Investment Research General Market Conditions 19 October Economic Fact Book:

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1 Investment Research General Market Conditions 19 October 11 Economic Fact Book: The is a small open economy and the export share represents more than two-thirds of GDP. GDP depends heavily on world demand and its business cycle follows the business cycles in important export markets, especially countries within the European Union. The current account is in surplus. The is the seventh most competitive economy in the world according to the World Economic Forum s Index of the most competitive economies in the world. This is due to a highly skilled labour force, innovative business and a well-functioning infrastructure. In addition to this the growth in labour productivity is high. GDP has grown much more than Euro average during the s and is now almost 5% higher than in. Even though the experienced a sharp decrease in GDP during the financial crisis because of the decline in world demand, GDP is now larger than before the crisis and the output gap is not as bad as in other places. The unemployment rate is only 4%. Government expenditure and revenue were equal before the crisis, but like in other European countries the budget deficit fell below the 3% rule the years after the crisis due to bank bailouts and expansive fiscal policy. The budget deficit is expected to be below 3 in 1, but not in surplus. The government debt has reached the 6% limit, but is below Euro average. The housing bubble burst in 8 and existing-home sales fell dramatically and are still below the level as seen in. House prices fell as well and are now at a standstill. The is a large natural gas producer, the largest within the European Union, representing more than 4% of the total production in the union. The value of natural gas exports is more than EUR1.5bn and the is the fifth largest natural gas exporter in the world. The proved reserves are estimated at trillion cubic metre. Key facts Population: 16.7m ( 11). GDP per capita: EUR,1 (1) th highest in the euro area. Government type: Parliamentary democracy under a constitutional monarchy Queen: Beatrix Wilhelmina Armgard Minority cabinet: VVD-CDA Prime Minister: Mark Rutte (VVD) Next election: 14 Central Bank Governor: Klaas Knot Economic characteristics Open and competitive economy - export share is two-third of GDP Gov. budget deficit and debt are in the critical area Outlook for key economic variables - Outlook for key economic variables GDP higher than pre-crisis level. Very low unemployment rate Housing bubble burst GDP (1) CPI (1) Unemployment () Govt. Budget (3) Govt. Debt (3) IMF n.a. n.a OECD n.a. n.a. EU (Commission) ) % y/y. ) % of labour force. 3). Sources: OECD, IMF, EU, Danske Markets Analyst Anders Møller Lumholtz andjrg@danskebank.dk Assistant Analyst Mikael Olai Milhøj milh@danskebank.dk Assistant Analyst Pernille Bomholdt Nielsen pernni@danskebank.dk Important disclosures and certifications are contained from page 6 of this report.

2 / Economic Fact Book: Key macroeconomic indicators Structural indicators versus the euro area (EMU) When EMU When EMU Sovereign ratings GDP(1) Q GDP per capita (5) 1,1 7,799 S&P Public sector () Q Economic size in EMU (4) 5,7% - Moody's Private cons () Q Inflation - HICP (8) Sep Fitch AAA Aaa AAA Investments () Q Public budget () EC fcst Exports () Q Public debt () EC fcst Sovereign bond yields C/A () - 1M av. Q Long-term interest rates Sep Y yield (6).86 Unemployment (3) Aug Industry sector (,7) Q-11 n.a Y yield (6).6 Household loans () 1 17 Service sector (, 7) Q-11 n.a n.a 1: % q/q, : Pct of GDP, 3: % of labour force, 4: based on ECB capital key ratios, 5: EUR per capita, 6: %, 3M av, 7: Weighted average of Germany France, Italy and Spain, 8: % y/y Public finances Budget deficit close to average Budget gap has started to narrow General Govt budget, EC forecast Government budget, 1-month MA Expenditure Revenue Sources: Reuters Ecowin and the EU-Commission Government debt close to 6% limit Spreads still at a low level General Govt debt, EC forecast % Government bonds spreads to Germany, 1-month MA 1 year year October 11

3 / Economic Fact Book: National Account GDP much higher than average 15 1 Index, =1 14 GDP in constant prices Output gap is decent Output gap %-points Jan 4 Jan 5 Jan 6 Jan 7 Jan 8 Jan 9 Jan 1 Jan 11 OECD USA Sources: OECD Private consumption growth is above average Index, = Private consumption, 1 constant prices and so are investments 14 Index, =1 13 Gross capital formation, constant prices Export and trade Current account Export over two-thirds of GDP , Ecofin forecast.5, quarterly data., Ecofin forecast Germany France Distribution of export on regions European export is most important EU USA China OTHER Monthly Exp., EUR bn Pct of total exp Pct of GDP Key export countries Germany Belgium France Pct of total exp Pct of GDP % of total export 7 6 Exports by region, SA Eurozone Other 1 USA China October 11

4 / Economic Fact Book: Industrial activity indicators Industrial production is recovering... especially manufacturing Index =1 Total industrial production EU Index, 5=1 Industrial activity 15 by type, SA 1 Eletricity, gas and water Food 1 Manufacturing Capacity utilisation recovering Low confidence in construction 87.5 % Capacity utilisation, manufacturing sector, SA Euro area Diffusion index Construction -1 Manufacturing - -3 Business survey, confidence, -4 3-months MA Leading indicators Consumers are not too optimistic Manufacturing PMI Consumer confidence index Index Index Competitiveness indicators Competitiveness near average Price developments following EA Index, =1 Real effective exchange rate Index, = Harmonized consumer prices October 11

5 / Economic Fact Book: Labour market and demographics Unemployment rate much lower than average... and above-average productivity 11 % Unemployment 1 9 Euro Area 8 7 6, 5 EU harmonized Index, =1 Labour productivity per hours worked, SA Labour cost close to average Declining population is a challenge Index, = Unit labour cost (ULC) ,75 17,5 17,5 17, 16,75 16,5 16,5 16, Millions << Population % y/y Change in population >> 15, ,7,6,5,4,3,,1, -,1 -, Housing market Housing bubble burst House prices have stabilized 15 Index =1 14 Existing-home sales , Index, 5=1 117,5, 11,5 11, 17,5 15, 1,5 1, 97, , 117,5, 11,5 11, 17,5 15, 1,5 1, 97,5 Construction less important to GDP Household loans at a really high level 5,8 5,7 5,6 Value added, 5,5 economic activity, construction 5,4 5,3 5, 5,1 5, 4,9 4,8 4, ,8 5,7 5,6 5,5 5,4 5,3 5, 5,1 5, 4,9 4,8 4, Households loans October 11

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