CHART OF THE WEEK WEEK ON THE MARKETS HIGHLIGHTS OF THE WEEK 25/2013. English translation by an external party

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1 AT IE NL SE DK DE BE FI UK FR IT ES CY MT SI CZ SK GR PT LT EE PL HU LV HR RO BG English translation by an external party HIGHLIGHTS OF THE WEEK 25/2013 > Chart of the Week: Slovak Economy Caught Up With the First Two Countries of the Original EU15 > Unemployment Stable in May WEEK ON THE MARKETS USD/EUR JPY/EUR CHART OF THE WEEK GDP per capita in PPS (EU27=100) CZ HU PL SI SK GBP/EUR CZK/EUR Interest rates curves EURIBOR M 3M 6M 12M 24th week 25th week Source: UniCredit Bank based on Eurostat Even despite the fact that the growth of Slovak economy decelerated in the previous year, mainly at its end, Slovakia still belonged to the fastest growing EU countries. With a GDP growth of 2.0% yoy it reported the fourth fastest growth from among the EU countries following the three Baltic States (or the second fastest within the euro area). The above-average growth of economy was reflected also in the on-going convergence to the EU average. GDP per capita in the purchasing power standard went up from 74% to 75% of the EU average in Also owing to the drop of economies of Southern Europe, the Slovak economy caught up with the first economies of the original EU15 - Greece and Portugal - in Even the gap between the Slovak economy and the best-performing economies of Central and Eastern Europe - Slovenia and the Czech Republic - has narrowed slightly. Both these economies reported a drop in GDP in the previous year, diverging from the EU average. Within the EU, the highest GDP per capita in PPS in 2012 was reported by Luxembourg (271% of the EU average). However, in case of Luxembourg this indicator is distorted by the large number of foreign workers in the country (foreign workers participate in the generation of GDP of Luxembourg, but they are not its citizens, i.e. they are not included in the denominator when calculating the indicator). As for the other countries, the highest GDP per capita in PPS was reported by the neighbouring Austria (131% of the EU average) followed by Ireland (129%) and the Netherlands and Sweden (both 128%). The poorest EU countries are still Bulgaria (47%) and Romania (49%). Croatia, which is about to become a member of the EU in > 1

2 one week (1 July), will be the third poorest EU country with economy performance at 61% of the EU average (following Latvia (62%), which will become the poorest euro area country from January 2014 with adopting the euro). Convergence of the Slovak economy continues also after the crisis outbreak, however, the pace of the convergence to the EU average decelerated. The most intensive shift of Slovakia towards the EU average took place in the previous decade until the outbreak of the global economic crisis in 2008, in particular due to the growth of Slovak industry (mainly the automotive and consumer electronics) as the result of a massive inflow of foreign investments. The growth of Slovak economy in the mentioned period has considerably exceeded the growth of the neighbouring economies of Central Europe. Performance of Slovak economy per capita in exceeded the performance of the neighbouring Hungarian economy. Falling short of the Czech economy was gradually diminishing from almost 40% in 1995 through around 30% at the beginning of the millennium to around 5% in Other reforms which would push the economy towards sectors with higher value added and innovation rate will be crucial for a longer-term growth of the Slovak economy. Reforms should thus be aimed in particular at improving the quality of education and science and support of the business environment. (lk) ECONOMIC CALENDAR Week Indicator Period Unemployment (June 15-20) Producer Prices (June 28) Market Consensus UniCredit Bank Estimate Reality May - 14,55% 14.26% May 0.5% yoy -, Reuters, NBS, SOSR, UPSVaR, MinFin SR, UniCredit Bank Slovakia ECONOMY Unemployment stable in May UNEMPLOYMENT According to the statistics of the Central Office of Labour, Social Affairs and Family, the rate of unemployment went up by 1.07 pp to 14.26% yoy in May. After adjustment for traditional season, the unemployment was stable on a mom basis in May the seasonally adjusted unemployment (calculated by the UniCredit Bank) increased only very slightly by 0.02 pp to 14.47%. In May, the unemployment is traditionally negatively influenced by the inflow of university graduates in the records of labour offices. University graduates register in May and June (usually at the 2:3 ratio). However, the Central Office of Labour, Social Affairs and Family has not published the figures regarding the graduates in May so far. Thus, we cannot rule out that the stable unemployment in May was affected only by a lower inflow of graduates in the records, which will be compensated by a higher inflow in the next month. The hypothesis regarding the stabilisation of unemployment might be thus subsequently confirmed (or disproved) by the data regarding graduates or even the unemployment figures in June. In terms of regions, the fastest yoy growth of unemployment was in the regions of Trenčín and Nitra. On the contrary, the slowest growth of unemployment was in the regions of Banská Bystrica and Košice. The highest unemployment is still reported by the regions of Prešov (20.3%), Banská Bystrica (19.62%) and Košice (18.95%), with the lowest unemployment being in the region of Bratislava (6.01%). In terms of districts, the fastest yoy growth of unemployment was in Medzilaborce, Levoča, Revúca and Poltár; on the contrary, the unemployment dropped the most in Stará Ľubovňa, Krupina and Námestovo. The highest unemployment (more than 25%) is still reported by some districts in the south of the Central and Eastern Slovakia Rimavská Sobota, Revúca, Rožňava, Kežmarok and Poltár. In May, unemployment of more than 20% was reported by 18 out of 79 districts of Slovakia; on the contrary, 20 out of 79 reported unemployment below 10%. > 2

