OOO Barclays Capital, affiliated company of Barclays Bank PLC, registered and regulated in Russia by the FSFM. Broker
License #177-11850-100000; Dealer License #177-11855-010000. Registered address in Russia: 125047 Moscow, 1st Tverskaya-Yamskaya str. 21.
This material is distributed in Singapore by the Singapore branch of Barclays Bank PLC, a bank licensed in Singapore by the Monetary Authority of Singapore.
For matters in connection with this report, recipients in Singapore may contact the Singapore branch of Barclays Bank PLC, whose registered address is One
Raffles Quay Level 28, South Tower, Singapore 048583.
Barclays Bank PLC, Australia Branch (ARBN 062 449 585, AFSL 246617) is distributing this material in Australia. It is directed at 'wholesale clients' as defined
by Australian Corporations Act 2001.
IRS Circular 230 Prepared Materials Disclaimer: Barclays does not provide tax advice and nothing contained herein should be construed to be tax advice.
Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used, and cannot
be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the transactions or other
matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor.
Copyright Barclays Bank PLC (2014). All rights reserved. No part of this publication may be reproduced in any manner without the prior written permission
of Barclays. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP. Additional information regarding
this publication will be furnished upon request.

47 Economic Outlook Recover

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

47 Economic Outlook Recover

Uploaded by

Copyright:

Available Formats

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 25

You might also like