3 Chart 1: Unemployment (seasonally adjusted) Statistical effect of the economically active population change Monthly change Unemployment (SA, rx) Source: UniCredit Bank base on data of Labour Office OUTLOOK We expect that the unemployment might rise very slightly in June due to the diminishing effect of the inflow of university graduates. Even despite the expected slight recovery of the economic growth in the second half of the year, it is likely that the growth of Slovak economy will still not be strong enough for unemployment to decrease more considerably. We assume that unemployment should remain at relatively high levels also during the rest of the year, more or less only copying the traditional seasonal fluctuations. (lk) > 3

4 ECONOMIC OUTLOOK Slovakia E 2013F 2014F Real GDP grow th GDP per capita 11,910 11,589 12,128 12,725 13,158 13,337 13,791 Household consumption Government consumption Gross investments Exports Imports Industrial Production Construction Retail Sales CPI (average) HICP (Dec.) Real Estate inflation Average Wage level Nominal Wage grow th Real Wage grow th Employment grow th Unemployment (average) Fiscal deficit (% of GDP) Public Debt (% of GDP) Foreign Direct investment (EURbn) ECB Refi rate (%, Dec.) M EURIBOR (%, Dec.) Y SK gov't bonds(%,dec.) Y SK gov't bonds(%,dec.) Abroad F 2013F 2014F Eurozone GDP German GDP Czech R GDP USA GDP Eurozone Inflation EUR/USD (average) EUR/USD (Dec) EUR/CZK (Dec) EUR/HUF (Dec) EUR/PLN (Dec) Source: NBS. SOSR. ÚPSVaR. MinFin SR. Eurostat. ECB Forecasts: UniCredit Bank Slovakia Slovakia. Eurozone. USA (EURIBOR. USDLIBOR. Brent. USD/EUR); UniCredit Group (CEE Economic Research. CIB) Eurozone. USA > 4

5 FOREIGN EXCHANGE USD/EUR GBP/EUR JPY/EUR NOK/EUR SEK/EUR CZK/EUR HUF/EUR PLN/EUR MONEY MARKET Interest rates curves EURIBOR M 3M 6M 12M 24th week 25th week > 5

6 FIXED INCOME IRS EUR State bonds yield curves - EUR Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y - 2Y 3Y 4Y 5Y 8Y 10Y 20Y Dow Jones Industrial S&P ,000 1,700 EQUITY 15,000 14,000 13,000 1,600 1,500 1,400 1,300 12,000 1,200 EURO STOXX 50 NIKKEI 225 2,750 2,500 2,250 2,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 > 6

7 UniCredit Bank Weekly N.o.t.e.s has been prepared by Market Research and Strategy Ľubomír Koršňák, Chief Economist ; Lubomir.Korsnak@unicreditgroup.sk Alena Štefániková, Analyst ; Alena.Stefanikova@unicreditgroup.sk Jaroslav Habo, Large Corporates and Multinationals ; Jaroslav.Habo@unicreditgroup.sk Greta Slaninková, Real Estate Financing ; Greta.Slaninkova@unicreditgroup.sk Štefan Brychta, Corporate and Project Finance ; Stefan.Brychta@unicreditgroup.sk František Doležal, MID Corporates ; Frantisek.Dolezal@unicreditgroup.sk Matej Letko, Financial Institutions ; Matej.Letko@unicreditgroup.sk Tomáš Perďoch, Markets and Investment Banking ; Tomas.Perdoch@unicreditgroup.sk Roland Viskupič, Global Transaction Banking ; Roland.Viskupic@unicreditgroup.sk Marian Burian, Retail and SME ; Marian.Burian@unicreditgroup.sk Jana Maličkayová, Private ; Jana.Malickayova@unicreditgroup.sk The present material was elaborated by UniCredit Bank Slovakia a. s. and can be reproduced only with its prior written consent. The document contains opinions of authors, which do not necessarily have to correspond with the opinion of UniCredit Bank Slovakia a. s.. Information and opinions contained herein were obtained from sources, which were deemed as reliable, however. UniCredit Bank Slovakia a. s. does not provide any guarantee for their correctness and completeness. UniCredit Bank Slovakia a. s. bears no responsibility for possible damage or other detriment, which can be suffered by third parties if they decide to use information contained herein. The present document cannot be deemed as a replacement for provision of individual investment consultancy. Investors have to make their own assessment of suitability and adequacy of investment in any financial instrument mentioned herein and that based on the substance of and risks connected with the relevant financial instrument, their own investment strategy and their own conditions and financial situation. The present document is not an investment recommendation or direct personal advice, neither this document nor any part hereof is a basis for conclusion of any contract or agreement upon obligation of whatsoever kind, and one cannot rely on the present document in connection with conclusion of any contract or agreement upon any obligation and it is not meant to be used as persuasion or recommendation for conclusion of any contract or agreement upon any obligation of any kind. We strongly recommend investors to contact their own investment consultants in order to receive the required explanations and individual investment consultancy. The present material is only for information purposes and (i) it does not represent any offer for sale or subscription or call to file proposals for purchase or subscription of any financial instruments or securities (ii) it does not represent whatsoever propagation thereof. Investment opportunities mentioned herein do not have to be suitable and adequate for certain particular investors, namely depending on their specific investment objectives and time horizon of investment or in connection with their overall financial situation. Investments in financial instruments are connected with risk and value of the investment and revenue on the investment can grow or fall, and that also as a consequence of currency fluctuations. Performance in the past is not a reliable indicator of future performances. No predictions of performance in the future are a reliable indicator of performance in the future. One cannot rely on this document as on an explanation of all risks connected with investing in financial instruments, instruments of the money market, investment instruments or securities referred to herein. > 7